High deductible health insurance with HSA for family of 5

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Topic Author
Grover
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Joined: Sun Apr 19, 2015 3:22 pm

High deductible health insurance with HSA for family of 5

Post by Grover »

My employer offering HSA plan but I am reluctant to go for it. I just need some input from you guys. Here is my situation:

1)Family of five I am 40, wife is 37,kids are 4,4,5 all healthy no more pregnancies.
2)Employer contributes 2250 to HSA
3)The other health insurance option is a comprehension plan which is a really good plan. Both health insurance premium are payed by employer.
4)I am planing to contribute max 6900 a year
5)I am on 39% marginal tax.

Would you go for HSA or go for peace of mind with the a really good comprehensive plan?

Thanks!
Determined
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Joined: Sat Aug 12, 2017 7:43 pm

Re: High deductible health insurance with HSA for family of 5

Post by Determined »

What are the deductibles and out of pocket maximums? I have felt good about switching my family to an hdhp and I have three children as well. I haven't met the deductible for either plan since my 12 year old was born. The employer contribution will count toward your maximum.
masteraleph
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Re: High deductible health insurance with HSA for family of 5

Post by masteraleph »

1) Can you post more details about the plans? HDHPs can vary wildly. If the HDHP is, for example, a $2000 individual/$4000 family deductible with $3000/$6000 max out of pocket, that would be one thing. If it's $4000/$8000 with $6500/$13000 out of pocket, that's very different. Also, what are the differences in coverage? Does the comprehensive plan have out of network and the HDHP doesn't, are the networks different, etc.

2) What state do you live in? Several states (CA, NJ, and AL) don't recognize HSAs for state tax purposes, and others (NH and TN) tax earnings, though that's not as big a deal for right now.. Losing the state tax benefits are a pain.

3) I presume you know this, but you can invest the HSA money, either with your employer's provided HSA or with one you transfer your money into. If you're in the 39% marginal tax bracket, you'd probably be best off saving (scanning) receipts and paying health expenses out of pocket, with the goal of investing the money in the HSA now and only claiming expenses in future years.
nolesrule
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Re: High deductible health insurance with HSA for family of 5

Post by nolesrule »

If your employer contributes $2250 to the HSA, you will only be able to contribute $4650.
Topic Author
Grover
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Joined: Sun Apr 19, 2015 3:22 pm

Re: High deductible health insurance with HSA for family of 5

Post by Grover »

Thanks guys for taking the time to reply

Deductible in network 1500/3000
Coinsurance 90%
Max out of pocket 3000/6000

Out of network deductible 5000/10000
Coinsurance 60%
Max out of pocket 10k/20k
Topic Author
Grover
Posts: 76
Joined: Sun Apr 19, 2015 3:22 pm

Re: High deductible health insurance with HSA for family of 5

Post by Grover »

nolesrule wrote: Sun Nov 19, 2017 8:59 pm If your employer contributes $2250 to the HSA, you will only be able to contribute $4650.
Yes this is what I meant to say. Thanks
Topic Author
Grover
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Re: High deductible health insurance with HSA for family of 5

Post by Grover »

masteraleph wrote: Sun Nov 19, 2017 8:57 pm 1) Can you post more details about the plans? HDHPs can vary wildly. If the HDHP is, for example, a $2000 individual/$4000 family deductible with $3000/$6000 max out of pocket, that would be one thing. If it's $4000/$8000 with $6500/$13000 out of pocket, that's very different. Also, what are the differences in coverage? Does the comprehensive plan have out of network and the HDHP doesn't, are the networks different, etc.

2) What state do you live in? Several states (CA, NJ, and AL) don't recognize HSAs for state tax purposes, and others (NH and TN) tax earnings, though that's not as big a deal for right now.. Losing the state tax benefits are a pain.

3) I presume you know this, but you can invest the HSA money, either with your employer's provided HSA or with one you transfer your money into. If you're in the 39% marginal tax bracket, you'd probably be best off saving (scanning) receipts and paying health expenses out of pocket, with the goal of investing the money in the HSA now and only claiming expenses in future years.
Thanks for taking the time,
Details as follows
Deductible in network 1500/3000
Coinsurance 90%
Max out of pocket 3000/6000

Out of network deductible 5000/10000
Coinsurance 60%
Max out of pocket 10k/20k

And yes I am doing HSA for the retirement saving and investing I am probably going to pay the medical bills and leave the HSA to grow. Thanks
Topic Author
Grover
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Re: High deductible health insurance with HSA for family of 5

Post by Grover »

Determined wrote: Sun Nov 19, 2017 8:55 pm What are the deductibles and out of pocket maximums? I have felt good about switching my family to an hdhp and I have three children as well. I haven't met the deductible for either plan since my 12 year old was born. The employer contribution will count toward your maximum.

