Monday, March 19, 2012

Researching HSAs: an Outsider's Tale

My task today is to research HSAs. I know nothing about these so I'm going to track my learnin' here.

A health savings account is a tax-advantaged medical savings account available to taxpayers in the U.S. who are enrolled in a high-deductible health plan (HDHP). The funds contributed to an account are not subjected to federal income tax at the time of deposit. Unlike a flexible spending account (FSA), funds roll over and accumulate year to year if not spent.
It seems Minnesota HSA law differed from federal standards prior to January 1, 2007, so our current form of HSA is a relatively new governance. Tax-advantaged means accounts and investments that are tax-deferred, -reduced, or -free. All of this is clear enough, I think. What are my options as a U.S. citizen living in Minnesota?

IRS Publication 969 [PDF]: Health Savings Accounts and Other Tax-Favored Health Plans (Table of Contents [HTML]) - This is the authoritative document intended to help for tax purposes, but it doesn't tell me where I could participate in or qualify for an HSA.

Wells Fargo has a lot of information, including "webcasts," for people who would like to start an HSA for their (small) business. HSA Bank (never heard of them) claims to be a "national leader" in HSAs. They feature a four-step enrollment process that will culminate in determining whether you're eligible for one through them. hsamember, in collaboration with BNY Mellon, offers HSAs to employees of participating businesses, so this is not open to the public and therefore not an option. They do love their stock photos, though, which... maybe it's unfair, but it always makes me suspicious of a place when they can't commission original photography. Stock photos make a website seem like a fly-by-night scam, but that's irrelevant. But in that vein, the misleadingly named HSA Home Warranty specializes in home warranties, but they have named themselves in such a way as to attract people looking for unrelated information.

By this, I learn a general search for "HSA" is completely useless and counterproductive. These false positives and gated communities make me feel suspicious about the whole HSA business altogether.

Opposite all this non-helpful information is MN Health Insurance Network. The copy is a little childishly written, in places, but they have numbers, useful information, and links.
Now nearly everyone maintaining an individual or family high deductible health plan will be eligible to get an HSA. ... Any eligible person can establish an HSA with a qualified trustee or custodian... [such as]... Any insurance company or bank... [and] individuals who are approved to create and maintain IRAs, such as a financial advisor...
The minimum family deductible of the HDHP has to be $2,400.00, and the maximum out-of-pocket expense must be $12,100.00. I'm shopping for my spouse and will be covered under her plan, so all stats here will be for a family account. Having been unemployed for nearly four months, I'm ineligible to participate in any HSA as I can't start my own HDHP.

Blue Cross/Blue Shield has posted their "Health Plans 101," a list of five advantages to having an HSA. With more directly relevant information, eHealthInsurance lets you search by your ZIP code to find local HSA providers. Find Bank Rates even provides a calculator based on how much you're willing to contribute to an HSA. For that matter, I see that our credit union offers an HSA as well. That could be convenient, though now I have to learn what makes one HSA competitive with another.

SPIRE Federal Credit Union puts a limit of $6,250 annual contribution (employer/employee total) on their HSAs for 2012. Somehow I think that won't be a problem for us—that'd be just over $500 each month. There's no minimum balance required to earn on your investment, and it has an Annual Percentage Yield (APY) of 15%. For comparison, Find Bank Rates reports State Farm offers 20% APY, while American Chartered Bank only provides 10% APY with their HSAs. So that's right in the middle, and APY is prone to fluctuation, but this gives me a rough understanding of what various accounts feature.

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