HSA Account with upcoming medical expenses - when is it not worth it?

[JK]

I currently have been using an HSA account for the past few years and think they are a great idea and plan to use them throughout the rest of my career for its various benefits (my wife and I are completely healthy). However, my wife and I will likely be trying for our first child in the coming months and I was wondering, when is it not worth it to get the HSA account. If we're expecting a delivery in the next year or two, the hospital charges for the delivery alone could likely be outrageous and it might make sense to have a health plan that covers a lot more.

Along those lines, what about when you have young kids for the first few years and they are always sick. Does it make sense to keep the HSA, keep me on the HSA and the rest of my family on a higher plan (two separate employers) or put the whole family on a more comprehensive plan? When does everyone advocate making the switch from HSA coverage to more robust plan when discussing a full family.

[Josh0731]

I would encourage you to sit down and do the math to see how bad it would be to continue with the HSA. I was facing a similar question last year, but I found that after accounting for the cheaper premiums and annual tax deduction it almost made up for the highest deductible. It's tougher to estimate the benefit of tax-free compound growth on invested HSA funds, but the younger you are the more valuable that will be. For me I felt the numbers justified my continued use of a HDHP and HSA.

[The White Coat Investor]

Your question would more properly be when is an HDHP not worth it. The HSA is always worth it if you can get it. But the first question should be which health plan is worth it for you. Then, if it is an HDHP, use the HSA you are now entitled to.

 

Compare the difference in premiums to your expected outlay for the baby. If the higher premiums + lower deductible are less money than the lower premiums + higher deductible, then go with the non-HDHP.

[wbenutley]

I like the way Jim parses this question, and I would parse it further by drawing on insurance theory, there are four levels of “peril” here that pertain to your future medical expenses:
1. huge and unpredictable, which call for an HDHP
2. large and predictable, which call for first-dollar coverage
3. small and predictable, which can be paid out of pocket
4. small and unpredictable, which can be paid out of pocket

Your wife’s delivery falls into Cateory #2. Your kids’ sniffles fall under #4.

Since you are each separately employed, It might be possible for you to take at least one of the kids onto your own HDHP (which gives you the ability to make “family” contributions to the HSA) during the year when your wife is expected to deliver while she chooses first-dollar coverage.

 

Physician Family Financial Advisors

[jz]

Does your employer offer a Flex account ?  If so, consider :   all of the  below simultaneously.

1) Spouse #1:   HDHP + HSA , for the tax advantages.

2) Either spouse:  Flex account to pay predictables PRETAX

3) Spouse #2:   first dollar coverage policy

 

My employer offers an HSA with premiums so cheap, that I can pay the premiums and take the line 25 income adjustment, REGARDLESS OF WHETHER I WANT THE INSURANCE OR NOT.  I can pocket $$ just by purchasing the insurance.

[jz]

correcting above:  ..............my employer offers a HDHP ....

[tex]

@JK

 

I worked through an example for myself here: https://www.whitecoatinvestor.com/forums/topic/hsa-or-double-insurance-coverage/#post-11832

 

In regards to this thread my spouse's non-HDHP has $0 premiums, so switching her to my HDHP just so we can do a family HSA contribution is probably not worth it. As Ben suggests above I might add a dependent to my HDHP to increase my contribution limit, however.

 

[JK]

Lots of good input here. WCI more aptly put it - "when is a HDHP not worth it". I think what makes the most sense was mentioned above. I'll continue with the HDHP on my insurance and max the individual HSA account while she stays on her company plan that offers better insurance for her eventual delivery. After delivery, we'd certainly have to reconsider the numbers to evaluate which makes the most sense, but it seems that the HDHP might work out the best at that point.