HSA vs. Regular Plan--two very good choices

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
rexhat
Posts: 48
Joined: Sat Jun 08, 2013 4:56 pm

HSA vs. Regular Plan--two very good choices

Post by rexhat » Sat Feb 22, 2014 11:06 pm

Hi all,

I'm trying to decide on choosing an HSA vs. a standard healthcare plan. My employer is generous and pays all premiums for either plan. For the HSA, they kick in an extra $2,250. We've always done the standard plan in the past, but I'm intrigued about the HSA.

Background: Me: 35, DW:33, Child: 6 mos.
Already maxing out retirement accts (401k and backdoor roth). If we did HSA we would let it grow until retirement (keepings records of all expenses until then)

Standard Plan
doctor network Same
Premiums paid 100% by employer
Employer HSA contribution $0
in network deductible $0
in network coinsurance $0
in network out of pocket $0
office visit $30-$50 copay
out of network deductible $1,000/$2,500 indiv/family
out of network coninsurance I pay 30% to $10,000
out of network out of pocket $4000/$10,000 indiv/family
preventive medicine 100% covered
Lifetime max unlimited

HSA option
doctor network Same
Premiums paid 100% by employer
Employer HSA contribution $2,250
in network deductible $1,500/$3000 (individual/family)
in network coinsurance I pay 10% up to out of pocket maximum
in network out of pocket $3000/$6,000 (individual/family)
office visit 100% up to deductible, then 10% up to out of pocket maximum
out of network deductible $5,000/$10,000 indiv/family
out of network coninsurance I pay 40% to $12,500
out of network out of pocket $10,000/$20,000 indiv/family
preventive medicine 100% covered
Lifetime max unlimited

We're currently young and healthy. Other than for unanticipated illness, we only plan to have one ultrasound annually each (wife and me for known benign conditions) and our child will likely have a few sick visits, unfortunately. Well visits are 100% covered.

So the way I see it, if we do the HSA, we get $2,250 free from the employer. We contribute an extra $4,350 (or whatever brings us to the max). In total we save ~$2,500 in taxes (federal (~33-39.6% marginal), state and some FICA) and get $2,250 free. We could use those savings to pay for the extra costs we would have with the high-deductible plan(which if we stay in-network is capped at $6,000, but likely to be less than $3,000). Of course we would let the $6,550 grow until retirement each year.

Based on these numbers and the scenarios above, does picking the HSA plan make sense?

Thanks for your input!

mnvalue
Posts: 1086
Joined: Sun May 05, 2013 2:22 pm

Re: HSA vs. Regular Plan--two very good choices

Post by mnvalue » Sat Feb 22, 2014 11:32 pm

If your health expenses are more than $2,250, you go backwards. If they're less, you come out ahead. The taxes saved are only relevant if you're already maxing out all tax-advantaged space, right?

rexhat
Posts: 48
Joined: Sat Jun 08, 2013 4:56 pm

Re: HSA vs. Regular Plan--two very good choices

Post by rexhat » Sat Feb 22, 2014 11:43 pm

Yes all tax advantaged space is maxed out. 401k, back door roth, & 529

rexhat
Posts: 48
Joined: Sat Jun 08, 2013 4:56 pm

Re: HSA vs. Regular Plan--two very good choices

Post by rexhat » Sun Feb 23, 2014 10:34 am

Anyone else have an opinion on this HSA option?

Laura
Posts: 7973
Joined: Mon Feb 19, 2007 7:40 pm

Re: HSA vs. Regular Plan--two very good choices

Post by Laura » Sun Feb 23, 2014 11:14 am

If you have benign conditions that require annual monitoring it seems like you could unexpectedly incur rather large medical expenses in the future. That would tip me toward the standard plan. Also, plan on increased medical expenses with the child. Things just happen like playground accidents, biking accidents, etc. You may still be able to cover this out of pocket but a 6 month old is easier than older kids in this regard.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.

rexhat
Posts: 48
Joined: Sat Jun 08, 2013 4:56 pm

Re: HSA vs. Regular Plan--two very good choices

Post by rexhat » Sun Feb 23, 2014 2:34 pm

Thanks Laura, I'm still intrigued by this pre-tax contributions, no tax in withdrawal and being allowed to invest the money for decades. The worst case we are out $6,000/year in-network which doesn't seem bad at all. I think average case would be between $1,000-$2,000/year in expenses, which the employer subsidized $2,250 each year anyway. Am I missing something?

