Business is Personal (Finance)

For those of you coming into this topic cold, here's a good primer at The Penny Saved: Health Savings Account Vs Health Reimbursement Account Vs Flex Savings Account (and keeping my hair for cheaper)

I originally planned to write a followup on my previous HDP/HSA article after a few more months of medical bills. However, I just noticed an error in my spreadsheet so I've decided on an earlier update. The initial spreadsheet did not have a row for transaction costs -- this has been fixed now, download here: HSA_investment_options.ods, HSA_investment_options.xls

Spreadsheet Example: HSA Bank

Let's use HSA Bank as a quick example of how to use this spreadsheet. HSA Bank charges $2.25 per month if you have a bank balance of less than $3000. On the other hand, they pay a puny 2% interest compared to 5.12% at Patelco (minus $1/mo in fees). So we have 2 options:

• Keep $3000 at HSA Bank earning 2% interest and pay no fees
• Keep $0 at HSA Bank and pay $39 in fees

To run the numbers on this scenario, fill in the spreadsheet like so:



Although people don't like fees in general, sometimes it's better to pay them. In the above example, the 3.12% interest difference on $3000 is $93.60. Would you pay $39 in fees to get $93.60 back? I would.

New Investment Option: Bancorp HSA

While browsing Boggleheads, I ran across this message about Bancorp HSA using a Fidelity platform with mutual funds available for $4.95 per transaction. (The price is scheduled to increase to $5.95 as of March 14 -- see their fee schedule for more details.) Fees are waived if you have an automatic ACH deposit plan. Among the list of 1500 mutual funds available at $5.95 are Fidelity's Spartan Index funds. Assuming you meet the minimums for those funds (or the minimums are waived for HSA accounts), this seems to be the lowest cost investment option available. (The updated spreadsheet includes Bancorp HSA.)

Updated Summary

In the below table, Bancorp HSA uses Fidelity Spartan funds at above 10K balance. Below 10K, index funds from Dreyfus, Columbia, JPM Morgan, etc are available ranging from 0.15% to 0.60%.

	HSA Administrators	HSA Bank	HSA Resources	Saturna Capital	Select Account	Bancorp HSA
$1000	5.62%	5.54%	6.84%	2.55%	5.43%	2.05%
$2500	2.56%	2.30%	2.82%	1.83%	2.51%	0.97%
$5000	1.54%	1.22%	1.48%	1.59%	1.43%	0.61%
$7500	1.20%	0.86%	1.03%	1.51%	1.21%	0.49%
$10000	1.03%	0.68%	0.81%	1.47%	0.88%	0.25%
$15000	0.86%	0.50%	0.50%	1.43%	0.88%	0.25%
$20000	0.78%	0.41%	0.47%	1.41%	0.80%	0.22%
$35000	0.51%	0.29%	0.33%	1.38%	0.70%	0.18%
$50000	0.41%	0.25%	0.27%	1.37%	0.66%	0.17%

Tax Filings

Remember to file Form 8889 if during 2007:

• You or your employer made contributions
• You withdrew money for any reason (medical, non-qualified or rollover)

After looking through this form, it appears the cheapest and quickest way to transfer money across acounts is to write a check to yourself and deposit the money manually as the various HSA administrators all seem to charge fees for an outgoing rollover. If you do it by hand, fill in a simple offset on lines 14a, 14b, 14c during tax time and it's a done deal.

Paying Medical Expenses

No issues. The bills I get in the mail, I use online bill pay. When I go to the pharmacy or optometrist, I use the debit card. And for reimbursements, I write a check to myself. Pretty easy.

My balance has remained relatively constant even though there's a constant stream of bills for my wife's pregnancy. The bills seem spaced out just enough to be covered by the employer contributions. Of course, making an additional contribution last year has helped maintain a good buffer. At this point, we're about $1800 away from the annual deductible and $2500 away from the out of pocket maximum. Once those numbers are hit, I expect my account to start growing again.

You also have the option of never paying a single medical bill out of your HSA. Instead, let it grow tax free until you pass away. At that time, your estate will then submit all your saved medical receipts for reimbursement. The math works out in your favor -- assuming Congress doesn't close this loophole.

(Filed in health insurance, investing, tools)