Finding A Good HSA Administrator
Health Savings Accounts (HSAs) can be a great way for people to save money on health insurance, especially if you are young and healthy. I looked at compatible high-deductible plans last year but missed some deadlines, and need to start again. I found quotes online as low as $80 a month at eHealthInsurance, whereas I currently pay about $200 a month as part of my wife’s plan. I could even stay with the same company (BlueCross/BlueShield), just with different deductibles.
Now, HSAs are great mainly due to the fact that earnings grow tax-free, and when used for healthcare expenses withdrawals are tax-free too. (I list additional HSA pros and cons here). I think of it as a Health Roth IRA. Accordingly, the ideal way to take advantage of this is to max out the HSA (up to your deductible) when you are young, and not use it. You want to pay out-of-pocket now, and leave the HSA money in some mutual funds to compound away until retirement (when you’ll really need it).
The main problem with this setup is that the last time I looked, there were very few administrators with good mutual fund options. You were usually stuck with just a bank account earning tiny interest, or with some obscure mutual funds with high fees. But I just found out that HSA Administrators now offers Vanguards funds. Some of them are even their Admiral class funds, with even lower expense ratios. For example, Vanguard 500 Index Fund Admiral Shares (VFIAX) has a 0.09% expense ratio.
Unfortunately, there are some fees, like a $35 annual fee and a what amounts to a 0.5% extra annual maintenance fee. I would hope that competition will make this go down in the future.
There are other administrators that allow you to invest in a variety of mutual funds, but I’m not sure what kinds of transaction fees they charge. Sterling HSA says that you can use “any broker or dealer”, while HSA Bank lets you open up a TD Ameritrade Corporate account to trade with.
Of course, I have yet to actually meet a person who has an HSA. Is there something I’m missing or why aren’t these things more popular?
July 27th, 2006 at 6:31 am
Good point about letting it grow. We don’t have one, but my parents do (at least from what they’ve explained to me about their plan, it sounds that way). They’ve been using it this year. I’ll discuss with them letting it grow, that sounds like a great idea.
July 27th, 2006 at 6:57 am
Jonathan,
You need to check out this site to find a good admin. http://www.hsafinder.com/finde.....dians.aspx it makes it very easy to compare. All of them have high fees in my opinion.(compared to IRA fees) My HSA is with the one you mentioned HSA Admin. because of the Vanguard funds. They have high fees and take a while to get your money invested or to move it if you request a change. The HSA is like an HMO it is good only if you don’t go to the MD much. If you go alot or have kids an HSA make not be for you. As much as my friends” kids go the MD I don’t think it would benefit them.
In my opinion it is also best to put the money in the Prime MM at first then move it to your choice of funds when you put in next year’s deductible. That way there is less danger of a problem if you have to come up with the deductible when the market is down. And watch out for those cheaper health insurance quotes sometimes you get what you pay for. I have the Blue Value with Blue Cross. I have not been to the MD in 3 yrs so I have $7500 plus gains in my account.
My new problem is that I just got remarried and will be adding my spouse to the policy and the ded. will go to $5000 but women have yearly medical maintainence costs so not sure how this will work. If you can find a policy that pays for checkups and such it would help.
July 27th, 2006 at 6:58 am
I have and use an HSA. It works out well for us because my company would charge $200 a month more for regular coverage, and that is what the HSA deductables apply towards.
Since we don’t have a ton of extra money to save in the HSA right now, we are just using it to pay back our medical expenses. The biggest advantage: our insurance pays practically nothing for non-network coverage (like our favorite chiropracter). However, we can use our HSA funds and still count it towards our deductible (and still end up under $200 / month).
July 27th, 2006 at 7:01 am
so an HSA is not an insurer? i went to HSA Administrator’s website and realized this, so now i’m confused. i’ve been intrigued for a while.
