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Decreased health costs, increased 401k

January 27, 2009

One of my 2009 goals was to increase my 401k contributions from 8% to 10%.  In January, I bumped them up to 9%.  In February, I have it set to 10%, and my paycheck will be within $5 of what it was last year.  That was not a very hard goal to achieve.  This is due to my changes in health care.

Last year, I saved about $1800 in a Health Savings Account, and this year I switched to an HMO. That $1800 might be used for LASIK someday (no time soon), but for now it is just sort of like this separate fund for any health emergencies.  I can’t contribute to my HSA this year (since I do not have a high deductible plan), but I did set aside $500 for my flexible health spending account for co-pays, contact lenses and such.

I really like the philosophy of health savings accounts and high deductible health plans, especially for the young and healthy.  In fact, if they had covered my birth control prescription, I may have stuck with it.  I find it obnoxious that they cover medication to lower blood pressure/cholesterol/etc. while I live a relatively healthy lifestyle but just am not ready to create life yet.  Paying $50-$60/month for BC ate up my employers contribution.  It was just financially smarter to choose a different option.

Now I have better coverage, the same take home pay, and 2% more in my 401k.  Everyone wins, right?

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9 Comments leave one →
  1. January 27, 2009 12:21 pm

    Is a health savings account the same as a Flexible Spending Account? Because Flex dollars MUST be spent in the year they are withheld from the paycheck and cannot be rolled over into the next year–if you don’t use them, you lose them.

    I’d hate for you to save for Lasik for years only to find out you lost the money!

  2. January 27, 2009 12:35 pm

    @LMM – No they are not the same thing. They are similar, but what you mentioned is the key difference. Also, HSA can only go with a high deductible plan. You can’t contribute to them with “regular” insurance.

  3. January 27, 2009 12:52 pm

    I’ve never had the opportunity to examine the HSA … what happens with the account now that you’ve switched? I assume it was administered by a company through your employer, so does that mean the HSA is portable?

  4. Janet permalink
    January 27, 2009 2:24 pm

    I’m really surprised your previous health insurance covered prescriptions but did not include birth control pills. Were you living in California at the time? It’s the law in California that they have to cover that if they cover prescriptions in general. I’m not an expert on the topic, I’m not a lawyer, there might be loopholes I am not aware of, but I in general it is the law for many states. (The link is to a national conference of state legislatures, they seem unbiased)
    http://www.ncsl.org/programs/health/contraceplaws.htm

  5. January 27, 2009 3:22 pm

    @Janet – The nature of a high deductible health plans is that nothing is covered except (often) preventative care. Birth controls are not considered a preventative medication. They are covered only once the deductible (which is high) is met. I think that is the reason, but I’ll check out the link

    @Revanche – Yes–you can roll them over, sort of like an IRA. Actually, I currently have 2 HSAs (one from my previous employer that I never rolled over, but that use most, so it only has $40 left).

    Often times they have annoying monthly fees ($2-$3) that your employer will cover, and if you leave your employer, they stop covering the fee. But my main HSA is still just sitting there. Nothing happens to it, I can still withdraw from it, but can’t add to it.

  6. January 27, 2009 4:01 pm

    Yeah, I never have any idea what I’m doing with the health benefits. I went for an HMO because it was cheap, and I use it every so often when I need contact refills.

    I don’t like doctors, so I guess that works for me.

  7. January 27, 2009 4:17 pm

    One thing you should always check when you’re having trouble with any prescription’s cost is whether there is a viable generic alternative. I was having the same problem with my BC costs, but I switched to the generic and started picking it up from Target for only $9 a month.

  8. January 28, 2009 7:06 am

    A lot of people confuse HSAs and FSAs, I wrote a compare/contrast type post to explain the two types of plans. It’s on my sidebar under popular posts if anyone is interested.

    I think it’s interesting that the HSA was costing you more overall. They tout them as this great way to lower health costs, it seems that is only true if you don’t save money in the investment account! That’s great you were able to save more in your 401k without much pain. I’m sticking at 8% and adding a ROTH this year.

  9. January 28, 2009 7:56 am

    @miss m – i think the HSA was probably costing my employer less, but me personally, it cost more for me! Like I mentioned, that is mainly because I was paying 50+/mo for birth control, while my HMO is totally free (of premiums) and I pay 15/mo copay.

    I should have linked to a post like yours. HSAs are new and uncommon enough that a lot of people don’t know the details. 🙂

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