High Deductible Health Plan + HSA: A Practical Guide

Warning: I am not a financial or insurance professional. The following is my experiences with medical insurance and is not professional advice nor guidance. You are responsible for understanding all specifics and conditions of any medical plans you are considering!

I did it. This past fall I switched from my normal medical insurance to a High Deductible Health Plan plus Healthcare Savings Account (HDHP + HSA). I had been considering making the switch for a couple of years, and this year the numbers seemed to work and I convinced myself it was the way to go.

The biggest problem with HSA based plans is that they are complicated — or at least seem complicated. So people are wary of making the switch. I mean, who wants to research medical insurance? Most folks rather have a root canal.

Now that I’ve lived with an HSA plan for a few months I figured I’d write about my experiences making the change. And that might help you decide if HDHP + HSA is the way to go. So let’s get started:

What is an HDHP + HSA?

HSA based plans have two parts:

  1. A high deductible insurance plan (HDHP)
  2. A healthcare savings account (HSA)

HDHP

The HDHP is a lot like normal insurance, but instead of a deductible of hundreds of dollars the deductible is thousands of dollars. And, unlike most plans, almost everything hits the deductible.

You can think of this deductible as a bridge that you must cross before the insurance kicks in. Almost all medical costs count against this bridge and you must pay out of your pocket until the bridge is crossed (the deductible is paid off). I say “almost all” because health maintenance items like physicals and mammograms often do not get charged against the deductible and are therefore covered by the insurance.

Once you cross the bridge the insurance kicks in.

For example, let’s say you go to the doctor because you’re sick, and you get a prescription. Under traditional insurance you would pay a co-pay (say $20) for the doctor’s visit, and a co-pay (say $15) for the prescription. So $35 out of pocket. Your insurance pays for everything else.

But under an HDHP it all goes against the deductible and therefore comes out of your pocket. So maybe $150 for the doctor’s visit and $50 for the prescription. $200 out of your pocket that counts against the deductible.

So if your deductible (bridge) is $3000, you have paid down $200 of that, and are left with $2800 more to go before the insurance kicks in.

Now you may be thinking: WTF? This sounds terrible! Why would I ever want this type of insurance?  Two reasons:

  1. It has lower premiums, so each month you will pay less for this insurance
  2. It allows you to have an HSA, which is a hugely beneficial financial tool

HSA

OK, so you have this awful bridge you must cross before your insurance kicks in. Now if you never get sick and only have physicals you never need to worry about crossing the bridge. But what if you do get sick? How do you pay for those bills?

This is where the HSA helps. You contribute pre-tax dollars to the HSA, and when you take the money out to pay for medical expenses it is also tax free. Plus any investment income earned by the account is not taxed. That’s called triple tax free. That’s really good.

And the HSA is yours for life. Any time you have a HDHP you can contribute to your HSA. And all the money in an HSA rolls over year to year. And it is yours for life, so you can use it 10, 15 , 20 years from now to pay for medical expenses. And many HSA’s offer investment options like mutual funds if your balance is over a certain level.

So in many ways an HSA is like a medical 401k. But it is even better than a 401k. Why? Because in a traditional 401k your money is taxed when you take it out, but for an HSA the money is not taxed when you use it to pay for qualified medical expenses. And after age 65 those medical expenses can include premiums for medical insurance. Finally, even if you don’t use it for medical expenses, after age 65 there is no penalty for making withdrawls — you just pay income tax on the money you pull out (just like you would for a 401k).

And as a bonus, your employer might give you seed money each year for your HSA! That’s right, free money! Another benefit is you can, one time, rollover IRA funds into an HSA. So if you want you can seed your HSA with funds from an IRA.

Note there are limitations. There is a cap for how much you can contribute to an HSA, and in order to contribute to an HSA your must have a HDHP.