July 27th, 2006 at 7:18 am
We decided to go the HSA route for my wife and two kids, since my employer’s health plan is over $600 for 80/20 insurance with a $250 Deductible and $15 Doctor Visit copays. Luckily they are young and healthy and we have made out quite well. We are taking a bit of a gamble, since we do not have maternity coverage through the HSA, but the cost $157/month with a $5100 deductible cannot be beat.
I have taken the other approach of only putting into the HSA when we have medical bills - though I, of course, have the $5100 in a High Yield Savings account. We are doing it this way, since the HSA is only temporary for us. Since we are doing it this way, we use the Insurer as the HSA Administrator as well. Since there is nothing in the account, the low interest doesn’t bother us.
July 27th, 2006 at 7:33 am
Probably because not everyone is as healthy as you :-). I can’t even consider it, but I would give it a hard look if I could.
I think they would be much more popular if you could have a HSA and regular insurance plan.
July 27th, 2006 at 8:32 am
Check out this book by Paul Zane Pilzer:The New Health insurance Solution. It does a good job of explaining HSAccounts. I recently opened a high deductible savings plan with blue cross for 72/month.
For HSA administrators use this link to get started:http://www.health–savings–accounts.com/admins.htm
Most have sign up fees or very small monthly charges of 2-3/month. Also if there is no monthly fee, some will charge a brokerage fee of 3/month. Some waive this monthly fee for account balances over a certain amount (several thousand dollars). I looked up several and decided to go with American chartered. It has absolutely no fees. But the drawback is it only has CDs for investment. The CD rates are around 5-5.5% for 6 months and variable rates. Once I build up a balance to waive the fees for the other accounts with brokerage accounts, I will change administrators. I am happy with 5-5.5% for about a year.
July 27th, 2006 at 8:52 am
We also looked into HSA as an option since my wife’s health insurace cost my paycheck nearly $500 a month. However, if you look carefully, HSA doesn’t really cover marternity or their coverage is so minimal, it’s a joke. So for young and healthy men, HSA might be a good choice. For young and healthy women, make sure you understand the cost of having babies.
July 27th, 2006 at 10:30 am
I have an HSA for my family. The HDHP is through American Medical Security (via eHealthinsurance orignally but switched to a local agent) and the HSA is with American Chartered Bank which is based in Chicago (I don’t live there, I just set it up online). However I was in the area for work and visited a branch just to make sure they were legit.
Anyhow, American Chartered only offered CD’s… the rates weren’t the best but not bad. I was very turned off by the HSA administrators who offered brokerage services but lots of fees… which seemed like most of them.
I did investigate Saturna who offeres a no fee HSA if you invest in their no load funds. I still need to do further research, I don’t know enough about them. They seem like a very small shop. http://www.saturna.com/hsa.htm
It’s a matter of time until these get more acceptance. It took some time for self employed 401(k)’s to catch on but they came finally came around. Heck, even my CPA didn’t know all the rules (that’s another story entirely). Let me know if you find better HSA admin options.
I look at it like you do, pay everything out of pocket now and let the money grow tax free. When my daughter was born my wife was working and the pregnancy was covered through her work. The issue now is she isn’t working so if we have another baby we’d have to cover the delivery out of pocket, but it’s not that crazy if you negotiate it up front.
July 27th, 2006 at 10:46 am
I have an HSA and have had one for two years. I opened mine through State Farm Bank and simply take on interest through the savings account.
http://www.statefarm.com/bank/rates.asp
Interest rates are better at First American Bank
http://www.firstambank.com/851.html?REFERER=Google
…but I plan on moving my HSA to an account where I can invest it as soon as an option sticks out at me. The HSA Bank - TD Ameritrade relationship is new, I’ll have to research it. There’s also Saturna HSAs which alow you to invest your funds in many different options. They don’t have a very helpful website though.
http://www.saturna.com/hsa.htm
Anyway, to answer your question, until all banks and brokerages start offering HSA accounts the general population won’t think about getting them… after all, you’ve got to put the “savings” somewhere and if there’s nowhere to put it why bother. State Farm is good enough for me for now but I’m ancious to get my savings invested.
