2018 FEHB HDHP Recommendations

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Kanefa
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2018 FEHB HDHP Recommendations

Post by Kanefa » Sun Nov 12, 2017 4:10 pm

Hello, I'm a federal employee looking to switch to a HDHP and an HSA and I am looking for recommendations. My current plan is Kaiser's standard plan which I like. Unfortunately, Kaiser does not offer an HDHP plan. The health providers offering a HDHP to federal employees are Aetna (HMO), CareFirst BlueChoice (HMO), GEHA (FFS), MHMB (FFS), and UnitedHealthcare (HMO).

As a recent federal hire I'm interested in feedback with regards to the healthcare provider in general and the particular HDHP plans. Are any of these healthcare providers or plans commonly viewed favorable to the rest? Also, when going with an HDHP does it make sense to consider supplemental dental insurance?

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mrc
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Re: 2018 FEHB HDHP Recommendations

Post by mrc » Sun Nov 12, 2017 4:28 pm

Many feds like checkbook.org (preorders for 2018 available now) for just this research. OPM and carrier plans are out there, but this site puts everything together. You can subscribe to a hard copy, online access (search/select), or both. Good to do the first time.
If it’s not long term it’s small talk

stormswami
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Re: 2018 FEHB HDHP Recommendations

Post by stormswami » Sun Nov 12, 2017 6:06 pm

Hi Kanefa. There is also some (free) rating/satisfaction info available at:
https://www.opm.gov/healthcare-insuranc ... ns/quality

A research-intensive and thrifty Boglehead-like Federal coworker of mine switched from BCBS Basic to a HDHP with GEHA several years ago. He ended up having a significant cancer scare and has been dealing with that over the past year or so. He has far exceeded yearly catastrophic limits. Through that process, he's not experienced anything that would temp him to switch, particularly since he's considerably farther ahead monetarily than he would be if he were still on BCBS (due to the HSA tax benefits; maxing out yearly contributions etc.)

motorcyclesarecool
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Re: 2018 FEHB HDHP Recommendations

Post by motorcyclesarecool » Mon Nov 13, 2017 6:01 am

We switched to GEHA HSA for the birth of our second child and haven’t looked back. GEHA carries decent dental coverage, so we cancelled our FEDVIP coverage. Compare your total annual outlay when comparing plans, and don’t forget to factor in the premium pass-through.

The HSA is housed at HSABank and I invest at TDAmeritrade for no extra cost.
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

motorcyclesarecool
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Re: 2018 FEHB HDHP Recommendations

Post by motorcyclesarecool » Mon Nov 13, 2017 6:21 am

Paraphrasing myself in another post:
motorcyclesarecool wrote:
Thu Oct 05, 2017 4:24 am
You need to understand that opting for an HDHP is very much a "red pill" approach in today's society. It feels weird shelling out $100 for a doctor's visit for an ear infection, or $400 for the panel of blood tests they give to pregnant women. The vast majority would rather pay a much higher annual premium in order to have a $20 copay per office visit, and will think you weird for opting for an HSA, should you do so.
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

AnonJohn
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Re: 2018 FEHB HDHP Recommendations

Post by AnonJohn » Mon Nov 13, 2017 9:30 am

I'm chiming in with more questions than answers, but hopefully won't sidetrack the thread. Same situation. My research suggests that both GEHA and CF BCBS HDHP are excellent options to have. No judgment/knowledge of the others you list. Both GEHA and CF seem to have ~95% of the same doctors I've been using under FEPBlue. (the exception being a pediatric urgent care clinic)

I am struggling with something you may want to think about: CF has fixed copayments after meeting the deductible. GEHA has coinsurance (usually 5%). I analyzed two representative years of EOB's under my current insurance to get a sense of what 5% of the negotiated rate means. I found that, for most things, 5% < copayment under FEPBlue. However, for some large expenses (hospitalizations) it was more expensive. I'm not sure what to make of this and am hoping others will have ideas. As far as I can tell it's a question of whether, given unknown health insurance needs, you want to maximize potential upsides (+~$1000 with GEHA) or minimize potential downsides (-~$3000, with BCBS / relative to GEHA).

@motorcyclesarecool - Thanks for the point re: GEHA dental. When you say "for the birth of our second" ... were you on the HDHP at time of birth? I'm happily expecting #2 next year. I think it makes sense to go HDHP anyway; with 100% maternity (after deductible), the downside (with GEHA) is an extended NICU stay or massive bills for someone other than DW. But liability there is limited to $5K (per person catastrophic). Would welcome your thoughts ...

BackOfTheNet
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Re: 2018 FEHB HDHP Recommendations

Post by BackOfTheNet » Mon Nov 13, 2017 10:15 am

motorcyclesarecool wrote:
Mon Nov 13, 2017 6:01 am
We switched to GEHA HSA for the birth of our second child and haven’t looked back. GEHA carries decent dental coverage, so we cancelled our FEDVIP coverage. Compare your total annual outlay when comparing plans, and don’t forget to factor in the premium pass-through.

The HSA is housed at HSABank and I invest at TDAmeritrade for no extra cost.
We also use the HDHP GEHA plan and think it's a great deal. One year I made a real spreadsheet but it broke down something like:

Total Premium: $3,608
- Tax savings(%28) $1,010
- HSA pass-through $1,500
- Dental Savings ~$800 (or whatever you value the dental benefits at)
-----
Effective cost $300 per year

Plus you can contribute an additional $5,000 to the HSA account. Also, GEHA has "health rewards" benefit where adults can earn a few hundred dollars each year towards stuff at the HSAStore.com or Glasses.com . https://healthbalance.geha.com

Edit: One caveat might be that we don't use the doctor very much. We have 2 kids are are not planning on any more.

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BogleFanGal
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Re: 2018 FEHB HDHP Recommendations

Post by BogleFanGal » Mon Nov 13, 2017 1:42 pm

And to piggyback on thread, hopefully without sidetracking it, any insights re: if these options are better than Aetna's HDHP? We've been on that one 8 yrs. I review options every year, but always end up staying w/Aetna. They seem to have a lower catastrophic out of pocket total, although higher on initial per visit charges. Haven't had any problems w/them really and they're very quick to respond to questions. But for some reason, never any reviews/satisfaction ratings for them: always "N/A". Wondering if others had bad experiences?

I do Aetna + Met Life High (lousy teeth :( )

motorcyclesarecool
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Re: 2018 FEHB HDHP Recommendations

Post by motorcyclesarecool » Mon Nov 13, 2017 8:19 pm

AnonJohn wrote:
Mon Nov 13, 2017 9:30 am
@motorcyclesarecool - Thanks for the point re: GEHA dental. When you say "for the birth of our second" ... were you on the HDHP at time of birth? I'm happily expecting #2 next year. I think it makes sense to go HDHP anyway; with 100% maternity (after deductible), the downside (with GEHA) is an extended NICU stay or massive bills for someone other than DW. But liability there is limited to $5K (per person catastrophic). Would welcome your thoughts ...
Yes, we intentionally switched to GEHA HDHP prior to having a baby, after I threw all the relating EOBs from #1 child into a spreadsheet and compared the options. It helped that I had a significant balance in an HSA already from my bachelor days.

It happens that earlier that particular year, we ate a decent chunk of our deductible with:
1. A trip to the ER with child #1 for severe food allergies, follow-up visits with a specialist, extortionately (at the time) priced Epi-pens, and
2. A trip to Urgent Care for me after I slipped hard on ice and broke a rib.

With child #2 we had to deal with gestational diabetes. Insulin is expensive, yo, but worth every penny. The Insulin vaporized the remainder of our deductible.

