Advice needed HDHP+HSA vs PPO

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southbogle
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Advice needed HDHP+HSA vs PPO

Post by southbogle »

I have always had a PPO plan for health benefits and I was exploring the HDHP+HSA option based on some of the benefits of the HSA that I have learnt in this forum. The numbers don't make sense at all to me for the HDHP. I would like to put them out to see if I am missing something

HDHP+HSA

Total Annual Employee Contribution: $3000
Deductible (Individual/Family): $2,800/ $5,600
Out of Pocket Max (Ind/Fam) - In Network: $3,425/ $6,850
Out of Pocket Max (Ind/Fam) - Out of Network: $7,000/ $14,000
Prescription Drugs: $10/ $30/ $50/ 30% coinsurance

vs my current plan

Total Annual Employee Contribution: $3700
Deductible (Individual/Family): $500/ $1,500
Out of Pocket Max (Ind/Fam) - In Network: $3,500/ $7,000
Out of Pocket Max (Ind/Fam) - Out of Network: $7,000/ $14,000
Primary Care Visit Copay: $20
Specialist Visit Copay: $20
Urgent Care Copay: $20
Emergency Care Copay: $150 plus 20% coinsurance
Prescription Drugs: $5/ $25/ $40/ $45

So it looks like for only $700 less per year I bump up the deductible by $2300 and pay the full fees for even the primary care visits. Does this pricing seem reasonable?

I have a wife and two young kids and all of us are in good health other than a few cuts/bruises/cold/flu etc. Would appreciate some advice to see if this makes sense purely as a way of saving money using a HSA for retirement.
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FiveK
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Re: Advice needed HDHP+HSA vs PPO

Post by FiveK »

At a quick glance, for your situation "it depends...."

Might be worth putting your numbers into a couple of comparison tools, e.g., Health Savings Account (HSA) vs. Traditional Health Plan and the 'HDHP Analysis' tab of the personal finance toolbox spreadsheet.

To make this comparison, one has to guess at the amount and type of medical expense during the year. Don't know of any generic comparison tool (including the ones above) that is configurable to address all plan types.
AnEngineer
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Re: Advice needed HDHP+HSA vs PPO

Post by AnEngineer »

Best case and worst case are both better for HDHP without even considering HSA, trad may be better in between.

Keep in mind, normal annual visits (or more often with very little ones) and preventative screenings are all still free with HDHP (by law), so it'll take quite a few visits to get past the $700 premium difference.
marcopolo
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Re: Advice needed HDHP+HSA vs PPO

Post by marcopolo »

The premium difference between your two plans are very small compared other plans i have seen. That may reduce the benefit of the HDPD somewhat.
You also do not state what the percentage co-pay is between the deductible and the OOP Max. That can often be lower for HDPD plans.

In general, I have found that HDPD plans come out ahead for low and high healthcare expenses. HDPD plans usually have a narrow window where they are a worse deal. The width of the window depends on particulars of the two plans.

Also need to consider what type of network plan is the HDPD. Is it a PPO, or a EPO, or HMO?
It is not strictly correct to say HDPD vs. PPO. One describes deductible and co-pay structure, the other describes provider network structure.
HDPD plans can also be PPOs.
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grabiner
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Re: Advice needed HDHP+HSA vs PPO

Post by grabiner »

southbogle wrote: Thu May 06, 2021 5:35 pm So it looks like for only $700 less per year I bump up the deductible by $2300 and pay the full fees for even the primary care visits. Does this pricing seem reasonable?
Yes, but if you are in a 22% tax bracket, the $7200 you contribute to the HSA saves you $1584 in taxes, so the net difference is $2284 (or $2130 if you also save 22% by using payroll deduction for the insurance premium).

And once you have met the deductible with the HDHP, you will pay the insurance rate for primary-care visits; until then, everything counts towards the deductible (except for preventive care, which is likely free).
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BobTexas
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Re: Advice needed HDHP+HSA vs PPO

Post by BobTexas »

Does the company contribute to the HSA? Often a mega Corp will contribute some $ to the HSA to encourage people to choose the HSA
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WarAdmiral
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Re: Advice needed HDHP+HSA vs PPO

Post by WarAdmiral »

southbogle wrote: Thu May 06, 2021 5:35 pm

HDHP+HSA

Total Annual Employee Contribution: $3000
Why are you contributing only $3000 ? There is a upper limit of $7200 per family per year.

HDHP + HSA is a no brainer for a healthy, young family like yours with long term investment outlook.
There is a lot of information on this forum and out on the internet on it's advantages.

The idea is you pay all medical expenses out of pocket today (save the receipts) and let your HSA contribution grow tax free for years.
In a pinch, you can withdraw $ from your HSA account anytime for the amounts indicated on your receipts - tax free.

