June, 2019
Archive

By In Around the Web, Money-Saving Tips

What Trump’s Price Transparency EO Means for FIRE

Earlier this week, President Trump announced an Executive Order requiring health care companies, particularly hospitals and insurers, to make their negotiated prices for services publicly available. Trump said, with his trademark understatement:

“This is a truly historic day. I don’t know if it will be covered that way by the fake news, but this is truly a historic day this is a very big thing that is happening right now and it’s pretty much going to blow everything away.”

President Donald Trump, signing the Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First, June 24 2019

Since then, there’s been a slew of coverage about whether this order will have quite that impact. The hardcore health economists have been talking about Danish cement (seriously) in saying that forcing hospitals to publish what they’ve negotiated with health insurers to pay for services will simply encourage the ones charging the least to raise their prices. I personally asked an economist if the airline industry might be a better comparison, with its major players, barriers to entry and regional differences in supply and demand. Here’s what he sent me:

Here’s what this Executive Order on transparency could mean for the FI community: ultimately, smart and active consumers do better when they have more information, so this’ll be good for FI. Duh.

But health care has nuances—many, many nuances.

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By In Health Savings Accounts (HSAs), Retirement Investment Accounts

Investing Your HSA Funds

In spite of being the fabled “triple-tax advantage” and therefore an ideal account for investing for your retirement, only a fraction of those with HSA’s actually invest the money.

Having worked on the business side of HSAs for a good number of years, I can tell you that there are three main reasons for these low investment rates:

  1. People are actively spending their HSA funds. They have medical expenses, or think they might, and are using their HSA debit card as the name would imply — to pay those expenses if and when they arise.
  2. People think they’ll need to actively spend their HSA funds. They don’t have medical expenses but think there might be a need to have the funds close at hand, just in case.
  3. People have no idea how to invest their HSA funds, or if they even can.

No. 1 is understandable. If you’re sick and/or you’re living paycheck to paycheck, that tax-preferred account will stretch your health care dollar.

No. 2 also makes sense to a point. It’s good to have an “emergency HSA fund” available on demand, in case you need it quickly. But in most cases, you can access invested HSA funds before you have to pay your medical bill(s), so maybe keep a smaller emergency fund than you need in order to maximize your investing potential.

No. 3 is sad but true. In some cases, your HSA trustee or custodian (just fancy words for the company that manages your HSA) hasn’t made it easy for you to invest your funds, or they haven’t given you options at all.

In this case, here’s all you need to know: Your HSA funds follow almost identical investing rules to traditional IRAs. You can invest funds from your HSA into an investment account that handles “normal” investments, like stocks, bonds, annuities, etc. You can’t invest in real property, like real estate or cars and boats. If you have returns on your investments and simply reinvest them, like an IRA, then you don’t pay taxes. Plus, if you do need to withdraw the funds from your HSA to pay for qualifying medical expenses, you don’t pay taxes then, either.

That’s about it. We’ll give you more investing tips but just wanted to put that one, simple piece of knowledge in your brain: yes, you can invest your HSA funds even if your current HSA provider has made it less than easy…just think about how you do it with your IRA. In fact, if you want to invest it the same place you currently have your IRA, go for it!

TMYK.

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By In Around the Web, Do the Math, Health Insurance

Employer Benefits Are Confusing. Duh.

As we have written about several times, getting benefits through your employer is essential to your FIRE plans but can also be very, very confusing. This article from a publication focused on brokers and consultants talks about exactly how confusing and frustrating it can be for you, the employee, to pick the right benefits for yourself and your family.

TL;DR: Only one in three of us feels like we’ve made the right decisions with our benefits selections — mainly because we haven’t been given the information we think will help us. As a result, we’re overly risk-averse.

Our advice is to do as much legwork as you can on your own. Put your analytical FI mind to work, build some spreadsheets, crunch some numbers, as your benefits administrator at your company loads and loads of questions. Then make your choices with more confidence. And if you find that your choices aren’t that great after all, let you benefits administrator know so that, hopefully, they’ll take your advice and do a better job for everyone the following year.

https://www.benefitspro.com/2019/06/12/confusion-and-risk-aversion-driving-poor-benefit-choices/?kw=Confusion%20and%20risk-aversion%20driving%20poor%20benefit%20choices&utm_source=email&utm_medium=enl&utm_campaign=bprodaily&utm_content=20190613&utm_term=bpro

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