We had to make a few phone calls to clarify that the endocrinology visits were part of our prenatal care, and GEHA customer service would reprocess the claim and pay in full.

DW had a medically indicated c-section due to prior birth complications with #1 child. Having met our deductible, GEHA paid the massive bills in full. Had baby #2 spent time in NICU, I would have been on the hook for 5% of the bill up to the annual OOP maximum at my in-network hospital.

There was one über-annoying thing about their customer service... the first person I’d speak to, after giving my member number and personal information, would always have to transfer me to an HDHP specialist, at which point I’d have to start over from scratch. I tried getting customer service to transfer me directly to an HDHP specialist prior to giving my information, but no joy. That is really the only negative thing I have to say about GEHA. Very satisfied customer.
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

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tarnation
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Re: 2018 FEHB HDHP Recommendations

Post by tarnation » Tue Nov 14, 2017 12:06 am

motorcyclesarecool wrote:
Mon Nov 13, 2017 8:19 pm
There was one über-annoying thing about their customer service... the first person I’d speak to, after giving my member number and personal information, would always have to transfer me to an HDHP specialist, at which point I’d have to start over from scratch. I tried getting customer service to transfer me directly to an HDHP specialist prior to giving my information, but no joy. That is really the only negative thing I have to say about GEHA. Very satisfied customer.
Yes, but there is a short cut around this. When the bot asks for the four digit extension you want, you can put in one that will take you straight to HDHP dept. We have been on GEHA since 2010 and would recommend it. I recall choosing them over the others partly since they were a nonprofit with ~94% of premiums going to benefits. My doc said he liked them, since they process and pay quickly. BTW, they now cover preventative/basic dental (cleanings, xrays etc) at 100%.
Image

Snezz1e
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Re: 2018 FEHB HDHP Recommendations

Post by Snezz1e » Tue Nov 14, 2017 1:06 pm

I've been with GEHA for 5-6 years and every year I look at other available HDHP and I think GEHA is still the best. The main competitor is Aetna. Their plan cost $214/year more for Self and $312/year for Family (after tax). GEHA is non-profit and put about 95% towards health benefits. The one year I had Aetna they sent a letter saying they were sending money back to the government in order to meet the 85% requirement.

The big difference in the two plan is mentioned by someone else is the catastrophic max. GEHA is 5000/10000 and Aetna is 4000/6850. The other difference is GEHA coinsurance is 5% vs. 10% for Aetna. With the lower co-insurance amount GEHA will only cost you more out of pocket if your medical cost is more than $51,500 for self and $78,500 for family in one year. Anything below that, GEHA would be cheaper due to 5% coinsurance. The breakeven period due to lower premiums is about 5 years for self and 10 years for family. This is even shorter if you have some medical cost, but below the threshold. So if you don't hit the catastrophic max in that time frame you would of been better off with GEHA.

GEHA also has a few extra compared to Aetna. Their vision coverage pays for glasses/contacts every year compared to every 2 years. I wear expensive daily contacts so even with this coverage and separate vision it's not enough. They also have a health rewards program that is not too hard to complete requirements for and gives you $250 ($75 prepaid card and $175 to spend at FSA Store). The investment option is better through HSA Bank from GEHA than Aetna.

Because I take advantage of all extra items my breakeven point is only 2 years and already saved enough over Aetna to cover hitting the higher catastrophic max several times.

For me personally the GEHA plan is better than free.

$1,012 After Tax Cost
-750 HSA Contribution
-110 Contact Lens Reimbursement
-250 Health Rewards
-174 Dental Benefits (based on after-tax cost of lowest priced dental plan)

$272 profit plus ability to put in additional $2,700/year in HSA which is tax free going in and out (for medical costs) making it better than TSP/Roth.

My only issue with GEHA was that they use to have a lot more insurance networks and the one they had for Nevada was a small non-major network that did not cover many urgent care centers for the one time I needed to use one. Now they use either Aetna or UHC depending on where you live and the urgent care/doctor options is much larger.

AnonJohn
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Re: 2018 FEHB HDHP Recommendations

Post by AnonJohn » Tue Nov 14, 2017 2:24 pm

motorcyclesarecool wrote:
Mon Nov 13, 2017 8:19 pm
...
Thank you! Very helpful and informative. Jives with my planning and EOB spreadsheet / analysis, which is quite reassuring.

seity
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Re: 2018 FEHB HDHP Recommendations

Post by seity » Tue Nov 14, 2017 3:37 pm

I have had GEHA with an FSA and am looking to switch to the GEHA HDHP with HSA this year. The past two years we had a lot of unexpected medical expenditures and so I made a spreadsheet comparing if I'd been on the HSA to what I actually paid and found that two years ago the HSA would have cost me almost exactly the same out of pocket, but they'd have given me $1500 to the HSA making it the better deal, plus the extra tax savings. This year, I'm still waiting on $4000 in charges for OT and I have no idea what the allowed amount will be, but using a best guess it's looking like they break even after factoring in the $1500 that would have been put into the HSA.
Projecting numbers into next year it still looking like both plans break about even with the HSA just barely a better option, so I'm ready to make the switch, so I don't have to be limited by the FSA $2600 for pre-tax dollars at tax time.

Cash
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Re: 2018 FEHB HDHP Recommendations

Post by Cash » Tue Nov 14, 2017 7:44 pm

Another vote for GEHA. I've had them for a few years now and am completely satisfied. Love the ability to invest the HSA at TDAmeritrade for free (although that's a bit less good now that they've gotten rid of the free Vanguard funds).

Jb11
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Re: 2018 FEHB HDHP Recommendations

Post by Jb11 » Tue Nov 14, 2017 8:25 pm

I’m also thinking of signing up for the GEHA HDHP with HSA. Does HSABank have a list of the available investment funds that GEHA members can invest in for free on its site somewhere? I looked but could not find a list.

motorcyclesarecool
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Re: 2018 FEHB HDHP Recommendations

Post by motorcyclesarecool » Tue Nov 14, 2017 9:56 pm

Jb11 wrote:
Tue Nov 14, 2017 8:25 pm
I’m also thinking of signing up for the GEHA HDHP with HSA. Does HSABank have a list of the available investment funds that GEHA members can invest in for free on its site somewhere? I looked but could not find a list.
It’s on the TD Ameritrade site. Search for ‘commission free ETF list’.
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

totesmagotes
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Re: 2018 FEHB HDHP Recommendations

Post by totesmagotes » Tue Nov 14, 2017 10:30 pm

I'm a new fed and am currently enrolled in the GEHA HDHP, and I'm planning on keeping that option for 2018. My wife and I aren't sure if we're going to try for another kiddo, but we'll probably need/want to decide by late next year or early 2019. The GEHA HDHP covers maternity 100% *after* the deductible. If I'm reading the plan document properly, the GEHA Standard plan covers maternity 100% *before* the deductible. Since you'll blow away the $3000 deductible (which is really $1500 out-of-pocket after the $1500 premium pass-through) if you have maternity claims on the HDHP option, it's possible that the GEHA Standard plan may save you money if you need maternity. The deductible of the standard option is $350 ind ($700 family), and the monthly premium is actually lower than the HDHP's premium. If you aren't maxing out all of your tax-deferred savings options, it's possible that you'd be better suited with GEHA Standard + FSA + max out the rest of your tax-advantaged space if you need maternity.