But what about FSA’s (Flexible Savings Accounts)? You might already have one of those without needing a HDHP. Yes, FSA’s are good, but they are not as good as an HSA: they are use-or-loose  (don’t rollover year-to-year), typically no employer seed money, you can’t “take them with you”, and no investment options. Keep in mind that having an HSA does not completely eliminate the option of having an FSA. There is something called a “Limited FSA” that you are allowed to contribute to even when you have an HSA. A Limited FSA is less flexible than a typical FSA, but can still handle a number of expenses like dental, etc.

So HSA’s are really good things. In fact some financial advisors recommend funding a 401k just up to the company match limit, and then put any additional savings into your HSA.

Got it? An HSA is fantastic,  but even so there are a number of other things to consider before jumping into an HDHP.

The Math

OK, so we have an HDHP which looks pretty awful due to that high deductible, and an HSA that sounds great. How do you decide if it’s the way to go?

First start by doing some arithmetic. You need to take into account  4 things:

  1. How large is the deductible (the bridge)
  2. How much will you save each month in premiums
  3. How much HSA seed money does your employer offer
  4. How much out-of-pocket expense do you usually have under your current plan

For example, let’s say:

  1. The deductible is $3000
  2. You will save $150 each month in premiums
  3. You will get $1000 in HSA seed money from your employer

Doing the math:

$3000 – $1000 – ($150 * 12) = $200

Hey, that’s not so bad! Your exposure to the deductible is just $200 because your employer is covering $1000 of the deductible, and your premium savings is covering another $1800.

So now you can take into account your out of pocket expenses under your current plan. Odds are your current deductible is more than $200 (although fewer things probably hit that deductible), and you are making co-pays. So depending on your situation that $200 deductible exposure under the HDHP might be AOK.

And obviously if you have a generous employer who gives you $1200 in seed money then it is a no brainer. Or if your premium savings is $170. In those cases your bridge is fully covered by the seed money plus premium savings.

Other Considerations

The dollars and cents arithmetic is a very important consideration, but not the only one. Some other things to look at.

The HDHP + HSA requires more work on your part

Under a traditional plan you go to the doctor, make your co-pay, and then forget about it. With an HSA plan you don’t pay anything at the doctor’s office, but you will get a bill after the visit. So you need to watch for the bill, make sure it is processed by your insurance company and applied to your deductible, and then make the payment (hopefully out of your HSA).

This means you need to be more involved with your medical expenses. In general this is a good thing, but it requires more work and planning. For some folks this is not a good fit. I know one guy at work that tried the HSA and hated it: “I get all these damn bills!” Well, duh, yes you do. He switched to Kaiser and is much happier!

Timing

You can’t borrow ahead against your HSA (like you can with many FSAs). That means if you get in a car accident in January and have thousands in medical bills you might not have enough money in your HSA to cover your out of pocket expenses. You will need to pay those bills somehow, and then re-imburse yourself later from the HSA after your HSA contributions catch up and fund it (there is a way to “pay yourself” from the HSA to reimburse you for qualified expenses).

This also means you might defer medical visits because you won’t have enough money in your HSA until later in the year. This might not be a good thing. If your employer gives you seed money that helps, but not everybody is that fortunate.

The Insurance

Another consideration is what is the HDHP coverage that your are bridging to? Is it comparable to your current plan?

In my case the insurance plans were comparable, but not identical. Instead of co-pays my cost under the HDHP is 10% for most procedures. Turns out that 10% is a bit less than many of the co-pays I had under my old plan. So that made the HDHP coverage a hair better for me.

Tooling

I mentioned that the HDHP + HSA requires more work on your part, so it is important to understand what tools are provided by the insurance company and HSA provider to help you manage these things.

In my case those tools are pretty good. I have two online accounts. One with the insurance provider and one with the HSA bank. The insurance is tightly integrated with the HSA, so a typical scenario for me is:

  1. I log into my insurance company account
  2. I review new claims to see what the costs were and that they were applied to the deductible
  3. I pay new claims/bills right there from the claim summary. It lets me pay electronically from my HSA with just a few clicks.

The HSA bank also provides a debit card that can be used to pay for prescriptions and other qualified medical expenses.

