HSA Strategies After Baby

Ok, so I'm a Dad, wOoOoo! 

Meanwhile, my HSA Account is getting hit HARD by all the bills. Luckily, I think we've gotten through the worst of them.

Baby made it's debut, and now we've got bills totally $4000. That's not bad for 48 hours at the hospital. 

I'm about $2000 short in my HSA account overall, but I could move money from investments to pay off some of that. That would leave me with about $2000 to pay out of pocket, which of course I could reimburse myself for at a later date.

Should I:

Option 1) Leave my HSA investments alone, pay everything ($4000) out of my own pocket, reimburse myself over the course of this year. 

Option 2) Empty my HSA, pay any overages from my pocket immediately.

Option 3) Empty HSA, setup a payment plan for overages, paying them from my HSA as they come in over the next year. 

To me, at least, I feel that the HSA should be emptied. That's what the account is there for, medical bills. That being said, my HSA investments make more (12%) than the (savings at bank) cash I've got on hand (1.5%). 

On the other hand, I can see the advantage of using the money that earns the least.

Just make sure you pay the hospital, you don't want that baby getting repossessed.  

Maybe I do haha

Maybe I can work out a payment schedule to get her back when she's potty trained and eating solid food 

It seems most of my coworkers who have kids find a FSA more flexible since you (at least here) get the amount up front vs. accumulated over time.  I rarely hear of any parent having to scramble at the end of the year to spend any unused balance before they lose it.

HSA money goes in before taxes, no? If you're paying out of pocket, you are using after tax money and effectively spending more.

In reply to Woody :

Yes, but FSA as well.

Personally, I max out my HSA contribution, but I treat it like another retirement account and don't touch it. But I'm also not married and have no kids.

1. Congrats!

2. Just wait. If I remember correctly this baby is pretty recent? It will take the hospital at least a month to work it out with any insurance you may have. Let them do that first. Don't do anything until that process is over. Probably good to check with your insurance company when you get the final statement to make sure they agree the process is over - often the hospital will bill the patient extra and early to put pressure on the patient to put pressure on the insurance company to pay the hospital (isn't that nice?). 

3. Then, I'd probably pay with the HSA what I could, and setup a payment plan with the hospital (this is common and interest-free) to pay from the HSA as my paychecks went into it. The hospital will likely be fine if you wanted to pay as little as $50 a month, just set it on autopay and forget. I personally don't have the patience for that but it can be done.

Woody said:

HSA money goes in before taxes, no? If you're paying out of pocket, you are using after tax money and effectively spending more.

Can't you deduct eligible medical expenses paid out of pocket from your taxes when you file? If so, there is no difference between paying from pre-tax money and getting a deduction on the post-tax money you spent.

Robbie said:

Woody said:

HSA money goes in before taxes, no? If you're paying out of pocket, you are using after tax money and effectively spending more.

Can't you deduct eligible medical expenses paid out of pocket from your taxes when you file? If so, there is no difference between paying from pre-tax money and getting a deduction on the post-tax money you spent.

 

It depends on how much and at what percentage of your income that amount represents.

In reply to Ian F :

Similar to the limits of how much you can put into an HSA right?

Robbie said:

3. Then, I'd probably pay with the HSA what I could, and setup a payment plan with the hospital (this is common and interest-free) to pay from the HSA as my paychecks went into it. The hospital will likely be fine if you wanted to pay as little as $50 a month, just set it on autopay and forget. I personally don't have the patience for that but it can be done.

Is that still an option? I know my parents did that when I was born, and after a couple years the hospital wrote the balance off, but I thought the option went away a few years ago. 

Dana's insurance paid everything for my little one, and I'm never ever ever having another one, but I have been curious about payment plans. 

Yes.  

The reality is there are no hard-fast rules here.  It's going to depend a lot on your own personal finances and your long and short term financial goals.  If you have an accountant or financial advisor who you can actually confide your income and numbers to, they'll be better able to advise you than anything we can say, which will be nothing more an anecdotal comments based on our own experiences, which as we know differ a lot on this site. 

Unless the rules have changed in the past few years--and they may have--the hospital cannot send your account to collections or impact your credit score if you're making payments. In theory you could pay $1 a week in perpetuity and they'd never be able to do anything about it, as long as you're paying. In practice, I'd assume you end up getting sent to collections anyways, but that's "what they say".