July 27th, 2006 at 10:51 am
I have an HSA account. I’m very happy with it and currently I’m with my high deductible provider Aenta that has a deal with citibank. As the money grows from my employers contribution I do a transfer to another HSA administrator. I only keep the deductible with citibank, which they give me a debit card, which I can use for my medical expenses. Once a year or how ever often you want you can transfer to another account.
Take a look at this place for option in vanguard funds
http://www.hsainvestors.com/ht.....tions.html
They charge 60 bucks a year, but you do get more investment options. I’m a big believer in index funds, but for an HSA account I prefer to treat my HSA account like a pension, which we know the majority of pension plans are 60/40 AA, thus until I build up more money I like the wellington.
July 27th, 2006 at 10:55 am
Interesting, I didn’t know what an HSA was. I’m in the same boat as you, a high deductable BS/BS coverage for me is about $80/month, but it is $200+/month to add me to my wife’s plan. I’m ahead of you in that last year I dropped off my wife’s plan and went with a high deductable BC/BS plan.
BTW, look out for the fine print. I was suprised on the perscriptions. I saw $30 co-pay, but did not realize it does not kick in until the $2000 deductable is paid. Benfit plans at work, never worked that way…
Get your pescrptions from Canada. Buy them online if you are not near the boarder, way cheaper.
Now I can write off medical expenses. Too late for this year? Off to research HSA…thanks.
Can’t write off premiums..dang.
July 27th, 2006 at 11:18 am
Health savings accounts are an optional companion to a high-deductible health insurance plan. The idea is to store your money there, so you have the money available to pay that high deductible at a later time, while at the same time allowing it to grow if you don’t need it.
It’s can be riskier than “normal” insurance, but you can pick the deductible you want. For example, you could just pick an annual deductible of $1,500 instead of $2,500.
Really? They skimp on the maternity insurance? Good to know what to look out for.
July 27th, 2006 at 11:26 am
Jonathan — It’s not really that they skimp on maternity coverage; it’s just that high-deductible health plans (HDHPs) cover nothing until you reach the deductible — no copays, drug maximums, or cost-per-hospital stay. You’re expected to pay the full cost of your medical treatment out of pocket until you reach the deductible (at which point it’s a co-insurance percentage). Example: my work plan has a 20% co-insurance and $1500 deductible. If your maternity stay costs $12,000; you pay $1500 plus 20% of $10,500 (a total of $3600 — pretty high when compared to traditional plans).
July 27th, 2006 at 11:27 am
As far as I know there is NO maternity coverage in most plans. However, a C section would be coverage as required surgery, normal delivery would not. You can pay for extra coverage but it’s often not worth it. I think you said your wife has coverage, maybe keep that.
Keep in mind that maternity is big business for hospitals with many renovating and introducting plush recovery/delivery suites. You can, and should, negotiate delivery/recovery up front. You can get it for alot cheaper than you would expect. Complications from delivery ARE typically covered by most insurance plans, just not delivery.
July 27th, 2006 at 11:32 am
The maternity coverage is the big issue. Make sure you read and understand this part of things carefully. This is what prevented us from going with an HSA. We found little to no maternity coverage. We live in the Phoenix area and had a second child last September. I asked for an itemized bill for the birth. It was roughly $17,000. I had no epidural, no complications, and was in the hospital for only 24 hours. A c-section can be over $30,000.
