Hustle #1 -- Health Savings Accounts

AR and I were at an Atlantic City card room some years back, where we befriended a shark. He was very eager to teach AR and me his "card hustles." After seeing we were suitably impressed, he proceeded to show us a million more "hustles." To him, basically anything he did to try (successfully or not) to make money was a hustle. It was very pathetic by the time he got to showing us his "slots hustle," during which, unsurprisingly, he lost about $100 he clearly couldn't afford, all within about 15 minutes. By then, we were far past being impressed.

I'm going to offer my own money-making hustles in this blog. Hopefully, they'll prove more successful than that guy's--though as with the "slots hustle," your mileage may vary.

The first is to get a Health Savings Account. The two of you might not be able to do so; your workplace has to offer it. But if they do, to qualify, you have to sign up for a "high deductible" (min. $1100/year) health insurance plan. Mine has a $1400 a year deductible, with no co-pays (though I get one free "well-woman" visit, plus labs and a flu shot, per year at zero cost to me). That means I pay every cent of my insured health expenses until I hit $1400. After that, I pay 20% of all expenses, up to a total maximum out-of-pocket of $5000.

The real benefit is the HSA. I can put up to $2900 a year into special account, using pretax dollars--meaning to get $2900 in the account, the real cost to me (since I don't pay tax on it) is $2900 - ($2900 * .31), or only $2000. Nice profit--I dare you to find any other investment vehicle with that kind of guaranteed return! I then get to use the HSA account dollars to pay for *all* medical and dental expenses, including things like contact lenses and solutions, OTC medicines, you name it. And unlike a traditional "flexible spending account" (FSA), I don't have to spend it before the year is up.

This health care plan costs me $71 a month, compared to the lower-deductible/no-HSA/no-free-wellness-and-shot plan of $105 a month (which has a $500 deductible, 20% after that up to a yearly out of pocket of $4000/yr). In addition to saving $34/mo straight up, I also "earn" that $900/12 per month (or $75/mo.) from the HSA. On top of that, I get the free visit plus labs ($250) and shot ($30), which averages to (250 + 30)/12 or $23/mo. Total I save per month over the lower deductible plan? $132/mo, or a whopping $1584 for the year.

But what if I get catastrophically ill (costs that exceed my max for the HSA plan--or anything over $5000 for the year)? In this case, the non-HSA plan is in fact better measured over the year--but barely. My HSA coverage costs me, for a year with catastrophic illness, $71X12 for the premium, or $852. But I also must pay the max of $5000/year--everything after that is paid 100%. So, I pay $5852 for the year for the HSA plan. Compare the other plan: $105 X 12 is $1260, plus another $4000 max, or $5260 for the year. But wait--don't forget the well-woman visit and flu shot! I get that with the HSA, but not with the non-HSA plan. Add $280 to the $5260, for $5540. So, all told for a catastrophic illness year, the non-HSA plan would save me 5852-5540 or $312.

But here's the thing: I won't usually get catastrophically ill. And any year I don't--in fact, any year where my medical expenses are less than about $3500 a year, I will save money with the HSA plan. In fact, most years I don't get sick at all; and each one of those years, I have made almost $700 over the non-HSA plan--which isn't even including the $900 HSA tax "bonus". Even if I got catastrophically ill two years out of three, I'd *still* be better off with the HSA plan because it saves me so much money in that one healthy year.

One final thing: I didn't account, in my "costs" of the plan analysis, the $900 I don't get withe non-HSA plan. This is because I could, if I planned it very carefully, get that same benefit by using a traditional FSA. Still, I think the HSA is a better account, even with identical tax deductibility, because with the FSAs, if you don't use it, you lose it. This makes them riskier, and they tempt you into purchases you wouldn't otherwise make, in order to not lose the money you've put in. (I've known of more than one Lasik eye surgery bought for just this reason.) Finally, you get no interest on an FSA--though admittedly the interest on a typical HSA is miniscule (around 1%). Though I have been FSA eligible for as long as I can remember, I haven't taken advantage of it for just these reasons.

So if you have access to an HSA, do the math for your own plans, but odds are good it is worth it.

Cha-ching! :)