But in reality, many people can use it as a retirement account similar to an IRA. If you don’t have a lot of medical expenses and if you have a long time horizon, you can invest the funds in the HSA in a mutual fund just like you can in an IRA. Your money will grow tax-free until you withdraw.

Let’s take a look at how HSA works and how you can maximize its benefits.

What is an HSA?

HSA was created to give people with high deductible health insurance plans an incentive to save. That’s because these plans have high deductibles that must be met before insurance pays out claims.

Any money you contribute to an HSA is tax-advantaged – that is all contributions are pre-tax. You also don’t pay any taxes when you take the money out as long as you use it for qualified medical expenses. Simple enough, right.

Take advantage of employer contributions to HSA

Many employers contribute $500 or $1000 every year to HSA accounts if you sign up for a high deductible healthcare plan. Unlike a 401(k), the employer contributions are not matches, so you can contribute as low as $1 as still get $500 or $1000 from your employer.

Investing HSA funds

Most people leave their HSA funds in cash or in a money market account, which pays you a meager interest rate. You can invest these funds in a mutual fund and get much better returns. If you are young and have many years to invest, your money can compound at 7-10%. When you invest in mutual funds, you are exposed to the fluctuations of the market but in the long run, markets have done well.

If you have anticipated medical needs, then you can set some money aside for those expenses and invest the rest in a mutual fund. Some HSAs have some minimum amount (eg. $1000) you need to set aside before you invest in mutual funds. HSA administrators do this to ensure that you have some liquid funds available in case medical expenses come up unexpectedly.

Withdrawing from an HSA

If you have medical expenses, you can withdraw from an HSA. That part is straight forward.

There is no requirement that you should reimburse yourself immediately after a medical expense occurs. For example, if a medical expense comes up, you can pay it yourself and keep the receipts. You can reimburse yourself 30 years later when your account balance has grown considerably.

What if you don’t have a lot of medical expenses? You can withdraw from an HSA at age 65 by paying taxes, just like you do with an IRA or a 401(K). Note that the minimum age for withdrawal from an IRA or a 401(k) is 59.5 years, whereas you have to be 65 to withdraw from an HSA. By withdrawing your money for non-qualified expenses, you have converted your HSA into a stealth IRA.

What happens if you no longer have a high deductible insurance plan?

If you don’t have a high-deductible insurance plan, you can no longer contribute to an HSA. But you can still spend the money in your HSA for eligible medical expenses.

HSAs are portable

If you switch jobs, you can rollover your HSA funds into your new employers’ HSA without any tax implications. You can also roll the HSA over into your own HSA (in case your new employer doesn’t offer an HSA). But keep an eye on fees. HSA administrators charge a small fee ($2-$4 per month). Your employer will pick up the fees if they offer an HSA but you will need to pay the fees if you own the account yourself.

Keep an eye on fees

Some HSAs also charge fees if you invest in mutual funds instead of keeping your funds in cash. The monthly charge is small, around $2 to $4 but these things add up. So keep a close eye on fees.

If you are investing in mutual funds, pay attention to the expenses the fund charges. Investment options in an HSA are limited compared to 401(k)s or IRAs. But by keeping fees and mutual fund expenses low, you will still come out ahead compared to keeping your money in cash or in a money market account.

Bottom Line

HSAs can be stealth IRAs for people who don’t have a lot of medical expenses and for people who are young. By moving your money from cash to mutual funds, you can grow your money at 7-10% annually. If you don’t have medical expenses, you can withdraw the money at age 65 by paying taxes on your withdrawals.

We will look at a few options available to get health insurance while you are looking for a new job.

Join your spouse’s employer-sponsored  plan

If your spouse has insurance through his or her insurance, typically you have 30 days to request enrollment in the plan.  This option is probably your best because your spouse’s employer likely subsidizes the premiums and employer-sponsored plans have lower premiums and wider networks of physicians and hospitals.