Good to hear, did the HDHI cover the kids well visits?
aristotelian
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Re: High deductible health insurance with HSA for family of 5

Post by aristotelian »

If I understand the numbers you posted, your employer contribution to the HSA more than makes up for the difference in deductibles.

For what it's worth, your employer contribution also covers about what I have been paying out of pocket under an HDHP for a healthyish family of four.

That out of pocket max of $6k for the HDHP if I understand correctly is very reasonable (I think ours is $12k).

With the ability to a) deduct $6900 from your taxes at a marginal rate of 39% and b) ability to cash flow receipts and invest tax free, I believe the HDHP/HSA is a no brainer in your situation.
DrGoogle2017
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Re: High deductible health insurance with HSA for family of 5

Post by DrGoogle2017 »

It’s worth a gamble for you, especially when everybody is young and healthy. I did for just one year then I realized I missed going to see my acupuncture. But it was a bit stressful psychological.
Determined
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Re: High deductible health insurance with HSA for family of 5

Post by Determined »

Grover wrote: Mon Nov 20, 2017 9:47 am
Determined wrote: Sun Nov 19, 2017 8:55 pm What are the deductibles and out of pocket maximums? I have felt good about switching my family to an hdhp and I have three children as well. I haven't met the deductible for either plan since my 12 year old was born. The employer contribution will count toward your maximum.

Good to hear, did the HDHI cover the kids well visits?
Yes, my plan covers well visits, pap smears, and mammograms.
Bacchus01
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Re: High deductible health insurance with HSA for family of 5

Post by Bacchus01 »

We’re a little older (mid 40s) with kids that are 8, 12, and 16. No contribution to HSA from employer, but otherwise similar numbers.

We do the HDHP/HSA and pay all expenses out of pocket and invest the HSA balance. We have yet to hit a deductible, but this year will be close our oldest had an ER visit that was $2K. Still, paid it out of pocket.

Your numbers seem to suggest that an HSA is the way to go.
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grabiner
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Re: High deductible health insurance with HSA for family of 5

Post by grabiner »

masteraleph wrote: Sun Nov 19, 2017 8:57 pm 2) What state do you live in? Several states (CA, NJ, and AL) don't recognize HSAs for state tax purposes, and others (NH and TN) tax earnings, though that's not as big a deal for right now.. Losing the state tax benefits are a pain.
I do not believe either NH or TN taxes earnings. This has been reported in some articles, but I believe it is a misunderstanding of the laws. NH and TN tax only investment income, so there is no state deduction for HSA contributions. However, if you follow the instructions on the NH or TN tax form, it says that you use the dividends and interest income from your federal tax form; the instructions don't say to add in HSAs (as, for example, the CA instructions do).
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Spacoli
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Re: High deductible health insurance with HSA for family of 5

Post by Spacoli »

Hoping to resurface this thread because I'm also considering switching to an HSA plan. Family of five with 3 kids similar ages to the OP (all under 9).

Unfortunately my employer does not contribute to the HSA. But they do pay 50% of the premiums for either the PPO plan or the HSA plan.

PPO
My portion of annual premium: $11,669
In-network
Deductible: $1,000
Out of pocket max: $3,000
Out of network
Deductible: $2,000
Out of pocket max: $6,000

PPO+HSA
My portion of annual premium: $7,936
In-network
Deductible: $4,000
Out of pocket max: $12,000
Out of network
Deductible: $8,000
Out of pocket max: $18,000

I'd love to be able to take advantage of an HSA, but the Out of Pocket Max numbers scare me a bit. Maybe I don't need to be too concerned about the out of pocket max. Have others encountered situations where your costs significantly exceeded your deductible?

Would appreciate some other thoughts on this.
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grabiner
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Re: High deductible health insurance with HSA for family of 5

Post by grabiner »

Spacoli wrote: Mon Jan 01, 2018 3:50 pm Hoping to resurface this thread because I'm also considering switching to an HSA plan. Family of five with 3 kids similar ages to the OP (all under 9).

Unfortunately my employer does not contribute to the HSA. But they do pay 50% of the premiums for either the PPO plan or the HSA plan.

PPO
My portion of annual premium: $11,669
In-network
Deductible: $1,000
Out of pocket max: $3,000
Out of network
Deductible: $2,000
Out of pocket max: $6,000

PPO+HSA
My portion of annual premium: $7,936
In-network
Deductible: $4,000
Out of pocket max: $12,000
Out of network
Deductible: $8,000
Out of pocket max: $18,000

I'd love to be able to take advantage of an HSA, but the Out of Pocket Max numbers scare me a bit. Maybe I don't need to be too concerned about the out of pocket max.
I don't know your tax bracket; I'll assume 24%, with premiums paid by payroll deduction, and ignore the FICA tax savings because that is close to break-even in reduced SS benefits.

