pls explain HSA as pseudo-Roth IRA tactic for annual investment $s #5001-#8200

[cabronjames]

(Note: wasn't sure wish Forum section was appropriate; Moderator feel free to move to "Other Discussions" if you feel it's appropriate)

I recall reading a CPA accountant poster (forgot his username) here on our Forum mentioning it is possible to use a certain type of HSA as a pseudo-Roth IRA that could be used after the Roth IRA is maxed out to the $5k limit.  As I understand it, the idea is that at age 65, money from this HSA could be withdrawn tax free & used for ANY spending.  Before age 65, any withdrawl as I understand it must be for an actual healthcare cost, perhaps requiring keeping the related receipts (eg the Walgreens $40 prescribed pharma bill, etc).

I am interested in this tactic, because it is potentially useful for the many of us with "401K lemonade problems".  afaict certain no-Brokerage Window-available 401Ks have fund lists from a PP asset alloc (AA) perspecitve really only offer a fund for Stock, & possibly also Cash (treasury money market fund or stable value fund).  In this case, a person's $5K Roth IRA annual contrib is too tiny relative to the $17K 401K space to fit in the remaining gold/Bond.  In this case, a person might have to invest in taxable accounts for each year's #5001st & beyond investment dollar, before maxing their 401K space, just to be able to implement a Perm Port AA, & even then it might take literally years for her to do so in order to finally get their huge stock chunk in their 401K to finally get to a rebalanced <= 35% of their PP pie.  This HSA tactic could help substantially for some people with this 401K Lemonade problem.

1 have any of you actually used this tactic?  Can you share your experience, implementation tips, etc

2 what specifically is this type/name of HSA?

3 do you know if this HSA acct can be held at Vanguard/Fidelity/etc, & if so, does it work the same as a Roth IRA account, in terms of funds available, any fees such as an annual account fee, etc?

4 does using this HSA lower the amount you are able to invest in other taxable accts?  In other words, if you invest $3200 in this HSA, can you still do $5K in your Roth IRA, & $17K in your 401K?

5 Is the annual tax paperwork associated with using this HSA for this purpose any different that the tax paperwork associated with funding a Roth IRA?

6 Is there any other such tax-advantaged accounts where this tactic can be used, such as Educational Savings Accounts?

Thanks again

[jatwell]

Here's a thread with some great info on HSA's.  Tons of info there including HSA account providers and anything else you'd need to know.

http://www.fatwallet.com/forums/finance/542257/

1. I have my son on my healthcare at work and can contribute the max family amount ~$6250 (wife is on her own work health plan and does not have a HDHP or HSA).  My plan pays 100% for preventative care, anything else I pay out of pocket and don't touch the HSA funds.  I retain the receipts because supposedly I can pay myself back on these receipts at any time in the future tax free from the account if necessary.
2. You have to have a HDHP (High Deductible Health Plan) before you can contribute.
3. Usually you use the HSA provider of your employer, most companies contribute some to your HSA.  You can do a rollover at least once a year to another HSA provider.  There are a couple providers that have brokerage windows (hsabank w/ td ameritrade I think) but generally there are monthly fees.  I haven't really found a great account without fees and access to a lot of funds.  I think you can get Vangaurd funds in the TD Ameritrade account, probably the best option.
4. No, does not lower other amounts at all.
5. If you don't use the HSA to pay for medical expenses and just for investment, paperwork is not bad at all.  The HSA provider sends a tax statement and you have to enter that on your taxes, wasn't too painful.  You have to retain any receipts for medical expenses paid through the HSA account.
6. Not sure, I use a 529 for my kid's college savings.  It's only deductible on my state taxes though.

[foglifter]

I've been using HSAs for almost 5 years and will gladly share my experience and my knowledge.

As far as "pseudo-Roth IRA" goes: I must offer a correction. The right way to name the tactics would "pseudo-Traditional IRA". To the best of my knowledge the "carrot" one gets from IRS after age 65 is the dismissal of 20% penalty (used to be 10%) when the funds are used for non-medical purposes. So, in a sense, after age 65 the HSA acts almost like traditional IRA: you can use money for anything and you only pay income tax. However I don't know and haven't seen any documents that would spell any potential of not paying income tax on non-medical expenses after age 65. Sure, that would be sweet, but alas. 

I religiously studied the IRS Publication 969 (the HSA section actually is not that long) and posted a quote from it regarding the "65 years" rule in another HSA thread back in May. In IRS language this penalty is called "additional tax". BTW I recommend to read the whole thread as it touched upon some other facets of HSAs.

