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Managing unexpected health care costs

Key takeaways

  • Unexpected medical emergencies can happen anytime so it's important to have a plan to cover those costs.
  • A tax-advantaged health savings account can help you pay for medical expenses now and in the future.

It was January 2021, and my wife Grace was 35 weeks along in what had been a perfectly normal pregnancy with our first child. She was at the point where she was seeing her obstetrician every few weeks, but because of COVID restrictions, I hadn't been able to come along to any of the appointments. This visit, they were planning to do a final ultrasound, and the doctor said: "For once we'll let your husband come along so he can finally see the baby."

We were living in downtown New York City at the time, in the process of finalizing the purchase of a new home in northern New Jersey. During COVID, Grace and I both worked from home—Grace as a second-grade teacher and myself as a private wealth management advisor—our Zoom calls sure sounded different!

The hospital where Grace was getting the ultrasound was close to our home, so before I left for the appointment, I told my colleagues that I'd be back at work in a couple of hours. I didn't wind up logging back in for over a week.

A sudden change of plans

The ultrasound showed that the baby was measuring small and Grace's fluid levels were low, so they decided to induce her within hours. Lucas was 4 pounds when he was born and his lungs were underdeveloped, so he needed breathing support and a feeding tube. He was in the NICU for over 2 weeks, during which time we closed on our house and our family helped move all our belongings. When we finally brought our new baby home, it was to an empty house filled with boxes.

Lucas seemed healthy when he was discharged from the hospital but unfortunately that wasn't the end of his medical needs. He developed 2 unrelated conditions—a hernia and testicular torsion—which both required spending days in the emergency room as well as surgery. There were some terrifying times when our child was in a great deal of pain, and we didn't know what was happening. Money was the last thing on our minds in those moments. As a parent you instinctually try to do whatever you need to do for your child.

Photo courtesy of the Hwang family

The million-dollar bill

Most importantly, both Lucas' surgeries were successful. But I was shocked when I saw the hospital bills—over $1,000,000! We were fortunate to have great health insurance that covered most of it, but we hit our annual out-of-pocket maximum for the first time—a big expense for new parents and new homeowners.

Luckily for us, many years prior I had been at an event with a Fidelity leader who discussed the potential benefits of savings in a health savings account (HSA). He said: "Even people who are young and healthy should consider getting an HSA." Until then, I hadn't really considered enrolling in a high-deductible health care plan, which would make me eligible for an HSA. It seemed like a lot to cover my initial bills until I met the deductible. But when I ran the numbers during open enrollment time, I realized the economics made sense for my situation because of the tax savings with the HSA: Tax-deductible contributions, tax-deferred growth, and tax-free withdrawals for qualified medical expenses*. Through our diligent contributions into our HSA, we had enough saved to cover all our out-of-pocket expenses for Lucas's medical treatments.

A growing family

Emergency savings is something I talk about with clients all the time, as part of our broader financial planning process. My own experiences really reinforced their importance. It's so critical to have a plan to cover large, unexpected expenses. And those expenses frequently take the form of medical bills, so if you're eligible for a HSA and it matches your medical needs, it may be worth looking into. Grace and I now contribute the maximum amount each year. We could also consider paying for some of our health care expenses out of pocket and investing the money in our HSA, which would allow us to take advantage of potential compounding and use it as a powerful savings vehicle for retirement.

Since his medical bouts, Lucas has remained healthy and has grown into a strong young boy. We recently welcomed a baby girl into the world, Mila, and Lucas is already in love with his younger sister. We remain hopeful that Mila won't have to endure medical hardship like her older brother, but if she does, we feel prepared as a family—both emotionally and financially—to overcome any challenge thrown our way.

About the author

Bryan Hwang
Vice President
Bryan Hwang, CFP®, CFA, is a Private Wealth Management Advisor based in New York City.

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Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

*With respect to federal taxation only. Contributions, investment earnings, and distributions may or may not be subject to state taxation.

The information provided herein is general in nature. It is not intended, nor should it be construed, as legal or tax advice. Because the administration of an HSA is a taxpayer responsibility, you are strongly encouraged to consult your tax advisor before opening an HSA. You are also encouraged to review information available from the Internal Revenue Service (IRS) for taxpayers, which can be found on the IRS website at You can find IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, and IRS Publication 502, Medical and Dental Expenses, online, or you can call the IRS to request a copy of each at 800-829-3676.

Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.

The CFP® certification is offered by the Certified Financial Planner Board of Standards Inc. ("CFP Board"). To obtain the CFP® certification, candidates must pass the comprehensive CFP® Certification examination, pass the CFP® Board's fitness standards for candidates and registrants, agree to abide by the CFP Board's Code of Ethics and Professional Responsibility, and have at least 3 years of qualifying work experience, among other requirements. The CFP Board owns the certification mark CFP®  in the U.S.

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