HSA has triple tax advantages (the only product of it's kind).
HSA $ go into the account pre-tax, they grow tax free, and are tax free on withdrawals - if used for current medical expenses or against old receipts.
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Re: Advice needed HDHP+HSA vs PPO

Post by UALflyer »

grabiner wrote: Thu May 06, 2021 10:03 pm
southbogle wrote: Thu May 06, 2021 5:35 pm So it looks like for only $700 less per year I bump up the deductible by $2300 and pay the full fees for even the primary care visits. Does this pricing seem reasonable?
Yes, but if you are in a 22% tax bracket, the $7200 you contribute to the HSA saves you $1584 in taxes, so the net difference is $2284 (or $2130 if you also save 22% by using payroll deduction for the insurance premium).
As you're well aware, as this is something that has been pointed out to you several times, that's not the net difference. Non-HDHP participants have access to the FSA's, which for tax purposes are treated identically to the HSA's. Subject to a $500 carryover (if allowed by the FSA plan administrator), the FSA balances are use it or lose it, while the HSA's can be carried forward indefinitely, so the latter are more flexible, but their tax treatment is absolutely identical.

The FSA maximum is $2,750/year. If we use the same 22% bracket that you've assumed, the net difference is $1,525, but this obviously assumes that the OP and his wife are maxing out their retirement account contributions and that they are also maxing out the HSA. Even if we assume that that's the case, they now need to look at their non-preventive expenditures to figure out what their healthcare usage has been. An office visit typically runs $200 (primary care) to $300 (specialist), and that's without any labs or imaging (with non HDHP's, the office co-pay may or may not cover all labs and imaging studies conducted during the office visit), so a combination of only 6 non-preventive office visits or so among the four of them would cause them to break even. More office visits than that, and the PPO is likely to make more financial sense.

Further, as I've also pointed out in prior threads, one of the big issues with the HDHP's is the fact that they create a strong incentive for their holders to avoid seeking medical care. This is an absolutely enormous issue for the HDHP's. If you break a leg, of course you'll seek medical care regardless of whether you have an HDHP, but there are quite a few serious and even deadly medical conditions out there that do not manifest themselves in an obvious way, and even the healthiest people can end up with them. With an HDHP, no matter how you slice it, you are spending your own money until you hit the deductible, so you have a very powerful financial incentive to abstain from medical care for conditions that you do not consider to be serious. If you are wrong, the repercussions can be quite serious. Many of those who pick the HDHP fail to give appropriate weight to the above issue by convincing themselves that it'll have no impact on their decision to seek care, whereas the reality tends to be very different.
Last edited by UALflyer on Fri May 07, 2021 9:58 am, edited 1 time in total.
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Re: Advice needed HDHP+HSA vs PPO

Post by UALflyer »

WarAdmiral wrote: Fri May 07, 2021 5:21 amThe idea is you pay all medical expenses out of pocket today (save the receipts) and let your HSA contribution grow tax free for years.
In a pinch, you can withdraw $ from your HSA account anytime for the amounts indicated on your receipts - tax free.

HSA has triple tax advantages (the only product of it's kind).
HSA $ go into the account pre-tax, they grow tax free, and are tax free on withdrawals - if used for current medical expenses or against old receipts.
Yes, but this assumes that the plan participants max out their respective retirement accounts (including (backdoor) IRA's, etc...), max out the HSA and invest the HSA balances, all while paying their ongoing healthcare expenses with post-tax funds out of pocket, save their healthcare receipts and use them in the future. Most HSA participants don't have the money to do so and/or are afraid that when they eventually do present their receipts years down the road, the plan administrator will say that it needs additional information and at that point it'll be too late for them to obtain it.

As I posted above, the tax treatment of the HSA contributions is identical to that of the FSA contributions. The former are more flexible in that they are not use it or lose it, but the tax treatment is exactly the same. If you don't max out all available retirement accounts (including (backdoor) IRA's, etc...) and would use the HSA balances for ongoing medical expenses, then the larger HSA contribution limits don't give you an additional tax advantage. In other words, if your option is to max out an HSA (and to pay ongoing healthcare expenses from it) versus contributing to an FSA and then putting the difference in a retirement account, then the former does not carry any additional tax advantages.
Last edited by UALflyer on Fri May 07, 2021 9:16 am, edited 1 time in total.
AnEngineer
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Re: Advice needed HDHP+HSA vs PPO

Post by AnEngineer »

UALflyer wrote: Fri May 07, 2021 8:07 amMost HSA participants don't have the money to do so and/or are afraid that when they eventually do present their receipts years down the road, the plan administrator will say that it needs additional information and at that point it'll be too late for them to obtain in.
You need to provide zero information to your plan administrator to get your money out: you just take it. The only scenario in which you need information is if the IRS decides to audit you. Note that even if you spend your HSA down, this audit could come years in the future, so you need to keep records either way, it's just a matter of how long you need to keep them for.
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Re: Advice needed HDHP+HSA vs PPO

Post by UALflyer »

AnEngineer wrote: Fri May 07, 2021 8:43 amYou need to provide zero information to your plan administrator to get your money out: you just take it.
If you intend to withdraw the money later, it doesn't really matter what the administrator's requirements are now. You'll need to comply with whatever the rules are at withdrawal, and these things do change from time to time. The FSA withdrawal rules, for instance, have been substantially relaxed, such that you can now use your FSA funds for over the counter medications and supplies. At some point in the future, the rules may tighten up again.
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Re: Advice needed HDHP+HSA vs PPO

