[ANOTHER!] HSA/HDHP or PPO plan?

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Texanbybirth
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Joined: Tue Apr 14, 2015 12:07 pm

[ANOTHER!] HSA/HDHP or PPO plan?

Post by Texanbybirth » Thu Apr 12, 2018 4:06 pm

Hi all,

We're coming up on Open Enrollment (mid-year) at work, and I want to try to discuss this decision with some dis-interested 3rd parties. I'll try to make this post sound as intelligent as possible, but I'm quite sure I'll leave out some vital information so please bear with me.

Family: Me, Wife (SAHM), 3yo and 1.5yo (trying to squeeze another in before 2018, but hopefully for sure in 2019 when this choice will cover us :D see below)
Taxes: 12% for 2018, no state income tax

We currently have the HDHP/HSA plan, and I'm leaning toward that again this year.

We are very blessed/fortunate/lucky (pick your word) that we pay no premiums on health insurance, no matter what we choose employer pays the monthly premiums.

HDHP
Premiums: $0
Ind/Fam Ded: $2600/$5200
OOP Max: $6000/$12000
Coverage(?): $0 until deductible, 80/20 (plan/us) to OOP max, then 100/0
Employer HSA Contribution: $4k (yes, $4,000, $333.33 per month), we put in the rest (per paycheck, not lump sum) up to the IRS max.
Limited FSA (vision and dental) available too. (no employer contr, we don't utilize right now but I do wear contacts and of course we go to the dentist)

PPO
Premiums: $0
Ind/Fam Ded: $2600/$5200
OOP Max: $6000/$12000
Coverage: we only pay co-pays for office visits, prescriptions, et al.
FSA available (no employer contr)

Same co-pays (after meeting HDHP deductible) for Office ($30), Specialist ($60), ER ($350), Urgent Care ($75, apparently lots of people use this as their primary care??), prescriptions (3 tiers) etc. for each plan.

All deductibles RESET on Jan 1, not PLAN YEAR. This has proven important in the past when switching between plans at mid-year. So if we met our deductible in January, it would follow us through the year no matter what plan we pick in May. It would still be met all year.

Some useful info:
My wife has already met her deductible this year. Hence, we're trying to get baby #3 in before 12/31. Obviously, this is an ancillary benefit to having another baby: it'd be pretty much free this year.

I take prescriptions that force me to meet my deductible every year, at least under the HDHP, by March. Under the PPO, my prescription was I think $75/month, $900/yr. Everyone in the family is very healthy (thank God), and we rarely go to the doctor. I'm sure that will change as the kids continue to get older and "explore" the world (of gravity) around them.

In terms of monthly costs, it's tough Jan-Mar to stomach meeting my deductible with these outrageous pills, but the $4k employer cash is a really nice bonus. I would feel like an idiot to pass that up, but in a year like this year we're $1200 in the hole so far: my deductible plus my wife's met in March, $5200-$4k. One of the themes I do see is that non-HDHP plans seem to have lower deductibles/OOP Max, but not in our case!

I think I'm mainly having a hard time conceptualizing the decision with all these moving parts. That's the main benefit (to me, right now) of asking you fine people for any input. I'm sure I've forgotten a very important piece of information. Thanks very much for reading/replying!

[EDIT: Removed seemingly irrelevant income info. Tried to clarify PPO plan]
Last edited by Texanbybirth on Fri Apr 13, 2018 8:19 am, edited 1 time in total.

Tal-
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Re: [ANOTHER!] HSA/HDHP or PPO plan?

Post by Tal- » Thu Apr 12, 2018 4:20 pm

Are you sure about your description of the PPO? Especially the deductible amount?

As written, the two options are extremely similar, except the $4k that you get in the HDHP, which makes the decision pretty easy.
Debt is to personal finance as a knife is to cooking.

inbox788
Posts: 5139
Joined: Thu Mar 15, 2012 5:24 pm

Re: [ANOTHER!] HSA/HDHP or PPO plan?

