Color of Money Live: Health insurance expert Myles Ma answers your questions about FSAs, high deductible plans, and open enrollment

Nov 14, 2019

Welcome to a weekly discussion about your money hosted by Michelle Singletary, nationally syndicated personal finance columnist for The Washington Post.

This week, Michelle was joined by Myles Ma, a health care expert and the managing editor at Policygenius Magazine in New York.

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Thanks for joining me today. I have a guest, Myles Ma, a health care expert from Policygenius. Since this is open enrollment season for a lot of folks, I thought he might help you with any questions you have about your plan. 

So, let's get started. 

My family has been blessed with several years of good health, so I have been able to build up a good amount of money in my HSA (some in cash, some in investments). How much of the balance should I keep in cash?

Great job saving! You should keep enough cash on hand to pay your annual deductible at a minimum. Ideally, you'd have your out-of-pocket maximum easily accessible as cash as well.

What happens to the balance in my medical FSA if I leave my employer?

In general, an FSA is use it or lose it, including when you change jobs and at the end of a calendar year. So spend it down before you leave.

No questions - just glad to see you here, because I hope that means your daughter is doing better. I hope her recovery is smooth and quick.

Thank you so much! My daughter is better. She's out of the hospital and healing. Still in pain but on her way to recovery. I tell you, it was quite a scare. As some of you know, I wrote about the experience hoping to use it to help others. Here are two columns and my newsletter for today about it all. 

Weigh in if you like. 

Trust me: You need to start saving now so you can fly last-minute to be there for someone you love when the time comes

Thank goodness for that rainy day fund. It helped me get through the unexpected.

You get sick. Then the hospital bill makes you ill.

Not a question, just wanted to say your daughter was in my prayers. I'm so glad to hear she's doing better.

I've received so many kind notes like yours. They've meant a lot. 

When is LTC insurance a good idea, and when is it better just to try to save a lot of money that could be put toward care? From experience with my mother and MIL, I know that assisted living and many of the activities of nursing care aren't covered by Medicare or supplemental health insurance. (she/her, Arlington)

This is a super difficult question, and I hate to rely on an old personal finance copout, but it depends. Long-term care insurance is a big, and long-lasting financial decision, and your age, health, income and net worth will all play a role. Your best bet is talking with a financial adviser who can get into the weeds of your particular situation.

Dear Michelle, My daughter and her husband have decided to sell their suburban house after three years and return to renting in a city. What should they be doing with the money they will realize from the sale of their house to protect it so that it will be there if they decide to go back to home ownership after a while?

Such a great question. I know I sound like a broken record but if the funds are substantial this is a good time to pay for a fee-only financial planner go over long-term goals. Maybe they will want to invest the money for retirement. Or if they are carrying a lot of consumer debt and especially student loans they could get rid of that and then invest the rest.

The point is look at the money not just from the perspective of buying a home again but what's the overall best use of this flush of cash.  

Do you have any advice on deciding on a high deductible plan or not? In general, I feel like with ah HDHP you're paying more for what you actually use vs. a premium that just goes to the insurance company. But, our out of pocket max is pretty high. what are the watchouts? We would have enough money to cover our out of pocket max but it'd be a huge hit to our overall savings.

It's a tough decision. The math I recommend people do is this: Add up the annual premium for all the plans. That's the amount you're giving to the insurance company no matter how healthy or sick you are. Then add in that out-of-pocket max. That's the worst-case scenario. The plan with the lowest sum of premium + out-of-pocket max is usually the best financial choice, and it's usually the HDHP. But if you want your health care costs to be more predictable, sometimes a higher premium feels like a safer bet. If your employer gives you money toward an HSA with the HDHP as part of your benefits, factor that in as well, because it's a great tool for helping cope with health expenses and possibly saving for the long term.

