Advice on picking best health plan, PPO vs HSA

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drlaomd
Posts: 3
Joined: Sat Feb 09, 2019 9:36 pm

Advice on picking best health plan, PPO vs HSA

Post by drlaomd » Mon Sep 09, 2019 11:57 pm

Hi everyone. I've researched this question for a while now on many forums including this one. I think I am understanding my options the more I read, but feel like I am still missing something. Each post is slightly different from mine. A lot of this requires one to 'crunch' the numbers and work it out, but I am not sure if I am doing this properly. If anyone would be kind enough to guide me through this with explanation it'll be greatly appreciated! Or whatever insight you can offer, thank you.


My employer offers PPO option and another plan with an HSA/PPO. The basic question is should I switch out of a PPO health plan later this fall during open enrollment into one with an HSA/PPO. Wife and I are in early 30's, we may have a child in the next 1-2 years.

Details

We currently make about $600,000/year as we are both physicians. All the numbers below will be for a family plan.
The PPO plan has 3 tiers, one is 'select plan' that is cheapest for us to seek care, essentially no deductible and $20 office visits. The 2nd tier is in-network plan, a preferred plan that is a little bit more expensive and the 3rd tier is out of network which is most expensive. We plan to use the 'select' physicians for most care.

The plan with the HSA is just in network vs out of network.

PPO plan (my current plan, family plan)
-Yearly premium: $6480
-Deductible: $0 if using 'select' providers. We hope to maximize using these providers.
-Out of pocket max: $8,700
-office visit: $20
-prenatal care: $20 (initial visit only)
-labs: $20 per visit
-inpatient visit: $250/admission
-Has FSA option (which we intend to max out)


HSA plan/PPO
-Yearly premium: $2437
-Deductible: $2,700 (in network providers)
-Once deductible is met, I pay 20% coinsurance until I hit out of pocket max which is,
-Out of pocket max: $6,400
-office visit: 20% coinsurance
-prenatal care: 20% coinsurance
-labs: 20% coinsurance
-inpatient visit: 20% coinsurance
-Has HSA option: Employer will contribute $1,000, while we would max out yearly to bring total up to $7,000

Baby planning may be tough to time perfectly, but this scenario assumes having a pregnancy in next 1-2 years.

I really enjoy the HSA option, I like how the money carries over year after year, I like how it is a stealth IRA. My employer also puts in $1,000, so I like to think of having a deductible that is $1,000 lower --> $1,700 instead of $2700. We would max out the HSA every year and use it to pay for services.

I am just not sure if switching to HSA/PPO with lower premiums and higher deductible would save us a significant amount of money than staying in our current PPO plan with no deductible and higher premiums. It's so hard to guess the numbers because there are so many assumptions.

Scenario:
Assuming cost of pregnancy is $10,000 (is this even a safe assumption?)

PPO plan
-Premium is $6480/year
-No deductible
-Assuming 2 doctor office visits per month during 9 month period, that is 18 visits and each time its $20, so that is $360
-Inpatient stay for delivery: $250/admission
-Total is about $610 (this is really rough estimate, i'm sure i'm missing other variables and cost) for the pregnancy. With the yearly premium added it is about $7,090 ($6480+$610)

HSA/PPO plan
-Premium is $2437/year
-Deductible is $2,700, but with the employer HSA $1,000 contribution it is like a deductible of $1,700.
-After meeting deductible, it is 20% co insurance until yearly max. So cost of pregnancy is ($10,000 - $2700) x 20% = $1460.
-Total is: Premium ($2437) + deductible ($2,700) + coinsurance ($1460) - employer HSA contribution ($1000) = $5597

So the HSA plan seems to be cheaper in the end, are these assumptions correct? What else am I missing?

Of course this is routine pregnancy, if there are complications I don't even know where to begin that calculation!

martint
Posts: 76
Joined: Fri Feb 19, 2016 11:31 am

Re: Advice on picking best health plan, PPO vs HSA

Post by martint » Tue Sep 10, 2019 1:32 am

drlaomd wrote:
Mon Sep 09, 2019 11:57 pm
Hi everyone. I've researched this question for a while now on many forums including this one. I think I am understanding my options the more I read, but feel like I am still missing something. Each post is slightly different from mine. A lot of this requires one to 'crunch' the numbers and work it out, but I am not sure if I am doing this properly. If anyone would be kind enough to guide me through this with explanation it'll be greatly appreciated! Or whatever insight you can offer, thank you.


My employer offers PPO option and another plan with an HSA/PPO. The basic question is should I switch out of a PPO health plan later this fall during open enrollment into one with an HSA/PPO. Wife and I are in early 30's, we may have a child in the next 1-2 years.