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BogleFanGal
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Re: 2018 FEHB HDHP Recommendations

Post by BogleFanGal » Wed Nov 15, 2017 7:30 am

motorcyclesarecool wrote:
Tue Nov 14, 2017 9:56 pm
Jb11 wrote:
Tue Nov 14, 2017 8:25 pm
I’m also thinking of signing up for the GEHA HDHP with HSA. Does HSABank have a list of the available investment funds that GEHA members can invest in for free on its site somewhere? I looked but could not find a list.
It’s on the TD Ameritrade site. Search for ‘commission free ETF list’.
When I search their "commission free ETF list", I see lots of Vanguard funds....but someone mentioned they're not available in the GEHA HSA?

Cash
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Re: 2018 FEHB HDHP Recommendations

Post by Cash » Wed Nov 15, 2017 8:16 am

BogleFanGal wrote:
Wed Nov 15, 2017 7:30 am
motorcyclesarecool wrote:
Tue Nov 14, 2017 9:56 pm
Jb11 wrote:
Tue Nov 14, 2017 8:25 pm
I’m also thinking of signing up for the GEHA HDHP with HSA. Does HSABank have a list of the available investment funds that GEHA members can invest in for free on its site somewhere? I looked but could not find a list.
It’s on the TD Ameritrade site. Search for ‘commission free ETF list’.
When I search their "commission free ETF list", I see lots of Vanguard funds....but someone mentioned they're not available in the GEHA HSA?
They are being dropped (TDAmeritrade recently extended the transition period until January 19, 2018. See this thread for more.

Cash
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Re: 2018 FEHB HDHP Recommendations

Post by Cash » Wed Nov 15, 2017 8:17 am

totesmagotes wrote:
Tue Nov 14, 2017 10:30 pm
I'm a new fed and am currently enrolled in the GEHA HDHP, and I'm planning on keeping that option for 2018. My wife and I aren't sure if we're going to try for another kiddo, but we'll probably need/want to decide by late next year or early 2019. The GEHA HDHP covers maternity 100% *after* the deductible. If I'm reading the plan document properly, the GEHA Standard plan covers maternity 100% *before* the deductible. Since you'll blow away the $3000 deductible (which is really $1500 out-of-pocket after the $1500 premium pass-through) if you have maternity claims on the HDHP option, it's possible that the GEHA Standard plan may save you money if you need maternity. The deductible of the standard option is $350 ind ($700 family), and the monthly premium is actually lower than the HDHP's premium. If you aren't maxing out all of your tax-deferred savings options, it's possible that you'd be better suited with GEHA Standard + FSA + max out the rest of your tax-advantaged space if you need maternity.
Yeah I was wondering how the poster above arrived at the conclusion that the HDHP would be better than BCBS Basic (100% maternity, no deductible) or, evidently, GEHA Standard for maternity care. But I have never had to deal with maternity care, so...

mavi
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Re: 2018 FEHB HDHP Recommendations

Post by mavi » Thu Nov 16, 2017 10:23 pm

Is there any reason why people don't like the MHPB Consumer option HDHP? It gives a full $900 back for self only and $1800 back for Self+1 or Family.

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Re: 2018 FEHB HDHP Recommendations

Post by grabiner » Thu Nov 16, 2017 10:52 pm

totesmagotes wrote:
Tue Nov 14, 2017 10:30 pm
I'm a new fed and am currently enrolled in the GEHA HDHP, and I'm planning on keeping that option for 2018. My wife and I aren't sure if we're going to try for another kiddo, but we'll probably need/want to decide by late next year or early 2019. The GEHA HDHP covers maternity 100% *after* the deductible. If I'm reading the plan document properly, the GEHA Standard plan covers maternity 100% *before* the deductible. Since you'll blow away the $3000 deductible (which is really $1500 out-of-pocket after the $1500 premium pass-through) if you have maternity claims on the HDHP option, it's possible that the GEHA Standard plan may save you money if you need maternity.
The other benefit of the HDHP is that you can contribute an additional $5400 to your HSA; the tax savings on that $5400 is approximately the other half of the deductible.

I worked this out a few years ago for the DC Bogleheads, and found that if you are in a 25% tax bracket plus state tax, you will approximately break even with GEHA HDHP versus the standard plan if you use the whole deductible under the HDHP and pay nothing under the standard plan.

This is not just the inherent tax advantage of HDHPs, but the way the government subsidizes the plans. The reason that the HDHP costs more is that it pays $1500 to your HSA. But with the government paying 75% of the cost of your insurance, it only costs you $375 extra in your share of the premium to get $1500 in the HSA.
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Re: 2018 FEHB HDHP Recommendations

Post by grabiner » Thu Nov 16, 2017 10:56 pm

AnonJohn wrote:
Mon Nov 13, 2017 9:30 am
I'm chiming in with more questions than answers, but hopefully won't sidetrack the thread. Same situation. My research suggests that both GEHA and CF BCBS HDHP are excellent options to have. No judgment/knowledge of the others you list. Both GEHA and CF seem to have ~95% of the same doctors I've been using under FEPBlue. (the exception being a pediatric urgent care clinic)
And that is probably the most important issue in choosing a health plan. The financial situation for all the federal HDHPs is similar, probably a difference of a few hundred dollars based on differences in premiums, deductibles, and HSA contributions. But there are significant differences in provider networks; if you like a doctor who is not on another plan's network, it isn't worth that few hundred dollars to switch networks.

Even if you have a plan, check every open season whether your doctors are still in-network; plans change networks regularly.
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Re: 2018 FEHB HDHP Recommendations

Post by ND Fan 1 » Fri Nov 17, 2017 2:12 pm

In 2017 we switched to GEHA HDHP after 2 years on the BCBS and are very happy with it. We have 3 children 4 and younger and have been blessed to only do preventative doctor visits, so we came out way ahead this year. In 2016, we have baby #3 a full year of maternity on the BCBS PPO plan, which involved an extended NICU stay and PPO Plan would have come out ahead by about $200, so still pretty close.

We will probably get pregnant the middle of 2018, and using the #s from 2016 maternity doctor visits, the HDHP plan would come out ahead by about $800. However, that would put us on track to have the baby in 2019 and would like to avoid having to double dip the deductible, so I may switch back to BCBS for the birth in 2019 (unfortunately we have a record of NICU stays). Or give my wife a deadline 31 March to get pregnant so we have the baby in 2018 :D

Bottom line, no complaints with the GEHA plan after our first year, the tax benefits are pretty amazing and plan on moving forward with this plan. I did mention comments about dental coverage so I may look at dropping our additional Dental insurance through FEDVIP

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Re: 2018 FEHB HDHP Recommendations

Post by Snezz1e » Fri Nov 17, 2017 7:31 pm

mavi wrote:
Thu Nov 16, 2017 10:23 pm
Is there any reason why people don't like the MHPB Consumer option HDHP? It gives a full $900 back for self only and $1800 back for Self+1 or Family.
The premiums are higher by $200/$400. So the extra contribution don't make up for the higher premiums. Also the deductible is higher for MHBP. GEHA is $1500/3000 while MHBP is $2000/4000. So when you do need to use them it is higher out of pocket cost. They operate on copays mostly instead of 5% coinsurance GEHA has. For a normal doctor visit the 5% is cheaper than their $15 copay. But for more expensive services and procedures the copays would likely be cheaper than the 5%.

However the extra $500/1000 deductible means you're getting an extra $10,000/20,000 in services under GEHA before that even matters. MHBP seems to be better only when you need a major surgery or lengthy hospital stay as there is no copay for that. Most people don't expect that to happen so GEHA is a better option. If you have a major procedure planned then they are worth considering.

Finally they don't have dental/vision coverage or a rewards program.

