On this HSA Day, October 15, 2020, SavingsOak is proud to start a new series, HSA User Perspectives, where we invite HSA users to share how they find out about HSA, how they are using it, and to share how HSA has been useful in their lives. Meet people who have been there, are doing it, and learn how to maximize the many benefits of an HSA. Today, we invite you to meet Eden, a young entrepreneur in her early thirties who saw the benefits of HSAs from the beginning.
How did you find out about health savings accounts (HSAs)?
It started about 5 years ago with me trying to make sense of all my health insurance options. Understanding the differences, tax implications, and trade-offs between going with a PPO plan and a High Deductible Health Plan. I looked through a maze of Google search results to understand my options. This led me to understand that one of the benefits of a High Deductible Plan is opening an HSA–a pre-tax account for paying for the approved medical expenses. This is how I use it today.
Was anybody leading you down the path towards an HSA–offering you guidance, education, or advice?
No. As an entrepreneur with a company headquartered abroad, I had to find my own insurance. I had to find and direct it myself, pay for it myself, and be reimbursed through the company. It’s quite unusual, I think, compared to most other situations.
How do you use your HSA? How do you see HSAs as a part of a bigger retirement strategy?
Usage of HSAs is like clockwork for me. I always fill it to the maximum every year to gain benefits to pay for expenses. And usually, I reimburse myself as much as possible. I know that there are other strategies for using HSAs for investment accounts but the limit on it is too small and the yields not substantial to make a difference to seek that strategy. I don’t really see it as part of a bigger retirement strategy at this time.
What advice would you give someone who is just starting on their HSA journey?
I don’t think a lot of people know what an HSA is. If they are beginning the HSA journey, they’ve already taken into account that HSAs are available to them and why it is useful. Then it’s really critical to look at the fine print of how the accounts work and see that it fits your goals and usage scenarios. Understanding the mechanics of associated fees, yields, investment options, stockpiling cash, etc. is crucial. Think about how they will use it day-to-day.
What have you seen that is available now that wasn’t 5 years ago?
I wasn’t following this at all until recently and I was surprised by how large the industry was. Some of the things I learned was that people were using them as retirement accounts rather than paying themselves out immediately for medical expenses. And maybe if I were to choose again right now and spend time thinking about who to work with on an HSA, perhaps I would seek out higher yield and more investment options. But it hasn’t been a large enough differential economically to change providers to do that.
What kind of investment options would you be looking for a long term investment strategy through HSA?
For me personally, I’d probably go a very traditional route, which is the same way that I do with my largest investment accounts, which are self-directed mutual funds on auto-pilot. I don’t look at it day-to-day and I expect very-low fees. This is the base-line of how I look at my investments. I don’t actively trade stocks or manage a portfolio. I believe that most people are the same way. Surprisingly, they really don’t make it a career to actively manage portfolios because we find that there is very little to gain. So, that’s the answer for myself. But my observation is that some people are seeking opportunities to actively manage portfolios and they want really specific things and specific yields targeting. Especially if they think about a diversified portfolio approach and they have time to deal with it. And there are people like me that just don’t care and seek out, well, a slightly better yield, because as a comparison, it’s very obvious what you’re getting on a checking account or CDs. It just needs to be comparable and in-line. Nothing too shocking.
Are there any specific expenses that you were surprised to find out were covered through HSA?
Definitely. There’s always all the marketing around “Did you know sunscreen and toothpaste and tampons are covered?!” I look at that and I’m shocked and I’m, like, “Wow, that’s amazing!” But over the course of having an HSA, I’ve had an incident that broke my arm in two spots and it paid for the procedure, it paid for the visits, it paid for the care. It was $6000 in total. That was a lot of money and it was all paid for through HSA. Even just thinking about that year, I’m really happy I made the decision to save through an HSA.
When you incurred $6000 worth of expenses, did you pause the next year to reconsider your decision about signing up for High Deductible Health Plan?
This was just an incident. When I’m thinking about healthcare and the costs of it, my bias is if I have chronic issues or something recurring, large that requires a lot of visits regularly. Maybe I would consider it. But this was a one-time deal. There were a bunch of procedures related to it, but I wouldn’t have thought of it as recurring.
When you were just starting to invest (in an HSA or in general) were there any mindset barriers that you had to overcome?
There are some habits that you form when you pay for things–you don’t think to take out that card from your wallet. There was a period where I was forgetting to use the card and I would have to pay myself back. I don’t think beyond those inconveniences, there was anything.
NOTE: These are edited excerpts from the conversation with an HSA participant. In some cases, stock photos and only first names or initials have been used to protect identity.