Post by AnEngineer »

UALflyer wrote: Fri May 07, 2021 9:09 am
AnEngineer wrote: Fri May 07, 2021 8:43 amYou need to provide zero information to your plan administrator to get your money out: you just take it.
If you intend to withdraw the money later, it doesn't really matter what the administrator's requirements are now. You'll need to comply with whatever the rules are at withdrawal, and these things do change from time to time. The FSA withdrawal rules, for instance, have been substantially relaxed, such that you can now use your FSA funds for over the counter medications and supplies. At some point in the future, the rules may tighten up again.
My point is that my administrator should be putting zero restrictions on my withdrawals as they don't control the law. If an HSA administrator were to do this, I would dump them very fast. To my knowledge, no one implements restrictions here (which can catch some people off guard when they accidentally withdraw for things which aren't allowed).
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Re: Advice needed HDHP+HSA vs PPO

Post by UALflyer »

AnEngineer wrote: Fri May 07, 2021 10:12 amMy point is that my administrator should be putting zero restrictions on my withdrawals as they don't control the law.
I understand your point. What I am trying to explain is that the rules on these things change all the time, so since you are talking about investing the HSA balances and making withdrawals many years from now, the withdrawals would be subject to the rules in place at that time. Keep in mind that with the healthcare FSA's, the FSA administrator looks at the receipts at the time of the requested withdrawal (this is the reason that a healthcare FSA audit is so unlikely), so it wouldn't be surprising if the HSA rules are subsequently modified and end up mirroring the FSA process, as the pre-tax contribution and withdrawal concept of the FSA's and HSA's is identical and getting the plan administrator to review the documentation up front gives the plan participants certainty while freeing up the IRS resources.
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Re: Advice needed HDHP+HSA vs PPO

Post by AnEngineer »

UALflyer wrote: Fri May 07, 2021 10:22 am
AnEngineer wrote: Fri May 07, 2021 10:12 amMy point is that my administrator should be putting zero restrictions on my withdrawals as they don't control the law.
I understand your point. What I am trying to explain is that the rules on these things change all the time, so since you are talking about investing the HSA balances and making withdrawals many years from now, the withdrawals would be subject to the rules in place at that time. Keep in mind that with the healthcare FSA's, the FSA administrator looks at the receipts at the time of the requested withdrawal (this is the reason that a healthcare FSA audit is so unlikely), so it wouldn't be surprising if the HSA rules are subsequently modified and end up mirroring the FSA process, as the pre-tax contribution and withdrawal concept of the FSA's and HSA's is identical and getting the plan administrator to review the documentation up front gives the plan participants certainty while freeing up the IRS resources.
I see, so by "administrator's requirements" you mean that the law may change that forces HSA administrators to confirm receipts. I think describing these as coming from the administrator is misleading.

I would doubt that such a change would occur, as it would effectively prevent the ability to do HSA rollovers.

Also note, such a change would not reduce IRS resources, as you do not submit anything related to HSA expenses unless specifically requested.
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Re: Advice needed HDHP+HSA vs PPO

Post by UALflyer »

AnEngineer wrote: Fri May 07, 2021 10:39 am I see, so by "administrator's requirements" you mean that the law may change that forces HSA administrators to confirm receipts. I think describing these as coming from the administrator is misleading.
Yes, the law may change to put the burden on the HSA administrators to confirm compliance, which would mirror the FSA documentation process. Plan administrators exercise discretion over certain matters, which is what I mean by the administrator's requirements. Sufficiency of certain documentation, eligibility of certain items and even carryover rules are within the FSA plan administrator discretion (each FSA plan administrator's rules are known up front).
I would doubt that such a change would occur, as it would effectively prevent the ability to do HSA rollovers.
Not at all. This isn't particularly different from the retirement account rollovers where the retirement plan administrators also have the ongoing burden of verifying various things both up front and throughout the time that they administer the plan.
Also note, such a change would not reduce IRS resources, as you do not submit anything related to HSA expenses unless specifically requested.
With the HSA plans, the IRS has to dedicate resources to auditing at least some of the plan participants, etc... With the FSA plans, they do not, as the burden is effectively on the plan administrator.

With properly set up non-HDHP plans with FSA's, when it comes to the health plan participants' co-pays and the like, the documentation hassles are actually non-existent. That's because the EOB's are automatically and electronically transmitted by the health plans to the FSA administrators, which then immediately and automatically process FSA distributions to the members.
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Re: Advice needed HDHP+HSA vs PPO

Post by AnEngineer »

UALflyer wrote: Fri May 07, 2021 10:52 am
AnEngineer wrote: Fri May 07, 2021 10:39 amI would doubt that such a change would occur, as it would effectively prevent the ability to do HSA rollovers.
Not at all. This isn't particularly different from the retirement account rollovers where the retirement plan administrators also have the ongoing burden of verifying various things both up front and throughout the time that they administer the plan.
What are you referring to? If I want to take money out of my IRA, I just do it. There are some tax forms that get generated, but there's no hurdle I have to pass to convince some company to allow me to withdraw my money.
With properly set up non-HDHP plans with FSA's, when it comes to the health plan participants' co-pays and the like, the documentation hassles are actually non-existent. That's because the EOB's are automatically and electronically transmitted by the health plans to the FSA administrators, which then immediately and automatically process FSA distributions to the members.
Well, something you learn on HDHPs is that EOBs are medical bills are often wrong, so I'm very skeptical of this. Also, I know someone who's been able to use an FSA debit card for non-allowed spending. This was flagged by the administrator and so there was a chance for correction (provide additional info or return the money), but the money still got out first.
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Re: Advice needed HDHP+HSA vs PPO