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Re: 2018 FEHB HDHP Recommendations

Post by grabiner » Fri Nov 17, 2017 11:43 pm

I am giving a presentation to the DC Bogleheads on a related topic, so I redid my comparisons for FEHB HDHPs versus conventional, and the HDHP is almost a guaranteed winner (as long as you won't be deterred from seeking necessary care due to the potential bills). I use GEHA in this comparison, as it is a popular HDHP available nationwide, but the numbers should be similar for other plans.

For my example, I assume a 25% federal and 5.75% VA tax bracket (since many DC Bogleheads live in VA; the state tax advantage is even greater in MD and DC). This is a 29.31% overall tax rate. I am ignoring the effect of payroll deduction on Social Security taxes, because this is close to break-even; you lose about as much future value in Social Security taxes as you save in payments.

For a family, the standard plan costs $3378, which is $2388 after tax.

The HDHP costs $3556, which is $2514 after tax. But the plan contributes $1500 to your HSA, which is free money, and you contribute another $5400, for a $1583 tax savings (compared, say, to contributing it to your Roth TSP, which would also grow tax-free), so the day-one cost is -$569, a difference of $2957.

So, if you use the entire $3000 deductible of the HDHP, you still come out ahead if your medical costs with the conventional plan would be more than $43.
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BogleFanGal
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Re: 2018 FEHB HDHP Recommendations

Post by BogleFanGal » Sat Nov 18, 2017 9:55 am

Has anyone here switched from one HDHP to another: if so, any glitches when your HSA account moved to the new provider? Reviewing this thread, it seems GEHA may be better than Aetna overall, but my only hesitation is any hassles the change in HSA - right now, it's 1/2 cash, 1/2 Vanguard Conservative Growth fund through Payflex.

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Re: 2018 FEHB HDHP Recommendations

Post by Cash » Sat Nov 18, 2017 9:57 am

grabiner wrote:
Fri Nov 17, 2017 11:43 pm
I am giving a presentation to the DC Bogleheads on a related topic, so I redid my comparisons for FEHB HDHPs versus conventional, and the HDHP is almost a guaranteed winner (as long as you won't be deterred from seeking necessary care due to the potential bills). I use GEHA in this comparison, as it is a popular HDHP available nationwide, but the numbers should be similar for other plans.

For my example, I assume a 25% federal and 5.75% VA tax bracket (since many DC Bogleheads live in VA; the state tax advantage is even greater in MD and DC). This is a 29.31% overall tax rate. I am ignoring the effect of payroll deduction on Social Security taxes, because this is close to break-even; you lose about as much future value in Social Security taxes as you save in payments.

For a family, the standard plan costs $3378, which is $2388 after tax.

The HDHP costs $3556, which is $2514 after tax. But the plan contributes $1500 to your HSA, which is free money, and you contribute another $5400, for a $1583 tax savings (compared, say, to contributing it to your Roth TSP, which would also grow tax-free), so the day-one cost is -$569, a difference of $2957.

So, if you use the entire $3000 deductible of the HDHP, you still come out ahead if your medical costs with the conventional plan would be more than $43.
Thanks for this analysis. I just ran my own numbers using your example here, and it really seems like a no-brainer, especially if you are in a higher tax bracket and your preferred providers are in-network.

Does your analysis take into account the $700 deductible for the standard plan?

It also looks like the HDHP provides better preventative dental care (free) than the standard plan (50% up to plan allowance and all charges in excess of the allowance), so one can also potentially save on supplemental dental insurance.

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Re: 2018 FEHB HDHP Recommendations

Post by Cash » Sat Nov 18, 2017 9:58 am

BogleFanGal wrote:
Sat Nov 18, 2017 9:55 am
Has anyone here switched from one HDHP to another: if so, any glitches when your HSA account moved to the new provider? Reviewing this thread, it seems GEHA may be better than Aetna overall, but my only hesitation is any hassles the change in HSA - right now, it's 1/2 cash, 1/2 Vanguard Conservative Growth fund through Payflex.
Yes, I used to have Aetna, then went to the private sector, then back to the government with GEHA. I transferred my HSA from wherever Aetna had it, to HSA Bank, to Alliant Credit Union, and then back to (currently) HSA Bank. You can just do a custodian-to-custodian transfer like you would do with an IRA, 401(k), etc. It's pretty simple.

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Re: 2018 FEHB HDHP Recommendations

Post by totesmagotes » Sat Nov 18, 2017 10:22 am

grabiner wrote:
Fri Nov 17, 2017 11:43 pm
I am giving a presentation to the DC Bogleheads on a related topic, so I redid my comparisons for FEHB HDHPs versus conventional, and the HDHP is almost a guaranteed winner (as long as you won't be deterred from seeking necessary care due to the potential bills). I use GEHA in this comparison, as it is a popular HDHP available nationwide, but the numbers should be similar for other plans.

For my example, I assume a 25% federal and 5.75% VA tax bracket (since many DC Bogleheads live in VA; the state tax advantage is even greater in MD and DC). This is a 29.31% overall tax rate. I am ignoring the effect of payroll deduction on Social Security taxes, because this is close to break-even; you lose about as much future value in Social Security taxes as you save in payments.

For a family, the standard plan costs $3378, which is $2388 after tax.

The HDHP costs $3556, which is $2514 after tax. But the plan contributes $1500 to your HSA, which is free money, and you contribute another $5400, for a $1583 tax savings (compared, say, to contributing it to your Roth TSP, which would also grow tax-free), so the day-one cost is -$569, a difference of $2957.

So, if you use the entire $3000 deductible of the HDHP, you still come out ahead if your medical costs with the conventional plan would be more than $43.
If you don't elect for an HDHP to contribute to an HSA, you'll probably do a healthcare FSA with a non-HDHP option. For 2018, you can contribute up to $2650 to a healthcare FSA. If using FSAFEDS, you can also carry over up to $500 to the next year in case you don't use the entire FSA amount.

You mentioned "as long you won't be deterred from seeking necessary care due to the potential bills". This year is my first year with an HDHP + HSA, which means I started with a $0 balance in my HSA linked to a plan that has a $3000 deductible. Although the premiums for the HDHP were ~15% less than those for the conventional plan (I say "were" because I changed jobs last month -- I'm currently on GEHA HDHP, which actually has higher premiums than GEHA Standard), the decision to seek care when I knew we'd pay ~$130 out of pocket for a sick visit at a doctor's office was a significant source of stress. There's something to be said for knowing that you'll pay such an amount out of pocket (well, out of HSA, but the HSA is in my name, so it's "my" money instead of the insurer's money that's being spent, even though the insurer's money is also my money collected through premiums)... "Well, if it's just a virus, the doctor won't do anything anyway, so maybe we should just keep (our child) at home and wait it out instead of spending $130 out of pocket only to learn that all we can do is wait it out." Both of the times this year that I've been sick, I avoided going to the doctor's office because I didn't want to spend the money out of pocket.

Of course, discouraging medical services is part of the entire purpose of an insurer offering a high deductible -- it shifts the burden for payment onto the insured with the thought that it would discourage unnecessary consumption of services. I've certainly found that to be the case. It's gotten a bit easier to spend money out-of-pocket in the past month or two now that we've built up our HSA such that any ~$130 visit would only be a small percentage of the HSA balance. I suspect it'll keep getting easier to pay out of pocket as the HSA balance builds above $10k next year, but it's still a mental burden for me to seek medical care knowing it'll be out of pocket.