I always wait for the EOB from the insurance to see what I actually owe. By waiting for the EOB from the insurance, your bill will be adjusted to their “reasonable and customary” negotiated rate.

Even though you have to pay for healthcare until the deductible is reached, you should only pay the rate negotiated by the insurance for the services. If you pay to early you will potentially end up paying more. 

Even after all is settled, I’d pay a portion of the bill from the HSA, and make arrangements for a payment plan to pay the rest from the HSA over the course of the year.

The reason for not draining the HSA, is so you can leave some in there for any RX that may be needed. 

I can't advise on taxes - but I do build the systems that hospitals use to bill insurance and patients. In general, hospitals are very lenient on sending people to collections (often its like 6-12 months of no-response/no-payment, with pre-collection agencies involved acting as the hospital representatives getting a shot before real collections agencies), and the systems really don't accelerate you if you pay on time. So little of the hospital revenue comes from patient payments they don't want to risk losing the patient's next insurance check to the other hospital because they sent a patient to collections over $800. Also, the systems (both computer and payment workflow in general) are so complicated they are fraught with mistakes, and sending people to collections incorrectly is a much bigger risk than waiting an extra few months to collect on debt.

It comes down to individual hospital policy on what the minimum weekly/monthly payment is, but there is also normally wiggle room if you call and ask. Once the payment plan is set they will never think about it again if you pay on time, and most are setup to auto-charge your credit card on a specified day of the month if you want to go that route.

I've never heard of automatically writing anything off after the payment plan has been faithfully paid for a few years though. If you're paying, they're accepting. You may be able to call and ask, wouldn't hurt.

Dont drain your account. Ask the hospital for a payment plan. 

As an aside, my HSA and my Insurance are one in the same. 

All of my current bills have been reviewed by insurance, and the bills I've got are what I'm to pay. I've never experience any changes in charges, even after letting bills sit for 3+ months. Then again, they weren't this high, either.

No real help, but this worked for me.

Sorry, what worked for you?

In reply to pheller :

He moved to Canada.

Having babies is free up here, unless you understand basic math and pay income tax.

Congratulations!

I think if you're seeing 12% return with your HSA on top of the pre tax savings, then I'd be looking to keep as much in that account as I could, while making payments with a combination of earnings from the HSA and new HSA deposits. 

I always try to make sure I've got enough to cover the deductible in the HSA, so How close are you to reaching your deductible for the year? If you empty the HSA now, how long will it take you to get next year's deductible saved into the HSA? If you can't have next years deductible saved up by the end of this year, then I might consider paying out of pocket/reimbursing.

Ok - Deductible is Maxed.

I still pay 20% of everything until I hit Max Out-Of-Pocket at $7000. 

If I empty it today, I will have next year's deductible ($3500) by year end. 

We just asked the hospital people to be put on a payment plan. They said how much a month would you like to pay? It was really easy. Then you just payoff the amount for the next couple years. It still only counts to the year it occurred for deductibles. Basically it gives you the ability to pay it off slowly and keeping a decent amount in there for something else like glasses or teeth cleaning. Or making money.

I take a pretty simplistic take on it- HSA is pre-tax income, therefor I've already saved whatver my marginal rate is.  We had 2 kids, both while I was on the HDHP (High Dedecuctible) with an HSA.  I used the HSA money to pay for both- both were about 4K out of pocket for us, too (though this included all of the pregnancy monthly visits and everything else- we went to a stand-alone birth center instead of a hospital, which worked out great for everyone involved each time).

I guess I don't understand _not_ using HSA money to pay for qualified medical expenses.  Of course, if your HSA balance won't cover what you owe, then either put more into the HSA and use it to pay the bills, or see if you can stretch it out over time.  However, I'd try to pay it all in one tax year, in case you have some other medical expenses that put you over the max deductible or max out of pocket.  

Actually, that's an idea- wait until Dec 31 to pay it off...if you haven't had any other major expenses in 2018, then pay it all off in January 2019, as ahedge against any medical expenses that year.  Like, say, having another kid.

Unless it counts in the year it's incurred, and not the year its paid.  In which case, that idea won't work.