Talk me down on HDHP (High Deductible Health Plan). What am I missing?

[Statistical]

Talk me down on HDHP. What am I missing?

Lots of people say HDHP with HSA are "crap" however I am changing jobs on Jan 1st and it "looks" to me that the HDHP plan is the best option. Maybe not for everyone but it looks like it in my case.

So between my & my spouse's plans we have 5 options (2 HMO, 2 PPO, and a HDHP). All 5 have a lifetime max of $5mil. Eliminating the "worse" HMO and PPO option this gives us:

HDHP:
$50 monthly premium ($600 annually)
$2400 deductible
20% co-insurance after deductible (insurance pays 80%)
$5950/$11900 annual max out of pocket.

PPO:
$300 monthly premium ($3600 annually)
$1000 deductible
20% co-insurance after deductible (insurance pays 70%)
$2500/$5000 annual max out of pocket

Now the HMO (not listed) looks best on paper but in the past we had a horrible horrible experience with an HMO deciding the best option (not that expensive and very routine) wasn't needed and wanted to do a less preferred option. Don't want to go into details but I would only take an HMO if I had no other options.

So comparing the PPO to HDHP
They both have exact same network. Obviously the HDHP has higher deduct and annual max however the employer chips in $500 to the HSA to pay for medical costs.

The PPO costs us $3000 more per year before paying a single dollar in coverage. Likely we would put that $3000 into an HSA. So in payroll deductions they are equal PPO: $3600 vs HDHP ($600 + $3000 HSA contribution).

Now the employer chips in another $500 into the HSA annually. The $3500 takes us well past the $2400 deductible which means the HSA can completely pay the annual deductible (if needed).

HDHP
first $2400 is paid 100% by HSA (deductible)
next $1100 is paid 80% by insurance and 20% by HSA.
At this point the $3500 in HSA is exhausted but due to the 80/20 split that nets us about $8400 in coverage before we pay a single penny in cash. After that we pay 20% of all rest of cost until we hit annual max ($11,900).

PPO
First $1000 is paid by us (cash).
Then insurance pays 70% (we pay 30%) until annual max of $5000.

The last thing to consider is the $3000 we put into HDHP is tax deductible so that saves us about $900 per year in taxes (fed + state).

The only situation that the HDHP falls behind is if we have massive medical bills and it hits the annual max.

HDHP: $11900 - $3500 - $900 (tax savings) = $7500 out of pocket expenses.
vs
PPO: $5000 out of pocket expenses

So while the HDHP is worse in that situation it isn't impossibly worse ($2500 more in cash expenses). However most years it is unlikely we will hit the max. I only wish I had done this a decade ago. I looked back (love medical bills being online) and we spent an average of $1500 per year in medical claims over last decade. Had I done this a decade ago that would be $35,000 contributed to HSA - $15,000 in expenses = $20,000 net value today.

So what am I missing? I am leaning towards signing up with the HDHP and opening a HSA w/ $3000 annual contribution (+$500 from employer).

[Statistical]

1. 60+ views and nobody has a comment good or bad?

Even if your don't want to read my specifics (sorry it is so long) I am interested in any personal experiences with HDHP (good or bad).

[Robyn66]

4. I would comment but I honstly have no idea (nt)

[comtec]

2. who is the HMO?

Honestly it looks like you are going to get screwed no matter what.
With the HMO you pay the middle,and get relatively ok service - but your payment is time and effort
with either of the two it looks like you may get more coverage but get completely bent over in costs!

The problem with the HDHP is if you have any problems I think you may learn WHY this legislation was just passed.

You can't plan for "probably won't"

I would honestly say toss a coin between the PPO and the HMO.

50 a month is tempting I know, so cheap! but research them online, and see if they are any good at actually PAYING OUT on claims!

I know Kaiser may not always be the fastest but overall they are considered the best IIRC

[Statistical]

3. All 5 plans are with Optima so no choice in provider.

We won't be paying just $50. Rather since PPO is $300 per month we would be paying $300 per month in HDHP (which gives us $3500 per year in HSA).

I agree you can't hope for the best. I looked at the worse case scenario also.

The HDHP has an annual out of pocket max of $11,900 which initially sounds awefully bad.
However when you consider $3500 will be paid by the HSA and we get about $900 in tax savings the actual "net cash" cost of worse case scenario is $7500 vs $5000 in PPO.

So if we rack up say $80,000 in medical bills the HDHP will cost us $2500 more than the PPO.

I am very wary of going to an HMO it was an emotional nightmare when the PCP couldn'/wouldn't get authorization for a medical procedure and recommended one that from what we read online is outdated, painful, and has unecessary side effects. It isn't so much the HMO not paying that I worry about it is the reliance on PCP (and behind the scenes the HMO) deciding which procedure they will approve.

[comtec]

7. If it's the same company then there is no worry, you'll be screwed equally

and HMOs tend to be all inclusive.

