HSA Strategies for Upcoming Baby Birthing

I've been on HDHP plan and HSA for going on 3 years now. Most years, my wife and I can live off my companies contribution of $1200.  My companies HDHP/HSA vs PPO calculator has pretty much every situation favoring the HDHP/HSA option IF YOU CONTRIBUTE ENOUGH, which I admittedly have been lax to do.

This year, however, will be different. 

For starters, all the pregnancy appts have been hitting the account hard, and a recent completely unnecessary ER visit has hit my account very hard. Currently I've got a bill of $1800 from the ER, and about $4500 in the HSA.

I've got approximately a month's worth of contributions prior to babies arrival February 6th. At that time, the amount in my HSA will cover my deductible ($3500), but likely not much more.

Should I: 

A) Instruct my payroll folks to put my entire paycheck into my HSA? We can live on my wife's income until baby comes. That would net another couple grand into the HSA prior to February. 

B) Pay for medical bills out of pocket (once HSA is depleted) and reimburse myself over the course of the next couple of years? We've got plenty of savings, so this wouldn't be a big deal. 

C) Put any charges that can't come from HSA onto a credit card, then pay off those charges from HSA throughout the rest of the year? 

If the savings are reasonably liquid, how about a combination of B) and C)?

Use a cashback credit card to pay the charges, pay off the credit card from savings, then replenish the savings as the HSA contributions roll in?

In my experience a birth is often just the start of a series of additional medical expenses. What's the deductible for your health plan? I'd recommend that you increase your HSA contribution to meet that.

I'm wondering about the tax implication of B/C vs A.

I feel like I'm getting more for my dollar by contributing straight from the paycheck with no taxes taken out.

In the case of C, I've got that interest rate working against me unless I pay the charges immediately. 

I guess that when I reimburse myself for qualified medical expenses, I'm technically getting the money tax free as well, so it's a wash. 

nderwater said:

In my experience a birth is often just the start of a series of additional medical expenses. What's the deductible for your health plan? I'd recommend that you increase your HSA contribution to meet that.

Deductible is $3500, anything over is 20%.

While YMMV, I have four kids, including a two month old, so we've been playing this game a while. I max my HSA contribution every year and find that it all always gets spent -- either directly on healthcare bills or through reimbursements.

Isn't your max contribution to HSA either $3500 or $6500?

Mine is $3500.  I max it every year because I can carry it over and invest it as well.  Its like a bonus IRA   We (me, wife, kid) rarely put much of a dent in it.  A couple co-pays and a couple prescriptions.

$6500 combined for a family. 

Which I'm set to do next year...but thats for the entire year. By December 2018 I'll have that amount (or at least I would if kiddo didnt spend it), but the problem is by Febuary 2018 (when kid is scheduled to arrive) we won't have more than $3500. 

The HSA limit for 2018 is $6900 for a family HDHP.  There is no benefit to putting in any more than that and I'm not sure you could if you wanted to. 

That said, given the tax benefits at this time, I would consider it worth it to max out the contribution.  It rolls over from year to year and it's your account, not attached to your employer in any way other than the direct deposit.  I max my contribution every year as I treat it like a second retirement account.  I'm sure I'll need it eventually as I get older and any withdrawals for medical needs aren't taxed.  Interest accrued isn't taxed (while not much, it's better than nothing - my account get about $5/mo and rising).  IMHO, anyone who is young and relatively healthy and doesn't take advantage of an HSA if available to them is missing out on a chance to have a good chunk of money saved up in case of a medical emergency.

Of course with kids, you'll easily burn through $6900 in medical costs every year.

Any chance of prepaying some medical expenses so they are in 2017?

I am assuming you have nearly maxed your deductible for 2017, and will be starting over Jan 1.  Anything you pay now is only 20% of the bill, instead of having to payout the entire deductible for 2018 first. 

All 5 of my kids were prepaid hospital. It took some serious negotiating, but the hospitals cut their invoices by over 50% when we prepaid in advance. 

(You may not be able to do this anymore. My kids all predate the ACA)

I try very hard to avoid any withdrawal from my HSA. I treat it like a 401(k) for my future medical costs. All medical expenses are paid for out of pocket. Not everybody can do that, but if you can tough it out and pay most of it out of pocket, you'll be far better off later in life.

Talk with the hospital to be put on a payment plan. We did, and its interest free. We just keep riding out the tax free payments via the slowly refilling HSA. Our kids are 3 and 1 as of November and we've been doing this most of the last 3.5 years because it is cheaper than using our bank account because thats taxed money. But we also have been maxing it out for 4 years now.

What's your out of pocket max on the plan?  

I think that if it's possible to put as much money as you can until the bill comes from having the baby, that you should do so. Do note that it'll take probably about a month from when you come home from the hospital before you start seeing bills arrive.

RossD said:

Talk with the hospital to be put on a payment plan. We did, and its interest free. We just keep riding out the tax free payments via the slowly refilling HSA. Our kids are 3 and 1 as of November and we've been doing this most of the last 3.5 years because it is cheaper than using our bank account because thats taxed money. But we also have been maxing it out for 4 years now.

This. Call the hospital before and after. Ask for self-pay, pre-pay, prompt-pay discounts. You can tell the billing office folks you are looking to get a price quote, and they may be able to give you one which could help later. They will want to know the details of your insurance but that is fine. If you have a ton in the hsa, they will try to get it. Often the hospital bills the insurance who pays their portion, but at the same time the insurance makes a payment on your behalf out of your hsa to the hospital. You may not want that, but if there is no money in the hsa, then they cant. Normally, ld ask for the Medicare rate but not many 65+ folks going through labor and delivery. 

Then after its all said and done and you have a "low" price, get the payment plan. Some systems are dumb enough that you can ask to pay $25/month on $100k account and you will never get a second call as long as you stay current (and you will never pay it off). I'm not joking about that. Set on auto pay and forget. 

szeis4cookie said:

What's your out of pocket max on the plan?  

I think that if it's possible to put as much money as you can until the bill comes from having the baby, that you should do so. Do note that it'll take probably about a month from when you come home from the hospital before you start seeing bills arrive.

Read carefully. Many hospitals will send what looks like a statement early, before they have finished with the insurance company. It will say like "informational" or something on it, but otherwise looks like a bill. It is not a bill. Wait for them to figure it out with your insurance for the insurance portion before you start paying.

In our case, this took about 8 months. Then they finally got it sorted out. We paid the statement. And then about a month later they sent our money back because they actually hadn't figured it out with the insurance correctly and overcharged us.