HSA vs PPO Plan

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Topic Author
beastykato
Posts: 166
Joined: Wed Aug 05, 2009 8:59 pm

HSA vs PPO Plan

Post by beastykato »

I'm on my phone so I apologize for any typos. My employer is finally offering us an HSA plan, but I'm not so sure I should take it and was hoping to get some opinions.

My PPO is $30 per pay and is contract negotiated. My deductible is $600 with an OOP max of $2700 for both in and out or network combined. Prescriptions are free on this plan unless branded and not subject to the deductible.

The HSA plan is $18 per pay and a $2700 deductible with $1200 cash towards that from the company. The OOP is 4200 max in-network but I have to pay for prescriptions before I hit that max too. Also the out of network max is double at 8400.

I'm having a really tough time because to be honest it seems like the HSA plan sucks. I know the benefits of the pretax money and investing though within the HSA.

I'm 30, single, and in decent health and have one 7 year old son. Being a kid he obviously gets sick multiple times a year and goes to medexpress or his doctor for scripts and so his missed days aren't unexcused. He is also healthy tho.

Is the out of pocket risk worth it in the HSA plan or should I stay put? Just to clarify too I am making out 401k, IRA and will max HSA as well if I choose it.
boglegirl
Posts: 629
Joined: Mon Dec 17, 2012 12:41 pm

Re: HSA vs PPO Plan

Post by boglegirl »

What's the premium cost to you for each plan? Usually HDHPs are cheaper, and the monthly savings make up for the higher out of pocket costs.
Topic Author
beastykato
Posts: 166
Joined: Wed Aug 05, 2009 8:59 pm

Re: HSA vs PPO Plan

Post by beastykato »

It's in the original post. The PPO is $30 per pay and the HSA is $18. I'm under contract for 6 years on that PPO plan. So, it's a lot better than most. Obviously, it doesn't provide the future investments of the HSA tho. Although, I could possibly just put that $6900 per year in a taxable account and stick with the PPO?
afan
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Joined: Sun Jul 25, 2010 4:01 pm

Re: HSA vs PPO Plan

Post by afan »

One problem: you give the premium per pay period but the deductible and oop maximum per year. You don't say how often you are paid, so no one can convert the premium to an annual cost.

Usually the high deductible with an employer contribution and taking advantage of the HSA tax advantage works out, but it depends on how much of the deductible and oop you would actually use. Depends on whether the coverage is comparable when you do get health care.

Start by giving us the annual premium for both plans and say whether the other coverage is identical.

Look at last year and see how much you and your child spent on health care. Would you have met the deductible?

The best use of the HSA is as tax free savings. If you can afford to pay for your deductible and oop maximum out of pocket and let the HSA ride you will get the most out of the plan.
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Topic Author
beastykato
Posts: 166
Joined: Wed Aug 05, 2009 8:59 pm

Re: HSA vs PPO Plan

Post by beastykato »

Sorry, I get paid bi-weekly and the coverage is the same other than differences mentioned about prescriptions. So, $780 per year for PPO and $540 for the HDHP.

I'm pretty sure I would have made out on the HDHP last year. It just scares me that if something expensive did happen the out of pocket is 4200/8400 vs 2700. And the premium isn't a big savings either. So, I wasn't sure if it was worth the out of pocket risk.

I would like to say I would be fine on the HDHP, but health problems are hard to predict. Now if my PPO was 200+ pay yeah this would be a much easier decision. Just not sure in this case whether the risk is worth taking since I still have such a low cost PPO.
cjg
Posts: 96
Joined: Sat Jan 11, 2014 8:03 pm

Re: HSA vs PPO Plan

Post by cjg »

beastykato wrote: Sat Nov 11, 2017 2:35 pm Sorry, I get paid bi-weekly and the coverage is the same other than differences mentioned about prescriptions. So, $780 per year for PPO and $540 for the HDHP.
$468/yr for the HDHP, $780 for PPO right? $312 difference.

You need to figure out how much you value the HSA. Are you maxing your other tax advantaged retirement accounts? What is your marginal tax rate (fed+state+FICA)? An HSA could easily be worth $1000+/yr depending on your situation.

