Another HSA vs PPO w/ Expected baby in 2019

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Topic Author
H-Dog
Posts: 34
Joined: Tue Sep 08, 2015 10:39 pm

Another HSA vs PPO w/ Expected baby in 2019

Post by H-Dog » Tue Oct 23, 2018 10:53 pm

Hello everyone!

I would love to have Bogleheads review my insurance numbers and poke holes if possible. We are expecting a baby in 2019(you are the first to know!). I know there have been a few posts about health insurance recently which I have reviewed.

Based off of our numbers I am seeing the following options and costs. I am including HSA tax savings @ 24.65% or $1,479 (12% marginal federal savings + 5% state tax + 7.65% payroll tax savings) for maxing our HSA contribution net of the employer contribution. FSA tax savings are calculated with the same rate.

1st scenario
2 adults (assuming 1 adult hits OOP max)
  • HSA Plan #1 costs ~$3,481 ($4,000 OOP [individual]+ $1,960 premiums - $1,000 HSA contribution from employer - $1,479 tax savings)
  • PPO Plan #2 costs ~$5,086 ($2,500 OOP [individual] + $3,202 premiums - $616 [FSA tax savings @ $2,500 FSA])

2nd scenario
2 adults + baby (family hits OOP max)
  • HSA Plan #1 costs ~$8,282 ($8,000 OOP [family]+ $2,761 premiums - $1,000 HSA contribution from employer - $1,479 tax savings)
  • PPO Plan #2 costs ~$8,279 ($5,000 OOP + $4,512 premiums - $1233 [FSA tax savings @ $5,000 FSA])

I think it is safe to say that the expected average OOP expense is as follows (the average of both scenarios):
HSA: $5,881.5
PPO: $6,682.5

We will lose half of my partner's income once the baby is born. This will not change our marginal tax rate.

The above health insurance calculations mean that we should clearly go with the HSA unless I missed something? We initially chose the PPO option based on some back of napkin math :oops: but after writing this post I will switch our insurance back to the HSA..

Best,
H
Last edited by H-Dog on Thu Oct 25, 2018 8:56 pm, edited 2 times in total.

supalong52
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Joined: Tue Feb 09, 2010 1:51 pm

Re: Another HSA vs PPO w/ Expected baby in 2019

Post by supalong52 » Wed Oct 24, 2018 12:40 am

We are in the same boat. I haven't researched this extensively though. Our plan was to be on an HDHP at first, then in the new year transition to a regular PPO for the birth/delivery. That plan has gone to poop because she is going through hyperemesis gravidarum, which has required 3 trips to urgent care in the past week alone. This site gives some numbers on a high deductible plan: http://poorerthanyou.com/2017/01/31/pre ... -delivery/.

Topic Author
H-Dog
Posts: 34
Joined: Tue Sep 08, 2015 10:39 pm

Re: Another HSA vs PPO w/ Expected baby in 2019

Post by H-Dog » Wed Oct 24, 2018 7:43 pm

That is actually really interesting. I do like your blog, seems like there are some fun posts that apply to us, millennials.

Thanks for sharing!

ShowMeTheER
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Re: Another HSA vs PPO w/ Expected baby in 2019

Post by ShowMeTheER » Wed Oct 24, 2018 9:00 pm

If you have FSA available you may want to factor in some tax savings to PPO as well for more appropriate compare

Topic Author
H-Dog
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Joined: Tue Sep 08, 2015 10:39 pm

Re: Another HSA vs PPO w/ Expected baby in 2019

Post by H-Dog » Thu Oct 25, 2018 8:55 pm

ShowMeTheER wrote:
Wed Oct 24, 2018 9:00 pm
If you have FSA available you may want to factor in some tax savings to PPO as well for more appropriate compare
Great point! I do have a FSA available. I am using the same tax rate that I used for HSA to calculate tax savings.

FSA is now cheaper by $3 for the second scenario. For the first scenario HSA is still better.

HSA is still currently cheaper for the expected scenario (probability of 1st and 2nd scenario combined @ 50%).

JGoneRiding
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Joined: Tue Jul 15, 2014 3:26 pm

Re: Another HSA vs PPO w/ Expected baby in 2019

Post by JGoneRiding » Thu Oct 25, 2018 10:52 pm

Either way you have great health insurance . We have no hsa option with another baby coming next year we are looking at max individual oop of $5600 and potential double that for "family"

Luckily the last had no issues and didn't cost to much besides the c section but mom was hitting oop no matter what so that wasn't much extra

Topic Author
H-Dog
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Re: Another HSA vs PPO w/ Expected baby in 2019

Post by H-Dog » Wed Jan 30, 2019 9:47 pm

Sorry to bring this topic back to life. We are now in 2019 and we have an interesting situation. We maxed out our HSA for this year and supposedly have an option to change to PPO that sounds to good to be true.

We got the employer match and the tax benefits of maxing the HSA. Can we really switch to PPO so our oop max would be lower this year?

jbmitt
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Re: Another HSA vs PPO w/ Expected baby in 2019

Post by jbmitt » Wed Jan 30, 2019 9:55 pm

H-Dog wrote:
Wed Jan 30, 2019 9:47 pm
Sorry to bring this topic back to life. We are now in 2019 and we have an interesting situation. We maxed out our HSA for this year and supposedly have an option to change to PPO that sounds to good to be true.

We got the employer match and the tax benefits of maxing the HSA. Can we really switch to PPO so our oop max would be lower this year?
I believe that you have to pro-rate your contributions.. meaning if you've already maxed out for the year, you may have some problems with your strategy. These links are from the society of human resource management (SHRM) and reference some information that the IRS website should have further information on.

https://www.shrm.org/resourcesandtools/ ... -says.aspx
https://www.benstrat.com/downloads/HSA- ... bility.pdf

Topic Author
H-Dog
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Joined: Tue Sep 08, 2015 10:39 pm

Re: Another HSA vs PPO w/ Expected baby in 2019

Post by H-Dog » Thu Jan 31, 2019 10:28 am

Thank you. This is very helpful.

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Artful Dodger
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Re: Another HSA vs PPO w/ Expected baby in 2019

Post by Artful Dodger » Thu Jan 31, 2019 11:23 am

As noted above, you do have to prorate your contributions when leaving a HDHP plan mid year. Also, you only get the 7.65% FICA savings when your employer is payroll deducting your HSA contribution as part of a section 125 (cafeteria) plan. Contributions you make directly reduce federal and state tax, but not FICA.

Topic Author
H-Dog
Posts: 34
Joined: Tue Sep 08, 2015 10:39 pm

Re: Another HSA vs PPO w/ Expected baby in 2019

Post by H-Dog » Thu Jan 31, 2019 11:00 pm

Thank you for the info. I will stick with the HSA as it sounds like it would be a nightmare to undo all of it. I already calculated out that HSA was more beneficial in my situation.

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