Details

We currently make about $600,000/year as we are both physicians. All the numbers below will be for a family plan.
The PPO plan has 3 tiers, one is 'select plan' that is cheapest for us to seek care, essentially no deductible and $20 office visits. The 2nd tier is in-network plan, a preferred plan that is a little bit more expensive and the 3rd tier is out of network which is most expensive. We plan to use the 'select' physicians for most care.

The plan with the HSA is just in network vs out of network.

PPO plan (my current plan, family plan)
-Yearly premium: $6480
-Deductible: $0 if using 'select' providers. We hope to maximize using these providers.
-Out of pocket max: $8,700
-office visit: $20
-prenatal care: $20 (initial visit only)
-labs: $20 per visit
-inpatient visit: $250/admission
-Has FSA option (which we intend to max out)


HSA plan/PPO
-Yearly premium: $2437
-Deductible: $2,700 (in network providers)
-Once deductible is met, I pay 20% coinsurance until I hit out of pocket max which is,
-Out of pocket max: $6,400
-office visit: 20% coinsurance
-prenatal care: 20% coinsurance
-labs: 20% coinsurance
-inpatient visit: 20% coinsurance
-Has HSA option: Employer will contribute $1,000, while we would max out yearly to bring total up to $7,000

Baby planning may be tough to time perfectly, but this scenario assumes having a pregnancy in next 1-2 years.

I really enjoy the HSA option, I like how the money carries over year after year, I like how it is a stealth IRA. My employer also puts in $1,000, so I like to think of having a deductible that is $1,000 lower --> $1,700 instead of $2700. We would max out the HSA every year and use it to pay for services.

I am just not sure if switching to HSA/PPO with lower premiums and higher deductible would save us a significant amount of money than staying in our current PPO plan with no deductible and higher premiums. It's so hard to guess the numbers because there are so many assumptions.

Scenario:
Assuming cost of pregnancy is $10,000 (is this even a safe assumption?)

PPO plan
-Premium is $6480/year
-No deductible
-Assuming 2 doctor office visits per month during 9 month period, that is 18 visits and each time its $20, so that is $360
-Inpatient stay for delivery: $250/admission
-Total is about $610 (this is really rough estimate, i'm sure i'm missing other variables and cost) for the pregnancy. With the yearly premium added it is about $7,090 ($6480+$610)

HSA/PPO plan
-Premium is $2437/year
-Deductible is $2,700, but with the employer HSA $1,000 contribution it is like a deductible of $1,700.
-After meeting deductible, it is 20% co insurance until yearly max. So cost of pregnancy is ($10,000 - $2700) x 20% = $1460.
-Total is: Premium ($2437) + deductible ($2,700) + coinsurance ($1460) - employer HSA contribution ($1000) = $5597

So the HSA plan seems to be cheaper in the end, are these assumptions correct? What else am I missing?

Of course this is routine pregnancy, if there are complications I don't even know where to begin that calculation!
You’re forgetting the tax savings for the HSA. That’s substantial given your income range. What state?

Just one data point, but when my kid was born the actual delivery fees (including hospital stay of a few days) was covered entirely by the HDHP. No delivery complications though. After the kid was born, the HDHP deductible went up (to family plan limit).

The way I would look at it: premiums are guaranteed to be spent. Deductibles get spent based on your health situation which is harder to predict. Considering the upside on the HDHP w/ HSA, I’d pick that one.

Tdubs
Posts: 761
Joined: Tue Apr 24, 2018 7:50 pm

Re: Advice on picking best health plan, PPO vs HSA

Post by Tdubs » Tue Sep 10, 2019 5:08 am

Can't say I like the 20 percent coinsurance. That means every procedure you get will cost more than the standard plan. Kind of a disincentive to go for care. That isn't the case for my plan where the HDHP has a lower coinsurance once the deductible is met.

Does the standard plan have any other advantages? Free ER visits or the like? Also you have gamed this out as if the only event will be a pregnancy. How does the plan look if you fall off a ladder?

But given the large savings in premiums and the tax savings for the HDHP/HSA, it still looks like the was to go.

Deblog
Posts: 38
Joined: Mon Nov 05, 2018 6:16 am

Re: Advice on picking best health plan, PPO vs HSA

Post by Deblog » Tue Sep 10, 2019 5:40 am

How is prescription coverage handled? My Plan gives me a prescription card with a more basic formulary covered for maintenance meds. Other meds like one time antibiotics I have to hit deductible and then pay 20%. But your plan cost difference between the 2 plans makes it seem like high deductible is a no brainer.

motorcyclesarecool
Posts: 751
Joined: Sun Dec 14, 2014 7:39 am

Re: Advice on picking best health plan, PPO vs HSA

Post by motorcyclesarecool » Tue Sep 10, 2019 6:09 am

Your out of pocket maximum represents $18,500 of total medical bills (not your share) beyond the deductible. A trip to NICU could make quick work of that.