Tip to those who wants to find the 65 years rule in the document: click on the link above, scroll down a bit until you pass the third black box called "TIP". "The Phrase" is right above the next section title - "Balance in an HSA".

3. HSA account may be offered through an employer, but generally it isn't required to be affiliated with your employer or your insurance company in any way. There are circumstances, when one should open an account through an employer to obtain employer's contributions. But, like with IRAs, you are not limited to only one HSA account: you can open one account through an employer to receive the employer contributions and also contribute your own money into another account with potentially better rates and/or investment choices. In fact, I had an experience of getting employer contributions into an account that I opened myself in a bank of my choice - all I had to do is to give my HR the account # and bank's routing #. There are plenty of banks/credit unions that offer HSA, Bogleheads Wiki has a nice writeup on HSA with a list of providers. Another way to shop for HSA providers is to check out the Deposit Accounts website:
http://www.depositaccounts.com/savings/ ... ounts.html

As to HSABank: I am considering opening an HSA with them (maybe I will transfer assets from my current HSA)  because they seem to have slashed fees and with 5K balance in the core account you don't pay anything. The nice thing is you can use commission-free ETFs (including many from Vanguard) in the brokerage account. I recall that WildAboutHarry mentioned a few months ago that he was buying TLT in his HSA to eliminate state taxes (oh yeah, some of us live in states that don't recognize HSAs and have to pay state income tax on HSA earnings ).

[Storm]

Please allow me to play devils advocate for a minute:

HSAs are only available to those that have high deductible health plans (HDHP), right?  It seems to me that any employer that only offers lousy coverage is not an employer worth working for in the first place.  Since Harry Browne said "your career provides your wealth," wouldn't you be much better off at retirement if you just got a job at a company that provided decent coverage?

You wouldn't have to worry about paying excessive medical costs out of pocket since you'd have a lower deductible, and in the long run you could probably save more money anyway.  You could use a standard IRA instead of an HSA, but think about the total amount you can save with most employers - it's probably more than you can afford anyway:

1. $17,000 401k + $17,000 spouse 401k.
2. $5,000 IRA + $5,000 spouse IRA.
3. $5,000 Series I Savings Bond + $5,000 spouse Series I Savings Bond + $5,000 tax return Series I Savings Bond.
4. $13,000 529 Plan.

So, a family of 3 can essentially contribute $72,000 to tax free accounts.  Is there ever a scenario where you would need to contribute more?  If you're making enough to afford more then you probably qualify for a deferred compensation plan (DCAP) because you're an executive.  If so, just utilize your DCAP plan to soak up the excess.

I can see one advantage to HSAs for self-employed people, however, in that case you can also do a self employed pension (SEP).

Perhaps I'm missing something, but I think a lot of people would be better off in the long run if they just looked for a better job, rather than going to extraordinary lengths to use HSAs in a way they were not intended.  What if congress changed the law 20 years from now and you get penalized for your withdrawals?

[Lone Wolf]

HSAs are only available to those that have high deductible health plans (HDHP), right?  It seems to me that any employer that only offers lousy coverage is not an employer worth working for in the first place.  Since Harry Browne said "your career provides your wealth," wouldn't you be much better off at retirement if you just got a job at a company that provided decent coverage?

I love my HDHP.  It's astonishing that you view them so negatively.  IMO, a high-deductible health plan with low premiums and extremely high lifetime maximum payouts is exactly what any healthy person should seek out for insurance.

I am healthy and I have savings.  Therefore, I have no interest in the prepaid health plans that we erroneously call "insurance" in this country.  I want very low premiums, which will allow me to save more.

If I'm unlucky enough to be hit by a meteor, I will pay my deductible and then the insurance company will pay to have me stapled back together.  I just want insurance.  Anything else is a waste of resources.

Perhaps I'm missing something, but I think a lot of people would be better off in the long run if they just looked for a better job

I don't understand this idea that if your employer offers an HDHP option you must be working some lousy, dead-end job.  Unless they were paying all of my medical insurance premiums, I would be highly annoyed not to have the HDHP option!  Are you sure that you have given these plans due consideration?  Unless you are already sick, do you really need a prepaid health plan?

Remember, also, that many employers make HSA contributions on your behalf if you participate in the HDHP.  That's a nice little tax-deferred bonus just for picking what is IMO the smartest insurance option for those without chronic conditions.