You will have to deal with the same assholes no matter what.
Might as well go for the plan that will cover the most with the least out of pocket plan.

But thats my two cents.

[Lydia Leftcoast]

5. A $2400-deductible health plan with a $50 premium is one thing

A $5000-deductible plan with a $250 monthly premium is quite another. It's the best deal I can get as a middle-aged, self-employed person, and even that may become unaffordable if the current reduction in income continues. :-(

[Statistical]

6. I agree the private market is much worse.

Only wish there was a method to create a single risk pool and thus self employed could at least access HDHP at reasonable rates (50 & $2400 for example). It would seem simple that all self employed and small business in a state could create a single risk pool. combined the pool would be larger than the largest corporation and then negotiate as a single entity. Why Congress hasn't looked at that simply solution I don't know.

Sorry about your situation. If it were up to me I would make ALL employer based plans illegal. Simply make all employers pay cash to employee for the amount they were spending on healthcare. Yhen allow everyone to purchase from an exchange (w/ public option one of plains available) and everyone deduct the cost of medical care from their taxes. Thus evening the "playing field" between larger business, small business, and self employed.

The employer system has IMHO created a 2 tiered system. I have considered going into business for myself but I don't know how I would attract employees given I wouldn't be able to afford offering them "reasonable" healthcare.

[Lydia Leftcoast]

9. Your suggestion makes too much sense

But the insurance companies rake in more money if they pretend that individual purchasers are groups of one.

[Statistical]

10. Agreed and that would be a simple thing Congress could have done

with minimal taxpayer costs to make Health Insurance more fair (and thus increased number of insured).

Simply have govt organize pools, allow self employed and small business to join the pool and then request quotes from insurance companies on insuring the pool.

[HopeHoops]

8. We went with the highest deductible because the math made sense.

The next lower deductible (family plan) was double the monthly premium. The difference between the total out of pocket on the high and total out of pocket on the medium was the same as the difference we would pay in a year by going with the medium. So the rationale? With the medium plan we were committing to spend that difference. With the high deductible plan we would only pay it if we incurred the expenses. Either way the maximum was the same so we decided to avoid spending the money if we didn't have to.

[Tom Rinaldo]

11. I think it makes sense for you

...and for those who have enough income or whatever to pay the high deductible and co-pays and maximum annual out of pocket costs if need be PLUS the monthly cost of the insurance AND your other financial obligations. It does give you some protection (if the insurance company doesn't play games) against catastrophic medical bills, and your aren't forking over a small fortune every month to get it.

This is what I chose while I still could do all of the above. When times got tougher and I realized I couldn't pay for both doctors visits AND my insurance PLUS my mortgage, I dropped my insurance so I could pay for doctors visits AND my mortgage using funds saved by not having monthly insurance premiums. Mandates likely will hurt me if I don't hit 65 before penelties kick in.

[dugaresa]

12. I basically did the same thing this year but check the fine points on the

deductible information as to what counts towards it. You may pay for something and they may not increment it towards your deductible.

[Vinca]

13. Isn't it a shame we don't have Canada's health care system?

You would get your identification card to present for medical treatment and the only thing you'd have to worry about is remembering to bring it with you to appointments.

[dflprincess]

14. Don't get sick before you have money in your HSA

Or it's coming out of your pocket - after taxes.

Also keep in mind, there are expenses that aren't covered by your insurance that won't apply to your deductible and you may or may not be able to use your HSA for them. For example, the plan I'll soon have doesn't cover vision and, we've been told, we can't use the HSA for those expenses because they're not covered by our policy. So, in addition to the HSA, we can also set up a limited FSA, but only for vision and dental. Other expenses not covered by the policy will have to be paid out of pocket with after tax dollars.

My employer is moving to one of these scams as of Jan 1 and the only people at work who aren't looking for jobs with better benefits are those who can get on a spouse's insurance.

[Statistical]

15. You were given wrong advice.

The IRS controls what an HSA can be used to pay for. Not the employer, and not the plan.

Section 213d covers what is considered a "qualified mecial expense" for tax deduction purposes.
If it is qualified it can be used on tax deduction, paid from HSA, or paid from FSA. If it isn't it can't be used anywhere.

http://www.irs.gov/publications/p502/index.html

So hypothetically if something can't be covered by HSA (say breast implants) it can't be covered by FSA, HRA, or straight tax deduction either. The IRS doesn't care about the "vehicle" it simply cares if it is qualified or not.

You can use HSA funds to pay for any qualified medical expense from asprin at grocery store to lasik eye surgery. It doesn't just have to be something covered by your insurance.

So while eyeglasses or eye exam may not be part of deductible you can still use HSA funds to pay for it.

No reason to have an HSA and Medical FSA at same time. If it is too late to change just be sure to use up the FSA first (because it doesn't roll over).