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Re: 2018 FEHB HDHP Recommendations

Post by ChrisC » Sat Nov 18, 2017 10:51 am

totesmagotes wrote:
Sat Nov 18, 2017 10:22 am
Of course, discouraging medical services is part of the entire purpose of an insurer offering a high deductible -- it shifts the burden for payment onto the insured with the thought that it would discourage unnecessary consumption of services. I've certainly found that to be the case. It's gotten a bit easier to spend money out-of-pocket in the past month or two now that we've built up our HSA such that any ~$130 visit would only be a small percentage of the HSA balance. I suspect it'll keep getting easier to pay out of pocket as the HSA balance builds above $10k next year, but it's still a mental burden for me to seek medical care knowing it'll be out of pocket.
Yes, what you say also seems to be my experience, though I would say we've become slightly hesitant about seeking medical services when we're on the hook for full payment of services before the HDHP deductible is met. On the other hand, most HDHPs offer a menu of no-cost preventive health care services -- annual medical exams, colonoscopies, dental cleanings and check-ups, some vision care, flu and other vaccination shots, etc -- that we consume without hesitation. And once the deductible is met, the two HDHPs we've had under FEHB (Aetna and GEHA) operate no differently than traditional health insurance plans, so in that case we might be less hesitant about seeking services -- though I really think we are still paying close attention to the cost of the services.

We really don't pay attention to the balance we have in our HSAs as a factor in seeking medical services since we generally don't use the accounts to pay for current medical services. We're building up our balances in our HSAs to take advantage of the tax exempt growth in the accounts and postponing reimbursement or payment of current medical expenses. l

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Re: 2018 FEHB HDHP Recommendations

Post by snoopyfozzieotto » Sat Nov 18, 2017 12:50 pm

It seems that all of the HDHP plans require to to keep a certain minimum amount of cash with the HSA administrator before you are allowed to invest anything above that - and that cash is just parked and earning a very low interest rate. Has anyone compared across all the options to find which is the best there?

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Re: 2018 FEHB HDHP Recommendations

Post by Cash » Sat Nov 18, 2017 4:50 pm

I am not aware of a minimum balance to invest with GEHA HDHP.

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Re: 2018 FEHB HDHP Recommendations

Post by tarnation » Sat Nov 18, 2017 5:16 pm

snoopyfozzieotto wrote:
Sat Nov 18, 2017 12:50 pm
It seems that all of the HDHP plans require to to keep a certain minimum amount of cash with the HSA administrator before you are allowed to invest anything above that - and that cash is just parked and earning a very low interest rate. Has anyone compared across all the options to find which is the best there?
Its been a while since we started, but GEHA has a deal with HSABank so that your low balance fees are waived.
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Re: 2018 FEHB HDHP Recommendations

Post by grabiner » Sat Nov 18, 2017 8:13 pm

totesmagotes wrote:
Sat Nov 18, 2017 10:22 am
grabiner wrote:
Fri Nov 17, 2017 11:43 pm
I am giving a presentation to the DC Bogleheads on a related topic, so I redid my comparisons for FEHB HDHPs versus conventional, and the HDHP is almost a guaranteed winner (as long as you won't be deterred from seeking necessary care due to the potential bills). I use GEHA in this comparison, as it is a popular HDHP available nationwide, but the numbers should be similar for other plans.

For my example, I assume a 25% federal and 5.75% VA tax bracket (since many DC Bogleheads live in VA; the state tax advantage is even greater in MD and DC). This is a 29.31% overall tax rate. I am ignoring the effect of payroll deduction on Social Security taxes, because this is close to break-even; you lose about as much future value in Social Security taxes as you save in payments.

For a family, the standard plan costs $3378, which is $2388 after tax.

The HDHP costs $3556, which is $2514 after tax. But the plan contributes $1500 to your HSA, which is free money, and you contribute another $5400, for a $1583 tax savings (compared, say, to contributing it to your Roth TSP, which would also grow tax-free), so the day-one cost is -$569, a difference of $2957.

So, if you use the entire $3000 deductible of the HDHP, you still come out ahead if your medical costs with the conventional plan would be more than $43.
If you don't elect for an HDHP to contribute to an HSA, you'll probably do a healthcare FSA with a non-HDHP option. For 2018, you can contribute up to $2650 to a healthcare FSA. If using FSAFEDS, you can also carry over up to $500 to the next year in case you don't use the entire FSA amount.
However, you still pay 70.69% of the bill; if you contribute $1000 to your FSA for medical care, that implies $707 of expenses, which is enough to put the HDHP clearly ahead.

If you use your FSA for dental and vision costs, you can do that even with the HDHP; the government allows you to open a limited-expense FSA which is usable only for dental and vision.
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Re: 2018 FEHB HDHP Recommendations

Post by Snezz1e » Sun Nov 19, 2017 1:16 pm

grabiner wrote:
Fri Nov 17, 2017 11:43 pm
I am giving a presentation to the DC Bogleheads on a related topic, so I redid my comparisons for FEHB HDHPs versus conventional, and the HDHP is almost a guaranteed winner (as long as you won't be deterred from seeking necessary care due to the potential bills). I use GEHA in this comparison, as it is a popular HDHP available nationwide, but the numbers should be similar for other plans.

For my example, I assume a 25% federal and 5.75% VA tax bracket (since many DC Bogleheads live in VA; the state tax advantage is even greater in MD and DC). This is a 29.31% overall tax rate. I am ignoring the effect of payroll deduction on Social Security taxes, because this is close to break-even; you lose about as much future value in Social Security taxes as you save in payments.

For a family, the standard plan costs $3378, which is $2388 after tax.

The HDHP costs $3556, which is $2514 after tax. But the plan contributes $1500 to your HSA, which is free money, and you contribute another $5400, for a $1583 tax savings (compared, say, to contributing it to your Roth TSP, which would also grow tax-free), so the day-one cost is -$569, a difference of $2957.

So, if you use the entire $3000 deductible of the HDHP, you still come out ahead if your medical costs with the conventional plan would be more than $43.
I don't think the FICA savings is breakeven. If you're over the second bend then $214 in FICA savings is $1 in monthly SS benefits or $12/year. I plan on retiring at minimum FERS retirement age of 57 which is 10 years from SS retirement. So in the final year a $214 savings invested for 10 years with a real rate of return of 4% would give me $316 and a 4% withdrawal rate gives me $12.6 year so it is about breakeven.

However at my current age (30) $214 over 37 years at 4% is $913 which gives $36.50 year at 4% withdrawal rate which is roughly 3 times the social security benefit. This means I only had to invest a third of my savings to break even and the rest was real savings or about 5%. This savings get reduced as you get older and is only worth 2.5% if you're only over first bend.

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Re: 2018 FEHB HDHP Recommendations

Post by AnonJohn » Sun Nov 19, 2017 1:39 pm

grabiner wrote:
Fri Nov 17, 2017 11:43 pm
I am giving a presentation to the DC Bogleheads on a related topic, so I redid my comparisons for FEHB HDHPs versus conventional, and the HDHP is almost a guaranteed winner (as long as you won't be deterred from seeking necessary care due to the potential bills). I use GEHA in this comparison, as it is a popular HDHP available nationwide, but the numbers should be similar for other plans.

For my example, I assume a 25% federal and 5.75% VA tax bracket (since many DC Bogleheads live in VA; the state tax advantage is even greater in MD and DC). This is a 29.31% overall tax rate. I am ignoring the effect of payroll deduction on Social Security taxes, because this is close to break-even; you lose about as much future value in Social Security taxes as you save in payments.

For a family, the standard plan costs $3378, which is $2388 after tax.