Your articles recently about long term care costs, aging in place, and selecting an executor (or power of attorney) are so necessary. Thank you. We also noted a spate of articles recently on the AARP website on rising long term care costs and also on the growing move toward memory care facilities. Our mother (93 years old) has dementia (diagnosed by her doctor and other health care professionals). Mom is currently in a memory care home. My sister (who holds the health and property p.o.a) and I have worn ourselves out researching these topics on our own over this last year. Some of our other family members keep 'interfering' because they are operating on old information or on hearsay information about dementia, rising in-home care costs, memory care facilities, etc. Nobody seems to believe us when we tell them about the huge costs involved; however, they won't do the research themselves. All of Mom's assets will be going to her own care ( until she is eligible for Medicaid). I'd like to send the links to all these sites to these relatives and hopefully they will understand what we're going through. No one in our immediate family is in good enough financial health or physical health to take care of our mother in our own homes. We're in our mid-70's and still working part-time or full-time jobs build up our own retirement and long-term health care plans. We're also not sure we can provide the 24/7 surveillance required to keep Mom from wandering away. Thank you for getting this information out -- maybe folks will pay more attention to these topics if they come from you.

First, bless you for taking on this task. I've been the caregiver for my grandfather (died of lung cancer), grandmother (natural causes), disabled brother (died at 32 after living years with severe epilepsy,  aunt (financial caregiver until she died in her early 90s), and my father-in-law (died of lung cancer living with me and my husband).

 So, trust me I get it and the naysayers about cost. Makes me want to smack people. I suggest you send them copies of the monthly bill and expenses. In fact, you might send out a quarterly report on how much is costing. Send copies of the actual bills as a FYI.

Also, anybody out there dealing with siblings/heirs who question your spending for care because they are trying not to spend down the person's money, except you suspect they are trying to preserve the funds for themselves?

Anyway, I'm so glad the columns helped. Here are the links you can send out.

 

Here’s how to pick the executor of your estate. It may not be the person you think.

For seniors hoping to age in place, the cost of in-home care just got a lot more expensive

For many families, the costs of long-term care are horrifying

 

 

What is the biggest mistake people make during open enrollment? Also, what advice would you give about figuring out should you stay or should you change up your health plan? There is just so much information to look over. I can see why people just stay put. 

One big mistake of staying on the same plan without doing any homework is that your coverage network may change year to year. At the very least, people should do the work of making sure their doctors are still in their plans' network. Even if all things are the same from year to year, the network can change.

Why do many insurance companies limit orthodontics to a set reimbursement amount for life? Many kids need braces more than once. It's like saying you can only get the flu once.

Insurance companies in general price based on what's most likely to happen. If their actuaries tell them that the people are most likely to get braces once, that's how they'll price their plans.

you are getting some benefit from having the policy before you reach your limit. My yearly blood tests last year had "charges" of hundreds of dollars - close to a thousand, actually. The fact that I had insurance brought the negotiated price down to around $150. My insurance covered a lot of that, which was great, but the biggest chunk of financial benefit was in getting the costs from over $900 to less than $200.

Thanks for sharing. But can I say. This is just crazy. We need a more universe solution to this guessing how much we may have to pay and hoping we have the money. 

I have family medical/dental coverage that includes myself, spouse and 23 year old child. Under HSA rules, I was able to use the account for eligible expenses for my child when she was a full time student and I could claim her as a dependent. The ACA allows for adult children to be on a parent’s policy until age 26. She is now in community college part time, working full time and also files her own tax return. My husband can use the HSA, but my daughter can’t. I guess it has more to do with tax filings, but it is very confusing. I imagine many people make mistakes in how to use their HSA funds in this regard. Someone told me that the use of funds aren’t audited and ‘how would anyone know,’ but I don’t want to knowingly break any rules. Can you please explain what I’m missing here? Thank you so much!

In general, you can use your HSA for people on your health plan, your spouse and dependents. You may want to talk to your benefits provider about your specific situation.

expenses for the hospital, there can be lots of other charges for the doctors. most of whom are not hospital employees, but independent business people themselves. They may be in network, or not. For some reason, it is particularly common for anesthesiology groups to not be in all the same networks as the hospitals in which they operate. This is a disaster and pretty much shouldn't be allowed, at least in emergency situations. Pretty much the last thing you should be worried about when a doctor is asking you if have ever had an allergic reaction to anesthesia is whether she/he is in network for you insurance.