[Pointedstick]

LoneWolf, would you mind shedding some light on how your HDHP worked out with children? My wife has a baby on the way and I hear they're medically very expensive for the first year or two of life, what with many emergency room visits. I know I sure was…

[Lone Wolf]

LoneWolf, would you mind shedding some light on how your HDHP worked out with children? My wife has a baby on the way and I hear they're medically very expensive for the first year or two of life, what with many emergency room visits. I know I sure was…

Congratulations, Pointedstick!  That's great news.  This will cut down substantially on your Alpha Centauri playing time but it's still good fun. 

It may feel like gaming the system, but you can simply make sure that your wife is covered on one of the more "premium" plans during the pregnancy and childbirth.  My wife was on her own employer's plan for each of our children.

We have been fortunate not to have any emergency room visits yet.  My HDHP covers well baby, well child care, and all preventive care at 100% w/ no deductible so it has even fit well for kids.  Every plan is of course different, though, so you've got to do whatever makes sense for what they are offering you.

[foglifter]

HSAs are only available to those that have high deductible health plans (HDHP), right?  It seems to me that any employer that only offers lousy coverage is not an employer worth working for in the first place.  Since Harry Browne said "your career provides your wealth," wouldn't you be much better off at retirement if you just got a job at a company that provided decent coverage?

I love my HDHP.  It's astonishing that you view them so negatively.  IMO, a high-deductible health plan with low premiums and extremely high lifetime maximum payouts is exactly what any healthy person should seek out for insurance.

I am healthy and I have savings.  Therefore, I have no interest in the prepaid health plans that we erroneously call "insurance" in this country.  I want very low premiums, which will allow me to save more.

If I'm unlucky enough to be hit by a meteor, I will pay my deductible and then the insurance company will pay to have me stapled back together.  I just want insurance.  Anything else is a waste of resources.

Perhaps I'm missing something, but I think a lot of people would be better off in the long run if they just looked for a better job

I don't understand this idea that if your employer offers an HDHP option you must be working some lousy, dead-end job.  Unless they were paying all of my medical insurance premiums, I would be highly annoyed not to have the HDHP option!  Are you sure that you have given these plans due consideration?  Unless you are already sick, do you really need a prepaid health plan?

Remember, also, that many employers make HSA contributions on your behalf if you participate in the HDHP.  That's a nice little tax-deferred bonus just for picking what is IMO the smartest insurance option for those without chronic conditions.

Well said, Lone Wolf.

HDHPs are not a sign of bad employer. In fact, my HDHP is one of the many other PPO and HMO plans offered by my employer, but I don't want to pay $500-$1700 a month for a privilege of a low-deductible "good" plan. With low deductible plans you premiums are wasted, whether you have any medical expenses or not. With HDHP I pay $70 a month and can set aside $6K per year. There's still an out-of-pocket maximum cap so I know if needed I won't pay more than certain amount a year as a deductible (which still will be less that the total amount of premiums I would definitely pay with a low-deductible plan)

[Storm]

I appreciate the perspective, LW and foglifter.  I assumed that most HDHP are for "McJobs"; is that not the case?  Personally we pay about $140 a month for our low deductible plan, which seems pretty reasonable.  Out of pocket we had to pay about $4,500 during the year our son was born, but I expect the cost to go down significantly for years where a birth is not in the picture.

I suppose if you are healthy and only have routine visits, being able to use the employer contributions towards retirement is a nice bonus, but, you might keep in mind that it only takes one emergency room visit or ambulance ride to wipe out almost 2 years in contributions (assuming $6K yearly max and a $10K deductible).

Something I have been wondering is whether really good jobs even offer these plans.  It seems that most Fortune 500 companies probably wouldn't offer them because they need to compete on benefits, except to entry level workers such as service or call center employees.

[Xan]

LoneWolf, would you be comfortable telling us more about the plan you're on?  At least who the provider is?  It sounds great.

[Storm]

LoneWolf, would you mind shedding some light on how your HDHP worked out with children? My wife has a baby on the way and I hear they're medically very expensive for the first year or two of life, what with many emergency room visits. I know I sure was…

Congratulations, stickshift!  As a recent father I can tell you that you're in for the ride of your life.

[foglifter]

I appreciate the perspective, LW and foglifter.  I assumed that most HDHP are for "McJobs"; is that not the case?  Personally we pay about $140 a month for our low deductible plan, which seems pretty reasonable.  Out of pocket we had to pay about $4,500 during the year our son was born, but I expect the cost to go down significantly for years where a birth is not in the picture.

