HDHP vs PPO (least bad choice)

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mortal
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HDHP vs PPO (least bad choice)

Post by mortal »

Howdy folks,

We're having 'open enrollment' at my employer. I have a choice between two health plans at the moment, and would like help chosing between them.

1. $86 / mo. PPO $1500 deductible
10% Co-Insurance after deductible is met, $100 Rx deductible.

2. $40 / mo. HDHP $2500 deductible.
For those unfamiliar with HDHP, the plan pays nothing until the deductible is met, 100% thereafter.
$500 / year employer contribution to HSA. Tax deduction est ~$700 value. (3300 limit - 500 emp contrib) * 25% tax rate. (+ Georgia?)

So, doing the math...
Savings on premiums: $552
Employer contribution: $500
Tax break: $700
Total: $1752

It would seem that as long as I spend less than $1752 / year I come out ahead using the HSA. Given that the PPO has copays of $30 / $75 / $250 for office / urgent / emergency visits, I suspect the number is a bit closer to $2000.

What do y'all think? The numbers seem to point to the HDHP.

However, I will say that knowing I have to plunk down $140 for a PCP visit, it makes me 'tough it out' longer than I would otherwise. I recently had an ear infection that I was treating with hydrogen peroxide. While this had cleared up the issue before, this time it became an inner ear infection. When that happened, I had to throw in the towel and go see a doctor for antibiotics. I still haven't gotten the bill for that. It drives me nuts that I'm supposed to make 'informed decisions' about 'my care' without any information!
BruDude
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Re: HDHP vs PPO (least bad choice)

Post by BruDude »

What are the out of pocket maximums? Are we assuming your health expenses at this time are minimal?
AlbertaHipster
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Re: HDHP vs PPO (least bad choice)

Post by AlbertaHipster »

The lack of upfront pricing information does get frustrating with an HSA plan. Doctors don't always know prices, and the people who do know prices aren't qualified to make medical recommendations. With the PPO you're paying for convenience -- you don't have to hassle as much with researching pricing for everything, but if your needs are minimal you'll pay more to be covered.

Another factor, discussed at length on these forums, is that the HSA provides more tax-sheltered space for your investments (although depending on the plan specifics it might take a few years of contributions before you're eligible to invest.) That can be quite beneficial over time.
BruDude
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Re: HDHP vs PPO (least bad choice)

Post by BruDude »

I also want to point out that an HDHP can also be a PPO. PPO just refers to the plan network, so an HDHP can be an HMO, PPO, EPO, or POS. Alphabet soup.
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ThePrune
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Re: HDHP vs PPO (least bad choice)

Post by ThePrune »

BruDude wrote:What are the out of pocket maximums? Are we assuming your health expenses at this time are minimal?
+1
Insurance should be viewed first and foremost as protection against unlikely but devastating economic events. So if there is a significant difference in out-of-pocket maximums for these two plans, give it a high weighting in your decision.
Investment skill is often just luck in sheep's clothing.
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Steelersfan
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Re: HDHP vs PPO (least bad choice)

Post by Steelersfan »

BruDude wrote:I also want to point out that an HDHP can also be a PPO. PPO just refers to the plan network, so an HDHP can be an HMO, PPO, EPO, or POS. Alphabet soup.
+1

I've got a HDHP that has a PPO network.
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restandinvest
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Re: HDHP vs PPO (least bad choice)

Post by restandinvest »

It looks like the HDHP is the way to go. I administrate the benefits program for our company, and we have switched to a HDHP. Insurance is about risk management, not about a way to finance routine care. You can use it to finance routine care, but you'll pay for that luxury. It would be equivalent to having car insurance which covers oil changes, minor maintenance, and even a few tanks of gas. It "great insurance" but it would cost a fortune. Self-insure for the minor risks, and use the actual insurance to mitigate against a major risk.

