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HSA - Qualified Medical Expenses

My friend just asked me whether she can use her HSA funds at noobster02/27/18
Who provides service is not relevant. The worst that could qdllc02/28/18
that's a lot of effort to avoid ~$3,500 bucks in tax liabili lilgub02/28/18
You can contribute on a pre-tax basis every year up to a cer noobster02/28/18
As long as the service was actually rendered and the out-of- onehell03/01/18
Assumes your employer has one? Or if not, is there such a t dogdaypm03/01/18
All HSAs are "non employer" HSAs. It's just a special type o onehell03/01/18
" All your employer has to do is agree to forward on the pre dogdaypm03/01/18
That's not unusual. The "pre loaded spending account" is pro onehell03/01/18
Thanks again for continuing the discussion. But my thinking dogdaypm03/01/18
If it's all available up-front, and it's use it or lose it, onehell03/04/18
noobster (Feb 27, 2018 - 8:17 pm)

My friend just asked me whether she can use her HSA funds at her husband's medical practice, specifically for basic routine checks. It's definitely a qualified medical expense but does it matter she is spending it at her husband's practice?

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qdllc (Feb 28, 2018 - 11:28 am)

Who provides service is not relevant. The worst that could happen is an inquiry as to if services were indeed rendered, but if it’s on her chart, they’d need hard evidence to refute it.

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lilgub (Feb 28, 2018 - 2:02 pm)

that's a lot of effort to avoid ~$3,500 bucks in tax liability. Is it possible there's a conflict? yes. Is anyone going to notice? Probably not.

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noobster (Feb 28, 2018 - 5:20 pm)

You can contribute on a pre-tax basis every year up to a certain amount. You don't lose it if you don't use it, it carries over and the balance grows with interest. After x amount of years, you can have a good amount of money in it.

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onehell (Mar 1, 2018 - 11:58 am)

As long as the service was actually rendered and the out-of-pocket amount paid from the HSA is what it is supposed to be based on the insurance company's Explanation of Benefits, then it should be fine.

But, as noobster alluded to above, HSAs are actually a really good investment vehicle. Once your balance reaches a certain level you can even start putting it into stocks and stuff. When you reach age 65 you can withdraw without penalty for whatever you want, paying only ordinary income tax like a 401k (or you can use it for your retirement medical costs in which case you aren't taxed at all, not even on the investment gains, which means that depending on how you use it, it combines the best qualities of both an IRA and a Roth).

Essentially, there is no type of account in the world with more favorable tax treatment than an HSA. It's better viewed as supplementary retirement savings than as something you use to pay for basic office visits and stuff.

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dogdaypm (Mar 1, 2018 - 12:01 pm)

Assumes your employer has one? Or if not, is there such a thing as a private (non-employer) HSA?

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onehell (Mar 1, 2018 - 12:08 pm)

All HSAs are "non employer" HSAs. It's just a special type of bank/investment account, and unlike FSA, it is always YOUR account.

There is no such thing as an employer "having or not having" an HSA. The issue is whether your health insurance is "HSA qualified," which basically means "are the deductibles high enough for the plan to qualify as a high deductible plan?" If yes, then you are free to open up an HSA anywhere you want - it's your account. All your employer has to do is agree to forward on the pretax contributions (which requires telling the employer nothing more than your HSA routing and account numbers and staying within your contribution limits), and even if they won't do that, you can just contribute into it and deduct the contributions you made yourself on your tax return.

Many employers do facilitate HSAs, e.g. by offering to enroll you into their preferred one if you sign up for the HDHP option. But really, it's your account and you can open it up wherever you want, so long as the deductibles on your health coverage are high enough to qualify. To an employer, it looks the same as any other account (direct deposit using routing and account numbers) so they really don't have much reason to care where you choose to open one any more than they have reason to care what bank you choose to use for your regular paycheck direct deposit. The only difference is they (hopefully) are willing to press the button that tells the payroll system to make the deposit on a pretax basis. Technically the employer needs some kind of a "cafeteria plan document" to make that option available, but in the unlikely event they don't already have one on file somewhere, most of the HDHP plans will give them the boilerplate necessary to have on file for purposes of being allowed to facilitate pretax contributions.

If your employer doesn't offer health insurance, or offers insurance that doesn't meet the ACA's affordability definition, you can go on the exchange. Obamacare Bronze level plans usually do have high enough deductibles that you qualify to open an HSA. In any case, it's not so much about your employer as it is about what the deductible is on whatever coverage you have, from wherever you happen to get it. If the deductible is high enough, you can open an HSA. If your employer is cooperative, you can contribute to it pretax. If not, you can contribute post-tax and deduct up to your contribution limits when you do your taxes, which reaches the same end result. But honestly there's no reason for the employer not to be cooperative. If they can direct deposit a paycheck, then they have the capability to facilitate pretax HSA contributions already in whatever system they're using.

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dogdaypm (Mar 1, 2018 - 12:40 pm)

" All your employer has to do is agree to forward on the pretax contributions... or deduct contributions on tax return "

Great, thanks for the explanation. That's mainly what I was wondering about, how the pretax deal would work if the employer wasn't sponsoring or facilitating the plan.

I'll have to see if our (employer-sponsored) med plan actually qualifies. It's a bit of an odd duck with zero deductibles or copays through $X thousand spent in an annual pre-loaded spending account, then $2500/person $5000/family deductibles apply, after which it's a straight percentage 90/10 plan/me cost. Most years we don't exhaust the spending account.

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onehell (Mar 1, 2018 - 1:08 pm)

That's not unusual. The "pre loaded spending account" is probably an FSA and if you have one, you usually can't have both an FSA and a HSA at the same time unless it is a "limited purpose FSA," which this does not sound like. An FSA does not lower your deductibles; it merely provides a vehicle for paying them. Those deductibles are above the HDHP required minimums, which is good, but you'll want to ask to make sure it really does qualify as a high deductible plan.

Best thing to do is ask the insurance company (or administrator, usually a third-party administrator, if a self-insured plan) whether the plan is HDHP/HSA qualified. If it is you could set up an HSA but might have to opt out of the FSA. If it's not qualified, then you're SOL unless you opt out and buy an HDHP from somewhere else, which the premiums might be too high to justify.

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dogdaypm (Mar 1, 2018 - 2:14 pm)

Thanks again for continuing the discussion. But my thinking on an FSA is that they are funded by pre-tax money coming from me. Whereas this health plan's spending account is funded by the health care plan and is use/lose and fully reloaded each january.

Now, whether behind the scenes some accounting sleight-of-hand goes on (e.g., our pre-tax premiums are what actually funds the spending acct each year), I don't know but certainly could be possible, I guess, which would then make it essentially the same as an FSA.

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onehell (Mar 4, 2018 - 12:41 am)

If it's all available up-front, and it's use it or lose it, and you don't get taxed on it, it's an FSA. It doesn't have to be funded solely by your pretax contributions; employers can make contributions to an FSA too. Also, it may or may not "feel" like an account in the first place. That's because most FSAs are not segregated from the employer's assets, they are known as "notional" accounts where there's a ledger that shows how much you've spent and how much you have left, but it's not actually coming out of a separate account, unlike an HSA. Depending on what administrator they use there might or might not be a card, but the actual dollars that come out of it actually just come right out of the employer's checking account.

In short, there's nothing about anything you describe that is inconsistent with an FSA.

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