How We Used Our HSA To Pay For A Medical Emergency

Originally posted on The $76K Project on 11/19/2018

One early morning last March, my son shuffled into our bedroom, his hands clenched to his abdomen.

"Mom," he whispered. "Mom. I don't feel good. My stomach hurts. Can I stay home today?"

"Mrrrph," I said from beneath the covers, wondering how long it'd be before I'd be cleaning up puke off the bathroom floor.

Three hours later, I was about to log into a conference call with my boss when I heard an odd, gut-wrenching moan from across the house. Parental alarm bells went off in my head. I hurried into the Kiddo's room to find him curled up in a ball on the bed, his skin pale, his face scrunched up in pain. 

I canceled my meeting and we headed to urgent care, where the doctor took one look at him and announced that we'd need to go straight to the ER.

The verdict: a classic presentation of appendicitis. By 8 PM that evening, the Kiddo was in surgery. By 9 PM, he was enjoying a popsicle in the recovery room. By noon the next day, we were on our way back home with instructions to let him rest for a week. Two weeks later, he met with the surgeon and received a clean bill of health.

All in all, it was a sudden but relatively short-lived emergency, and we quickly returned to life as usual... until the medical bills started rolling in.

As anyone who lives in the United States and has encountered a medical emergency knows all too well, the aftermath of a hospital visit is overwhelming.

Once the bills started showing up in our mailbox, they just kept coming. For months.

Our 30-hour medical emergency generated bills from the following providers and offices:

• Urgent care
• Ultrasound technician
• Ultrasound analysis
• Pathology
• ER services
• ER doctor
• Surgeon
• Anesthesiologist
• Nurse anesthetist 
• Use of operating room
• Use of recovery room
• Follow-up visit with surgeon
• Hospital stay

Luckily, I have health insurance through my employer, so we weren't responsible for the full amount. But because I have a high deductible health plan with a family deductible of $2500 and an out-of-pocket maximum of $7000, we were still on the hook for thousands and thousands of dollars. 

Did we have thousands and thousands of dollars saved up?

Nope, sure didn't.

We evaluated our options:

-Call providers and ask for a big discount. If you ever get hit with a medical bill, you should absolutely request a discount. Just know that results vary widely. When my son was born via C-section, we didn't have insurance. That was fun. On the bright side, the hospital was willing to chop off a huge portion of the balance if we paid in full (which we were able to do with my parents' help). This time, though, we negotiated only 10 percent off the total. The remainder was still too high for us to pay outright, so this option was a non-starter.

-Pay with a credit card. We may have done it for the points had we had cash on hand, but since we knew we couldn't pay it off right away, the credit card route was a great big NOPE.

-Request a payment plan. Ultimately, this is what we ended up doing, and with the help of our HSA, it was a relatively painless choice. Even if you don't have an HSA, I highly recommend that you do this. I've heard that hospitals will generally agree to proposed terms of payment, at low or no interest, as long as you are paying something each month.

High deductible health plans kind of suck, but one of their few redeeming qualities is that many of them come with a health savings account, or HSA. You (and possibly your employer, if it's an employer-sponsored plan) contribute money to the account, which rolls over from year to year and is yours to keep forever. Not only are your HSA contributions tax-deductible (up to $3500 for an individual and $7000 for a family in 2019), once you reach a balance threshold, you can invest your HSA cash and earn tax-free interest. Woohoo!

Anyway, when my son ended up in the hospital, I'd been at my current job for only a couple of months and had only a few hundred dollars in my HSA. But I was still able to use my HSA to pay all of our medical bills with little impact to our monthly budget. 

Here's how we did it:

1. I made a list of healthcare providers and how much we owed to each of them. 

2. I reviewed every bill carefully and contacted the insurance company and providers to discuss apparent errors. Have I mentioned that I hate talking on the phone? This part was challenging for me but ultimately worthwhile. In a couple of instances, the providers made some... interesting billing choices, and the insurance company stepped in on our behalf. We saved a few hundred dollars in the process.

3. I paid off some of the smaller bills with the money I'd already saved in my HSA. I did this for organizational and motivational purposes: eliminating a few bills right off the bat made me feel like I'd accomplished something. It also meant I had fewer accounts to keep track of.

4. I maximized my HSA contribution. I calculated how much my employer would contribute in 2018 (close to $2000), figured out how much I'd need to chip in to meet the HSA maximum, and adjusted my biweekly HSA contribution accordingly. It did make a dent in my paycheck, but not an exceedingly large one. The fact that contributions are tax deductible made it an easy choice. I'll be maxing out my HSA contribution every year from now on.

5. I participated in my company's wellness incentive program. Many big companies have programs like this. Basically, you accrue points by completing a bunch of health-oriented tasks - getting a flu shot, scheduling a yearly physical, participating in a sport or other healthy activity - and when you earn enough points, you receive a discount on your monthly premium or some extra HSA cash. In my case, my company deposited an additional $500 into my HSA upon my successful completion of the program. I used this windfall to pay off the anesthesiology bill.

6. I calculated how much money would be coming into my HSA each month - about $500 - and set up automated monthly payments accordingly. Basically, I called each provider's billing department and told them what we could afford to pay each month. To my surprise, they all agreed to my suggested terms. I then set up automated monthly payments directly from the HSA. That was key: money goes into the HSA and comes out of the HSA, but it never touches my bank account. Which means that it never touches our budget. 

7. As I paid off smaller bills, I used the debt snowball method to increase payments to other providers. A few weeks ago we paid the balance of the surgeon's bill, so now we can allocate $500/month to the last remaining bill for hospital services.

As of today, that bill holds a balance of $1800. We'll pay it off by March - one year after my son's surgery.

My company does offer a more traditional health insurance plan, one that would have us paying higher monthly premiums but much lower deductibles. Personally, though, I'll never go back to a more traditional plan because the HSA offers so many benefits. 

Lower monthly premiums? Nice.

Free money from my employer? Yes please.

A tax deduction to the tune of nearly $7K? Mmmhmmm.

Tax-free interest? Ooooooh yeah.

An account that we can use to pay for healthcare expenses as long as there's money in it? Sign me up.

DON'T GET ME WRONG: the healthcare system in the United States is a complete shitshow (hashtag TRUEFACT), and if you don't see that, well, lucky you because clearly you've been sheltered from its horrors up to this point. I also know that I am writing this from a relatively privileged position: we have the financial wiggle room to contribute to an HSA. But if you have an HSA available to you, you might be able to use it as a tool to wrangle a little bit of control if/when you face a medical emergency.