The key to HDHP insurance is building up the balance in the HSA. You feel more exposed at first, but as your balance builds you become more and more self insured. Contributions, earnings, and withdrawals are all done tax-free (assuming the withdrawals are for medical purposes.) Also, the HSA stays with you if you move jobs. This can be valuable as I can tell you that the trend among employers is towards HDHP plans.
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Kosmo
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Re: HDHP vs PPO (least bad choice)

Post by Kosmo »

You're not considering a few things:
1) As others have said, out of pocket max is a factor. But you say the HDHP pays 100% after meeting the deductible, so that means the max is $2500. Is that true? (I have not heard of such a thing, but that doesn't mean it doesn't exist.) If that's the case, this is a no brainer. But I suspect it's not, usually insurance pays 80% or 90% after the deductible is met, up to the OOP max.
2) Monthly premium and HSA contributions also bypass FICA taxes, so you save another 1.45%+6.2%. This would tilt the decision even more towards HDHP.
3) How does the HDHP treat prescriptions? Do they count towards the deductible?

I don't know if considering any of these factors will change the final decision, but it may make it clearer. Usually the tax benefits of having an HSA are hard to pass up. No taxes going in and no taxes coming out (when used appropriately). I make sure I max out my HSA contributions before any other retirement contributions.
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mortal
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Re: HDHP vs PPO (least bad choice)

Post by mortal »

I believe the oop max is 5k, but with the plan covering 100% after 2500 for in network , I think it's hard to get there short of an ambulance taking you to an out of network hospital. Prescriptions are also covered.

I take one generic prescription / mo. Runs me 10 at Walmart. I have cp, but it is a stable condition that doesn't require much ongoing treatment.
SimonJester
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Re: HDHP vs PPO (least bad choice)

Post by SimonJester »

mortal wrote:I take one generic prescription / mo. Runs me 10 at Walmart. I have cp, but it is a stable condition that doesn't require much ongoing treatment.
Find out the retail cost of that generic prescription, because in some plans that will be deducted from your HSA not the $10. Under my HDHP we eat full retail costs of generics, and if you have a name brand you pay full retail costs and the difference between the generic and retail does NOT count towards your deductible. So one or two prescriptions a year eats through my HRA money.

On the wife's HDHP prescriptions are separate and she only pays $15 co pay.

I would also double check the amount covered after the deductible, most I've seen do cover 80% no 100.
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yosef
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Re: HDHP vs PPO (least bad choice)

Post by yosef »

You don't mention if you have any dependents. If it's just you, the HDHP probably makes sense. I think it is much harder to make the case for it however if you have dependents, particularly children. Mostly because the deductible typically goes up a lot and children seem to need non-preventative care more often.
Topic Author
mortal
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Re: HDHP vs PPO (least bad choice)

Post by mortal »

Update : verified oop max $2500 in network 2x out
Everything beyond deductible is covered 100%

Single, No dependants
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Kosmo
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Re: HDHP vs PPO (least bad choice)

Post by Kosmo »

mortal wrote:Update : verified oop max $2500 in network 2x out
Everything beyond deductible is covered 100%

Single, No dependants
That would deal the deal for me as long as the network has the doctors you regularly see. Having the OOP max and the deductible be the same makes it a whole lot easier. And your HSA yearly contributions will cover that and then some. Effectively, you'll never have to come up with any money out of pocket.
mlipps
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Re: HDHP vs PPO (least bad choice)

Post by mlipps »

Kosmo wrote:You're not considering a few things:
1) As others have said, out of pocket max is a factor. But you say the HDHP pays 100% after meeting the deductible, so that means the max is $2500. Is that true? (I have not heard of such a thing, but that doesn't mean it doesn't exist.) If that's the case, this is a no brainer. But I suspect it's not, usually insurance pays 80% or 90% after the deductible is met, up to the OOP max.


I don't know if considering any of these factors will change the final decision, but it may make it clearer. Usually the tax benefits of having an HSA are hard to pass up. No taxes going in and no taxes coming out (when used appropriately). I make sure I max out my HSA contributions before any other retirement contributions.
This is how my husband's HDHP is set up as well, not that uncommon I don't think.
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