A few weeks back when I highlighted my monthly budget, a few readers noticed a few absent line items.
One gigantic glaring absence, as reader, Jason, pointed out, was the cost of health insurance (and more generally, health care).
And, indeed, I did neglect to highlight that I have $36 per bi-weekly paycheck deducted automatically by my employer for health insurance (for 2). Or any health care expenses, for that matter.
So why would I neglect to include such essential expenses?
Is it because I’m trying to be deceptive in how low my costs are? Nope.
Is it because I forgot about it because it’s automatically deducted from my paycheck? No.
Is it because I don’t consider it an expense because it’s deducted before it ever hits my bank account? Nah.
It’s because I am net positive on my health insurance PLUS out-of-pocket health care costs. WTF?! How can that be?!
How I Actually MADE Money on Health Insurance & Health Care Last Year
Here’s the math:
- My annual premium (pre-tax, I might add) deductions for a high deductible health plan for two is $936.
- My employer contributes $1,600 to my HSA, plus an additional $400 in HSA bonuses if we each go in for annual preventative visits.
- My HSA expenses in year 1 totaled $906, and covered prescriptions, eye exam, contacts, and 1 urgent care visit. This left me with an HSA balance of $1,094 at the end of the year.
$1,094 in HSA savings (income) > $936 in premiums paid (expenses)
So I actually made a net positive $158 on health care last year, not factoring in tax deductibility, which would swing things even greater in my favor.
And because HSAs travel with you when you leave an employer and you can eventually withdraw funds in retirement (see my article on choosing the best HSA account if you’re not happy with your current one), I officially own that money.
Just a few more years at this pace, and I’ll reach a point where my HSA savings exceed my out-of-pocket maximums. That’s a real-life fantasyland we can call “health insurance nirvana“.
Health Care Costs Moving Forward
Previous results aren’t always a predictor of future, but my premiums did not rise this year. And now that birth control is free, that should save us another $200 this year. So I am crossing my fingers that I can have another net positive year for health care costs.
For a more in-depth overview of my HDHP vs. PPO cost savings in year 1, check out that link.
Really, this is not a surprise, as the title of this post would implicate. I consciously knew this would be a possibility, a goal even, when I made the move to the HDHP.
Granted, this isn’t possible for everyone. If your employer doesn’t offer a similar HDHP + HSA plan, aren’t as generous with their plans as mine, you have expensive medical conditions, or you’re older, you’re not going to be able to achieve similar net-positive results. My point for sharing this is not to pat myself on the back or suggest everyone is able to do it. I share it, because:
- I felt no need to highlight health care + health insurance costs when I was net positive on them, and you asked.
- There is a young and (presumably) healthy audience here. If I can achieve these results, others out there surely can too.
Even if you don’t have an HDHP option with your employer, they can be had for cheap elsewhere if you’re young and healthy (as most of you are). Check out the public health insurance exchange at healthcare.gov.
Health Care Costs Discussion:
I’m curious to hear if others were able to achieve similar results last year and the math behind it. And if you’re self-employed, what were your total costs with an HDHP?
I’m young but not healthy. When I aged out of my mother’s plan four years ago, I was even able to buy on the open market and was forced to buy COBRA at $550/month. I screwed up my back almost ten years ago and since then, I was considered uninsurable, even though I don’t cost a lot for the insurance companies, since most don’t cover massage or medical equipment which is how I mostly treat the back problem. I do use medication but very rarely so it does not cost much for the insurance company there either.
Assuming that young=healthy is not always a good assumption, but I am happy that you are profiting off your healthiness :)
Come to think of it, since August (BC free) we’ve made money, too. We don’t pay any premiums and since we haven’t gotten sick recently we’ve had no copays or prescriptions to pay for. I don’t think my husband has spent a dime on healthcare in 6 years and I haven’t had a copay in about 2 years I think. Anyway, the cost is $0 and I’ve “made” money because I signed up for a wellness program so I get around $100 a year from that in gift cards.
That being said, dental and vision are not including in our healthcare plan, so we pay out of pocket for those.
Out of curiosity, which state do you live in?
I live in New York State and a high deductible plan for two people in their 20s starts at over $400 per month through Healthy NY. Meanwhile, my husband’s company offers a private HDHP plan which (after the employer’s contribution) would cost us $285 per month… plus funding our own HSA. It makes more sense to pay the extra $50 per month for the HMO plan to avoid the $4,000 deductible.