I suppose if you are healthy and only have routine visits, being able to use the employer contributions towards retirement is a nice bonus, but, you might keep in mind that it only takes one emergency room visit or ambulance ride to wipe out almost 2 years in contributions (assuming $6K yearly max and a $10K deductible).

Something I have been wondering is whether really good jobs even offer these plans.  It seems that most Fortune 500 companies probably wouldn't offer them because they need to compete on benefits, except to entry level workers such as service or call center employees.

HDHPs are actually gaining momentum and based on my conversations with many friends companies small and big do offer them. My daughter works as an underwrighter for a giant medical insurance company and they also offer HDHPs. premiums for low deductible and for HDHPs are varying because they depend on many factors: demographics, any preexisting conditions in the group, number of employees etc. For example, in my company coverage for  employee only is FREE for ANY plan(!). Of course, because of that premiums are a bit higher for employee+spouse and employee+family coverage, but it's just how the employer decided to spread the costs. I'm paying ~$80/month for myself and my wife for an HDHP with 6K deductible and 10K OOP max. By the way, the OOP maximum includes the deductible paid, it's not an extra on top of the deductible.

I'd say HDHP don't work only if one has very high ongoing expenses that by the end of the year exceed significantly the OOP maximum of the HDHP. the end of. As to newborn baby, I agree that it might make sense to get on the low-deductible plan temporarily and eventually switch to ah HDHP.

[Lone Wolf]

I appreciate the perspective, LW and foglifter.  I assumed that most HDHP are for "McJobs"; is that not the case?  Personally we pay about $140 a month for our low deductible plan, which seems pretty reasonable.  Out of pocket we had to pay about $4,500 during the year our son was born, but I expect the cost to go down significantly for years where a birth is not in the picture.

Here's something interesting about the high-deductible health plan -- to qualify, the only rule is that they must have a "high deductible" of at least ~$2500 or so for family coverage.  (Mine is $3000.)  After that, they can take very good care of you but still qualify as HDHP.

For example, my plan would cover me at 100% once I met my deductible.  In other words, the plan is structured so that my deductible equals my out of pocket maximum for the year.  The first $3000 (apart from preventive/well child/well baby) is all on me.  After that, the insurance would take over everything else.  (Happily, I have not had to take them up on this!)

I suppose if you are healthy and only have routine visits, being able to use the employer contributions towards retirement is a nice bonus, but, you might keep in mind that it only takes one emergency room visit or ambulance ride to wipe out almost 2 years in contributions (assuming $6K yearly max and a $10K deductible).

Something I have been wondering is whether really good jobs even offer these plans.  It seems that most Fortune 500 companies probably wouldn't offer them because they need to compete on benefits, except to entry level workers such as service or call center employees.

I can confirm that at least one Fortune 100 company offers very good HDHP options.  Like foglifter pointed out, they're usually offered alongside PPO plans for those that are more comfortable with those arrangements.

I agree that a $10k deductible would be quite high and imply very little subsidy from the employer.  That's well above the legal minimum, though, and employers that are competing on benefits can (and do) bring it far lower than that.

[Lone Wolf]

LoneWolf, would you be comfortable telling us more about the plan you're on?  At least who the provider is?  It sounds great.

The plan is administered via UHC but my employer self-insures.  I'm not sure whether this program is a template that lots of other large companies are using or not.

[Pointedstick]

Thanks for the good wishes, everyone! I'm very excited.

This thread is underscoring just how little I know about health insurance so I was wondering if the more knowledgeable folks would be willing to tell me if my coverage stinks, is a rip-off, etc. I get coverage with Kaiser Permanente through my employer and I've elected to cover both myself and my wife. It costs about $195 a month and includes dental and vision. We're generally very healthy and don't need to visit the doctor often, but whenever we've gone, I've been very impressed with the quality of care and the low expenses. For example my wife needed to visit the ER a few months ago and we paid $75 out of pocket. And so far we've paid pocket change for all the pregnancy-related visits; probably under $150 total.

[foglifter]

Thanks for the good wishes, everyone! I'm very excited.

This thread is underscoring just how little I know about health insurance so I was wondering if the more knowledgeable folks would be willing to tell me if my coverage stinks, is a rip-off, etc. I get coverage with Kaiser Permanente through my employer and I've elected to cover both myself and my wife. It costs about $195 a month and includes dental and vision. We're generally very healthy and don't need to visit the doctor often, but whenever we've gone, I've been very impressed with the quality of care and the low expenses. For example my wife needed to visit the ER a few months ago and we paid $75 out of pocket. And so far we've paid pocket change for all the pregnancy-related visits; probably under $150 total.