The HDHP costs $3556, which is $2514 after tax. But the plan contributes $1500 to your HSA, which is free money, and you contribute another $5400, for a $1583 tax savings (compared, say, to contributing it to your Roth TSP, which would also grow tax-free), so the day-one cost is -$569, a difference of $2957.

So, if you use the entire $3000 deductible of the HDHP, you still come out ahead if your medical costs with the conventional plan would be more than $43.
Thank you for your post and for updating your analysis - I've seen it on other threads and every time I read it things get a little clearer for me! (I've been studying this for two years, almost ready to pull the trigger). One question: I understand why you ignore social security. But what about the 1.45% medicare payroll tax? If you contribute to an HSA with a payroll deduction, I think you also avoid that? And unlike social security it is not directly linked to future benefits?

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Re: 2018 FEHB HDHP Recommendations

Post by snoopyfozzieotto » Sun Nov 19, 2017 2:14 pm

Cash wrote:
Sat Nov 18, 2017 4:50 pm
I am not aware of a minimum balance to invest with GEHA HDHP.
You're right upon reviewing there is none; however if you use a different HDHP + HSA some do. PayFlex, which is the HSA administrator of choice for Aetna, says this:
You may open an investment account once you reach the minimum balance (typically $1,000) in your HSA. The minimum amount is determined by your employer. Any amount above the minimum balance can be transferred from your HSA to your investment account.
https://content.payflex.com/Media/Defau ... 0Flyer.pdf

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Re: 2018 FEHB HDHP Recommendations

Post by grabiner » Sun Nov 19, 2017 4:26 pm

AnonJohn wrote:
Sun Nov 19, 2017 1:39 pm
grabiner wrote:
Fri Nov 17, 2017 11:43 pm
I am ignoring the effect of payroll deduction on Social Security taxes, because this is close to break-even; you lose about as much future value in Social Security taxes as you save in payments.
Thank you for your post and for updating your analysis - I've seen it on other threads and every time I read it things get a little clearer for me! (I've been studying this for two years, almost ready to pull the trigger). One question: I understand why you ignore social security. But what about the 1.45% medicare payroll tax? If you contribute to an HSA with a payroll deduction, I think you also avoid that? And unlike social security it is not directly linked to future benefits?
I count the tax rate as 7.65%, including both SS and Medicare; this is what makes it close to break-even. If you pay only Medicare (because you are above the maximum for SS taxation), the tax you avoid is a pure gain, although it is a rather small amount.
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Re: 2018 FEHB HDHP Recommendations

Post by ziggy29 » Sun Nov 19, 2017 4:44 pm

I'm an APWU represented postal worker so I get a sweetheart deal with the union-sponsored APWU Consumer Directed plan where I only pay 5% of the cost (about $28 per 2 weeks for my wife and me). If I didn't get that deal, I'd be in the GEHA HDHP.

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Re: 2018 FEHB HDHP Recommendations

Post by AnonJohn » Sun Nov 19, 2017 8:27 pm

grabiner wrote:
Sun Nov 19, 2017 4:26 pm
...
I count the tax rate as 7.65%, including both SS and Medicare; this is what makes it close to break-even. If you pay only Medicare (because you are above the maximum for SS taxation), the tax you avoid is a pure gain, although it is a rather small amount.
Thank you. Makes sense.

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Re: 2018 FEHB HDHP Recommendations

Post by c5ruzr » Sun Dec 10, 2017 2:27 am

BogleFanGal wrote:
Sat Nov 18, 2017 9:55 am
Has anyone here switched from one HDHP to another: if so, any glitches when your HSA account moved to the new provider? Reviewing this thread, it seems GEHA may be better than Aetna overall, but my only hesitation is any hassles the change in HSA - right now, it's 1/2 cash, 1/2 Vanguard Conservative Growth fund through Payflex.
I have been with the Aetna HDHP for 11 years now, and I'm about to jump to GEHA. They keep upping the premiums at Aetna, and the fluoride on the dental preventive care isn't included on the Aetna whereas it is on GEHA. I probably average ~$50 a year in spend so the HSA basically becomes another savings account. I also started maxing it out as once my backdoor Roth and TSP's are maxed; it's the next easiest tax advantaged plan available. And it will become accessible without penalty down the road.

I do still have a few questions though. One is the Aetna PayFlex to GEHA HSA transfer. Will I likely have to pay the $25 account closing fee at PayFlex? With assets of VSMAX and AVUAX in PayFlex, should I sell and transfer the cash? Or are those funds I can use with the GEHA TDAmeritrade plan? Do I have it correct that there's no monthly low balance or investment fees with the TDA account? If they are phasing out the no load etf's, what are their other trading fees like?

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Re: 2018 FEHB HDHP Recommendations

Post by nps » Mon Dec 11, 2017 6:57 am

c5ruzr wrote:
Sun Dec 10, 2017 2:27 am
I do still have a few questions though. One is the Aetna PayFlex to GEHA HSA transfer. Will I likely have to pay the $25 account closing fee at PayFlex? With assets of VSMAX and AVUAX in PayFlex, should I sell and transfer the cash? Or are those funds I can use with the GEHA TDAmeritrade plan? Do I have it correct that there's no monthly low balance or investment fees with the TDA account? If they are phasing out the no load etf's, what are their other trading fees like?
I previously switched from Aetna to GEHA. I didn't have any PayFlex funds invested since I had already been transferring regularly into an HSA Bank account, but I don't recall any fees to move out my remaining cash.

There are no low balance or investment fees for the TDA account or the HSA Bank account. TDA charges $6.95 for equity trades, or zero if a comission-free ETF. These still exist but there were some recent fund changes.

Don't know if you will be able to transfer your existing mutual funds in-kind.

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Re: 2018 FEHB HDHP Recommendations

Post by UALflyer » Tue Dec 12, 2017 9:45 am

grabiner wrote:
Fri Nov 17, 2017 11:43 pm
I am giving a presentation to the DC Bogleheads on a related topic, so I redid my comparisons for FEHB HDHPs versus conventional, and the HDHP is almost a guaranteed winner (as long as you won't be deterred from seeking necessary care due to the potential bills). I use GEHA in this comparison, as it is a popular HDHP available nationwide, but the numbers should be similar for other plans.

For my example, I assume a 25% federal and 5.75% VA tax bracket (since many DC Bogleheads live in VA; the state tax advantage is even greater in MD and DC). This is a 29.31% overall tax rate. I am ignoring the effect of payroll deduction on Social Security taxes, because this is close to break-even; you lose about as much future value in Social Security taxes as you save in payments.

For a family, the standard plan costs $3378, which is $2388 after tax.

The HDHP costs $3556, which is $2514 after tax. But the plan contributes $1500 to your HSA, which is free money, and you contribute another $5400, for a $1583 tax savings (compared, say, to contributing it to your Roth TSP, which would also grow tax-free), so the day-one cost is -$569, a difference of $2957.

So, if you use the entire $3000 deductible of the HDHP, you still come out ahead if your medical costs with the conventional plan would be more than $43.
There are several big problems with your analysis, as the HDHP is not a bad choice and can certainly end up being cheaper, but is not even close to being an almost guaranteed winner.

If you elect a family HDHP with GEHA and then spend $3,000 on non-preventative medical care (of which $1,500 would be covered under GEHA's passthrough contribution to the HDHP), if you assume the same 29.31% tax rate, your annual cost of the plan is now $2,514 in after tax premiums, plus $1,060 in net after tax copays, for a grand total of $3,574.

With a standard plan, which you would combine with an FSA, your tax benefits are identical to those of an HDHP with an HSA. The HSA obviously gets a $1,500 pass through contribution and allows for higher contributions and carryovers, but it also provides no coverage between $1,500 and $3,000 in non-preventative spending.