Post by UALflyer »

AnEngineer wrote: Fri May 07, 2021 12:05 pm What are you referring to? If I want to take money out of my IRA, I just do it. There are some tax forms that get generated, but there's no hurdle I have to pass to convince some company to allow me to withdraw my money.
You had said that you doubt that there would be a rule change requiring HSA plan administrators to verify your receipts because you thought that such a requirement "would effectively prevent the ability to do HSA rollovers." I'm explaining that it would not, as it isn't particularly different from the retirement account rollovers (not withdrawals, but rollovers) where the retirement plan administrators also have the ongoing burden of verifying various things both up front and throughout the time that they administer the plan.
Well, something you learn on HDHPs is that EOBs are medical bills are often wrong, so I'm very skeptical of this.
You're skeptical of what? Yes, the EOB's are frequently incorrect, but for practical purposes, when the EOB's are revised, the FSA administrators don't require the plan participants to repay the funds. This is different from the situation where an FSA holder uses an FSA-linked debit card, as regardless of whether the funds go through or not, the cardholder is generally required to substantiate the expenses.

Regardless, this is all a relatively minor point either way. The biggest considerations are the financial ones that I mentioned above.

There's absolutely nothing wrong with the HDHP and in many cases they can save people money (and in many other cases a non-HDHP option would be preferable), but I continue to be troubled by a number of Bogleheads' posters creating misleading posts about them. I get that it's difficult to create responses in which every consideration is mentioned, but it is incredibly misleading for people to push others towards HDHP's by touting the tax benefits of the HSA's, while completely ignoring the identical tax benefits of the FSA's. Likewise, it has become quite common on Bogleheads to talk about the tax benefits of the HSA's while failing to ask whether the posters are maxing out all their other retirement accounts. This all makes a lot of the advice given quite misleading.
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Re: Advice needed HDHP+HSA vs PPO

Post by FiveK »

UALflyer wrote: Fri May 07, 2021 12:28 pm...touting the tax benefits of the HSA's, while completely ignoring the identical tax benefits of the FSA's.
The spreadsheet linked in this post earlier in the thread considers FSAs also.
Likewise, it has become quite common on Bogleheads to talk about the tax benefits of the HSA's while failing to ask whether the posters are maxing out all their other retirement accounts. This all makes a lot of the advice given quite misleading.
Can't comment on the statistics of individual posts in various threads, but at least How to use the plan in the HSA wiki addresses this point.
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Re: Advice needed HDHP+HSA vs PPO

Post by UALflyer »

FiveK wrote: Fri May 07, 2021 12:36 pm
UALflyer wrote: Fri May 07, 2021 12:28 pm...touting the tax benefits of the HSA's, while completely ignoring the identical tax benefits of the FSA's.
The spreadsheet linked in this post earlier in the thread considers FSAs also.
Likewise, it has become quite common on Bogleheads to talk about the tax benefits of the HSA's while failing to ask whether the posters are maxing out all their other retirement accounts. This all makes a lot of the advice given quite misleading.
Can't comment on the statistics of individual posts in various threads, but at least How to use the plan in the HSA wiki addresses this point.
Right, your post was spot on.
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Re: Advice needed HDHP+HSA vs PPO

Post by marcopolo »

UALflyer wrote: Fri May 07, 2021 8:07 am
WarAdmiral wrote: Fri May 07, 2021 5:21 amThe idea is you pay all medical expenses out of pocket today (save the receipts) and let your HSA contribution grow tax free for years.
In a pinch, you can withdraw $ from your HSA account anytime for the amounts indicated on your receipts - tax free.

HSA has triple tax advantages (the only product of it's kind).
HSA $ go into the account pre-tax, they grow tax free, and are tax free on withdrawals - if used for current medical expenses or against old receipts.
Yes, but this assumes that the plan participants max out their respective retirement accounts (including (backdoor) IRA's, etc...), max out the HSA and invest the HSA balances, all while paying their ongoing healthcare expenses with post-tax funds out of pocket, save their healthcare receipts and use them in the future. Most HSA participants don't have the money to do so and/or are afraid that when they eventually do present their receipts years down the road, the plan administrator will say that it needs additional information and at that point it'll be too late for them to obtain it.

As I posted above, the tax treatment of the HSA contributions is identical to that of the FSA contributions. The former are more flexible in that they are not use it or lose it, but the tax treatment is exactly the same. If you don't max out all available retirement accounts (including (backdoor) IRA's, etc...) and would use the HSA balances for ongoing medical expenses, then the larger HSA contribution limits don't give you an additional tax advantage. In other words, if your option is to max out an HSA (and to pay ongoing healthcare expenses from it) versus contributing to an FSA and then putting the difference in a retirement account, then the former does not carry any additional tax advantages.