Post by inbox788 » Fri Apr 13, 2018 1:09 am

Texanbybirth wrote:
Thu Apr 12, 2018 4:06 pm
Ind/Fam Ded: $2600/$5200
OOP Max: $6000/$12000
AFAIK, for a family, the individual deductible is meaningless, so you get $4k from employer and spend first up to that amount and you have $1200 in deductibles left before expenses split 80/20 up to $12,000 (or next $6800.)

Also, are you maxing out your HSA? Remember, HSA is pretax monies. Without HSA, you're paying out after tax monies. Plus if you don't spend HSA account, they can get tax-free growth, so best of both/all worlds, so long as you have qualifying healthcare bills to pay.
My wife has already met her deductible this year. Hence, we're trying to get baby #3 in before 12/31. Obviously, this is an ancillary benefit to having another baby: it'd be pretty much free this year.
Which is your current plan, HDHP? What is your due date?

Your PPO plan doesn't seem to help your situation

madbrain
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Re: [ANOTHER!] HSA/HDHP or PPO plan?

Post by madbrain » Fri Apr 13, 2018 2:05 am

Texanbybirth wrote:
Thu Apr 12, 2018 4:06 pm
Employer HSA Contribution: $4k (yes, $4,000, once per month), we put in the rest (per paycheck, not lump sum) up to the IRS max.
If it's really $4k per month, it's a no brainer. I assume you meant per year.
All deductibles RESET on Jan 1, not PLAN YEAR. This has proven important in the past when switching between plans at mid-year.
So how does that work if you change plan mid-year ? Your deductible is not reset under the new plan ? Are the new plans with the same insurance company ?

On paper, the HSA/HDHP option sounds like a no-brainer. You mathematically cannot come out ahead with the PPO given the matching deductible and no $4K HSA employer contribution.

There is probably something else that's different about these plans which we are all missing. Maybe copays, percentage of coinsurance, maybe a pharmacy benefit manager raising the price of drugs in one case but not the other. The health insurance market is not certainly transparent - understatement of the century.

deltaneutral83
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Re: [ANOTHER!] HSA/HDHP or PPO plan?

Post by deltaneutral83 » Fri Apr 13, 2018 8:24 am

If OP is spending well in excess of $4k annually (the amount employer gives) in health care for he and his family, I can't see how the PPO wouldn't work with these numbers. OP can only go up to $6,850 in his HSA in annual contributions, correct, which $4k of it is the employer? He's on the hook up to $12k which is the OOP max with HDHP. That seems a little high? If anyone on his plan is admitted into the hospital , the HDHP is comes out ahead no question. All in all, with HDHP, you're spending $8k max oop (employer pays $4k) annually, that's not bad for a family of 4 and it covers the worst case scenario.

Texanbybirth
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Joined: Tue Apr 14, 2015 12:07 pm

Re: [ANOTHER!] HSA/HDHP or PPO plan?

Post by Texanbybirth » Fri Apr 13, 2018 8:29 am

Tal- wrote:
Thu Apr 12, 2018 4:20 pm
Are you sure about your description of the PPO? Especially the deductible amount?

As written, the two options are extremely similar, except the $4k that you get in the HDHP, which makes the decision pretty easy.
Yes, the deductibles and OOP Max amts are the same under each plan.

The PPO is pretty much all co-pays. For instance, my prescription is over $800/mo on the HDHP (until we meet the deductible), but it's only $90/qtr under the PPO. A routine office visit with labs would be $30 under the PPO, but probably $300 under the HDHP. Of that $300 in the latter, all $300 would count toward the deductible, but under the PPO the co-pays don't count toward the deductible.
inbox788 wrote:
Fri Apr 13, 2018 1:09 am
Texanbybirth wrote:
Thu Apr 12, 2018 4:06 pm
Ind/Fam Ded: $2600/$5200
OOP Max: $6000/$12000
AFAIK, for a family, the individual deductible is meaningless, so you get $4k from employer and spend first up to that amount and you have $1200 in deductibles left before expenses split 80/20 up to $12,000 (or next $6800.)