Periodically I will log into my HSA bank account to verify my paycheck contributions are going in and what funds are available and what has been paid out.

Overall I find the tools to be good, and I expect other major insurance companies would provide similar online tools.

Your Age

I am well into middle age, but if I was young, healthy, and typically only went to the doctor for physicals (which might be %100 covered under your plan) — then I would consider HDHP + HSA very seriously. You possibly get free seed money from your employer, you can put your premium savings into the HSA, and voila! you are saving for retirement!

401k Tradeoff

Another buddy at work is considering reducing some of his 401k contributions and putting that money into his HSA. He is being careful to make sure he still maximizes the company match on the 401k, but he is viewing the HSA as a long term savings plan for retirement like his 401k is. Note he is NOT reducing his 401k contributions to pay current medical bills, instead he is shifting some of his retirement savings from the 401k to the HSA as part of his long term plans. Why? Because as stated earlier, you pay no taxes on money pulled out of an HSA to pay medical bills. You do pay taxes on money pulled out of (most) 401k’s to pay medical bills. So in your retirement years the money in the HSA has more value (assuming you will have medical bills).

Is It Right For You?

My brother, who had an HSA based plan for a number of years, commented to me that during the bridge “I was the insurance company”. He became more aware of healthcare costs, and he felt more empowered to question things — since he was the insurance company!  So he would question his doctor if that full panel of lab tests was necessary. Or if a more cost effective prescription option was available.  And he found that yes, there were often other (less expensive) options.

Maybe that appeals to you, maybe it doesn’t. But even if it doesn’t the arithmetic does not lie.  If your effective exposure deductible is low, and you are reasonably healthy, then you can come out far ahead with an HSA plan.

 

 

 

 

 

Amazon Kindle Fire HD 8 Review

Update: This review is for the original Fire HD 8, not the updated model that was just introduced in Sept 2016. The new HD 8 is faster and cheaper, which makes it even more compelling. Now if they could just improve what is offered in the Amazon App Store!

For the past couple of years I’ve been using a hand-me-down Apple iPad 1 as my tablet, and while it might have been revolutionary in 2010, today it is pretty archaic: slow, low-res screen, and a web browser that crashes more often than not.

So I decided to get myself a new tablet for Christmas. My requirements were modest, and I decided I did not want to pay the “Apple Tax” for an iPad. Android would be fine. And being an Amazon Prime user, there was some appeal in getting a Fire OS device. So when Amazon put their HD 8 tablet on sale I pulled the trigger.

After using the device for a few weeks, here are my impressions.

What I Got

  • Fire HD 8, 8″ HD Display, Wi-Fi, 16 GB – Includes Special Offers, Black:  $169.99 $149.99 (on sale)
  • AmazonBasics 8-Inch Tablet Sleeve:  $6.79
  • SanDisk 64 GB micro SD Memory Card: $22.99

So I got an 80GB, 8″ tablet with sleeve for $179.77 ($198.49 after tax delivered to my door). I chose not to buy a case for it, since who wants to spend $40-$50 on a case for a $150 device? ( I will be keeping an eye out on refurbished cases).

By comparison a 64GB iPad mini4 is $499. A 32GB iPad mini2 is $319. Yes, those are better tablets — but that much better?

Specifications

Let’s see how this device compares to my old iPad 1, and the current iPad Minis.

Fire HD 8 iPad 1 iPad Mini 2 iPad Mini 4
Screen Size 8 inches 9.7 inches 7.9 inches 7.9 inches
Screen Resolution 1280 x 800 1024×768 2048×1536 2048×1536
Screen PPI 189 132 326 326
RAM 1 GB 256 MB 1 GB 2 GB
Processor 1.5/1.2 GHz quad-core MediaTek 1 GHz ARM Cortex-A8 1.3 GHz dual-core Apple Cyclone 1.5 GHz dual-core Apple Typhoon
Back Camera
5 MP/1080p N/A 5 MP/1080p 8 MP/1080p
Front Camera
720p N/A 1.2 MP/720p 1.2 MP/720p

So the Fire holds its own against the current Mini’s on most specs, except for the screen (and it soundly trounces the old iPad 1). Also, Apple devices are known for  good quality cameras, so while the specs here are similar, one has to assume the Apple cameras would out-perform the Fire’s — something I believe is true based on informal comparisons.

