HDHP with HSA vs PPO breakeven point

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
BogleAlltheWay
Posts: 409
Joined: Mon May 15, 2017 5:25 pm

HDHP with HSA vs PPO breakeven point

Post by BogleAlltheWay »

Hi all ,

I am trying to figure out what is about the break point financially between 2 health care plans for myself only.
Both have 2k deductible
HDHP: 1,400 a year cheaper(include tax break) 50% coinsurance + I can max max out HSA ($3,450) office vists I have to pay all
PPO: 30% coinsurance and office visits are $30 copay. Copays for emergency room and urgent care.

Without the HSA I would be even at $1,400, but the HSA has the benefits of tax deduction and I can roll it over.
TheOscarGuy
Posts: 1547
Joined: Sat Oct 06, 2012 1:10 pm
Location: Where I wanna be.

Re: HDHP with HSA vs PPO breakeven point

Post by TheOscarGuy »

Depends on how your health is, how many visits do you typically have in a year, do plans cover both specialists and general practitioners at same rate? It’s too little information to tell break even point.
Topic Author
BogleAlltheWay
Posts: 409
Joined: Mon May 15, 2017 5:25 pm

Re: HDHP with HSA vs PPO breakeven point

Post by BogleAlltheWay »

TheOscarGuy wrote: Tue Dec 12, 2017 8:41 am Depends on how your health is, how many visits do you typically have in a year, do plans cover both specialists and general practitioners at same rate? It’s too little information to tell break even point.

Visit: once a year for a checkup I currently don't have any prescriptions.
specialists and general practitioners for the PPO: 30/50 copay and the HDHP is full price.
Jags4186
Posts: 8198
Joined: Wed Jun 18, 2014 7:12 pm

Re: HDHP with HSA vs PPO breakeven point

Post by Jags4186 »

If you're someone who goes to the doctor everytime you have the sniffles or you have a chronic condition that requires maintenance it might make sense to go with a PPO but I think most healthy people would be better off with a HDHP.

In my case I went with a HDHP because the only situation I found it to be worse than the PPO plan was if both my spouse and I came close to maxing out or OOP max, a situation where I'm willing to self insure against.

I recommend you look at the bare minimum and worst case scenario and then judge how likely each is to happen.
Topic Author
BogleAlltheWay
Posts: 409
Joined: Mon May 15, 2017 5:25 pm

Re: HDHP with HSA vs PPO breakeven point

Post by BogleAlltheWay »

Jags4186 wrote: Tue Dec 12, 2017 8:47 am If you're someone who goes to the doctor everytime you have the sniffles or you have a chronic condition that requires maintenance it might make sense to go with a PPO but I think most healthy people would be better off with a HDHP.

In my case I went with a HDHP because the only situation I found it to be worse than the PPO plan was if both my spouse and I came close to maxing out or OOP max, a situation where I'm willing to self insure against.

I recommend you look at the bare minimum and worst case scenario and then judge how likely each is to happen.
That is along the lines that I have been thinking. The office visits and prescriptions are the killers.
SlowMovingInvestor
Posts: 3482
Joined: Sun Sep 11, 2016 11:27 am

Re: HDHP with HSA vs PPO breakeven point

Post by SlowMovingInvestor »

Annual checkup will still be free in HDHP. And you can try and get specialist visits or some prescrips filled in the next 2 weeks to minimize costs for next year.
aristotelian
Posts: 12262
Joined: Wed Jan 11, 2017 7:05 pm

Re: HDHP with HSA vs PPO breakeven point

Post by aristotelian »

Assuming you are in the 25% tax bracket and you already max your 401k, the HSA tax break gives you an ~$900 including state taxes (if not in CA) and FICA.

The HDHP has a $2300 head start.

How do the Out of Pocket Max compare for the two plans?
Topic Author
BogleAlltheWay
Posts: 409
Joined: Mon May 15, 2017 5:25 pm

Re: HDHP with HSA vs PPO breakeven point

Post by BogleAlltheWay »

aristotelian wrote: Tue Dec 12, 2017 10:07 am Assuming you are in the 25% tax bracket and you already max your 401k, the HSA tax break gives you an ~$900 including state taxes (if not in CA) and FICA.

The HDHP has a $2300 head start.