Perhaps your plans are different, but what you describe is the exact opposite of what I have experienced.

1) HSA withdrawals have no gate keeping. I can withdraw whatever I want. Administrator does not care. That is between me and the IRS.

2) FSA has tighter reimbursement paper work requirement. Receipt submitted to administrator to get withdrawal.

3) HSA is triple tax-free. I can invest as aggresively as I choose and get withdraw later with tax-free growth.

4) FSA really does not have tax free growth, as there is no investment option, and it is use it or loose it. You are essentially making a interest free loan to the admisistrator, and then having to go hat in hand to get your money backin time.

5) I have never skipped getting medical attention to save deductible.

6) I have spent money on unnecessary things at the end of the year so as not to loose the captive dollars in an FSA.

To say that and FSA is superior to a HSA just seems counter to all the facts I have observed.
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Re: Advice needed HDHP+HSA vs PPO

Post by UALflyer »

marcopolo wrote: Fri May 07, 2021 1:35 pmTo say that and FSA is superior to a HSA just seems counter to all the facts I have observed.
Please re-read the posts before responding. There isn't a single one that says that the FSA is "superior" to an HSA. In fact, I've mentioned that while the HSA is more flexible, their tax treatment is identical. I've also pointed out a number of specific financial considerations that must be considered.
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Re: Advice needed HDHP+HSA vs PPO

Post by AnEngineer »

UALflyer wrote: Fri May 07, 2021 12:28 pm
AnEngineer wrote: Fri May 07, 2021 12:05 pm What are you referring to? If I want to take money out of my IRA, I just do it. There are some tax forms that get generated, but there's no hurdle I have to pass to convince some company to allow me to withdraw my money.
You had said that you doubt that there would be a rule change requiring HSA plan administrators to verify your receipts because you thought that such a requirement "would effectively prevent the ability to do HSA rollovers." I'm explaining that it would not, as it isn't particularly different from the retirement account rollovers (not withdrawals, but rollovers) where the retirement plan administrators also have the ongoing burden of verifying various things both up front and throughout the time that they administer the plan.
But that's all documentation. I'm not aware of IRA providers who prevent me from withdrawing because they think it's not allowed.
Well, something you learn on HDHPs is that EOBs are medical bills are often wrong, so I'm very skeptical of this.
You're skeptical of what? Yes, the EOB's are frequently incorrect, but for practical purposes, when the EOB's are revised, the FSA administrators don't require the plan participants to repay the funds. This is different from the situation where an FSA holder uses an FSA-linked debit card, as regardless of whether the funds go through or not, the cardholder is generally required to substantiate the expenses.
I'm skeptical that
the documentation hassles are actually non-existent.
... I continue to be troubled by a number of Bogleheads' posters creating misleading posts about them.
Can you clarify what you think is misleading?
I get that it's difficult to create responses in which every consideration is mentioned, but it is incredibly misleading for people to push others towards HDHP's by touting the tax benefits of the HSA's, while completely ignoring the identical tax benefits of the FSA's. Likewise, it has become quite common on Bogleheads to talk about the tax benefits of the HSA's while failing to ask whether the posters are maxing out all their other retirement accounts. This all makes a lot of the advice given quite misleading.
But the tax benefits are not identical. FSA has a lower limit and a use it or lose it provision.

While HSAs may not be as awesome for those who aren't already maxing out all tax-advantaged accounts (which would be good for the OP to clarify), usually the HDHP is better than a traditional plan at both low and high medical spending cases even ignoring the HSA (as it is for the plans listed by the OP). But there are two sub-scenarios for people who are not maxing out all tax-advantaged accounts:
1) They have no medical spending, in which case there was no short term advantage to using a HSA over a traditional 401k/IRA.
2) They have medical spending now (or at some time in the future). In this case, they can divert (e.g.) 401k contributions to the HSA, spend the HSA dollars on medical care, and then pump the money into the 401k. Compared to not using the HSA (contribute to 401k, spend money from a taxable account on medical care), you gain 2x the tax advantage (deduct the amount of the medical expense twice: once for HSA, once for 401k).
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Re: Advice needed HDHP+HSA vs PPO

Post by tj »

UALflyer wrote: Fri May 07, 2021 7:49 am
grabiner wrote: Thu May 06, 2021 10:03 pm
southbogle wrote: Thu May 06, 2021 5:35 pm So it looks like for only $700 less per year I bump up the deductible by $2300 and pay the full fees for even the primary care visits. Does this pricing seem reasonable?
Yes, but if you are in a 22% tax bracket, the $7200 you contribute to the HSA saves you $1584 in taxes, so the net difference is $2284 (or $2130 if you also save 22% by using payroll deduction for the insurance premium).
As you're well aware, as this is something that has been pointed out to you several times, that's not the net difference. Non-HDHP participants have access to the FSA's, which for tax purposes are treated identically to the HSA's. Subject to a $500 carryover (if allowed by the FSA plan administrator), the FSA balances are use it or lose it, while the HSA's can be carried forward indefinitely, so the latter are more flexible, but their tax treatment is absolutely identical.