Storage

One fantastic thing about the Fire is that it accepts micro SD memory cards, so it’s cheap to upgrade from 16GB to 80GB. But there is some confusion as to how this add-on storage is used. So to clarify:

  1. Not everything can be stored on the add-on SD card. According to Amazon: audio books, books, Silk Browser downloads, email, and some apps must be stored on the internal storage.
  2. For other stuff you control use of the external SD card in Settings under Storage. This lets you store movies, TV shows, music, photos, videos and some (“supported”) apps to the SD card.

So the internal storage is always used for some stuff. Because of this I got the 16GB model instead of the 8GB model. Fortunately large things, like music and video, can be stored on the external SSD card.

Display

One of my concerns with the HD 8 was the display. The specs are OK, but nowhere near Apple’s retina displays. So would the HD 8 display be sufficient?

In short, the answer is yes. The HD has an IPS display that is bright, with vivid colors and good viewing from off-angle. It is very good for games and video.  It is fine for photos, and is sufficient for book reading if you are not doing lengthy reading sessions.

This last point is important. If you intend to use the HD 8 as a primary Kindle e-reader, then you might be disappointed due to it’s fairly low (by Apple standards) PPI.  The HD 8 is fine for casual reading, but if you want a serious e-reader then I’d get a Kindle Paperwhite. Fortunately you can get an  HD 8 and a Kindle Paperwhite for less than an iPad mini!

So overall the display, while not fantastic, is sufficient — at least for my use.

Camera

So far I’ve only used the rear facing 5MP still camera. Based on initial results I’d say the camera is fine for Facebook posts and other casual snapshots, but there is some degree of softness and lack of detail. This won’t be replacing your iPhone 6 or dedicated digital camera, but it is perfectly fine for quick social media shots.

Fire OS 5.5

If you’ve used a Fire TV or Fire Stick then the Fire operating system will be familiar. While the home screen has the obligatory set of app icons, the rest of the user interface is oriented around content — especially Amazon content. Swiping vertically on the home screen scrolls through your apps. Scrolling horizontally takes you through content types: Books, Video, Games, Shop, Apps, Music, AudioBooks, Newsstand.

This works fine, although results in multiple ways to get to the same content, and the content is presented in different ways. Want to play music? You can open the Amazon Music app from the Home screen, or you can tap on the Music category. Why would you want to do one over the other?  Generally speaking the categories tend to focus on Amazon content with recommendations for you, while the apps focus on your content more specifically. But still, it’s two different ways to get to the same stuff, and any UI based on that is bound to be a bit sub-optimal.

One nice feature is that swiping to the left of the home screen shows a “Recents” page that summarizes apps and content that you’ve recently accessed. Very convenient.

So overall the user experience is fine, but this would not be my first choice for my mom where the simpler and more consistent Apple iOS experience would be easier to use.

Which brings me to my next point. Much of Fire OS focuses on Amazon Prime content. That’s one of the appeals of a Fire tablet for Prime members. But if you are not an Amazon Prime member then that takes away a large portion of the benefit of using Fire OS.

Basic Apps: E-Mail, Silk Web Browser

E-Mail works fine. Simple to set up. Runs and performs well. No complaints.

The Silk web browser works and preforms ok, but overall it feels less mature than Safari on iOS. For example the Southwest Airlines web site doesn’t load on my Fire HD 8, but it loads fine on my wife’s iPad. My wife has confidence that she can do any web browsing on her iPad that she would do on a iMac. I do NOT have that confidence with Silk. It’s fine for most uses, but it does not replace your laptop.

Performance and Stability

Performance of the tablet is tolerable. It performs well for games and media. Surfing the web is ok for many sites, although on occasion Silk is sluggish to respond to taps on links, and more complex sites can bog down (Note: the extra memory in the updated version should help this).