How do the Out of Pocket Max compare for the two plans?
The Out of Pocket Max is $100 more for the HDHP.
About how much is the added value in that the HSA can grow tax free?
aristotelian
Posts: 12262
Joined: Wed Jan 11, 2017 7:05 pm

Re: HDHP with HSA vs PPO breakeven point

Post by aristotelian »

BogleAlltheWay wrote: Tue Dec 12, 2017 10:30 am The Out of Pocket Max is $100 more for the HDHP.
About how much is the added value in that the HSA can grow tax free?
I would go with the HDHP. Lots of upside with the only downside being $100 at the most. Possible benefit of tax free growth depends on time in the market and what you invest in. Suffice it to say, it could be a lot!
User avatar
gasdoc
Posts: 2039
Joined: Mon Nov 03, 2014 7:26 am

Re: HDHP with HSA vs PPO breakeven point

Post by gasdoc »

Many of us here on Bogleheads use our HSA's as an investment vehicle. Money goes in tax free, grows tax free, and is taken out tax free many years later when it is used for medical expenses. No other investment vehicle has these advantages. To make this work, you must have the financial resources to pay your current medical expenses out-of-pocket. Many of us also save our current receipts to be reimbursed later when we begin spending down our HSA's. There have been previous threads on this, including threads where people state the current value of their HSA's. Mine is currently at around $50K.

gasdoc
runner540
Posts: 1763
Joined: Sun Feb 26, 2017 4:43 pm

Re: HDHP with HSA vs PPO breakeven point

Post by runner540 »

BogleAlltheWay wrote: Tue Dec 12, 2017 10:30 am
aristotelian wrote: Tue Dec 12, 2017 10:07 am Assuming you are in the 25% tax bracket and you already max your 401k, the HSA tax break gives you an ~$900 including state taxes (if not in CA) and FICA.

The HDHP has a $2300 head start.

How do the Out of Pocket Max compare for the two plans?
The Out of Pocket Max is $100 more for the HDHP.
About how much is the added value in that the HSA can grow tax free?
Wow, only $100 difference? That is extremely unusual and kind of defeats the insurer's purpose of a HDHP. Please double check that. On my plan for an individual, the OOP max is $12k vs $18k.
Topic Author
BogleAlltheWay
Posts: 409
Joined: Mon May 15, 2017 5:25 pm

Re: HDHP with HSA vs PPO breakeven point

Post by BogleAlltheWay »

aristotelian wrote: Tue Dec 12, 2017 10:35 am
BogleAlltheWay wrote: Tue Dec 12, 2017 10:30 am The Out of Pocket Max is $100 more for the HDHP.
About how much is the added value in that the HSA can grow tax free?
I would go with the HDHP. Lots of upside with the only downside being $100 at the most. Possible benefit of tax free growth depends on time in the market and what you invest in. Suffice it to say, it could be a lot!
The downside is well more than $100. That is only if I max both out. Using the 2400 number, I lose if I spend more than 2400 and not enough to get near the max of the PPO.
Topic Author
BogleAlltheWay
Posts: 409
Joined: Mon May 15, 2017 5:25 pm

Re: HDHP with HSA vs PPO breakeven point

Post by BogleAlltheWay »

runner540 wrote: Tue Dec 12, 2017 10:59 am
BogleAlltheWay wrote: Tue Dec 12, 2017 10:30 am
aristotelian wrote: Tue Dec 12, 2017 10:07 am Assuming you are in the 25% tax bracket and you already max your 401k, the HSA tax break gives you an ~$900 including state taxes (if not in CA) and FICA.

The HDHP has a $2300 head start.

How do the Out of Pocket Max compare for the two plans?
The Out of Pocket Max is $100 more for the HDHP.
About how much is the added value in that the HSA can grow tax free?
Wow, only $100 difference? That is extremely unusual and kind of defeats the insurer's purpose of a HDHP. Please double check that. On my plan for an individual, the OOP max is $12k vs $18k.

It is 100 difference if I max out both plans but it is alot harder to max out the PPO. The HDHP is full price for prescriptions and office visits.
for example, if i get 7,000 worth of medical care the HDP would cost me the max, but if 2000 of that was office visits, the PPO would cost 2000 for deductible and 1500 with coinsuraance so it would be about 3500. In doing the math, It seems lose if it my total medical care costs between 6000 and 11000 depending on where the costs come from.
JBTX
Posts: 11205
Joined: Wed Jul 26, 2017 12:46 pm

Re: HDHP with HSA vs PPO breakeven point

Post by JBTX »

BogleAlltheWay wrote: Tue Dec 12, 2017 8:16 am Hi all ,

I am trying to figure out what is about the break point financially between 2 health care plans for myself only.
Both have 2k deductible
HDHP: 1,400 a year cheaper(include tax break) 50% coinsurance + I can max max out HSA ($3,450) office vists I have to pay all
PPO: 30% coinsurance and office visits are $30 copay. Copays for emergency room and urgent care.

