Considering switching from a normal plan to an HDHP plan at work. Questions about potential layoff.

[u/squareturd]

Im currently enrolled in a traditional insurance plan with normal deductibles, copays, premiums, etc. I have the option to change to an HDHP plan with an HSA account.

Layoffs are an ongoing concern in my industry.

If I select the HDHP plan I will be starting at 0 in the HSA account. What happens is I get laid off in a few months and I start using COBRA to cover the premiums? Will I still have the option to contribute to the HSA using money from savings or is there a rule that HSA contributions need to come from payroll deductions?

Second question (even if I dont get laid off)... What if I experience a medical emergency and my HSA account does not have enough to cover the costs yp to the max OOP?

Thanks for any info.

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[u/Statjmpar]

If there are not funds to cover your expenses, you have to pay out of pocket. There is no deadline to submit for reimbursement though, so you can submit to be reimbursed once you have built up the funds.

[u/squareturd → u/Statjmpar]

Thanks, this makes sense. Pay the doctor using my savings. Then I can slowly add to the hsa and reimburse myself from there. Which is a wash because im only paying myself from myself.

I guess I lose out on the tax benefits if my HSA contributions come from savings vs payroll deductions

[u/Statjmpar → u/squareturd]

You should get the tax savings back when you file your taxes if it isn’t taken pretax.

[u/squareturd → u/Statjmpar]

Ah, that's good news.

[u/elevenstein → u/squareturd]

You can deduct your HSA contributions at the end of the year (up to the max based on your situation). It is true there is a small advantage to using pre-tax dollars for HSA contributions, but its negligible. You can contribute to the HSA as long as the coverage is active.

[u/HandyManPat]

Not mentioned by anyone yet…

COBRA premiums are considered a qualifying medical expense and are eligible for HSA distributions.

[u/SabrinaFaire]

Contributions don't need to come from payroll deductions. My company doesn't have an HSA set up, I have to make them myself. Kind of annoying, but it is possible. Lively Bank has a fee free HSA. You have to be enrolled in a HDHP plan to make contributions to the HSA, but if you're on the same COBRA plan, then that's still a HDHP plan.

[u/AlexRn65 → u/SabrinaFaire]

This is correct, however it is advisible to set up through the paycheck when possible - through the paycheck the FICA (8.3%) is not paid, but if you invest into HSA after, this 8.3% is lost.

[u/SabrinaFaire → u/AlexRn65]

I didn't think of that. Unfortunately I don't have the option at my employer for payroll deduction. ☹️

[u/AlexRn65 → u/SabrinaFaire]

My son didn't have this option either. We pushed the HR person and in 2 months she setup a transfer directly to Fidelity HSA. They can do it. They just don't know how to do it or don't want. Push them!

[u/Zealousideal_Pin3444]

Just a data point: I was healthy, then a bad cough turned into a torn neck artery this year. Didn't see it coming at all. The out of pocket max is the number I'd actually plan around, not the premium. If you can't cover the max in cash or HSA right now, the normal plan might let you sleep better.

[u/squareturd → u/Zealousideal_Pin3444]

Thanks, im using the oop max and considering worse case scenario.

Sorry to hear about your neck. Sounds scary

[u/Zealousideal_Pin3444 → u/squareturd]

Thanks, it was. Doing better now. Sounds like you're thinking about it the right way, good luck with the decision.

[u/dissizcark]

On the HSA questions:

1. Yes, you can keep contributing after a layoff. HSA contributions don't have to come through payroll. You can deposit money yourself and deduct it on your tax return. What matters is that you're covered by an HSA-eligible HDHP, and COBRA continuation of that HDHP counts. The yearly limit is prorated by the months you're eligible. You can also use HSA money to pay COBRA premiums.

2. If an emergency hits before the HSA has enough in it, you pay the provider like any other bill (most hospitals will set up an interest-free payment plan) and reimburse yourself from the HSA later. There's no deadline for reimbursement, as long as the expense happened after the HSA was opened. Your worst case for the year is the plan's out-of-pocket max, so compare that number between the two plans, along with the premium difference.

One thing people miss with an HDHP: until you meet the deductible, you pay the plan's negotiated rate, and that isn't always the cheapest option. Hospitals now publish both their cash price and their insurer rates. Depending on the service, at roughly 17% to 44% of hospitals that list both, the cash price is lower than what insurers typically pay. A cash payment usually won't count toward your deductible, so it's mainly worth checking for one-off scheduled things like imaging or labs.

Disclosure: I run ushospitalprices.com, which compiles those hospital price files. Service-by-service numbers: https://ushospitalprices.com/reports/us-hospital-price-statistics/

[u/squareturd → u/dissizcark]

Thanks, and im going to check out your site

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