[USER]

A “high deductible” health plan has always been scary and many of my finance peers will choose the HMO plan.

When I asked them why, they said if they have an emergency visit in January, they may reach their OOP immediately.

(I keep the equivalent of my OOP maximum in a savings account to cover that possibility).

I compare for myself each year and my results for this year are below. I ran scenarios of having $2k in coinsurance and $10k in coinsurance for the year.

My assumptions are that I will put $4,500 aside each year for medical costs. I will use an HSA if I have a high deductible plan because it is mine to keep. Under the HMO plan, I will use a savings account since an FSA is use it or lose it.

I also assume that I will save 7.65% in FICA and 33% Fed and State income taxes on the HSA contributions.

Question: Can you think of anything I may be missing?

[Preston]

Gains on invested HSA further support your implied decision imo

[Teresa]

I thought FICA was taken out before any other deductions. May not be a saving in that area.

[Marty]

We have been in an HSA for 4 years . Remember you also must invest in your HSA. I put $250 a paycheck in.

I am
Comfortable as we have the max out of pocket set aside and we invest in it so that future medical will be fully covered tax free.

Without taking advantage of those things I wouldn’t do it

[Gina]

Last year I took a HD Plan, with limited options. My regular doc was on and I didn’t anticipate any surgeries, illnesses.

Fast forward to June, son was in an accident and had open fractures and had be sent to an OON trauma center.

Then 3 months later, I ended up in hospital for 6 days with pneumonia.
I paid out tons

[Keri]

For us the huge difference is out of network coverage. Our HDHP out of pocket out of network maxes at 6600 per family versus PPO at 1600 per family.

We max out on out of network coverage each year.

If we were pretty darn sure we would have near zero out of network coverage, HDHP would definitely beat our PPO option.

[Ashley]

I have found that high deductible plans work best if you are either a heavy or low insurance user. If you have a lot of ongoing/lower cost stuff, it could go either way.

I was lucky to have high deductible when I gave birth and for my January baby it was awesome to pay $2k up front, then have 100 % coverage for the rest of the year.

My job has since modified the plan to have 90 or 95% coverage after meeting the deductible, but when I knew I had lots of medical expenses those years, it was great.

[Chris]

We use hdhp + hsa. Leave it to grow. Most regular visits are out of pocket.

For a major event I set up payment plans with the hospital and it’s zero interest.

[Ev]

Double check if you are in one of the states that don’t conform for HSAs. That is, they treat the HSA as no different than a taxable investment.

Still can be a good deal, just more tracking headaches.

[Rebecca]

Your annualized premium savings are greater than the hdhp deductible.

After that point it’s pretty likely that the coinsurance/copays would be comparable.

I find the hdhp to be a no brainer in this case.

I’ve been on an hdhp since 2009 and have hit my deductible only a handful of times, oop max only once.

From single to married to a family of four with two pregnancies, a few emergencies and a few surgeries along the way.

As for timing, even if you have an emergency in January you wouldn’t have to pay that very day, and that’s really only a potential problem in year 1 when you don’t have an hsa cushion yet.

[Zoe]

My copays and max out of pocket are significantly different between plans as well as monthly costs so I figure all cash out possible for the year as a family then see if tax savings help from there.

I work out worst case best case scenario too and see if there is a difference.

Nice to know there are just as focused spreadsheet people out there for the yearly open season as me!

[Rick]

What if the economy has an emergency in January? Does that make your 401k a bad idea? Of course not as that is a short term and losing mindset. Your finance peers are not being fair to the hdhp+hsa.

I do like you analysis. I did something extremely similar for many years.

A minimum, moderate, and maximum healthcare expenses analysis. Minimum was essentially no healthcare use other than covered items like an annual check, just premiums.

Moderate was healthcare costs up to each deductible.

Maximum was healthcare up to each oop max.

I would color code the best outcome as green, worst outcome as red, and others as yellow, like a heat map.

Time after time, year after year, employer plan changes some years but not others, etc etc, the hdhp+hsa kept winning the lions share of green boxes.

[Eli]

Your tax savings may be understated because if you leave those funds invested for years (decades) all the earnings are tax-free as well.

Very hard to come out behind with HDHP.

[Asucena]

You didn’t ask this but an FSA typically becomes a “Limited FSA” when you have an HSA in place, meaning you can only use it for vision and dental not medical.

I did what you did 4 years ago and never looked back. Invest that HSA money is key though.

Don’t just let it sit there if you’re truly trying to maximize the benefits.

[Misty]

We are switching to an HDHP next year. This year we will have paid almost $30k in premiums and my husband met his $1500 deductible plus we paid about $400 in coinsirance/copays.

Out of pocket $32k
Insurance covered >$3k

I’m done being afraid of an unexpected expense. I should be afraid of that premium!!

[Karen]

I don’t think people realize that an HDHP doesn’t have to be a big expense bomb at the beginning of the year, if you contribute to an HSA.

(Other than the first year while you’re building your balance.) I switched to a HDHP many years ago, and I took the premium difference between the HDHP and the PPO and put it into my HSA.

If I had a big medical bill, I paid for it out of my HSA so I didn’t have to come up with the money.

In my case, the math worked so that my HDHP’s annual max OOP + premiums was very close to the PPO annual premiums.

The BIG difference is that with a PPO/HMO, if you pay the premium but don’t use it, it’s gone; but with the HDHP, if you put money in the HSA and don’t use it, it accumulates!

People really need to compare the max OOP + premiums for both options, because the HDHP can really be a great option if you look at the numbers.

(Now that I’m more financially secure, I pay medical bills out of pocket to keep money in the HSA, but that’s a different strategy.)

[Author]

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