HSAs are the worst new hotness in healthcare
In the US, if you are willing — and rich/privileged enough — or forced to select a health insurance policy that qualifies as “high deductible”, there’s a self-laundering investment tool for you!
Okay, so, what makes this the worst? Let’s start with the nature of a high-deductible health plan. You don’t have things like copays. Until you hit the deductible — which, on a very nice HDHP is $3000 for a family — you don’t really have insurance. Oh, you pay for it, sure, and it’s I guess a safety net or something, but there’s no such thing as a copay. Not for office visits, not for medication. Maybe you’ll get some office visits free, if they’re qualified as preventative — so much for non-emergency issues being redirected to doctors and urgent care, if there’s no copay the affordability suffers a ton. Maybe there’ll be a short list of preventative medications you get free. Mental health will not count, period. Everything is out of pocket until you hit that deductible.
Now, it’s cheaper than insurance, sure, and ends up being cheaper in most cases if you run the numbers (and if you can pay cash), but it still sucks.
Anyway! So back to this self-laundering investment tool. If you have an HDHP, you can have a Health Savings Account. You can set up a pre-tax deduction so you don’t pay tax on the income you put in it, you can invest the money in it in mutual funds and whatnot and not pay tax on the returns, and — here’s the self-laundering part — you can then extract funds, tax-free, to pay for any medical expense in any year after and including the year you opened it. At any time. Also, once you’re 65 or whatever, you can also extract funds (just like a 401k) as regular income.
Forbes, and really anyone associated with the financial industry (or HR) will tell you, treat this like a savings account. Pay for your health care out of pocket; save your receipts (oh, and if they’re more than 10% of your AGI, you can double-dip by deducting those expenses on your income tax…) and when you want to make a tax-free withdrawal from your magic tax-free investment account, just put some receipts together and do it.
Which is all well and good when you can afford to pay for healthcare up front until you hit your deductible. Or when you have an employer helping you by throwing a few bucks into your HSA.
It’s not so good if you have an HDHP because it’s what you can afford, and your plan is to avoid using health care at all except emergencies. It’s not so good if whatever money you can spare to throw into an HSA is just going to get wiped out by expensive healthcare anyway, because you can’t afford to pay for healthcare up front as well that’s why you put it in an HSA isn’t that the entire goddamn point
It’s something of a synecdoche for fiscal and, well, healthcare policy for the last… ever. Solutions for the rich, and a focus on “personal responsibility” — don’t miss the significance of the fact that HSAs are self-directed investment accounts, that’s money that could just vanish to the vagaries of the invisible hand as opposed to a contractual obligation from an insurance company to cough it up.
Anyway, yeah. If you’re in a position to take advantage of them, HSAs sure are the new hotness, let me tell you.
They’re still the worst.