Also, are you maxing out your HSA? Remember, HSA is pretax monies. Without HSA, you're paying out after tax monies. Plus if you don't spend HSA account, they can get tax-free growth, so best of both/all worlds, so long as you have qualifying healthcare bills to pay.
My wife has already met her deductible this year. Hence, we're trying to get baby #3 in before 12/31. Obviously, this is an ancillary benefit to having another baby: it'd be pretty much free this year.
Which is your current plan, HDHP? What is your due date?

Your PPO plan doesn't seem to help your situation
We're currently on the HDHP. I think for me the reason the indiv deductible is relevant is because I meet mine every year, and generally have more doctors visits than the rest of the family (combined). So in my head, in a good year (not this year), we're pocketing ~$1,400 from my employer, plus tax savings on HSA contributions. We do max out the HSA contributions, but we're not in a position to pay expenses out of pocket each year and let the HSA grow. Anything over what we spend is left in there of course, but it seems like in a year like this year we will be withdrawing the full contributions. There is no baby officially on the way, but let's say we'll know that answer BEFORE we have to make this decision for open-enrollment. :happy



I've heard that HDHP/HSA plans are good for very health people or very sick people, due to (a) not worrying about bills and socking money away into the HSA or (b) meeting your deductible/OOPM quickly and getting 100% coverage all year. It seems like we're in a gray area in between, and that's what makes it difficult for me to do this assessment.

Texanbybirth
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Joined: Tue Apr 14, 2015 12:07 pm

Re: [ANOTHER!] HSA/HDHP or PPO plan?

Post by Texanbybirth » Fri Apr 13, 2018 8:32 am

madbrain wrote:
Fri Apr 13, 2018 2:05 am
Texanbybirth wrote:
Thu Apr 12, 2018 4:06 pm
Employer HSA Contribution: $4k (yes, $4,000, once per month), we put in the rest (per paycheck, not lump sum) up to the IRS max.
If it's really $4k per month, it's a no brainer. I assume you meant per year.
All deductibles RESET on Jan 1, not PLAN YEAR. This has proven important in the past when switching between plans at mid-year.
So how does that work if you change plan mid-year ? Your deductible is not reset under the new plan ? Are the new plans with the same insurance company ?

On paper, the HSA/HDHP option sounds like a no-brainer. You mathematically cannot come out ahead with the PPO given the matching deductible and no $4K HSA employer contribution.

There is probably something else that's different about these plans which we are all missing. Maybe copays, percentage of coinsurance, maybe a pharmacy benefit manager raising the price of drugs in one case but not the other. The health insurance market is not certainly transparent - understatement of the century.
Yes, I tried to clarify that in an edit. It's $333.33/month.

On the deductibles, if we meet the ded in January, then it stays with us all year. The plans are with the same company, *shudder* UHC.

I think I wasn't clear on the PPO. It is pretty much all co-pays. For instance, my prescription is over $800/mo on the HDHP (until we meet the deductible), but it's only $90/qtr under the PPO. A routine office visit with labs would be $30 under the PPO, but probably $300 under the HDHP. Of that $300 in the latter, all $300 would count toward the deductible, but under the PPO the co-pays don't count toward the deductible.

That's probably clear as mud.

inbox788
Posts: 5139
Joined: Thu Mar 15, 2012 5:24 pm

Re: [ANOTHER!] HSA/HDHP or PPO plan?

Post by inbox788 » Fri Apr 13, 2018 10:44 am

Texanbybirth wrote:
Fri Apr 13, 2018 8:29 am
We're currently on the HDHP. I think for me the reason the indiv deductible is relevant is because I meet mine every year, and generally have more doctors visits than the rest of the family (combined). So in my head, in a good year (not this year), we're pocketing ~$1,400 from my employer, plus tax savings on HSA contributions. We do max out the HSA contributions, but we're not in a position to pay expenses out of pocket each year and let the HSA grow. Anything over what we spend is left in there of course, but it seems like in a year like this year we will be withdrawing the full contributions. There is no baby officially on the way, but let's say we'll know that answer BEFORE we have to make this decision for open-enrollment. :happy



I've heard that HDHP/HSA plans are good for very health people or very sick people, due to (a) not worrying about bills and socking money away into the HSA or (b) meeting your deductible/OOPM quickly and getting 100% coverage all year. It seems like we're in a gray area in between, and that's what makes it difficult for me to do this assessment.
Each plan is different, but make sure you're understanding your plan deductibles and max OOP correctly.

