Category Archives: How To

How to Use Your HSA While Unemployed

If you are reading this, there is a chance that you are unemployed and looking for work. Sorry to hear that, I have been there and it sucks. Keep your head up, make good financial choices and find the next (better) thing.

Health Insurance is confusing enough, but being unemployed adds a layer of complexity to it. Moreover, there are some complications and rules for using your Health Savings Account while unemployed. The following is a guideline for HSA holders if they ever find themselves unemployed and needing to lower their costs and make smart financial decisions:

Stay Insured

Losing a job definitely means a loss of cash flow and it is wise to seriously curb your spending during this period. That said, health insurance is not something you should cut from your budget. It is never worth opening yourself up to the risk of huge medical bills of a hospital visit just because you lost your job. I often state it as such:

A job loss is a temporary setback, but being injured while uninsured can create a long term crisis.

You should, however, consider cutting back on the type of insurance you have. At this point, you just need barebones, good, solid coverage, not a “cadillac” plan that includes low deductibles, low copays, vision, massage and back rubs, etc. You should be looking at the following and finding one that is affordable:

  • Short Term Insurance
    Short term health insurance is temporary insurance designed to fill gaps in coverage. Typically, this insurance lasts for 6 months but may last up to a year. Premiums are much less expensive than comparable plans and are a great option while you look for a job. You can find your term plans at eHealthInsurance.
  • High Deductible / Catastrophic Health Plan
    If you can’t find a short term insurance plan, search for plans that are longer in duration. What you are looking for is low premiums / high deductible – typical of a HDHP. Your goal is to use this insurance as little as possible (using it can be expensive) and to have it in case something catastrophic happens. You can also get quotes for this at eHealthInsurance.
  • Continue your current health plan using COBRA
    Your previous employer might be required to offer you your current health insurance after you leave as a result of the COBRA health care law. Depending on your plan, you might find COBRA very expensive as you are paying the entire premium now. However, definitely compare it against your other options.

Use HSA funds to pay for health insurance premiums while unemployed

If you had the foresight to contribute to your health savings account prior to losing your job, you will be glad you did. One of the HSA’s best benefits is that it allows you to use your HSA to pay for health insurance premiums while you are unemployed. To qualify, you must be receiving federal/state unemployment insurance or paying for COBRA or other continuation coverage. If so, your health insurance premiums while unemployed are qualified medical expenses.

In essence, you could contribute to you HSA for six months, lose your job, and use those contributions to pay for your health insurance for the next six months, all tax free. It is great piece of mind to know that, should you lose your job, your health insurance is financially covered. It is a part of using an HSA as an unemployment safety net.

Cash out any unreimbursed QME you are due

If you have been an astute HSA holder, you have been protecting your HSA and paying for as many medical expenses out of pocket as you can. Doing so allows two things to happen:

  1. You don’t deplete your HSA, so it continues to grow, tax free
  2. You are allowed to reimburse yourself for those expenses at any time in the future from your HSA

This is all part of the using your HSA as an ATM strategy. Now that you are unemployed, it may be time to cash those expenses in and generate some cash flow. While it isn’t ideal to tap your HSA, sometimes the situation calls for it and this is a great source of cash should you need it.

Negotiate any Health Insurance Expenses

While you are unemployed, cash is definitely king and you want to save as much as you can. You have been smart and gotten a high deductible health plan for the short term, but sometimes things happen and you need medical care. If your unexpected expense is below your deductible, you will likely be paying this out of pocket (or HSA) which can sting (these plans only kick in once you hit that deductible).

Don’t be afraid to negotiate your health care costs should they arise. Be straight up with your hospital billing agent and tell them you have a high deductible health plan that this entire expense will be paid out of pocket. Given that they only receive a fraction of what they bill insurance companies, that is amount you are shooting for.

Here is a great link on how to negotiate lower health care prices while you are unemployed. I have personally negotiated and lowered physician/emergency room medical expenses as well as with insurance companies while I was unemployed. Don’t be afraid, you can do it.

The Difference Between HMO and PPO Plans

There are often a lot of questions about the differences between HMO’s (Health Maintenance Organizations) and PPO’s (Preferred Provider Organizations) insurance plans.  Understanding this difference can help you select the best insurance plan for your situation and family.  Moreover, people wonder if an HSA (Health Savings Account) is also an option, and how this relates to the big picture.

First, Understand Your Plan’s Network

An insurer has a unique network of doctors, care centers and hospitals that they partner with. Because they have contracts and partnerships, they work together to provide you care at pre-determined rates. Additionally, since they are aligned with costs, billing, and procedures, the process is much easier for the patient. Basically, they know what to do and how to handle your case.  Visiting a member of this partnership is considered in-network care and is significantly cheaper than any other alternative.  Basically, you want to receive care in-network if possible.