I personally never used Kaiser, but heard both good and bad things about it. Kaiser is unique in a way that it combines the insurer and provider as well as all specialties in one place: you go to a Kaiser facility and all doctors are there in one place. However I don't use Kaiser is I prefer a greater freedom of choosing doctors in the UnitedHealthCare PPO network.

The web is full of comparisons between Kaiser and other large providers (UHC, Aetna, BlueShield being the most frequently mentioned), however every situation is special. I heard good things about UHC and that's what I've been using for a few years now. Try the search string "Kaiser vs" and you will find lots of posts.

[Pointedstick]

Let's say I signed up for an HDHP. What would folks suggest investing the HSA in? A Permanent Portfolio, right? But it seems like your time horizon for HSA expenses is potentially much shorter and you might not be able to tolerate any loss of principal. All T-bills?

[foglifter]

Let's say I signed up for an HDHP. What would folks suggest investing the HSA in? A Permanent Portfolio, right? But it seems like your time horizon for HSA expenses is potentially much shorter and you might not be able to tolerate any loss of principal. All T-bills?

Before asking this question I would first think about the primary role your HSA account would play in your total assets. Most HDHPs are covering for 100% preventive care (annual checkup, lab tests, immunizations) without requiring any copayment.

Scenario 1:
- You are healthy
- Your dependents (spouse,  grown kids) covered by your HDHP are healthy
- You don't have newborn kids (this was discussed earlier)
- Your out-of-pocket medical expenses are relatively small (say, you caught cold and had to visit a physician or specialist. I'm talking about maybe a few hundred dollars a year)

Action plan: pay your expenses with the after-tax money and keep your HSA funds intact. Max out your HSA contributions.

Scenario 2:
You are expecting to have a major surgery or you have moderate/high  and
Scenario 1:
- You or your dependents have moderate-to-high recurring expenses (say, expensive drugs, surgeries, etc.)
- Annual total of a low-deductible insurance premium payments plus any out-of-pocket expenses (office visit copay, Rx copay) is less than the insurance premium + out-of-pocket maximum of an HDHP plan.

Action plan: you'll probably be better of with a standard insurance plan.

Now, if HSA sounds like a better option then you need to decide if you want to consider it as a part of your PP or as a completely separate asset.

If the former is the case, I'd treat the HSA money as either cash or bonds. Personally, I use my HSA as a part of my cash bucket and keep the balance in an FDIC bank account earning 3% APY. Another option is to buy TLT or EDV in an HSABank (good for those living in HSA-unfriendly states so you can avoid state taxes). It would be nice to buy bonds directly, but as of this writing Fidelity doesn't offer HSAs to retail investors. I don't know if Vanguard or any other discount broker offers them.

If the latter is your choice, then you can do whatever you want and doing a second PP is one option. But you still should consider the scenario when you will need to cover some major medical need a few decades later (God forbid) so you want to make sure you'll have a clear action plan of how to quickly "liquify" your HSA balance so you can use it as cash.

Last but not least: I forgot to mention that as of 2007 if you open an account say in December you can still contribute the annual maximum. This rule however doesn't  apply if your HDHP coverage ends - in this case you can only contribute a pro-rated amount for that particular year.

[sophie]

My employer (a major university) just started offering an HDHP option this year, so I've only just started grokking HSAs.

First off, your costs for health plans are going to vary tremendously depending on employer benefit structure, so the costs aren't really comparable.  For example, my HDHP costs me $11/month pretax, but that just means that my employer is focusing benefits there and shorting us someplace else.  What you have to do is compare among all your options.  In my case, the deductible on my existing plan was set to increase to the point where it made no sense not to switch to the high deductible plan, even though I do anticipate some medical expenses this year.

High deductible health plans, even with some expenses, are generally cheaper because routine medical expenses are suddenly no longer free - and that changes the choices you make.  You're less likely to visit a doctor and ask for an antibiotic for a sore throat, for example, if you know you'll have to pay $200 for the privilege.

I've come to the conclusion that HSAs are nothing more than a potential vehicle for additional tax-deferred space for my PP.  I think it would be more beneficial in the long run to let earnings accumulate tax free than to offset routine medical expenses now.  If you save your receipts, you can take the money out of the HSA tax free in future, giving you a nice pot of money for emergencies of all kinds.

My wife has a baby on the way and I hear they're medically very expensive for the first year or two of life, what with many emergency room visits.