Without the HSA I would be even at $1,400, but the HSA has the benefits of tax deduction and I can roll it over.
I see a lot of people discuss the tax deduction benefit of HSA. But keep in mind the higher premiums of the PPO are excluded from income also. So that part is a wash.

The only way to estimate which is Better is to have an idea what you might spend and compare the respective deductibles and out of pockets for both. If you are have lots of medical bills there are other wrinkles that can come up and blow up your assumptions (this has happened to me several times)
JBTX
Posts: 11205
Joined: Wed Jul 26, 2017 12:46 pm

Re: HDHP with HSA vs PPO breakeven point

Post by JBTX »

aristotelian wrote: Tue Dec 12, 2017 10:07 am Assuming you are in the 25% tax bracket and you already max your 401k, the HSA tax break gives you an ~$900 including state taxes (if not in CA) and FICA.

The HDHP has a $2300 head start.

How do the Out of Pocket Max compare for the two plans?
So does the higher premiums of the PPO.
Topic Author
BogleAlltheWay
Posts: 409
Joined: Mon May 15, 2017 5:25 pm

Re: HDHP with HSA vs PPO breakeven point

Post by BogleAlltheWay »

JBTX wrote: Tue Dec 12, 2017 11:39 am
BogleAlltheWay wrote: Tue Dec 12, 2017 8:16 am Hi all ,

I am trying to figure out what is about the break point financially between 2 health care plans for myself only.
Both have 2k deductible
HDHP: 1,400 a year cheaper(include tax break) 50% coinsurance + I can max max out HSA ($3,450) office vists I have to pay all
PPO: 30% coinsurance and office visits are $30 copay. Copays for emergency room and urgent care.

Without the HSA I would be even at $1,400, but the HSA has the benefits of tax deduction and I can roll it over.
I see a lot of people discuss the tax deduction benefit of HSA. But keep in mind the higher premiums of the PPO are excluded from income also. So that part is a wash.

The only way to estimate which is Better is to have an idea what you might spend and compare the respective deductibles and out of pockets for both. If you are have lots of medical bills there are other wrinkles that can come up and blow up your assumptions (this has happened to me several times)
They have essentially the same deductibles and max out of pocket.
The 1400 extra premium for the PPO does include the tax break. With the PPO i get a tax break on 2000 and the HSA I would get a tax break on 3000.
JBTX
Posts: 11205
Joined: Wed Jul 26, 2017 12:46 pm

Re: HDHP with HSA vs PPO breakeven point

Post by JBTX »

BogleAlltheWay wrote: Tue Dec 12, 2017 11:51 am
JBTX wrote: Tue Dec 12, 2017 11:39 am
BogleAlltheWay wrote: Tue Dec 12, 2017 8:16 am Hi all ,

I am trying to figure out what is about the break point financially between 2 health care plans for myself only.
Both have 2k deductible
HDHP: 1,400 a year cheaper(include tax break) 50% coinsurance + I can max max out HSA ($3,450) office vists I have to pay all
PPO: 30% coinsurance and office visits are $30 copay. Copays for emergency room and urgent care.

Without the HSA I would be even at $1,400, but the HSA has the benefits of tax deduction and I can roll it over.
I see a lot of people discuss the tax deduction benefit of HSA. But keep in mind the higher premiums of the PPO are excluded from income also. So that part is a wash.

The only way to estimate which is Better is to have an idea what you might spend and compare the respective deductibles and out of pockets for both. If you are have lots of medical bills there are other wrinkles that can come up and blow up your assumptions (this has happened to me several times)
They have essentially the same deductibles and max out of pocket.
The 1400 extra premium for the PPO does include the tax break. With the PPO i get a tax break on 2000 and the HSA I would get a tax break on 3000.
From what you have given seems the HDHP is a better deal. It is unusual to see PPO and HDHP have same deductible and out of pocket. Those are usually higher on the HDHP.

Now with the PPO many office visits would cost the copay, while on the HDHP you would pay whatever the cost of the visit/service until you hit the deductible. But it is hard to fathom that total difference of all those visits being $1400 or more, unless maybe you have some sort of unexpected hospital visit - but you really have to know all the terms to figure out the liability on each plan. HDHP's are pretty straightforward (by law, I think), but PPO's can vary.