The tablet has been pretty stable except for one incident that could have been part user error. After using the tablet for a couple weeks I started getting random messages about the SD card being removed improperly — even though I never touched the SD card after initially installing it. This led to the tablet failing to launch apps, and eventually getting into a reboot / filesystem repair loop.

I then removed the SD card, did a factory reset on the tablet, reinstalled the SD card and erased it, then re-downloaded apps. That seemed to do the trick and I have had no problems since. My theory is when I initially installed the SD card I did not seat it fully in its slot.

Update: The SD card has continued to be an issue with the tablet occasionally having issues reading the card. I suspect it is my SD card, but it has not happened often enough for me to try another card to verify this. I’m now thinking it might be best to always have apps installed onto the built-in storage, and use the SD card only for media (music and video). This is controllable via the Settings.

Other than that the tablet has been pretty stable. I do end up power cycling it once a week or so to keep issues at bay and it running smoothly.

The Kindle App Store

One of the advantages of Fire OS is easy access to Amazon Prime content. But one of the disadvantages of Fire OS is the relatively weak Kindle App Store.

You want DropBox? Not there.

1Password? Nope.

Instagram? Snapchat?  Sorry.

These are all available in Google Play. But not in the Kindle AppStore. And this can be frustrating.

There is a way around this — it’s called sideloading. Basically you

  1. Change a setting on your Fire tablet to allow applications installed from untrusted sources.
  2. Go download the app’s software package from somewhere
  3. Install it on your Fire tablet
  4. Hope it works

#2 can be the hard part. In some cases it’s not bad, for example DropBox provides an Android download on its website. But 1Password does not — I ended up signing up as a Beta user to get an Android download.

There are ways to trick Google Play into letting you download packages onto FireOS, but it gets fairly complicated.

This is the big tradeoff with an Amazon Fire tablet. You get easy access to Amazon Prime content, but you loose easy access to some number of Android apps. Also, the Kindle Store has a fair amount of cruft in it. For example, there actually is a version of Instagram in the App Store, but it is old and doesn’t support the current tablets.

So once again, if you don’t have Amazon Prime then you probably don’t want a Fire tablet. In that case a more vanilla Android tablet would be a better choice.

Update: Amazon seems to be making a renewed push for developers to use their App Testing Service to verify their Android apps for Fire OS — touting that 85% of all Android apps “just work” on Fire OS. Let’s hope that this starts bringing new content to the Amazon App Store.

Security / Encryption

As expected you can set a pin or password that is required to unlock the device after it has been idle — a highly recommended precaution to take.

But as far as I can tell, there is no device encryption. Apparently this was available on some earlier fire tablets, but I don’t see this option on the HD 8. Maybe it doesn’t have the hardware necessary to support (fast) encryption, or maybe it will come in a later OS update. But depending on your use this could be a deal killer.

Update: It’s confirmed. Amazon did remove device encryption from Fire OS 5 and they now have announced plans to bring it back in the spring.

Special Offers

I opted for the Special Offers edition to save a few bucks. A couple observations:

  1. The offers only appear on the lock screen. You don’t see them otherwise (well, except for the next bug).
  2. On rare occasions I’ve had the “special offers” screen saver linger in the background after I switch to the Home screen. This problem seems to have gone away after I set my own wallpaper — fingers crossed. Update: since setting my own wallpaper this problem has gone away.
  3. While unlocking the tablet, once in a while I inadvertently tap something concerning the speical offer and end up getting more information on the offer or playing a video concerning the offer. Annoying.

You can disable special offers after purchase by paying $15. Due to #3 above I am now considering this!

Summary

Overall the tablet works pretty well, but there are some drawbacks:

  1. The Kindle App Store is weak compared to Google Play
  2. No full device encryption, but hopefully that will be remedied in a few months.

If you have Amazon Prime and you are looking for a cheap tablet to access Amazon content, then the tablet is good choice. Otherwise a generic Android tablet might be a better way to go.