Out-of-network care are providers outside of this realm and are generally more expensive. These hospitals/providers are not in your insurance company’s “club” and you do not gain the “club’s” advantages by visiting them. Because they do not regularly do business together, their cost structure, billing, and information exchange may be separate or disjointed. More importantly, in-network providers have a quid pro quo type of relationship. Since they work together, they agree to bill each other at reduced rates and generally make things easier all around. This is completely lost when you visit out-of-network providers, and you may be surprised how expensive some procedures can be. As you can imagine, reimbursement rates are lower (if at all) for out-of-network care. This means you end up paying the entire bill for out-of-network care.

Both HMO’s and PPO’s have in-network and out-of-network care. The difference is how much of each is covered by insurance.

HMO (Health Maintenance Organization)

The main tenant of an HMO is that you select a primary care physician (from a list) who manages your health care. Think of this as the family doctor that you see first whenever something happens. When you fall sick, he assesses your symptoms and either prescribes medicine or schedules further tests. Often times, visiting other specialists requires a referral from your physician, so in this regard they act as a gatekeeper. Many people find confidence in developing a relationship with their doctor, which can lead to better care. For others, the process is more indirect and time consuming.

HMO’s have a smaller network than PPO’s. It is more localized with fewer options, which will often be determined by the doctor. Think of it this way: you fall ill, visit your doctor, who points you to the specialist who is in network. Just because the network is smaller does not mean that the coverage is any less excellent; the “club” is just smaller. Moreover, cost of in-network care at HMO’s is the lowest. This is your return for following the rules and visiting your physician. The downside is that out-of-network care is often much more expensive and may not be covered by the HMO.

PPO (Preferred Provider Organization)

The PPO is based on a network of “Preferred Providers” through whom you are allowed to schedule care. While you may have a primary care physician, you do not need referrals or to see them before seeing a specialist. Instead, you can research which specialists are considered preferred in your plan’s network and make an appointment. This list of “Preferred Providers” constitute the in-network portion of care. This network is generally larger than a HMO’s network.

PPO’s also have an advantage in out of network care. Because they are larger, they have more contacts with other networks and can afford you cheaper care should you venture out-of-network. Check your plan for details, but many PPO’s offer coinsurance for out-of-network care, which can help you should you require it. Moreover, monthly premiums are generally lower for PPO plans, while in-network rates may be slightly higher than HMO’s.

General Comparison of PPO vs. HMO
HMO PPO
Primary Care Physician Yes No
Referral for Specialist? Yes No
Network size Smaller, local Larger, broader
Monthly Premiums Generally higher Generally lower
In-Network Lowest rates Low rates
Out-of-Network May not cover May reimburse a %
Copay Often Often
HSA eligible Some Some



How does an HSA fit in?

People often wonder how an HSA relates to a PPO or HMO. A succinct summary of the difference:

Your health insurance plan is either an HMO or PPO, which may also qualify you to open an HSA

Thus, they are two separate characteristics.  Your plan’s network and cost structure is determined by whether it is an HMO or PPO.  Your ability to contribute to save money tax free is determined by whether that plan is HSA eligible. You can have a PPO, a PPO with an HSA, an HMO, or an HMO with an HSA. You can’t just have an HSA, because it is an benefit allowed by health insurance plans that are HSA eligible. According to the AHIP’s Center for Policy research, the majority (80-93% across groups) of HSA plans were in PPO products.

Consider Start Dates for Health Insurance Applications

Throughout life, the need to change health insurance providers or plans may arise. For example, you may:

  • Need to add a dependent or spouse to your plan
  • Move from an employer sponsored plan to an independent plan
  • Change your policy with different care options
  • Start a new, individual health insurance plan

If you plan on making such a change, you definitely want to consider how long application approval can take.   One may (rationally) assume, “I’ll submit my application, be approved within 24 hours, and coverage will be in place.”  Unfortunately -like many things in health insurance- approval is not that fast or easy.  What’s worse is that your application has a chance of being rejected, which would leave you back at square one.

Looking at a recent health insurance application reveals that this provider only offers two start dates per month for when coverage begins.  These are the 1st and 15th of each month.  That’s it.  Whether this results from streamlining accounting/operations, approval time, or incompetence, the world may never know.   Other providers may be the same, and this is worth noting.  The goal is not to allow a gap in coverage to occur, as this creates a condition of unlimited medical liability should something awful happen.

With most things in life, it is best to prepare and apply early.  If you will require an upcoming change in coverage, it is best to apply now and begin the process.  You can always elect for the coverage to begin in the future, but if you wait until the last minute, you may temporarily go without insurance coverage.  Applying 30-60 days in advance seems to be a safe time horizon.

Here are some steps you can take to prepare for making the switch:

  • Examine your situation.  What type of coverage do you need?  How much does your budget allow?  What amount of deductible are you comfortable with?  Do you prefer a PPO or HMO?
  • Begin researching how insurance plans are compared and what each term means.
  • Have your medical records handy, as you will need information on past insurance as well as any doctor’s visits.  Here is a good system for organized medical record keeping.
  • Find a broker that allows you to compare plans.  I recommend ehealthinsurance.com
  • Compare quotes and plan offerings, select one and begin the application process.

Hopefully -with a little foresight and planning- you can avoid the risks associated with being uninsured and your insurance transition will be smooth and painless.