July 27th, 2006 at 12:24 pm
I would suggest parking the funds in some type of “HSA CD” (w/ decent interest rates) short term. . . at least until HSA balances (in general) increase to the point that HSA administrators/banks begin to offer investments in index funds w/out the steep transaction costs. I think it only goes to say that as some of the HSA balances out there increases, banks and administrators will have to compete more (e.g., waive fees) to attract the higher balances. As it stands now, it probably doesn’t make much sense for banks/administrators to waive fee for their HSA’s because most HSA balances are still quite low (i.e., when compared to IRA’s). Therefore, I agree with 2million’s thoughts RE: American Chartered Bank. I opened my HSA w/ them (the $1k minimum for opening CD’s is nice, plus the interest rate isn’t too bad for a B&M). You might consider parking the funds in a CD w/ a bank like that until an administrator comes along who offers investments in index funds (or whatever) w/out the outrageous fees. Plus, the links your other commenters have left are good resources. I’ve found the information at health–savings–accounts.com especially helpful. Just be wary of contributing the correct amount for the amount of time you have the plan (e.g., my HDHP is only effective for 8 full months before my employer’s hmo coverage kicks in. . . therefore, I’m limited to contributing $2025, even though my deductible of $5k would allow for the fulll $2700 if the HDHP coverage was for the entire year). I’m not sure if that last part makes sense, but if you read through the weblinks provided, it should come together. The state farm website has a contribution calculator if I’m not mistaken. . .
July 27th, 2006 at 12:59 pm
Maternity isn’t a problem with my plan. I pay 10%, but that cuts off at my high deductible of 2,500 dollars. The 2,500 dollars also comes out of the savings. For my plan personally I pay 75 dollars a month and my company pays 225, but 125 dollars goes into my HSA. Not bad paying 75 dollars a month to get 125 dollars in my HSA and that’s without any contribution on my behalf. For me an HSA was an easy choice.
July 27th, 2006 at 5:31 pm
Jbo, who’s your HSA provider? I’ve searched HSA for a long time. Never once I found one HSA will pay marternity for more than $1,000. Think of it, why would they cover this seemingly planned expense (where all other health expense are unplanned and unexpected.)
Let’s do a math here: say an average no complication deliverance of a baby cost anywhere around $15,000 to $25,000. If you pay 10% + $2500, that’s only $4000. The HSA has to pick up the rest $11,000-$21,000 tab. To them, that’s a no brainer lose lose business. Their risk of losing money on a 25-35 year old married yound woman is nearly 100%! If you run HSA as a business, will you really do it? Come to think of it, that’s why my wife’s traditional health insurance premium is so high, because they don’t want to lose money on you.
For those who are using HSA, if you think you are covered for marternity, you’d better double check the fine print of your plan.
July 27th, 2006 at 10:38 pm
**yawn** Sorry didnt mean to be rude
July 28th, 2006 at 5:19 am
Aetna
On page 78 of their PDF file it states:
Maternity care
In-network: 10% of our Plan allowance
Differences between our Plan allowance and the bill: Network Providers agree to accept our Plan allowance so if you use a network provider, you
never have to worry about paying the difference between our Plan allowance and the billed
amount for covered services.
July 29th, 2006 at 10:57 am
My plan doesn’t cover maternity and I’m fully aware of it. Please keep in mind that the costs you are seeing for delivery ($15k - $20k) are way out of line for what an individual would probably pay (assuming normal child birth).
Yes, that is what insurance companies pay but individuals can pay ALOT less. I know it seems counterintuitive that a large insurer actually pays higher rates, but it’s true.
The catch is that you negotiate upfront. Negotiate delivery cost? Absolutely. I first read about this in USA Today and talked to a few doctors. I was very surprised at the level of discounts they offer for alternatives like prepayment, etc.
For self employed, reasonably healthy folks (like myself), HSA’s are usually the best bet. I would rather pay the maternity out of pocket than pay the exorbinant insurance rates (that usually amount to MORE than the discounted delivey costs). My plan DOES cover C-sections as required surgery but everything up to that and after (recovery) is out of pocket for me.
Delivery is big business for hospitals now and they will compete for your business. Don’t be shy about asking, comparing services, and then picking the best option for you.
Some say this is commoditizing something very important, I say not at all. It’s my choice. Do I want to pay more for the room with massage beds, a 24 hour massuese on staff, and gourmet food or I am happy with the basics? Totally up to me. That’s more choice than many traditional plans.