How the Family Deductible Works in a High Deductible Health Plan
https://www.verywell.com/how-the-family ... hp-1738662

Are you a project manager?
https://i.pinimg.com/originals/e6/a9/1c ... 4907bb.png

Anyway, with a $4k headstart and similar limits, I'm having trouble seeing when the PPO plan would ever be better. Pretty black and white to me, unless I'm missing something. And I probably am because I just noticed these oddities about your comparison.
Texanbybirth wrote:
Thu Apr 12, 2018 4:06 pm
We're coming up on Open Enrollment (mid-year) ...
All deductibles RESET on Jan 1, not PLAN YEAR. This has proven important in the past when switching between plans at mid-year. So if we met our deductible in January, it would follow us through the year no matter what plan we pick in May. It would still be met all year.
I've never heard of this before. Do you have another enrollment period in the end of the year? Having a mid-year opportunity to make changes allows you to take into account current year information to optimize your plans, and with advanced planning, you might even be able to optimize the year end decision as well, since you have an opportunity to change tracks. Interesting and complicated.
Texanbybirth wrote:
Fri Apr 13, 2018 8:29 am
The PPO is pretty much all co-pays. For instance, my prescription is over $800/mo on the HDHP (until we meet the deductible), but it's only $90/qtr under the PPO. A routine office visit with labs would be $30 under the PPO, but probably $300 under the HDHP. Of that $300 in the latter, all $300 would count toward the deductible, but under the PPO the co-pays don't count toward the deductible.
Unless it's a very expensive drug, the $800 seems to be full price and maybe more (sometimes pharmacies charge more via insurance than the cash price and they're not all telling you this). https://www.nytimes.com/2017/12/09/heal ... rance.html
Insurance companies usually negotiate a good price for medical services and drugs because they're paying the bill, but with high deductibles and more OOP, they're passing the costs to the patients. I don't know if you're getting different prices from the two different plans or if the PPO is just providing much lower costs (and higher coverage). If you're getting the same costs when you max out the plans, then it sounds more like the latter. So one way to think about this is that you've got a good employer that's giving you $4k for HDHP and HSA benefit vs. paying 80-100% your OOP first dollars, and if you can predict and calculate those, it might be another way to compare.

Texanbybirth
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Re: [ANOTHER!] HSA/HDHP or PPO plan?

Post by Texanbybirth » Fri Apr 13, 2018 11:10 am

The deductibles are calendar year (Jan - Dec), but the plan year is Jun - May. We only have one open-enrollment period, in May, and then the choice sticks (barring a qualifying event, like having a kid or getting married, all of which we've experienced in the last few years) till the next May. It's weird, and took about two cycles for us to completely understand.

One of the big minuses about it is that even though the two plans are with the same company (*shudder* UHC), if we DO switch plans (HDHP<->PPO) then WE have to complete the deductible transfer paperwork - EVEN THOUGH IT'S AT THE SAME COMPANY! It is not a fast or easy process.

So for instance, say we don't have a baby till 2019. My wife will definitely hit her deductible when the baby is born and I will hit mine with the prescriptions, which means we'll be out $5,200, but we'll also get $4,000 (assuming I stay with employer all of 2019) for a net of $1,200. Tax savings on HSA contributions would be ($2,850 * 12%) $342, so we'd really be out of pocket $856. And then the excess HSA contributions could be invested for tax-free growth. Am I thinking about that correctly? (I know we don't know what amounts will be in 2019, I'm just using 2018's numbers for rough math. )

inbox788
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Re: [ANOTHER!] HSA/HDHP or PPO plan?