If you are currently with a doctor, you may want to check if your doctor is covered under your wife’s health insurance plan.  If your doctor is not covered, and you are flexible, consider choosing another doctor under the new plan.  That will save you money compared to seeing your regular doctor, who may be “out of network”.

Join your parent’s health insurance plan

Under the ACA (Affordable Care Act), children under 26 can join their parent’s plan even if they have a job and that job offer health insurance.  If you are unemployed, that’s still an option.  So ask your parents if you can join their plan.

COBRA

When a company terminates an employee, it must offer health coverage for 18 months following the termination. So you get to keep your old health insurance plan but you will pay both the employer and employee portions of the health care premium.  So COBRA can be very expensive.  In addition, employers also add an administrative surcharge which makes COBRA even more expensive

It is not uncommon for COBRA to cost $15,000 to $25,000.  While you may have only paid $3000 or so while you were an employee, many people don’t realize that their employer covered the rest.  Now you are responsible for both the employer and employee portion of the premium.

COBRA coverage is retroactive.  So you don’t have to sign up for COBRA right away.  You will typically have 60 days to sign up. If you have a medical emergency, you can retroactively apply for COBRA.

Shop for insurance at the government exchange (ACA)

If you lost your employer-sponsored health insurance, you get a special 60-day enrollment period to buy health insurance under the ACA through the market place.  Based on your income, you may qualify for tax credits that will lower your premiums.

Health insurance policies offered through the exchange must be compliant with ACA – they must offer some type of free preventive care, and provide some coverage for maternity and hospitalization.  These plans cannot deny you coverage if you have a pre-existing condition.

Buy insurance outside of the exchange

You can shop directly with insurance companies via their website or through brokers. You may find a cheaper plan here than in the government exchange described above but the plans are likely to be skinnier and not ACA compliant.

If you are hopeful of getting a job soon that offers health insurance, getting a policy outside of the exchange may not be a bad idea in the meantime.

Medicaid

When people lose their jobs and are looking for health insurance, Medicaid is not on top of their list. Medicaid offers health free or low-cost insurance for people with low incomes. Medicaid looks at monthly income, not annual income.  If you don’t have income and rely on unemployment benefits, you may qualify.

CHIP

Children in unemployed families may qualify for CHIP (Children’s Health Insurance Program) if your income is low enough to meet income thresholds.  As with Medicaid, you can apply anytime.

Bottom Line

Losing your income is stressful. Losing your health insurance only adds to the stress during an already uncertain time in your life.

You best option is to join your spouse’s employer sponsored plan if that is an option. You an also shop for plans on the ACA exchange where plans offered must meet certain coverage conditions, including covering pre-existing conditions. You can find cheaper options outside of the exchange but the coverage is likely to be skinny.  You can stay with your current plan through COBRA but is likely to be very expensive as you will be paying both the employer and the employee portion of the premium.

If you live in a city that has limited public transport, you have no choice but to drive to work.  Did you know that some cities have vanpools which allow you to commute together and not have to drive your own car?

What is a vanpool?

In a vanpool, a group of people (usually 5-15 people) commute to and from work together in a van or an SUV.  The vehicle – usually a van is leased and paid for by the riders.  The primary driver of the van leases the vehicle but is paid for by all the riders.

Typically, there is no long term commitment.  The lease is month to month but you can get a lower lease rate if you lease for a longer period.

How much does it cost?

Vanpool costs about $120-$180 per month per person. Cities and companies provide subsidies for vanpools, so your out of pockets costs could be even lower.

The riders could take turns driving the van. Usually, the driver gets a discount or rides for free.

What is the city’s role in the vanpool program?

Vans are usually leased by the city’s Metro program and then leased to the riders on a month to month basis.  The lease includes insurance and maintenance.

The city provides assistance in recruiting riders (usually through a website).  The city also establishes policies for the vanpool that all riders must follow.

What are the benefits of vanpool?