This is our concern with my daughter's insurance. He's got max $3,000 deductible but holding our breath about charges that we are not expecting. We will help her of course but it's very scary. She had a previous major health crisis when she was about 8 and our HMO covered everything. I don't recall much of any co-pays. It was such a relief because she was hospitalized for more than two months with chemo afterwards. Even with being good savers a huge medical bill would have wiped us out. 

I should have added, we have a great benefits person at work but we're a small company, so I don't want to ask a lot of questions about what happens to the account when I leave my job and risk tipping her off that I may be thinking about leaving.

Gotcha. You may be able to reach out to the company managing the FSA for those types of questions.

I understand your concern but you could wrap the questions you really want to know around other questions bout the FSA. Just a thought. 

My niece and nephew will be stuck keeping an eye on auntie. I want them to be able to get a decent place not too far away without it costing them anything. The time and effort will be more than enough of a burden to leave them with. Also, I was able to get into the federal one when I was still fairly young, so, even with the big increase, it is still affordable. And with no dependents, I have no need for life insurance.

Smart. Just make sure you have enough money for funeral expenses. Morbid I know but something that needs to be done. If you have savings fine. If not, you might want to get a small policy to cover the things that your niece and nephew may have to take care of when handling your care or estate. Such as the cost of taking off from work should they need to help take care of you even if you are in a facility. When my father-in-law was with us we spent quite a bit of money to make him comfortable. For example, we paid to have a room redone to make it more suitable for him. That money came out of our own pockets even though he had savings. We didn't want any heirs trying to say we were improving our home on his dime. We also paid for his food, adult diapers, etc. We just didn't want to nickel and dime his funds because we wanted to make sure that money was there for the big expenses such as the home health care aides we had to hire. 

How can people plan for the out-of-pocket expenses? It's just maddening because the costs to consumers just keeps going up. Also, what's the difference between coinsurance and copay?

It absolutely is maddening. Health expenses are hard to predict, and therefore hard to plan for. With every plan you're considering, make sure you have enough saved up to meet the deductible. If you don't, you may want to pick a higher premium plan.

A coinsurance and copay are both expenses you have to pay at the point of a medical service. A coinsurance refers to a percentage of the cost of the service that your insurer won't cover (so you do) and a copay is a flat fee. These are key terms, but as Policygenius learned in a recent survey, only 40% of people know what copay is, for instance. 

As I understand it, both FSA and HSA are funded with pretax dollars, but the FSA is use-it-or-lose-it at the end of the year whereas the HSA rolls over, potentially even into retirement when it could be used for age-related increased medical expenses or Medigap coverage. Is that right? If so, why would anyone ever choose the FSA?

Most likely because the HSA is not available to everyone, only to people with high-deductible health plans, which not everyone wants.

We have an American Express on which we accrue points. We use a few every year to get gift cards for family members or ourselves, but also keep a good number specifically for last-minute travel. So far, we've used them twice and then had plenty of time to build them back up. While we now have an emergency fund that could easily weather such expenses, we haven't always, so it's been a relief to have those points available.

Interestingly, after writing about the high cost of the airline tickets my husband and I had to get to fly to be with our daugher a lot of readers kept saying, "why didn't you ask for a special fare from the airline." You think I didn't?

No special rate, at least for the airlines I checked with. 

Anyway, I did end up using points for my ticket and cash for my husband's. Besides, my main concern was not calling every airline and trying to get the best rate. I was so worried, I just needed to get to her. And this is why you have -- if you can-- a life happens fund. We took a significant hit but we could handle it thank goodness.

Could you repost the information about seeking a fee only financial planner. I'm interested in selling some old company stock and need some help diversifying my retirement portfolio. Thanks so much for all you do and I'm too am very thankful for your daughter's recovery.

I don't think the "funeral fare" is much of a thing anymore. Even when it was, it was 50% off the standard fare, not the current fare. The best thing I received was flexibility in booking and changing tickets when a loved one was repeatedly hospitalized 1/2 way across the country. But not all airlines are accommodating for family emergencies. Sun Country will NEVER get another penny of my money for the way they handled such a request.

I asked and told representatives about the situation. Heard some clicking, a pause and then a nope the fare is the fare. But I did get a ticket that allowed us to change without a fee. And that turned out to be a good decision because a two-day hospital stay turned into nine days. And I was not leaving my baby's bedside. 