July 30th, 2006 at 12:42 am
In Minnesota, all insurance plans (or some verbage like that) have to cover pre-natal. This goes for the high-deductable plans you would use with an HSA as well. They also, of course, cover C-sections/etc. I’m guessing other states have similar stipulations.
August 1st, 2006 at 2:06 pm
High Deductible Health Plans (HDHP’s) CAN provide maternity, the coverage is based on the plan YOU pick.
A Health Savings Plan (HSA) works together with an HDHP - the HSA is a tax deferred savings account that you fund and then pay your medical expenses out of. The HSA is not health insurance, it is only a linked savings account.
August 6th, 2006 at 8:06 pm
I got my HSA at U.S. Bank. I think I was charged $15 to open the account, but they were having some kind of special offer or something so now I have no monthly fee, and no other fees of any kind.
They only pay %2.96 though - I guess I’m just waiting around for a year or two when I hopefully can roll it over into some kind of investment account or something.
December 17th, 2006 at 8:58 am
Just a late update to this thread. I recently re-evaluated my insurance situation as I had to find new insurance to take over my COBRA coverage. I opted to go with a high deductible insurance plan. For me, the monthly premium dropped from ~$235 to ~$80 (for $1850 deductible). This is covering 100% of all of my medical expenses once the deductible is met (lifetime 3mil). If you do the math, that works out to be $1850/12 = $155/month I can put into my HSA. $155+$80 puts me right back at the $235 I was paying previously. Only this way I have $1850/year extra retirement/emergency funds.
For me, as someone with reasonable free income each month, and who hasn’t gone to the doctor in almost 10 years, this is a no-brainer. I just wish I’d done the research a lot sooner! If I never spend this, it becomes regular retirement when I reach retirement age.
I think the reason why this hasn’t taken off has to do with the common attitude about health insurance. People don’t buy health insurance as _insurance_, they buy it to help offset day-to-day health costs. If more people paid for routine medical expenses out of pocket and waited for insurance for big expenses, this would be a lot more common.
December 17th, 2006 at 9:07 am
I am currently using ExanteBank (http://www.exantebankhsa.com) as it is the partner for my HDHP. I can go elsewhere, but I haven’t found an alternative yet. For balances under 2k you are limited to their money market account which is about the same as the other big interest providers currently (5%), minus the horrible $3 monthly fee (2%/yr on my deductible!). My biggest gripe with Exante is that their online presence feels antiquated, and they are not hooked up with Yodlee, so I can’t monitor it through BoA/Yodlee…
I’m looking through the HSA links here, and hopefully will find a better alternative.
December 20th, 2006 at 6:59 pm
Late post, yes, but perhaps useful. I did a lot of research too after deciding a High Deductable plan with an HSA was the best alternative. To use this HSA as an HSA/IRA for future investment needs and/or health expenses, it came down to either HSA Trustee Services (trading using optionsXpress via HSA Trustee Bank) or HSA Bank (partnered with Ameritrade). I’m going with optionsXpress rather than Ameritrade as all the reviews comparing the two rate the former much higher in all aspects.
February 22nd, 2007 at 8:35 pm
Here’s my take on HSA having completed my research.
Just pretend you’re still paying the high insurance cost for a low deductible policy. Ask yourself how much of that money are you getting back each year? Now take that money and put into a HSA account and buy a policy that would make that amount you’re not using but is paying year as your deductible.
Now use that money you put into an HSA account and treat it like your Traditional IRA retirement account and write it off on your tax. So put the money into a balance/medium risk mutual fund and don’t use it. Use cash to pay your medical expense let your HSA grow, unless it’s a true emergency and you don’t have another payment source.
But just in case you really need that money in the beginning it’s best to start with a HSA that charge you no fee but fairly give you low interest. The HSA should only charge more after your accounts grows into an investment account where it’s return is great enough to pay for the fees.