The FSA maximum is $2,750/year. If we use the same 22% bracket that you've assumed, the net difference is $1,525, but this obviously assumes that the OP and his wife are maxing out their retirement account contributions and that they are also maxing out the HSA. Even if we assume that that's the case, they now need to look at their non-preventive expenditures to figure out what their healthcare usage has been. An office visit typically runs $200 (primary care) to $300 (specialist), and that's without any labs or imaging (with non HDHP's, the office co-pay may or may not cover all labs and imaging studies conducted during the office visit), so a combination of only 6 non-preventive office visits or so among the four of them would cause them to break even. More office visits than that, and the PPO is likely to make more financial sense.

Further, as I've also pointed out in prior threads, one of the big issues with the HDHP's is the fact that they create a strong incentive for their holders to avoid seeking medical care. This is an absolutely enormous issue for the HDHP's. If you break a leg, of course you'll seek medical care regardless of whether you have an HDHP, but there are quite a few serious and even deadly medical conditions out there that do not manifest themselves in an obvious way, and even the healthiest people can end up with them. With an HDHP, no matter how you slice it, you are spending your own money until you hit the deductible, so you have a very powerful financial incentive to abstain from medical care for conditions that you do not consider to be serious. If you are wrong, the repercussions can be quite serious. Many of those who pick the HDHP fail to give appropriate weight to the above issue by convincing themselves that it'll have no impact on their decision to seek care, whereas the reality tends to be very different.
This isn't true. Even HDHP plans cover preventative care before the deductible is applicable. If people utilize their preventative care benefits, issues should be caught.
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Re: Advice needed HDHP+HSA vs PPO

Post by UALflyer »

tj wrote: Fri May 07, 2021 5:48 pm If people utilize their preventative care benefits, issues should be caught.
Unfortunately, that's not true. What if you get a really, really bad headache? If you have an HDHP, haven't incurred any expenses under it and are unlikely to do so by the end of the year, would you go to the emergency room knowing that it'll be $1,500+ and is probably just a really, really bad headache? Would you wait for a while to see if it goes away on its own? If it's a subarachnoid hemorrhage, this delay could result in a lifelong issue and can even cost you your life.

Would the decision to go to the ER be easier if you have a non-HDHP plan and an ER visit would cost you $100 or $150? There are very few people out there for whom the answer would be "no."
Last edited by UALflyer on Fri May 07, 2021 6:05 pm, edited 1 time in total.
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Re: Advice needed HDHP+HSA vs PPO

Post by FiveK »

tj wrote: Fri May 07, 2021 5:48 pm
UALflyer wrote: Fri May 07, 2021 7:49 amWith an HDHP, no matter how you slice it, you are spending your own money until you hit the deductible, so you have a very powerful financial incentive to abstain from medical care for conditions that you do not consider to be serious.
Even HDHP plans cover preventative care before the deductible is applicable.
Both statements are correct. :sharebeer
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Re: Advice needed HDHP+HSA vs PPO

Post by tj »

UALflyer wrote: Fri May 07, 2021 5:59 pm
tj wrote: Fri May 07, 2021 5:48 pm If people utilize their preventative care benefits, issues should be caught.
Unfortunately, that's not true. What if you get a really, really bad headache? If you have an HDHP, haven't incurred any expenses under it and are unlikely to do so by the end of the year, would you go to the emergency room knowing that it'll be $1,500+ and is probably just a really, really bad headache? Would you wait for a while to see if it goes away on its own? If it's subarachnoid hemorrhage, this delay could result in a lifelong issue and can even cost you your life.

Would the decision to go to the ER be easier if you have a non-HDHP plan and an ER visit would cost you $100 or $150? There are very few people out there for whom the answer would be "no."

I would think that it's rare for someone to go to an ER for a headache regardless of the type of insurance they have.
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Re: Advice needed HDHP+HSA vs PPO

Post by UALflyer »

tj wrote: Fri May 07, 2021 6:03 pm I would think that it's rare for someone to go to an ER for a headache regardless of the type of insurance they have.
You'd be wrong. A really, really bad headache, also described as the worst headache of your life, is a classic description of a subarachnoid hemorrhage, a medical emergency, with an approximately 25% death rate in the first 24 hours. A delay in treatment can result in permanent brain damage, permanent neurological impairment or death.