jhh9327
Posts: 252
Joined: Sat Mar 31, 2007 9:06 am

Re: HSA vs. Regular Plan--two very good choices

Post by jhh9327 » Sun Feb 23, 2014 6:04 pm

One thing that people can sometimes miss is once you get through the deductible, many out of pocket expenses are often cheaper on a HSA option than a co-pay option. A sick child visit runs about $85 where I'm at. That would be $8.50 once you are at the co-insurance level. It is always $30 for you on the co-pay plan. Unless a specialist visit costs over $500, it will be a cheaper expense on the HSA then co-pay also once you get through the deductible.

People often mention and are worried about having a lot of medical expenses when going on a HSA, but typically that would also mean a lot of co-pays even if they were in a standard plan.

Between your employer paying a large portion of the deductible amount and the tax benefits of the HSA option, I would personally go in that direction.

ChrisC
Posts: 677
Joined: Tue Jun 19, 2012 9:10 am
Location: North Carolina

Re: HSA vs. Regular Plan--two very good choices

Post by ChrisC » Sun Feb 23, 2014 8:09 pm

jhh9327 wrote:One thing that people can sometimes miss is once you get through the deductible, many out of pocket expenses are often cheaper on a HSA option than a co-pay option. A sick child visit runs about $85 where I'm at. That would be $8.50 once you are at the co-insurance level. It is always $30 for you on the co-pay plan. Unless a specialist visit costs over $500, it will be a cheaper expense on the HSA then co-pay also once you get through the deductible.

People often mention and are worried about having a lot of medical expenses when going on a HSA, but typically that would also mean a lot of co-pays even if they were in a standard plan.

Between your employer paying a large portion of the deductible amount and the tax benefits of the HSA option, I would personally go in that direction.
I agree with this thinking. You also, however, need to carefully review the medical coverage under both plans. There are differences in plans that could militate going for one rather than the other. For instance, a standard plan might also require hospital admission co-payments of up to $1000 (which was the case with a standard Blue-Cross plan I was considering) or, on the other hand, the standard plan might cover hearing aids (expensive hardware) whereas the HDHP might not cover the aids.

User avatar
grabiner
Advisory Board
Posts: 22200
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: HSA vs. Regular Plan--two very good choices

Post by grabiner » Sun Feb 23, 2014 9:05 pm

The generous employer subsidy justifies the HSA.

Usually, the worst case for a high-deductible plan is if you use the entire deductible, as the high-deductible plan is likely to cost less than the conventional plan once the deductibles have been met.

In your situation, if you use the whole $3000 deductible, you will pay $750 beyond the employer contribution to your HSA, and the tax subsidy on your own $4350 contribution is more than that, so you wind up ahead no matter what.
Wiki David Grabiner

porcupine
Posts: 1267
Joined: Thu Nov 04, 2010 11:05 am

Re: HSA vs. Regular Plan--two very good choices

Post by porcupine » Sun Feb 23, 2014 11:08 pm

grabiner wrote:The generous employer subsidy justifies the HSA.

Usually, the worst case for a high-deductible plan is if you use the entire deductible, as the high-deductible plan is likely to cost less than the conventional plan once the deductibles have been met.

In your situation, if you use the whole $3000 deductible, you will pay $750 beyond the employer contribution to your HSA, and the tax subsidy on your own $4350 contribution is more than that, so you wind up ahead no matter what.
I would say the employer subsidy, along with the fact that the max OOP in network is $6k, tips the scale towards the HDHP/HSA combo.

That said, I suggest that OP read my post about how you could get dinged by your PCP. Also, read the other thread that someone linked to in (my) thread. Both threads have eye-opening information on how you could go to the doctor for a "free" annual physical and come out with office visit payments of over $100.

sdrone
Posts: 108
Joined: Wed Jun 10, 2009 11:17 pm

Re: HSA vs. Regular Plan--two very good choices

Post by sdrone » Mon Feb 24, 2014 12:26 am

ARe you staying with this employer forever?