I have seen it when companies seem to price point the HDHP's much more competitively for the employees, presumably to attract them into a higher deductible plan than a lower plan.
Topic Author
BogleAlltheWay
Posts: 409
Joined: Mon May 15, 2017 5:25 pm

Re: HDHP with HSA vs PPO breakeven point

Post by BogleAlltheWay »

JBTX wrote: Tue Dec 12, 2017 8:56 pm
BogleAlltheWay wrote: Tue Dec 12, 2017 11:51 am
JBTX wrote: Tue Dec 12, 2017 11:39 am
BogleAlltheWay wrote: Tue Dec 12, 2017 8:16 am Hi all ,

I am trying to figure out what is about the break point financially between 2 health care plans for myself only.
Both have 2k deductible
HDHP: 1,400 a year cheaper(include tax break) 50% coinsurance + I can max max out HSA ($3,450) office vists I have to pay all
PPO: 30% coinsurance and office visits are $30 copay. Copays for emergency room and urgent care.

Without the HSA I would be even at $1,400, but the HSA has the benefits of tax deduction and I can roll it over.
I see a lot of people discuss the tax deduction benefit of HSA. But keep in mind the higher premiums of the PPO are excluded from income also. So that part is a wash.

The only way to estimate which is Better is to have an idea what you might spend and compare the respective deductibles and out of pockets for both. If you are have lots of medical bills there are other wrinkles that can come up and blow up your assumptions (this has happened to me several times)
They have essentially the same deductibles and max out of pocket.
The 1400 extra premium for the PPO does include the tax break. With the PPO i get a tax break on 2000 and the HSA I would get a tax break on 3000.
From what you have given seems the HDHP is a better deal. It is unusual to see PPO and HDHP have same deductible and out of pocket. Those are usually higher on the HDHP.

Now with the PPO many office visits would cost the copay, while on the HDHP you would pay whatever the cost of the visit/service until you hit the deductible. But it is hard to fathom that total difference of all those visits being $1400 or more, unless maybe you have some sort of unexpected hospital visit - but you really have to know all the terms to figure out the liability on each plan. HDHP's are pretty straightforward (by law, I think), but PPO's can vary.

I have seen it when companies seem to price point the HDHP's much more competitively for the employees, presumably to attract them into a higher deductible plan than a lower plan.
The one thing your missing is the HDHP plan does not cover prescriptions. That can be costly for people who need to have them all the time. I double checked and you are right the HDHP deductible is 2500.

I think you are on to something that companies push the lower plan because you want to make health care more affordable to everyone.
User avatar
FiveK
Posts: 15690
Joined: Sun Mar 16, 2014 2:43 pm

Re: HDHP with HSA vs PPO breakeven point

Post by FiveK »

BogleAlltheWay wrote: Tue Dec 12, 2017 8:16 am I am trying to figure out what is about the break point financially between 2 health care plans for myself only.
Might be worth putting your numbers into a couple of comparison tools, e.g., Health Savings Account (HSA) vs. Traditional Health Plan and the 'HDHP Analysis' tab of the personal finance toolbox spreadsheet.
Topic Author
BogleAlltheWay
Posts: 409
Joined: Mon May 15, 2017 5:25 pm

Re: HDHP with HSA vs PPO breakeven point

Post by BogleAlltheWay »

FiveK wrote: Tue Dec 12, 2017 9:29 pm
BogleAlltheWay wrote: Tue Dec 12, 2017 8:16 am I am trying to figure out what is about the break point financially between 2 health care plans for myself only.
Might be worth putting your numbers into a couple of comparison tools, e.g., Health Savings Account (HSA) vs. Traditional Health Plan and the 'HDHP Analysis' tab of the personal finance toolbox spreadsheet.
thanks this is great. Only thing that doesn't take into account is the tax break on the premiums. I adjusted for that and got a good estimate.
darkhorse
Posts: 146
Joined: Mon Dec 17, 2012 3:13 pm

Re: HDHP with HSA vs PPO breakeven point

Post by darkhorse »

Someone told me rule of thumb

At extremes (rare use vs maxing rxpense), hdhp is favorable.

In the middle, calculation may be helpful
Topic Author
BogleAlltheWay
Posts: 409
Joined: Mon May 15, 2017 5:25 pm

Re: HDHP with HSA vs PPO breakeven point

Post by BogleAlltheWay »

darkhorse wrote: Tue Dec 12, 2017 10:06 pm Someone told me rule of thumb

At extremes (rare use vs maxing rxpense), hdhp is favorable.

In the middle, calculation may be helpful

That makes sense. I don't have any cronic conditions so its a risk/reward. I have concluded, hopefully right,the range is relatively narrow. The worst case, I think, would be if all of that money comes from office visits ,non generic prescriptions, and lab tests that cost around 6000 on the HDHP. the PPO wouldsave me 3500(with premiums included). I would take a 3500 loss one year and then change to a different plan.
Post Reply