Hi there, this year is the first year that I'll be opting for an FSA in addition to normal coverage as my husband and I are having a baby in the new year. Being two healthy early 30 somethings, we've never really visited the doctors aside from an annual checkup. With the new baby and open enrollment, we're now taking a closer look at our options. What's an appropriate amount to withhold? Our health insurance deductible is $1000 and covers most aspects. We're estimating $2000 but are wondering if we should withhold the max in light of the use it or lose it aspect of FSAs

Congratulations! I'm having my first one in February. If you're confident your health insurance will cover most of the cost the price of labor and delivery, I would make sure to have a plan before setting aside the max, which is *$2,750 for families in 2020. Check this IRS page for the big list of stuff you can use FSA money on. Make sure you can fill your shopping cart with $2,750 of that stuff before setting aside that amount.
*Corrected. 

Congrats to both of you with the coming babies!

and I wanted to get there ASAP (Jewish funerals happen as early as possible), I asked about a bereavement rate for the flight. It was $5 more than the best price available for general purchase on the website. Given the documentation required, I wouldn't have bothered even if it was a better price until it started to be real money. It isn't like I didn't know that I was using the ticket, which was for the next day.

Those days are gone. 

My 26 year old is now off of our insurance and I can't seem to get him to focus on signing up himself -- even though I would pay the premiums. It's pretty frustrating. I wish there was a way that this would just automatically happen without a lot of extra work on the part of young adults, many of whom don't seem to think they will need insurance.

I feel your pain. I tried to get my daughter to stay on our family plan, which has excellent coverage. She wanted to be independent and I understand. But right about now, she's wishing she listened to her mama because who knows what this bill will be in the end. 

All you can do is provide your counsel. Sometimes they have to learn on their own. 

Hi Michelle! Sounds like it’s been a scary week, but I’m So glad to hear your daughter is on the mend. I really liked your reminders (and specific examples) about cutting out the treat yourself type overages we talk ourselves into, especially right before the holiday season. Even as someone who is typically responsible, this is a fantastic reminder/motivation to be a mindful spender and saver. Don’t let anyone give you any flak for that. I wanted to share one strategy my spouse and I started employing that really worked for us. You could call it a “life happens” line item, though we label it “necessary irregular spending.” While this won’t work for people at below living wage, it could absolutely help the folks you noted in your column. Basically, in addition to our life happens fund (which we are building up), we reserve a set amount (think a few hundred dollars) for smaller necessary irregular spending - things that definitely aren’t a reoccurring monthly budget item, yet we can’t ignore. It covers a range from the “definitely known, but too small to set up a separate account for” (annual HOA fee, annual registration fees for preschool, annual vet visit etc), the “we knew we’d need it, but not exactly when” type spending (new car battery/tires, kids suddenly outgrown all their shoes, repair of older appliance becomes necessary, school doing a fund raiser/field trip) to the complete surprises (emergency room copays, day trip out of town for a funeral, etc). Anything left over at the end of the month gets rolled into the life happens fund. We did this because, I suspect like a lot of folks, we looked at our tight budget at the beginning of the month and felt we’d work out that we could have a little wiggle room for “fun,” just to be hit by a cascade of school fees, minor car repairs, copays, and what have you as the month rolled on. We realized it averaged to around x hundred dollars, and that we needed a line item for x. Carving out this amount from our budget was not easy and did require discipline and life style changes - we sold our home and downsized to save on mortgage and utilities, even though a lot of family thought we were nuts and our friends were all buying bigger and better places. We eat almost exclusively from home now and plan meals religiously to make sure we’re not caught off guard. We cut cable. We changed insurance providers. It was a hassle, but it was NOT a Geneva code violation. This is manageable (for the middle class folks you described), it just requires a thorough and honest assessment of your spending, your needs, and your situation. I also can’t even begin to describe the effects from the peace of mind we get from doing this. -she/her, NC (*and to the moderator, feel free to put any new paragraph returns in my comment, WP always changes it to own giant paragraph when I write in for some reason)

Great advice. Thanks for sharing cuz you wrote a book :)

My husband's employer only offers an HSA in combination with the high-cost insurance option. Can we choose the low-cost insurance plan and open an HSA independently?