• Vanpools are considerably cheaper than driving your own car
• Vans can use the HOV (high occupancy vehicle) lane, which saves commute time
• Reduces stress – You don’t have to drive every day
• Reduces wear and tear on your personal vehicles
• Reduced parking rates for vanpools in many areas of the city
• Your employer may provide subsidies for vanpools, covering part of the cost of your rides.
• Reduces your carbon footprint with a more eco-friendly commute

What are the challenges of vanpools?

If you are someone whose schedule varies day to day, the vanpool program will be a challenge for you.  The program works best for people who have fixed work schedules.

Vanpool includes 10 to 15 people, and getting everyone to follow the rules and policies can sometimes be a challenge.

Vanpools in major cities

Here are links to vanpool programs in major cities.

Houston

Dallas

Chicago

Los Angeles

Bottom Line

Vanpools are a great way to save money and reduce stress. Your employer may offer subsidies for a vanpool program, which reduces your out of pocket costs.  You can even catch a nap on your daily commute!

But there are things that are within your control.  By controlling what you can, and taking a proactive role in your healthcare, you will be able to save money and get good value.

Here are some steps you can take to save money on your healthcare.

Choose The Right Plan For You

Whether you buy health insurance through your employer or you buy it on your own, choose an insurance policy with the proper deductible and coverage that works for you.

If you rarely use health insurance and don’t have any chronic health problems, you may be fine with a high deductible policy (also called High Deductible Health Plan or HDHP).  Because high deductible plans have deductibles starting at $2750, you will need liquid savings to cover the deductible and other expenses. You can set up a Health Savings Account (HSA) account if you have an HDHP plan.

If you anticipate immediate expenses such as surgery or childbirth,  check with your HDHP provider and your doctor, calculate your expenses and choose a plan with the right deductible.

Focus on Preventive care

Visit a doctor at least annually to get a regular check-up. Prevention is way cheaper than treating a disease.  Preventive care can help catch problems early and treat them before they become more serious.  Many employers will contribute $300-$600 a year to your HSA if you complete an annual physical exam.

Stay In-Network

Your insurance company negotiates discounted rates with in-network providers.  Naturally, you will get lower if you go to an in-service provider. Going to an out of network provider usually means paying much higher, sometimes 2-3 times higher.  If you go to an out of network provider, your insurance will only a small portion of the costs or none at all, and you will be responsible for the difference.

Check Bills For Errors

Always check your bills to ensure that you are only charged for the services provided.  Call your provider if you have any questions.  It is not uncommon to find coding errors that cost you hundreds of dollars.

If you are dealing with high medical bills, consider engaging a medical billing advocate to help you navigate the medical bills.  These advocates may charge an hourly rate or charge you a percent of the savings they bring.  Some employers offer this service free as part of their employees’ health benefits.

Use Free Health Screenings

Local pharmacies sometimes offer free screening for blood pressure, diabetes, etc.  Your community may also offer health fairs where companies may offer free screenings.  Use these free screenings to save money and stay on top of your health.

Comparison Shop For Medications

Use websites such as goodrx.com to comparison shop prescription drug prices. Walmart offers $4 for a 30-day prescription of generic drugs, which may be lower than your insurance copay.

Negotiate Medical Bills

If you call your provider and offer to pay immediately over the phone, you may get a 10 to 20% reduction in your bill if you just ask.  Being polite goes a long way.   If you call late in the year when hospitals and doctors are trying to close their books, you may be able to negotiate a discount on your bill.

Avoid ER Visits When Possible

If you have a serious medical problem that needs immediate medical attention such as a heart attack, or severe pain, you should go to the ER.

On the other hand, if you have a minor condition such as flu, fever, minor cuts, etc, you may be able to go to an urgent care center.  It is not only cheaper but also quicker in most cases.  Nearly all procedures at the urgent care centers are covered by insurance, and the average bill is around $150.