HSA question

U

Unregistered

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I am an American and I live in India. The company I work for provides basic health insurance on a local basis, so I have no coverage in the US. That said, the insurance is through Aetna which, I believe, is a US based company. Based on my pay and cost of services here, I really have no worries about regular care. My wife had a fairly bad accident late last year, and while it is an experience I'd rather not repeat, the treatments she received were appropriate. We considered sending her out of country for treatment, which would have been covered, but in the end, did not. The total medical bill after 10 days in the hospital was $1,500. My guess is US treatment would have been >$50,000.

That said, I worry about unexpected major health problems such as cancer, organ failure, etc. I've been considering taking out a really high deductible health plan simply to provide coverage in case of a such a major event. Looks like I can cover the family with a $12k deductible plan for around $2,000 / year. Thus, I would never use the policy unless it was a major event and the $12k out of pocket would not be financial disasterous if follow on care was covered.

Now to the question. Anyone know the government policy on HSAs? I believe you cannot set up a HSA if you have other insurance in place. This leads me to two questions:
1) If my insurance doesn't offer coverage in the US, can I still legally have an HSA?
2) If I set up an HSA, how would the government know I actually have insurance in place?

I don't even know where to go to ask such questions. I know question (2) opens the question to some debate on morality. Kind of like asking, if I steal and do not get caught, is it wrong? That said, the government is taking a nice fat cut of my pay and I'm consuming absolutely no government resources, so I am a bit comfortable with cutting a corner assuming I don't get caught. They've taken their pound of flesh or more like $50k worth of flesh, and I'm just trying to make sure my family is insured properly at the lowest cost.

Flame suite on, but any ideas? Anyone have an answer or could anyone steer me to a place that might be able to answer my questions?

PS - From IRS, it looks like any insurance other than workmans comp disallows and HSA. I would like to see one of our government types live with Indian insurance. No one made me take the job and I am happy to have it, but the randomness of our laws makes me much more comfortable violating if I will not get caught.
 
Unregistered said:
1) If my insurance doesn't offer coverage in the US, can I still legally have an HSA?
2) If I set up an HSA, how would the government know I actually have insurance in place?

I don't even know where to go to ask such questions.
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Any competent US tax professional should be able to answer your questions. Since you're living outside the US, you might try finding one of the big outfits like H&R Block or Jackson-Hewitt on the Internet and asking them by email. Or do you already have a tax preparation service for your US tax returns?
 
This will be easier to explain at a real keyboard. For my qualifications, I moonlight as the benefits administrator for my small company, and we just opened up HSA-compatible plans in December, so this is fresh in my mind.

If there are particulars regarding living out of the US, I have no idea what they are, and I suggest you consult a professional.

As a prerequisite, you MUST have a health plan that the IRS has deemed compatible with having a health savings account. Note - your dental, vision, etc plans have nothing to do with this, and are selected separately. This applies to your health coverage only.

If you are single, your 2013 health plan must have an annual deductible of $1250. This means that, at a minimum, you are responsible for $1250 of health care costs per year. If you are covering a family, this number goes up to $2500. In my personal case, I have a policy that covers my family and carries a deductible of $3000. In short, your employer has to offer a HSA compatible plan, and you have to elect that plan during your annual benefits election period or if you have a life event that would otherwise modify your coverage costs (i.e. getting married, having a child, etc). Note that often the annual cost of a high deductible plan is often reduced by something approaching the amount of the deductible, but if your employer pays the bulk of your insurance costs, they also get the bulk of the savings. In these cases an HSA compatible plan doesn't always make sense; however, if you are paying 100% of your health insurance premiums, it is more likely a smart decision to move to a plan like this.

Once you obtain this plan, you can go to ANY bank or brokerage that offers a health savings account. Note I said CAN - actually HAVING a health savings account is not required by the IRS (but it would be foolish not to!) This piece has nothing to do with your employer, although your employer or your employer's insurance company may have teamed up with a brokerage or bank to provide a health savings account with more services or lower / no fees. Often your personal bank will offer you a free health savings account, so it doesn't hurt to ask.

In terms of contribution, it is best if you have your employer remove $250+/month from your paycheck and put it in your HSA for you, so you can avoid tax withholding on this amount. You can contribute to your HSA yourself up to the annual contribution limits (3250 single, 6450 family), but you will have to report this contribution on your tax filing and will get the taxes you paid as part of your refund.

This should be obvious, but money from an HSA can only be spent on health care expenses (the merchant code applied to an HSA debit card must match a list of authorized codes), and you need to save all of your receipts forever.

Finally - and this is important - money in an HSA is your money. If you don't spend it, it remains your money. If you retire with a ton of money in your HSA that you don't need, just withdraw it and pay income tax on it =)
 
Are you in a high deductible plan? If you are and covered by non other ineligible plan you can contribute to an HSA. it doesn't matter how sucky the coverage of the plan is, the question is whether it qualifies as a HDHP or not.
 
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