Edit: also, does the $1200 from your employer count towards the OOP max? If it does, there isn't too much of a difference between the OOP max for the two plans.
Topic Author
beastykato
Posts: 166
Joined: Wed Aug 05, 2009 8:59 pm

Re: HSA vs PPO Plan

Post by beastykato »

Yes, you're correct on premiums. I'm not sure where I got 540. Must have hit the wrong key on the calculator. I'm at work, still even today, so I'm a bit distracted while replying.

Anyway, yes my other accounts are maxed. So, this is definitely the next logical step for me for tax advantaged accounts.

I don't know my exact tax rate off the top of my head. I usually make 70-80k and after 401 and TIRA that brings me down to under 60k. The HSA would then lower me another 5700 (can't do 6900+employer contribution correct)? So, I estimate ~50k/year after tax deductible accounts.

According to a calculator online I'm at 8.35 % marginal with a 70k income and filing head of household. Reducing it to 50k for the tax sheltered accounts lowers it to 5.64%. It didn't factor in my state tax of 3.1% in PA tho. I'm sure some of you are familiar with the calculation and can estimate it quickly and see if I'm close to being correct with that rate.

I'll have to check with HR to be sure, but I do think the 1200 counts toward OOP max.
noco-hawkeye
Posts: 465
Joined: Sat Aug 16, 2014 8:20 am

Re: HSA vs PPO Plan

Post by noco-hawkeye »

First off, I think both your plans are better than my choices. Take some stock in that, for what its worth.

I think the rules (or at least my rules) where HSA comes out ahead are this:
  • You know / have high confidence you will spend a modest amount on health care during the next year. Especially if you are around the deductible for the PPO - then the HDHP comes out ahead.
  • You make enough money that paying the HDHP deductibles are not going to cause any discomfort, and especially when you make so much that you are lacking tax advantaged space.
We spend a good chunk on healthcare every year, so the HSA is not as appealing to us.

It sounds like you don't expect to spend much on health care for this next year. If you have a good emergency fund and can cover the higher deductibles, I'd probably go for the HDHP instead of the PPO.
cjg
Posts: 96
Joined: Sat Jan 11, 2014 8:03 pm

Re: HSA vs PPO Plan

Post by cjg »

As long as the $1200 countS towards the OOP max, the HSA doesn't seem that much worse. You're saving $1512 between your premiums and the company contribution. If you subtract these numbers from the deductible and OOP max of the HSA plan, you get these numbers:

PPO:
First $600 - Towards hitting deductible
Next $2100 - Coinsurance

HSA:
First $1512 - premium savings and employer contribution
Next $1188 - Towards hitting the deductible
Next $1500 - coinsurance
Effective OOP Max after subtracting out $1512 = $2688

So with the HSA plan, you're not actually taking additional risk on large In-Network procedures. The HSA will be worse if your total medical expenditures are in that middle area after you've spent the $1512. The tax benefit value of having an HSA might be able to make up some of the difference in that middle area.

Are you sure about your marginal tax rates? I'm wondering if those are your total tax rate rather than marginal. Your federal marginal tax rate will usually fall into one of the brackets listed here (with a slight inflation adjustment for 2018) which will be $50k minus all your other deductions and exemptions. If you have two personal exemptions and use the standard deduction for head of household, you'd be well within the 15% marginal tax bracket. Filing head of household, you'd need enough deductions to get below $13,350 in taxable income to have a marginal tax rate below 15%. https://en.wikipedia.org/wiki/Income_ta ... s_for_2017

If that's the case, your marginal tax rate is 15% (fed) + 3.1% (state) + 7.65% (FICA) = 25.75%. This puts the benefits of maxing out the HSA at $3450 * 25.75% = $888. If the $1200 from your employer comes in the form of employer provided HSA contributions that count towards the contribution limit, the benefit is ($3450 - $1200) * 25.75% = $579. This doesn't include the benefit of tax-free growth within the HSA and assumes you're using the HSA funds for medical expenses in the year you contribute them. The benefit might be higher if you include tax-free growth.
Topic Author
beastykato
Posts: 166
Joined: Wed Aug 05, 2009 8:59 pm

Re: HSA vs PPO Plan

Post by beastykato »

Went back to that calculator to double check what I read. And yes it says total tax rate was 5.64 total and marginal was 15%.
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