Thus you get a $1620 tax benefit from the $6750 HSA contribution. The $3723 premium difference is $2628 after tax. So the day-one cost difference is $4248; this is how much you will save if you don't use your insurance for anything other than a free annual checkup.

Note that the day-one cost difference is more than the deductible. If you use the entire deductible with the HDHP, and pay nothing under the conventional plan, you'll still come out ahead.

If you have very high costs, you'll have to compare the post-deductible coverage. Usually, it's better with an HDHP than with a conventional plan. You could come out worse if you have more than $7248 of expenses under the HDHP, but that is not likely to happen very often; if your plan provides 90% coverage after the deductible, that would be more than $36,000 in medical bills. Your worst case is an extra $4752 under the HDHP, but that isn't so much relative to the total costs. As long as you don't go way over the deductible more than one year in three, you should still come out ahead in the long run.
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Spacoli
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Re: High deductible health insurance with HSA for family of 5

Post by Spacoli »

Thanks for your input!
33% tax bracket + 5.75% MD taxes. Which, given your illustration, further strengthens the case for the HSA.
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grabiner
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Re: High deductible health insurance with HSA for family of 5

Post by grabiner »

Spacoli wrote: Mon Jan 01, 2018 4:44 pm Thanks for your input!
33% tax bracket + 5.75% MD taxes. Which, given your illustration, further strengthens the case for the HSA.
Your state tax rate should include the local tax, so it is 8.95% if you live in the DC suburbs with a county rate of 3.20%.

And for 2018, the HSA may be even more attractive. With this much income, you are well over the $10,000 maximum in state taxes, so any reduction in state taxes does not affect your federal itemized deductions. And you may have moved into the phase-out for the child tax credit, depending on where you are in that 33% bracket (likely 32% for 2018); HSA contributions reduce your adjusted gross income. So your marginal tax rate is 32% plus 8.95%, plus another 5% if your gross income is $400K-520K, a rate of 41% or 46%.
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OldSport
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Re: High deductible health insurance with HSA for family of 5

Post by OldSport »

Grover wrote: Sun Nov 19, 2017 6:44 pm My employer offering HSA plan but I am reluctant to go for it. I just need some input from you guys. Here is my situation:

1)Family of five I am 40, wife is 37,kids are 4,4,5 all healthy no more pregnancies.
2)Employer contributes 2250 to HSA
3)The other health insurance option is a comprehension plan which is a really good plan. Both health insurance premium are payed by employer.
4)I am planing to contribute max 6900 a year
5)I am on 39% marginal tax.

Would you go for HSA or go for peace of mind with the a really good comprehensive plan?

Thanks!
Congrats on having an extremely generous employer.
Bacchus01
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Joined: Mon Dec 24, 2012 8:35 pm

Re: High deductible health insurance with HSA for family of 5

Post by Bacchus01 »

As just a frame of reference, we are mid 40s with three boys age 16, 12, 9.

We have had a HDHP since 2010. We pay everything out of pocket and invest the HSA contributions.

Despite a trip to the emergency room, twice, for trampoline park injuries (one a broken leg and another 8 staples in the head), a wife who has hip arthritis, the regular well checkups, colds, ear infections, etc. We pay out of pocket on average less than $2K a year.

I’s do the HDHP
texasdiver
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Re: High deductible health insurance with HSA for family of 5

Post by texasdiver »

My wife and I are in a situation similar to the OP. We have 3 kids ages 11, 14, and 19.

My wife's employer offers a HD plan with HSA and contributes approximately $2400 into it each year. We max it out each year with our own contributions. Her plan has a $4000 family deductible.

The cost difference between the HD plan and the regular HMO plan with low deductibles is about $5,000 a year except that preventative care has no deductible so our annual office visits are free.

By my estimate, we start out each year $8,900 ahead of where we would be with the traditional plan:

$2400 HSA contribution by employer
$1500 tax deduction on our HSA contribution (we are in the 33% bracket)
$5000 savings on annual insurance cost
_________________________________
$8900

We've been doing this for the past 5 years and have never had annual family medical costs that exceeded $1000 per year. Usually less than that except for orthodonics which isn't included in the low deductible plan anyway. We just pay out of pocket and don't touch the HSA for the minor stuff.

At this point we have a balance of over $30,000 in the HSA despite having tapped into it twice to pay for braces for two kids (about $9000). It's sitting in a Vanguard Total World Stock fund growing away. So this has worked out very well for us. At present we have 7.5 years worth of deductibles sitting in our HSA and it continues to grow. What's not to like?

Even if we spent our entire $4000 deductible every year we'd still come out $4900 ahead each year. Seems like a no-brainer.

EDIT: Reading through the thread I see that I forgot to account for the tax deduction on the higher premium cost. So That would reduce my savings by $1650. But the math still works out way in favor of the HSA.
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