With a standard plan, the calculations depend on the way the $3,000 is spent. If, for instance, it is all office visits and medications (the lab card benefit covers all lab costs and diagnostic testing at 100% with no deductible), then you would only owe your co-pays on those. If you are looking at $400 in co-pays under the standard plan, which is $282 after tax (through the FSA), then, when you combine it with $2,388 in after tax premiums, your grand total is $2,670. On a post tax basis, this is about $900 cheaper than the HDHP.

If your medical care causes you to use up the entire deductible under the GEHA standard plan, this advantage will certainly shrink, so it depends on the nature of your medical spending throughout the year.

So, in short, you are failing to account for the identical tax benefits of an FSA that you'd get with a standard plan. You are also failing to consider the fact that with a standard plan, depending on the nature of the charges, the standard plan can cost way less out of pocket than the HDHP (after the first $1,500 in non-preventative charges).
However, you still pay 70.69% of the bill; if you contribute $1000 to your FSA for medical care, that implies $707 of expenses, which is enough to put the HDHP clearly ahead.
This is one of the big problems with your analysis, as it assumes that $x in medical spending has the same out of pocket impact under the HDHP and the PPO. In reality, up until the time that you've hit your deductible under the HDHP, the HDHP costs you way more out of pocket.
Last edited by UALflyer on Tue Dec 12, 2017 10:30 am, edited 1 time in total.

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Re: 2018 FEHB HDHP Recommendations

Post by UALflyer » Tue Dec 12, 2017 10:11 am

grabiner wrote:
Fri Nov 17, 2017 11:43 pm
as long as you won't be deterred from seeking necessary care due to the potential bills
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.

When you combine it with the fact that, as I showed above, a standard GEHA PPO can actually be cheaper, there are plenty of rather compelling arguments against the HDHP. It does very much depend on your overall situation, but neither plan is a slam dunk.

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Re: 2018 FEHB HDHP Recommendations

Post by grabiner » Tue Dec 12, 2017 10:32 pm

UALflyer wrote:
Tue Dec 12, 2017 9:45 am
grabiner wrote:
Fri Nov 17, 2017 11:43 pm
I am giving a presentation to the DC Bogleheads on a related topic, so I redid my comparisons for FEHB HDHPs versus conventional, and the HDHP is almost a guaranteed winner (as long as you won't be deterred from seeking necessary care due to the potential bills). I use GEHA in this comparison, as it is a popular HDHP available nationwide, but the numbers should be similar for other plans.

For my example, I assume a 25% federal and 5.75% VA tax bracket (since many DC Bogleheads live in VA; the state tax advantage is even greater in MD and DC). This is a 29.31% overall tax rate. I am ignoring the effect of payroll deduction on Social Security taxes, because this is close to break-even; you lose about as much future value in Social Security taxes as you save in payments.

For a family, the standard plan costs $3378, which is $2388 after tax.

The HDHP costs $3556, which is $2514 after tax. But the plan contributes $1500 to your HSA, which is free money, and you contribute another $5400, for a $1583 tax savings (compared, say, to contributing it to your Roth TSP, which would also grow tax-free), so the day-one cost is -$569, a difference of $2957.

So, if you use the entire $3000 deductible of the HDHP, you still come out ahead if your medical costs with the conventional plan would be more than $43.
There are several big problems with your analysis, as the HDHP is not a bad choice and can certainly end up being cheaper, but is not even close to being an almost guaranteed winner.

If you elect a family HDHP with GEHA and then spend $3,000 on non-preventative medical care (of which $1,500 would be covered under GEHA's passthrough contribution to the HDHP), if you assume the same 29.31% tax rate, your annual cost of the plan is now $2,514 in after tax premiums, plus $1,060 in net after tax copays, for a grand total of $3,574.
What you miss here is that you get the value of the HSA contribution whether you use it this year or not. You have this $3574, but you also have the tax savings on an additional $3900, which is another $1143, so your net cost is $2433.

That $1143 is a gain even though it isn't used this year. You have $3900 growing tax-free for medical expenses in the future, which you will likely spend in retirement if you don't need it now. If you contributed to your Roth TSP instead, you would get tax-free growth but would only be able to contribute $2757 for the same out-of-pocket cost. (Alternatively, if you contributed $3900 to your traditional TSP, you would pay the same $2757 out of pocket but would pay taxes upon withdrawal.)
With a standard plan, which you would combine with an FSA, your tax benefits are identical to those of an HDHP with an HSA. The HSA obviously gets a $1,500 pass through contribution and allows for higher contributions and carryovers, but it also provides no coverage between $1,500 and $3,000 in non-preventative spending.

With a standard plan, the calculations depend on the way the $3,000 is spent. If, for instance, it is all office visits and medications (the lab card benefit covers all lab costs and diagnostic testing at 100% with no deductible), then you would only owe your co-pays on those. If you are looking at $400 in co-pays under the standard plan, which is $282 after tax (through the FSA), then, when you combine it with $2,388 in after tax premiums, your grand total is $2,670. On a post tax basis, this is about $900 cheaper than the HDHP.
And with this correction, the HDHP still comes out slightly ahead.
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Re: 2018 FEHB HDHP Recommendations

Post by 4nwestsaylng » Tue Dec 12, 2017 10:34 pm

I had GEHA HDHP for ten years, right up to age 65, and was happy with it.

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Re: 2018 FEHB HDHP Recommendations

Post by UALflyer » Wed Dec 13, 2017 8:17 am

grabiner wrote:
Tue Dec 12, 2017 10:32 pm
UALflyer wrote:
Tue Dec 12, 2017 9:45 am
grabiner wrote:
Fri Nov 17, 2017 11:43 pm
I am giving a presentation to the DC Bogleheads on a related topic, so I redid my comparisons for FEHB HDHPs versus conventional, and the HDHP is almost a guaranteed winner (as long as you won't be deterred from seeking necessary care due to the potential bills). I use GEHA in this comparison, as it is a popular HDHP available nationwide, but the numbers should be similar for other plans.

For my example, I assume a 25% federal and 5.75% VA tax bracket (since many DC Bogleheads live in VA; the state tax advantage is even greater in MD and DC). This is a 29.31% overall tax rate. I am ignoring the effect of payroll deduction on Social Security taxes, because this is close to break-even; you lose about as much future value in Social Security taxes as you save in payments.

For a family, the standard plan costs $3378, which is $2388 after tax.

The HDHP costs $3556, which is $2514 after tax. But the plan contributes $1500 to your HSA, which is free money, and you contribute another $5400, for a $1583 tax savings (compared, say, to contributing it to your Roth TSP, which would also grow tax-free), so the day-one cost is -$569, a difference of $2957.

So, if you use the entire $3000 deductible of the HDHP, you still come out ahead if your medical costs with the conventional plan would be more than $43.
There are several big problems with your analysis, as the HDHP is not a bad choice and can certainly end up being cheaper, but is not even close to being an almost guaranteed winner.

If you elect a family HDHP with GEHA and then spend $3,000 on non-preventative medical care (of which $1,500 would be covered under GEHA's passthrough contribution to the HDHP), if you assume the same 29.31% tax rate, your annual cost of the plan is now $2,514 in after tax premiums, plus $1,060 in net after tax copays, for a grand total of $3,574.
What you miss here is that you get the value of the HSA contribution whether you use it this year or not. You have this $3574, but you also have the tax savings on an additional $3900, which is another $1143, so your net cost is $2433.