Post by inbox788 » Fri Apr 13, 2018 1:25 pm

Texanbybirth wrote:
Fri Apr 13, 2018 11:10 am
The deductibles are calendar year (Jan - Dec), but the plan year is Jun - May. We only have one open-enrollment period, in May, and then the choice sticks (barring a qualifying event, like having a kid or getting married, all of which we've experienced in the last few years) till the next May. It's weird, and took about two cycles for us to completely understand.

One of the big minuses about it is that even though the two plans are with the same company (*shudder* UHC), if we DO switch plans (HDHP<->PPO) then WE have to complete the deductible transfer paperwork - EVEN THOUGH IT'S AT THE SAME COMPANY! It is not a fast or easy process.

So for instance, say we don't have a baby till 2019. My wife will definitely hit her deductible when the baby is born and I will hit mine with the prescriptions, which means we'll be out $5,200, but we'll also get $4,000 (assuming I stay with employer all of 2019) for a net of $1,200. Tax savings on HSA contributions would be ($2,850 * 12%) $342, so we'd really be out of pocket $856. And then the excess HSA contributions could be invested for tax-free growth. Am I thinking about that correctly? (I know we don't know what amounts will be in 2019, I'm just using 2018's numbers for rough math. )
This does seem to be a strange arrangement. In any case, you probably shouldn't be trying to optimize every year and oscillating between plans alternating every year no matter how conventional or unconventional the plans are. Stick with the plan that you think will give you the best outcome in 3 or 5 year periods. The worst thing that can happen to you is you get whipsawed as you switch plans anticipating one outcome but something totally unexpected comes up or doesn't. And in a year where you do switch, presumably you're switching for benefit, so doing the paperwork pays.

Numbers seem correct. You're not maxing out your $12k family OOP max yet. If you went with PPO, what would the costs look like? I think you're still on the hook for 20% of costs, and unless you have a major hospitalization, you're unlike to reach it. If the PPO costs are around $1k, you're in a similar position, but since your OOP max is further away, a hospitalization could cost you $12k for a year vs. around $7k for the HDHP. So even if you save $500 a year with PPO, if you have 1 major hospitalization every 10 years, it's about break even.

madbrain
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Re: [ANOTHER!] HSA/HDHP or PPO plan?

Post by madbrain » Fri Apr 13, 2018 5:26 pm

Texanbybirth wrote:
Fri Apr 13, 2018 8:32 am
Yes, I tried to clarify that in an edit. It's $333.33/month.

On the deductibles, if we meet the ded in January, then it stays with us all year. The plans are with the same company, *shudder* UHC.
I guess I still don't understand. Why specifically January ? If you meet it in any month of the year, is the deductible ever reset before next January ?
I think I wasn't clear on the PPO. It is pretty much all co-pays. For instance, my prescription is over $800/mo on the HDHP (until we meet the deductible), but it's only $90/qtr under the PPO. A routine office visit with labs would be $30 under the PPO, but probably $300 under the HDHP. Of that $300 in the latter, all $300 would count toward the deductible, but under the PPO the co-pays don't count toward the deductible.
If your co-pay doesn't count toward your PPO deductible, what actually counts towards PPO deductible, then ?
I am assuming this copay would still count towards max OOP.

I think you have your answer here. It sounds like OOP costs are much higher on the HDHP vs PPO.
Depending on your own usage of healthcare, it may make sense to be on the PPO. You would have to check with your usage in previous years, in terms of number of doctor visits, prescriptions, lab tests, etc. and see what they would actually cost you under each plan. It's hard work.
There are going to be some cases in which the HDHP is better, and others in which the PPO is better.

If you have expensive meds and lab tests, as it seems you do, you are likely to hit not just the deductible but maximum OOP on the HDHP.
It is much less likely that you will hit maximum OOP on the PPO. You may not even hit the deductible. Only you can do that math.
The difference may be more or less than the $4000 the employer is contributing. You also have to account for the ability to contribute to FSA if you go PPO, which will reduce your taxes, and thus reduce your net OOP costs.

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