I’ve found only company so far that can do this, this HSA has been mentioned in this blog:
https://www.americanchartered.com/personalHealthSavings.asp
Start with their checking then graduate to their CDs or investment account.
Rick
September 29th, 2007 at 8:47 am
Although it is a commendable savings practice to anticipate leaving your funds in your HSA, and letting them build up like an IRA, it may be counterproductive. If you take the funds out for medical purposes, the withdrawals are tax free. Any other withdrawal is a taxable event, just like a traditional IRA withdrawal. You have to weigh the tax consequences of future withdrawals against withdrawing as necessary for medical expenses. I am contributing the max for both my wife and myself, and will use as much as possible to pay all out of pocket medical expenses, which even include over the counter meds now.
September 29th, 2007 at 7:16 pm
My $50/year (or even if it were $500/year) in OTC expenditures aren’t going to make as near as big of a impact on my taxes as the benefit I’ll get from them due to compound interest. Sure, if I need the money it’s nice to know it’s there, but I figure long term benefit is much higher if I just pretend it doesn’t exist.
April 20th, 2008 at 5:45 am
Look at:
http://www.sovereignbank.com/p.....avings.asp
Debit Card/Checking, 2% interest with low balance, fee waived for bal over $1500, nice selection of funds.
Friend/client looking at setting up new company, just found it. Might not be best to have unlimited trading at a brokerage for these guys. Best to all.
Nice list of qualifying expenses.
http://www.hr.wayne.edu/tcw/pd.....penses.pdf
May 27th, 2008 at 10:21 am
I think HSAs are getting better- Bank of America offers 3.5% interest on their HSA- no minimum balance, good fund options too. The fees are minimul if you consider the savings with investing, compound interest, and the tax advantages. There’s a HSA calculator available at
http://www.bankofamerica.com/h.....individual
where you can see how much you could save with an HSA.
August 27th, 2008 at 8:30 pm
Adriondack Trust seems to offer an HSA without any fees and 5% APY. Only problem is you have to go to their branch to open it - they are a small bank based in Sarotaga Springs NY. http://www.adirondacktrust.com
September 24th, 2008 at 7:32 pm
Have been looking into HSA providers. Saturna bank looks promising. No fees at all, and you can invest in their 8 different funds. But they do not offer debit card or checking for HSA. Does anyone know for sure that they actually exist as a bank? Meaning, did anyone witness their physical existence?
For investment minded individuals who would let their HSA grow like an IRA, does anyone know what the tax consequences are? I know that if withdraw money from your account for non-eligible expenses, you would have to pay taxes on evey penny you withdraw for sure, but do you have to pay any penalty?
A more general question: I found a lot of banks from the Internet. How do I know if these banks actually do exist. What measures are there to prevent anyone to put up a website and call themselves a bank. Is there a regulatory body or organzation one can go to to check the legitemacy of thes banks?
February 23rd, 2009 at 8:43 pm
i HAVE A COMPANY hsa. tHE MONEY IS TAKEN OUT OF MY PAY, BUT IT IS NOT PUT INTO THE ACCOUNT sometimes for months. I work for a foreign company, but I cannot find who in the US government to send my complaint to!
This year the company changed insurance companies, I have no notice. I was sent that the deduction from my pay wold not happen until I signed the form? They did not tell me it(insurance) wa now a different company! Anyway, I have had 330 dollars taken out of my pay and I have no idea where it is! Who in the federal government can help?
August 10th, 2009 at 6:25 am
Found a great forum disusing HSA administrators on fatwallet under the financial section
http://www.fatwallet.com/forum.....7/?start=0
Unfortunately the new healthcare bill is already looking to to limit HSA’s from what I understand by excluding the purchase of over-the-counter meds: America’s Affordable Health Choices Act (H.R. 3200). Seems like I’m only hearing more and more negatives with this thing. Scary times we live in