You can only have an HSA with a high-deductible health plan.

Hello, my spouse and I are expecting a baby in March. Currently, we both are on separate employer-based healthcare plans (BCBS Feds & United Health) after comparing the costs of single vs together with each plan. When the baby comes, should the child be added to the mother's plan to be consistent with doctors, etc. or does it even matter? Thinking ahead as the mother (on United) is more likely to change employers next year than I am as a federal employee.

I think you're correct that it might not matter - you should pick the plan with the best benefits for your new baby (congrats by the way!). I'm curious though, what have other parents done here?

That's when I began following you, Michelle! You wrote openly and poignantly about your daughter's health issues and how difficult it is for some families to deal with something like that financially. I'm the long grown daughter of a health care professional who, when we were kids, made us watch the testimony that Ted Kennedy gave in front of his own committee with the stack of bills he had received from Georgetown University Hospital when his son had cancer. He put his hands on the bills and said something like "my son is lucky, we can afford this. But we are the exception, not the rule and something has to change." Sadly, even with ACA, it hasn't. Thank you, Michelle, for being so honest with us!

Wow. You get the Fan of the Day award. Of course, we couldn't help but remember that awful time. We nearly lost our daughter. 

In fact, I went back and read: Promise You'll Tell If It Will Hurt

Anyway, thank you for being a faithful reader and sharing that example about Kennedy. 

I also had a young adult daughter suddenly hospitalized for two weeks across the country for a sudden and very rare condition. The expenses included not just health care (much of which was covered after a pretty substantial deductible) but the flight, expensive parking at the hospital, meals, transportation in the city, etc. It was an enormous expense and I could not help but think of people less fortunate. How would they do it?

They can't do it. And as a result their children have to be left without someone constantly by their bedside. And this breaks my heart. 

I slipped getting out a tub this spring. Ruptured my quadriceps tendon. Surgery and 8 weeks out of work! My work provides short term disability which was a big help, but having the money in the bank to cover the added expenses and the loss of income took a huge worry off my mind.

Great Thursday Testimony about having a life happens fund!

Hi, Hope your daughter is doing better! My husband and I are thinking about where we'd like to live in retirement. A lot of retirement guides focus on things like cost of living---totally understandable. But many of the highly recommended places for financial reasons are also places not very friendly for people of color. Do you know of any books or web sites that include this factor to recommend places of relative safety/hospitality? Nothing is certain in this world but we'd rather do what research we can to reduce the chance that we land next door to BBQ Becky and her friends.

She is better thanks. And thanks to all of you who expressed concerned for my daughter. 

I don't know of a book but putting it out there for others who may. 

The FSA maximum contribution is $2,700, the HSA maximum contribution is $7,100. I think those got mixed up earlier in the question about the newborn. I'd put the maximum into an FSA, if you don't have any unexpected expenses...well, I'd be shocked, but you can also buy an infrared thermometer, first aid kits, and a lot of other things that will come in handy with a baby.

You're right, my mistake. Given that math, I agree about maxing it out. Thanks for catching!

New York passed laws protecting patients from out of network doctors who work at in-network hospitals. ANY provider that treats you within an in-network hospital has to be treated as in network. They can fight with your insurance for billing, but can't come after you. It's common sense! You shouldn't have to ask if the anesthesiologist is in network when you're unconscious from a car accident. Hopefully we can get more common sense consumer regulations for folks in other states.

Thanks for sharing this. People contact your state representatives! 

Unfortunately, our time is up. Thank you so much for joining me today. Really good questions, comments and discussion overall. Please come back and maybe recommend others join this weekly chat. 

Thanks to Myles, who has agreed to answer some leftover questions offline. I'll put the answers in a future column, probably next week. 

Again, thanks for joining me today. 

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Michelle Singletary
Michelle Singletary writes the nationally syndicated personal finance column, "The Color of Money," which appears in The Post on Wednesday and Sunday and is carried in more than 120 newspapers.

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Myles Ma
Myles Ma is a health care expert and the managing editor at Policygenius Magazine in New York City, where he reports on all things money. His work has appeared in outlets including CBS News and Salon and he previously worked as a reporter at the Star-Ledger in New Jersey.
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