Unfortunately, there is a substantial number of deadly diseases out there that don't manifest themselves in an obvious way, but which require immediate medical attention. If you have a financial incentive to discount these symptoms, the consequences can be quite severe. The very reason that the HDHP's are being promoted by the employers and insurance companies is because they do create an incentive to abstain from medical care, which reduces their utilization and saves them money.
Last edited by UALflyer on Sat May 08, 2021 7:33 am, edited 1 time in total.
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Re: Advice needed HDHP+HSA vs PPO

Post by grabiner »

UALflyer wrote: Fri May 07, 2021 7:49 am
grabiner wrote: Thu May 06, 2021 10:03 pm
southbogle wrote: Thu May 06, 2021 5:35 pm So it looks like for only $700 less per year I bump up the deductible by $2300 and pay the full fees for even the primary care visits. Does this pricing seem reasonable?
Yes, but if you are in a 22% tax bracket, the $7200 you contribute to the HSA saves you $1584 in taxes, so the net difference is $2284 (or $2130 if you also save 22% by using payroll deduction for the insurance premium).
As you're well aware, as this is something that has been pointed out to you several times, that's not the net difference. Non-HDHP participants have access to the FSA's, which for tax purposes are treated identically to the HSA's. Subject to a $500 carryover (if allowed by the FSA plan administrator), the FSA balances are use it or lose it, while the HSA's can be carried forward indefinitely, so the latter are more flexible, but their tax treatment is absolutely identical.

The FSA maximum is $2,750/year. If we use the same 22% bracket that you've assumed, the net difference is $1,525
This is correct, and I should have noted it. (Relatively few employers offer a limited expense FSA which lets you get some of the benefit even with an HDHP; such an FSA can cover your dental and vision expenses.)
but this obviously assumes that the OP and his wife are maxing out their retirement account contributions and that they are also maxing out the HSA.
But this is misleading. If you aren't maxing out, and you contribute $4550 to a Roth IRA instead of to an HSA, you pay the full 22% extra tax, which is $1001. If you contribute $4550 to a traditional 401(k) instead of to an HSA, you pay the same tax now, but you will lose part of the traditional 401(k) to taxes when you withdraw the money; if you withdraw at a 22% tax rate, you effectively invested only $3449 tax-free.

If you are maxing out, the benefit is even larger. If you invest $4550 in a taxable account instead of in an HSA, you pay $1001 in tax now, and you also pay tax on the growth of the $1001.
Even if we assume that that's the case, they now need to look at their non-preventive expenditures to figure out what their healthcare usage has been. An office visit typically runs $200 (primary care) to $300 (specialist), and that's without any labs or imaging (with non HDHP's, the office co-pay may or may not cover all labs and imaging studies conducted during the office visit), so a combination of only 6 non-preventive office visits or so among the four of them would cause them to break even. More office visits than that, and the PPO is likely to make more financial sense.
You still pay the in-network rate for the office visit, which is likely to be less than $200 or $300. If you have the same provider, you can check the EOB's for your previous office visits to see what you would have actually paid.
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Re: Advice needed HDHP+HSA vs PPO

Post by Seal the Deal »

UALflyer wrote: Fri May 07, 2021 6:14 pm
tj wrote: Fri May 07, 2021 6:03 pm I would think that it's rare for someone to go to an ER for a headache regardless of the type of insurance they have.
You'd be wrong. A really, really bad headache, also described as the worst headache of your life, is a classic description of a subarachnoid hemorrhage, a medical emergency, with an approximately 25% death rate in the first 24 hours. A delay in treatment can result in permanent brain damage, permanent neurological impairment or death.

Unfortunately, there is a substantial number of deadly diseases out there that don't manifest themselves in an obvious ways, but which require immediate medical attention. If you have a financial incentive to discount these symptoms, the consequences can be quite severe. The very reason that the HDHP's are being promoted by the employers and insurance companies is because they do create an incentive to abstain from medical care, which reduces their utilization and saves them money.
Do you have any references that state HSA participants have a higher death rate from subarachnoid hemorrhage than PPO participants? Or more generally that HSA participants have higher death rate from not seeking medical care than PPO participants? Genuinely curious.

I have an HSA and do not seek medical care any differently that when I had an PPO. I figure there is a decent chance my family will hit the deductible in a given year. In my case, HSA is financially a winner whether I spend 0, deductible, or max OOP.
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Re: Advice needed HDHP+HSA vs PPO

Post by UALflyer »

Seal the Deal wrote: Fri May 07, 2021 9:32 pmDo you have any references that state HSA participants have a higher death rate from subarachnoid hemorrhage than PPO participants? Or more generally that HSA participants have higher death rate from not seeking medical care than PPO participants? Genuinely curious.
There are plenty of scientific studies out there that highlight the self-evident fact that due to their structure, HDHP's result in lower healthcare utilization. Here's a quote (https://www.healthaffairs.org/doi/full/ ... .2017.0610): "We performed a systematic review of methodologically rigorous studies that examined the impact of HDHPs on health care utilization and costs. The plans were associated with a significant reduction in preventive care in seven of twelve studies and a significant reduction in office visits in six of eleven studies—which in turn led to a reduction in both appropriate and inappropriate care. Furthermore, bivariate analyses of data extracted from the included studies suggested that the plans may be associated with a reduction in appropriate preventive care and medication adherence. Current evidence suggests that HDHPs are associated with lower health care costs as a result of a reduction in the use of health services, including appropriate services."