Just some perspective on how much health insurance costs vary from state to state.
Good point. I live in Michigan. Location would not impact the health insurance premium paid for my employer’s, as they are a national/global company. However, becoming self-insured may yield different rates, by state.
Sarah brings up a good point, location is huge. I work for a large insurer and I can tell you that NY is by far the most expensive state for health insurance.
I am currently profiting off of my health insurance too. I pay very similar premiums except I get $600 off of them if I do an annual exam which brings my total yearly premiums to less than $400. Then my company gives me $500 towards my HSA, so I am in the same ballpark of gaining about $100 a year.
Not surprised we’re the most expensive since NY insurance is so heavily regulated.
It’s illegal to charge different rates based on age, gender, or physical condition. It’s illegal to deny coverage to anyone who wants to buy it. Family plans have to cover dependents up to age 29. All insurance companies must pay for autism treatment/therapy, drug abuse counseling, elective abortions, sterilization, hormone replacement therapy, and a whole slew of other things not required in other states.
I am a very big proponent of these types of healthcare plans. Especially for people from the age of 20-40 where healthcare costs statistically are low relative to the amount of money paid into premiums. HSA’s allow for tax savings (the real savings here) and tax deferred growth on investments (can use the HSA funds in mutual funds). They are great tools. I decided to use one of these myself. I’ve had money for eyeglasses, prescription drugs, CT scans, labs, my doctor visits, etc etc. As long as you save into an HSA, let it build, and have no ongoing, chronic diseases (while you’re young usually), they are great.
Awesome that you are able to benefit so much from the HDHP.
If I don’t go the Dr. other than my annual physical I go pocket a small amount of cash. I get a $400 incentive for being in the HDHP and my annual premiums last year were $340.
I did have 1 Doctor office visit which cost me about $120. If it were not for that I would have made a few dollars.
Either way I have been on the HDHP for 3 years now and the value of my HSA is 3 times my deductible and I contribute a small amount to my HSA now just to keep that going. Eventually it will be used and it is tax free money..
Wait. What? Your employer actually contributed to your HSA? How does that work? Is it still considered taxable “income” on your part? I’ve never heard of that – EVER. I want to call you lucky ;)
It’s tax-free. It’s also fairly common to those employers that offer an HDHP.
I work for a local gov’t entity so there is no match, nor is there a company contribution. So, I put in nearly the max contribution for a family (about $6150 a year) and make no extra money on that.
Well, that’s something I’m hearing for the first time – that you’re making money through your health insurance. It’s probably because you’re lucky enough not to get ill, and may it stay that way, but it’s a great thing to share with others, because as we all know, making money in this sad economy is more difficult than ever. And the $400 bonus probably saves your total expenses, because those preventative exams do plenty of good in the long run.
We too have made money on our HSA when it was just the 2 of us, however this year we had a baby and will max out the 8000 max out of pocket. With no premiums and no more medical bills in 2013 we have free visits the rest of this year. Off to the doctor to get all of our “optional” visits in along with refills of medications. 8000 sounds like a lot but we only pay about 6400 of it because of employer contributions and we pay all of our bills with our 2% cash back credit card, so in a way that is “free money”. I feel 6400 is not a lot for a family of 5, for everything for a year. We really like being on an HSA.
I get this with my work as well. Money for being healthy, woot!
We also have an HSA plan that my husband’s employer contributes to. They provide $175 a month, so the first year we decided to contribute enough additional each month ($75) to meet the deductible by the end of the year ($3,000) and since then we’ve just enjoyed watching the money grow. We’ve had normal checkups and one minor surgery in the last three years, so the money’s fluctuated a bit, but it’s still well over the deductible amount.
Another perk of the HSA system is that soon we’ll invest the HSA funds through TD Ameritrade while keeping a small portion available for basic medical costs with the rest growing in a mutual fund or money market account.
It’s difficult to ‘advise’ on HSAs because most people don’t have control over their employer’s insurance options. However, I think bringing it up to an employer, especially for a company with a younger demographic, is always a good idea. Maybe the HR department hadn’t considered the prospect before. It may not be possible, but the advantages of having the money for an emergency as well as ownership of the funds after leaving a position seems the obvious first choice in any health care plan.
I am not very wonderful with English but I find this really leisurely to interpret.