The minute you leave, the HSA starts hitting you with monthly fees, if they don't already. My new employer has an HSA plan, and I talked to the former employer HSA people about moving my money to the new HSA. They got a good laugh out of that.

mnvalue
Posts: 1086
Joined: Sun May 05, 2013 2:22 pm

Re: HSA vs. Regular Plan--two very good choices

Post by mnvalue » Mon Feb 24, 2014 12:51 am

sdrone, I don't know what's going on in your situation, but there are many people here who have changed HSA custodians. I can't yet comment on it personally, but I'm attempting it for the first time now.

Draak
Posts: 121
Joined: Fri Dec 06, 2013 7:04 pm

Re: HSA vs. Regular Plan--two very good choices

Post by Draak » Mon Feb 24, 2014 1:52 am

delete
Last edited by Draak on Sun Mar 16, 2014 2:35 am, edited 1 time in total.

mnvalue
Posts: 1086
Joined: Sun May 05, 2013 2:22 pm

Re: HSA vs. Regular Plan--two very good choices

Post by mnvalue » Mon Feb 24, 2014 2:08 am

Elfcu (Eli Lily Federal Credit Union) offers an HSA with no fees. That's the custodian I'm working on transferring to.

User avatar
tfb
Posts: 7849
Joined: Mon Feb 19, 2007 5:46 pm
Contact:

Re: HSA vs. Regular Plan--two very good choices

Post by tfb » Mon Feb 24, 2014 2:23 am

sdrone wrote:The minute you leave, the HSA starts hitting you with monthly fees, if they don't already. My new employer has an HSA plan, and I talked to the former employer HSA people about moving my money to the new HSA. They got a good laugh out of that.
Laugh as they wish. You can move your money to your new employer's HSA or one you establish yourself. The most your former employer HSA will make out of would be a one-time transfer fee or an account closing fee.
Draak wrote:Moving it to a private administrator seems to result in even higher fees, so there don't seem to be any good options to keep that money hanging around until I really need it. I am going to drain it down as fast as possible now.
You can find credit unions that don't charge fees. Elfcu is the best I found.
Harry Sit, taking a break from the forums.

porcupine
Posts: 1267
Joined: Thu Nov 04, 2010 11:05 am

Re: HSA vs. Regular Plan--two very good choices

Post by porcupine » Mon Feb 24, 2014 8:47 pm

tfb wrote:
sdrone wrote:The minute you leave, the HSA starts hitting you with monthly fees, if they don't already. My new employer has an HSA plan, and I talked to the former employer HSA people about moving my money to the new HSA. They got a good laugh out of that.
Laugh as they wish. You can move your money to your new employer's HSA or one you establish yourself. The most your former employer HSA will make out of would be a one-time transfer fee or an account closing fee.
Draak wrote:Moving it to a private administrator seems to result in even higher fees, so there don't seem to be any good options to keep that money hanging around until I really need it. I am going to drain it down as fast as possible now.
You can find credit unions that don't charge fees. Elfcu is the best I found.
+1.

Besides, not all employers charge maintenance fees; unfortunately, I have no clue what fraction does.

- Porcupine

Draak
Posts: 121
Joined: Fri Dec 06, 2013 7:04 pm

Re: HSA vs. Regular Plan--two very good choices

Post by Draak » Tue Feb 25, 2014 12:00 am

Eli Lilly FCU is one of the best & I wish I could be a member. They actually booted us out of it when they sold the company I worked for :(

I will look around more, but the 2 CUs I bank with don't handle them at all.

mnvalue
Posts: 1086
Joined: Sun May 05, 2013 2:22 pm

Re: HSA vs. Regular Plan--two very good choices

Post by mnvalue » Tue Feb 25, 2014 12:36 am

Anyone can join Elfcu with a $5 donation to Tru Direction.

rexhat
Posts: 48
Joined: Sat Jun 08, 2013 4:56 pm

Re: HSA vs. Regular Plan--two very good choices

Post by rexhat » Sun Mar 16, 2014 11:53 am

So I went ahead and signed up for the HSA. It's a 1 year experiment. Hopefully not too expensive and pays off. The account is through Chase. Anyone have an opinion of their HSA offering?

Post Reply