That $1143 is a gain even though it isn't used this year. You have $3900 growing tax-free for medical expenses in the future, which you will likely spend in retirement if you don't need it now. If you contributed to your Roth TSP instead, you would get tax-free growth but would only be able to contribute $2757 for the same out-of-pocket cost. (Alternatively, if you contributed $3900 to your traditional TSP, you would pay the same $2757 out of pocket but would pay taxes upon withdrawal.)
Your post contains the exact same mistake that I've already pointed out above, as it fails to account for the identical tax treatment of the FSA contributions, and assumes that no additional FSA contributions would be made beyond those required to pay the PPO co-pays.

I did not bring up the additional FSA contributions above, as I was running the numbers based on an apples to apples comparison of the same healthcare expenditures under both the HDHP and the PPO. If you want to run the numbers based on the maximum FSA contributions (of which $500/year can be carried forward to future years), that's $2,250 in additional FSA contributions, which, at the same hypothetical 29.31% tax rate, results in additional tax savings of about $660, so, even after accounting for the tax savings on the entire HSA contribution, the PPO ends up being roughly $400/year cheaper.

People also need to remember that the FSA funds can be used even by perfectly healthy people, as things like massages (which the federal FSA reimburses without a prescription), sunblock (also does not require a prescription), glasses/contacts and the like are eligible for FSA reimbursement. Hence, in a lot of situations it makes sense even for perfectly healthy families to max out their healthcare FSA's.

Having said that, as I've already mentioned above, there are also situations where an HDHP can come out ahead, so it's fact specific. I do wish that all people running these calculations would appropriately weigh the strong financial incentive under the HDHP to forego care, which can result in serious and even deadly consequences, and which tends to be glossed over in all these purely financial debates.

Most people out there simply do not have access to relatively inexpensive but very high quality PPO's, such as GEHA (or BCBS, etc...), so the calculations between HDHP's and PPO's (to the extent that a PPO is oven offered, as a lot of employers now only offer HDHP's to their employees) tend to be different, as those PPO's tend to be more expensive and the benefits tend to be less generous. Likewise, given the proliferation of HDHP's out there, which tend to be cheaper for the employers (primarily because they create a financial incentive to forego at least some care), you see a lot of articles out there discussing some of the ways to maximize the HDHP benefits through the HSA's. This has conditioned a lot of people to think that an HDHP is always preferable. Hence, when faced with a situation, such as the one that all federal employees face, where they have access not just to excellent HDHP's, but also to superb PPO's, they are just not sure how to properly run the calculations, so they end up failing to properly compare the structure and the benefits of both types of plans.

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grabiner
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Re: 2018 FEHB HDHP Recommendations

Post by grabiner » Wed Dec 13, 2017 5:33 pm

UALflyer wrote:
Wed Dec 13, 2017 8:17 am
grabiner wrote:
Tue Dec 12, 2017 10:32 pm
What you miss here is that you get the value of the HSA contribution whether you use it this year or not. You have this $3574, but you also have the tax savings on an additional $3900, which is another $1143, so your net cost is $2433.

That $1143 is a gain even though it isn't used this year. You have $3900 growing tax-free for medical expenses in the future, which you will likely spend in retirement if you don't need it now. If you contributed to your Roth TSP instead, you would get tax-free growth but would only be able to contribute $2757 for the same out-of-pocket cost. (Alternatively, if you contributed $3900 to your traditional TSP, you would pay the same $2757 out of pocket but would pay taxes upon withdrawal.)
Your post contains the exact same mistake that I've already pointed out above, as it fails to account for the identical tax treatment of the FSA contributions, and assumes that no additional FSA contributions would be made beyond those required to pay the PPO co-pays.

I did not bring up the additional FSA contributions above, as I was running the numbers based on an apples to apples comparison of the same healthcare expenditures under both the HDHP and the PPO. If you want to run the numbers based on the maximum FSA contributions (of which $500/year can be carried forward to future years), that's $2,250 in additional FSA contributions, which, at the same hypothetical 29.31% tax rate, results in additional tax savings of about $660, so, even after accounting for the tax savings on the entire HSA contribution, the PPO ends up being roughly $400/year cheaper.

People also need to remember that the FSA funds can be used even by perfectly healthy people, as things like massages (which the federal FSA reimburses without a prescription), sunblock (also does not require a prescription), glasses/contacts and the like are eligible for FSA reimbursement. Hence, in a lot of situations it makes sense even for perfectly healthy families to max out their healthcare FSA's.
And much of this is usable even with an HDHP. The government allows employees with an HDHP to set up a limited expense FSA, which covers dental and vision only, but these are most of the FSA-eligible expenses for healthy people.
Most people out there simply do not have access to relatively inexpensive but very high quality PPO's, such as GEHA (or BCBS, etc...), so the calculations between HDHP's and PPO's (to the extent that a PPO is oven offered, as a lot of employers now only offer HDHP's to their employees) tend to be different, as those PPO's tend to be more expensive and the benefits tend to be less generous.
Actually, this isn't even the reason that the HDHPs are so attractive for government employees. The way the government subsidized HDHPs is the reason for the numbers. The government pays 75% of the cost of insurance up to a limit, so government employees pay only $375 out of pocket (and that is tax-deductible) to put the plan contribution of $1500 in the FSA. If your employer gives the same subsidy for a conventional plan and an HDHP with the same provider, then the HDHP is likely to be more expensive if you are near the deductible.
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Re: 2018 FEHB HDHP Recommendations

Post by UALflyer » Wed Dec 13, 2017 6:06 pm

grabiner wrote:
Wed Dec 13, 2017 5:33 pm
And much of this is usable even with an HDHP. The government allows employees with an HDHP to set up a limited expense FSA, which covers dental and vision only, but these are most of the FSA-eligible expenses for healthy people.
Sure, you can set up a limited expense FSA to cover dental and vision expenses, but it's not nearly as flexible as a general purpose FSA that you get with a non HDHP plan, nor are these "most" of the FSA eligible expenses for healthy people, at least not in many cases.

With a limited expense FSA, you have to more or less accurately predict your dental and vision expenses for the year, as you cannot replace them with other types of expenses. A general FSA that you get with a PPO or another type of non-HDHP plan is significantly more flexible, which gives you the ability to elect higher contribution limits because if your dental, vision and healthcare copays are running too low for the year, you can easily fill in the gap with other eligible expenses (massages, sunblock, radon detection devices, etc...). The list of those FSA eligible expenses is enormous, and many of them do not require a prescription and are purchased anyway. At the same time, if your other FSA eligible expenses are running high for the year, you can easily defer purchasing many of the FSA eligible expenses until the following year.
Actually, this isn't even the reason that the HDHPs are so attractive for government employees. The way the government subsidized HDHPs is the reason for the numbers. The government pays 75% of the cost of insurance up to a limit, so government employees pay only $375 out of pocket (and that is tax-deductible) to put the plan contribution of $1500 in the FSA. If your employer gives the same subsidy for a conventional plan and an HDHP with the same provider, then the HDHP is likely to be more expensive if you are near the deductible.
The HDHP's are attractive to government employees for a number of different reasons, but as the numbers above illustrate, there are also plenty of situations under which the PPO's (or at least GEHA's PPO) actually cost less. Hence, people really need to make sure that when they are running the calculations, they are taking into account all the variables.

The following is not directly related to the discussion, but those wondering about the way the government's contribution is determined can take a look at the following (it's a bit different than"75% of the cost of insurance up to a limit," although this does not affect this particular discussion) https://www.opm.gov/healthcare-insuranc ... insurance/)

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