Tag Archives: Health Insurance

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.

2014 HSA Contribution Limits, Minimum Deductibles and Maximum Out of Pocket Expenses

For reference, here are all HSA relevant limits, maximums and minimums for the year 2014.

The federal government continues to increase the amount you can contribute to your HSA, but at a snails pace. The $50 increase in contribution limit compared to 2013 represents a 1.5% increase. With Obamacare, federal reserve printing, and business taxation, do you think healthcare costs are growing above or below 1.5% per annum?

2014 HSA Limits
2014 2013 2012
HSA Contribution Limit Individual: $3,300
Family: $6,550		 Individual: $3,250
Family: $6,450		 Individual: $3,100
Family: $6,250
HSA Catch up Contribution (55+) $1,000 $1,000 $1,000
Minimum Deductible to Qualify for HSA Individual: $1,250
Family: $2,500		 Individual: $1,250
Family: $2,500		 Individual: $1,200
Family: $2,400
Maximum Out of Pocket Expenses for HSA Individual: $6,350
Family: $12,700		 Individual: $6,250
Family: $12,500		 Individual: $6,050
Family: $12,100

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.