Congratulations!  No need to fear high medical expenses with a baby, though.  It's mainly well baby visits and immunizations that will be covered by your family or parent/child policy.  And may I respectfully suggest that you look for pediatricians with night/weekend answering services or, in a pinch, urgent care clinics, rather than emergency rooms.  Having answered many middle of the night phone calls from panicked parents of children with the chronic condition that is my specialty, I can tell you that the need for an emergency room visit for an otherwise healthy child is truly rare.  What looks to you like a frightening situation can almost always be handled at home with a little sensible and well-informed advice.

[WildAboutHarry]

I've come to the conclusion that HSAs are nothing more than a potential vehicle for additional tax-deferred space for my PP.  I think it would be more beneficial in the long run to let earnings accumulate tax free than to offset routine medical expenses now.  If you save your receipts, you can take the money out of the HSA tax free in future, giving you a nice pot of money for emergencies of all kinds.

Sophie is absolutely right on this.  Everyone has a finite number of years/dollars that they can use to fund a 401(k), tIRA, Roth IRA, etc.  By offering an HDHP, an employer effectively opens up another set of tax-free and/or deferred investment "years".

And the pseudo-tIRA aspect of HSAs is a great benefit.  However, these plans may become extinct due to the payout provisions of the ACA.

[sophie]

Wild - say not so!

Can you point us to some more information on the effect of ACA on HSAs?  So far it looks to me like the HDHP/HSA combination is a cornerstone of the ACA policy, and that the rules were just tightened up a bit (no reimbursement for OTC meds, increased penalty for withdrawal for non-medical expenses).

[MachineGhost]

Can you point us to some more information on the effect of ACA on HSAs?  So far it looks to me like the HDHP/HSA combination is a cornerstone of the ACA policy, and that the rules were just tightened up a bit (no reimbursement for OTC meds, increased penalty for withdrawal for non-medical expenses).

There is a lack of hard data currently, only claims and speculation..  I don't think we'll really know for sure until the state exchanges go into effect and see what is being offered for sale.

I, for one, don't plan on blowing $100+/mo. on low deductible, overpriced, overfeatured health insurance mandated by the government that I don't need and won't use.  So, I hope there will be enough market demand remaining for people to pay the tax penalty and then buy castrophobic coverage only or high deductible HSA's, etc. off the exchanges.  I prefer to direct my resources into health care not sickness care.

[WildAboutHarry]

Can you point us to some more information on the effect of ACA on HSAs?  So far it looks to me like the HDHP/HSA combination is a cornerstone of the ACA policy, and that the rules were just tightened up a bit (no reimbursement for OTC meds, increased penalty for withdrawal for non-medical expenses).

As I understand it ACA requires a certain percentage of premiums to be paid out of compliant plans, and it is tough to structure HDHPs to be compliant.

Like MachineGhost says, only speculation at this point.  I hope that providers are motivated to provide HDHPs so that the great HSA deal can continue.

And I wish I could get a $100 low deductible plan like MG:)

[MachineGhost]

And I wish I could get a $100 low deductible plan like MG:)

That may be a false assumption on my part that the governent-mandated low-deductible plans would actually cost around $100/mo with more people in a state's risk pool (which will fold in the high risk pool also) as in Switzerland.  So if Congress expects us to be paying $200-$300+ a freaking month for comprehensive plans just to subsidize every little consequence of other people's unhealthy lifestyles, I won't be one of them.

RomneyCare's experience is that insurance premiums will rise for everyone and subsidy and costs are dramatically higher than forecasted.  They are now resorting to implementing price controls this year.  I guess we are all doomed to be on the anti-Thatcherite train ride for a few decades until some common sense, market discipline gets forcefully restored.

Solace: It wont be hard to game the system.  Just sign up for health insurance for a few months, utilize it for procedures that cost more than the total premiums and then drop it.  I do think, however, that market discipline will push the cost of annual health insurance down to the inflation-adjusted 2.5% of household income penalty to maximize sales volume.  But, it will probably act as a floor too.

[sophie]

Solace: It wont be hard to game the system.  Just sign up for health insurance for a few months, utilize it for procedures that cost more than the total premiums and then drop it.

Before anyone tries this, better wait and see how the laws on pre-existing conditions play out.  I personally think the insurance industry will fight as dirty as it can on this issue, and they think faster and smarter than Congress does.  For example, insurance companies are fond of accusing people of fraud for even the tiniest paperwork mistake (e.g. forgetting to report a yeast infection on the application...true story), in order to cancel policies.