Participating in a HSA (Health Savings Account) is at best, described as a very delicate dance!
You may be wondering what the heck I mean by that?!?
Well, we’ve been participating in a HSA for the past 3 years now, but we were sweating bullets the first year and a half, when we didn’t have enough saved up for the cap where the regular insurance would kick in (our threshold limit was $5,000) if a major accident happened!
Here are some of the negative aspects of starting a HSAs:
- When you don’t have enough in a HSA, a major health accident can really hit you hard if you don’t have enough in your HSA to cover the threshold cap! So there is a risky period at the beginning.
- If you suffer a small injury (like I have), you will not want to go because you feel that you need a cushion in case one of your kids or wife has a serious injury.
- After a serious injury, and if we go above the $5,000 limit of our HSA, we will have to pay 15% of the total cost above the $5,000 from that serious accident!
- You will tend to suffer through colds and the flu if you catch them instead of going to the doctor’s office…
- There are nagging little fees that while don’t add up to much, are still frustrating!
So in my experience, the best time to start a HSA is when you are younger, but not too young, and perhaps a year or two before you want to start having kids.
If you are too young or active in sports, you might be at risk of being injured in which case a HSA wouldn’t be best for you.
If you have older kids, and are active or participate in sports it’s risky to start a HSA, unless you have enough money that it doesn’t matter!
Two years before you start to have kids is (in my opinion) the perfect time because it will give you time to build up the necessary protective net!
If your family (or your wife’s) has a history of cancer, heart disease, or any other health related problems that can be potentially inherited, a HSA may not be for you! I know if I had such issues, I would stick to the regular health insurance.
Now, in HSA’s defense, it is really nice to save about $100 a month in health care expenses once the $5,000 threshold limit (in my company’s plan) for the entire family!
If you have a HSA or you are thinking about starting one, please weigh the list I identified above.
Do you have any additional points that I many have missed?
-MR
Update: I also have an article at the “CashFlow Sherpa’s” today called: Maximizing your Finanances and Experiences
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MR – what you are essentially recommending here is using an HSA as an umbrella insurance policy where the deductible (in this case the $5k you have saved up) will kick in to satisfy your health insurance provider’s criteria before they start paying for 85% of the ongoing costs.
however, why the exception for those more prone to injury? is it because they would be paying “up da-W” anyway?
pretty much… If you are more prone to injury, it would be easier to pay a little extra and go with the regular insurance. Especially if you get a lot of small injuries…
What really makes it muddy, is what will happen with health care with the government involvment?
Well, our current insurance already makes me not want to go to the doctor because of the high copay and the cost of the prescriptions. I will always take my kids, but I hesitate for myself sometimes.
We are going to consider an HSA for next year, I have to go through all the paperwork this week.
Not fun any way that you go. Health care is such a huge bummer!
I’m not so sure your advice here is sound. Your forgetting about pregnancy and child birth, which are two major medical events in your life. Both are very unpredictable and can get real expensive real fast. Two years is not enough time to save up enough money to cover these events in my opinion. If your baby is premature (which is becoming very common) or you wife has complications in pregnancy (as mine did), the costs can get astronomical real quick.
I would not chance going through the process of having kids with an HSA and HDHP. I would recommend the best time is when you children are toddlers…besides some broken bones and scratches (cheap), the risk of having anyone suffer a high cost medical event is much smaller in that period.
I based my article on experience with owning an HSA, with a bit of logic and probablility.
The toddler age is what I do recommend above. “So in my experience, the best time to start a HSA is when you are younger, but not too young, and perhaps a year or two before you want to start having kids”
Often time childbirth is an expense that’s covered via health insurance anyway (at least on our HSA plan)…
It really comes down to doing the homework and figuring what works best for you. I know I now love the low insurance payment that my wife and I make monthly 🙂
I ended up going with a plan that isn’t HSA eligible, but I completely agree with all your points. If I do ever switch to the cheap plan, I’ll be crossing my fingers for the 2 years it will take to build up the HSA, lol. 🙂
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