Although preventive services are obviously covered under all health plans, including HDHP's, at 100% without a deductible, lots of plan participants have discovered that it's more complex than it sounds. Lots of HDHP participants try to save money by foregoing office visits and trying to get all their healthcare concerns addressed during their annual physical, which, in a lot of cases, will cause the entire visit to be coded as a regular office visit. If you've got a non-HDHP plan, this would mean that instead of $0, you're now responsible for something like a $20 office co-pay. If you've got an HDHP, you're now paying $300 - $500 (with labs) out of pocket. Hence, the reason that the above study shows that some/many HDHP participants even forego preventive visits.
I have an HSA and do not seek medical care any differently that when I had an PPO. I figure there is a decent chance my family will hit the deductible in a given year. In my case, HSA is financially a winner whether I spend 0, deductible, or max OOP.
Isn't this the key reason for it in your case? If you know that you're very likely to hit the deductible anyway, your decision making process is going to be quite different than the situation that I described above and which is quite common for very healthy policyholders, where a participant has used very few, if any, services for the year, is unlikely to hit the deductible and is now having to decide whether to go to the ER, which will result in a $1,500+ bill for something that might be emergent but isn't obviously so and is probably nothing? Isn't the decision way easier if you have a non-HDHP plan and your emergency room co-pay is $100 or $150?
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Re: Advice needed HDHP+HSA vs PPO

Post by UALflyer »

grabiner wrote: Fri May 07, 2021 7:02 pm
but this obviously assumes that the OP and his wife are maxing out their retirement account contributions and that they are also maxing out the HSA.
But this is misleading. If you aren't maxing out, and you contribute $4550 to a Roth IRA instead of to an HSA, you pay the full 22% extra tax, which is $1001. If you contribute $4550 to a traditional 401(k) instead of to an HSA, you pay the same tax now, but you will lose part of the traditional 401(k) to taxes when you withdraw the money; if you withdraw at a 22% tax rate, you effectively invested only $3449 tax-free.
There are a lot of situations that would make one type of an account preferable to another. For instance, an employer provided HDHP with payroll deductions may only use a specific HSA custodian, which only offers limited and expensive investment options. You should be able to roll over your balances, but it involves additional work. You may also have a fantastic 401(k) with super inexpensive investment options, etc... There are a lot of situations like this where one or the other type of an account would be preferable.

Regardless, my point is that if you are not already maxing out all retirement accounts, you can't just look at the HSA related tax savings and attribute them all to the HDHP. If you have a non-HDHP option, you could've taken the HSA contributions in excess of the FSA ones, put them into a retirement account and gotten the tax benefits associated with it. If in your particular situation the latter wouldn't be as attractive as the former, you can account for it in the calculations, but you do have to factor in the opportunity costs that you're incurring by, for instance, reducing your 401(k) contributions by $4,550 and, instead, putting that money into an HSA.
You still pay the in-network rate for the office visit, which is likely to be less than $200 or $300. If you have the same provider, you can check the EOB's for your previous office visits to see what you would have actually paid.
It obviously depends on the specialist and the complexity of the visit, but the in-network rate for a primary care visit is frequently $150 - $250 (so, I quoted $200, which is in the middle). For a specialist, it is frequently $250 to $400 (so, I quoted $300, which is towards the lower end of this range). If there are labs involved and with a non-HDHP all labs done during the visit would be fully covered, the overall in-network total could be even higher.
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Re: Advice needed HDHP+HSA vs PPO

Post by AnEngineer »

UALflyer wrote: Sat May 08, 2021 10:17 am Regardless, my point is that if you are not already maxing out all retirement accounts, you can't just look at the HSA related tax savings and attribute them all to the HDHP. If you have a non-HDHP option, you could've taken the HSA contributions in excess of the FSA ones, put them into a retirement account and gotten the tax benefits associated with it. If in your particular situation the latter wouldn't be as attractive as the former, you can account for it in the calculations, but you do have to factor in the opportunity costs that you're incurring by, for instance, reducing your 401(k) contributions by $4,550 and, instead, putting that money into an HSA.
You're forgetting that medical spending with HDHP plan is higher than without (assuming non zero), so more money goes through HSA than FSA (even assuming you could predict perfectly for FSA).
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Re: Advice needed HDHP+HSA vs PPO

Post by UALflyer »

AnEngineer wrote: Sat May 08, 2021 10:39 am
UALflyer wrote: Sat May 08, 2021 10:17 am Regardless, my point is that if you are not already maxing out all retirement accounts, you can't just look at the HSA related tax savings and attribute them all to the HDHP. If you have a non-HDHP option, you could've taken the HSA contributions in excess of the FSA ones, put them into a retirement account and gotten the tax benefits associated with it. If in your particular situation the latter wouldn't be as attractive as the former, you can account for it in the calculations, but you do have to factor in the opportunity costs that you're incurring by, for instance, reducing your 401(k) contributions by $4,550 and, instead, putting that money into an HSA.
You're forgetting that medical spending with HDHP plan is higher than without (assuming non zero), so more money goes through HSA than FSA (even assuming you could predict perfectly for FSA).
Correct, but what does this have to do with my explanation?
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Re: Advice needed HDHP+HSA vs PPO

Post by southbogle »

Thanks everyone for the excellent info!! I was worried about the same thing UALFlyer mentioned that I might not seek the care for seemingly minor issues but I think this is one behavioral modification I can easily make. I think I will give this a shot for one year to see how things turn out.
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