It’s My Imagination

Health Savings Accounts

April 25, 2008 on 8:06 am | In Family Health | No Comments

In preparation for our daughter getting braces and our having to pay for it, my husband and I decided to contribute a set amount of money into a Health Savings Account (HSA). This is similar to a regular savings account except that the money is deducted directly from my husband’s paycheck before taxes. This is our first time ever to use an HSA, so it’s a learning experience. This learning experience could prove to be expensive if not calculated correctly, you see, any money in the HSA that is not used, is lost. Money from one year cannot be carried over to the following year and you do not get the money back.

Knowing the cost of getting braces, we opted to put an amount into the account that was just under the maximum allowed per year. What we didn’t know before doing this was that the HSA will only reimburse you as expenses are incurred. This is fine in most dental or medical issues, after all, we usually only pay for expenses as they are incurred. Orthodontia is different. We had two options for paying for our daughter’s 20-24 month treatment. We could pay all of it up front and receive a 10% discount on the total (equated to approximately $500), or, we could pay a 10% down payment and then make monthly payment for 20 months.

We would have chosen the upfront payment to receive the discount, but I also discovered that our HSA would not reimburse us at all if we did this! So, we lose the discount, have to have monthly payments, and will get reimbursed from our HSA. Getting reimbursed from our HSA means we are paying for the treatment with pre-tax money, so we are reducing our tax liability. I’m not sure what our tax savings actually will be, so it’s difficult for me to determine if we made a good deal or not. Our tax savings would have to be greater than $500 to make the whole thing worthwhile.

In most cases, a Health Savings Account is an excellent financial plan. In the case of orthodontic treatment, I’m undecided.

Tags: health savings accounts, orthodontic treatment