The HSA theoretically should have a $8837 - $1000 = $7837 total premium, deductible, and coinsurance outlay for a worst case scenario year, and 100% of it would be pretax dollars. That’s substantially cheaper than a worst case scenario with the PPO plan. And it can be hard to get an FSA dialed in optimally. Every year feels like a crap shoot when I decide how much to put in my Limited Expense FSA. The use-or-lose nature of FSAs puts them beyond my appetite for risk.
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.

TheHouse7
Posts: 512
Joined: Fri Jan 13, 2017 2:40 am
Location: Washington State

Re: Advice on picking best health plan, PPO vs HSA

Post by TheHouse7 » Tue Sep 10, 2019 9:20 am

We are having our second kid with a HSA and we are loving it. Out of pocket max is $4,000 for her pre tax per year. Now the question is, we have a family of four do we switch to the low deductible now that everyone is "healthy"?
"PSX will always go up 20%, why invest in anything else?!" -Father-in-law early retired.

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LilyFleur
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Re: Advice on picking best health plan, PPO vs HSA

Post by LilyFleur » Tue Sep 10, 2019 5:37 pm

I honestly cannot think of a great reason for you to pick an HMO over a PPO. The difference in plans is an extremely small percentage of your yearly income. It's not like you are a middle-class family surviving on $75,000 a year. In that situation, a couple of thousand dollars is important. But you can afford the best in medical care. If you really want to save the money, though, talk to patients who use that HMO and see if they are happy with it before you make a decision based on only the money. Have you selected an ob/gyn that you like? Is he/she available through the HMO? What about any other doctors that you have seen through your PPO?

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willthrill81
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Re: Advice on picking best health plan, PPO vs HSA

Post by willthrill81 » Tue Sep 10, 2019 5:50 pm

If you can max out the HSA (which you really should since it's almost always the best tax-advantaged account out there), I would certainly go with the HSA plan.

With both of these plans, pay special attention to whether the out of pocket maximums will apply to out of network care. You don't want to need emergency care on vacation and later find out that your out of pocket max doesn't apply to such care, which is true of many plans today.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

azianbob
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Joined: Tue Jan 15, 2019 6:53 pm

Re: Advice on picking best health plan, PPO vs HSA

Post by azianbob » Tue Sep 10, 2019 6:05 pm

Go with the HDHP, and every year before annual enrollment, discuss with your wife if this is the year you want to be trying to have kids. If the answer is no, stay on the HDHP for another year and assess again. If the answer is yes, change plan to PPO.

sonic1124
Posts: 17
Joined: Tue Jun 26, 2018 9:20 pm

Re: Advice on picking best health plan, PPO vs HSA

Post by sonic1124 » Tue Sep 10, 2019 9:09 pm

drlaomd wrote:
Mon Sep 09, 2019 11:57 pm
Hi everyone. I've researched this question for a while now on many forums including this one. I think I am understanding my options the more I read, but feel like I am still missing something. Each post is slightly different from mine. A lot of this requires one to 'crunch' the numbers and work it out, but I am not sure if I am doing this properly. If anyone would be kind enough to guide me through this with explanation it'll be greatly appreciated! Or whatever insight you can offer, thank you.


My employer offers PPO option and another plan with an HSA/PPO. The basic question is should I switch out of a PPO health plan later this fall during open enrollment into one with an HSA/PPO. Wife and I are in early 30's, we may have a child in the next 1-2 years.

Details

We currently make about $600,000/year as we are both physicians. All the numbers below will be for a family plan.
The PPO plan has 3 tiers, one is 'select plan' that is cheapest for us to seek care, essentially no deductible and $20 office visits. The 2nd tier is in-network plan, a preferred plan that is a little bit more expensive and the 3rd tier is out of network which is most expensive. We plan to use the 'select' physicians for most care.

The plan with the HSA is just in network vs out of network.

PPO plan (my current plan, family plan)
-Yearly premium: $6480
-Deductible: $0 if using 'select' providers. We hope to maximize using these providers.
-Out of pocket max: $8,700
-office visit: $20
-prenatal care: $20 (initial visit only)
-labs: $20 per visit
-inpatient visit: $250/admission
-Has FSA option (which we intend to max out)


HSA plan/PPO
-Yearly premium: $2437
-Deductible: $2,700 (in network providers)
-Once deductible is met, I pay 20% coinsurance until I hit out of pocket max which is,
-Out of pocket max: $6,400
-office visit: 20% coinsurance
-prenatal care: 20% coinsurance
-labs: 20% coinsurance
-inpatient visit: 20% coinsurance
-Has HSA option: Employer will contribute $1,000, while we would max out yearly to bring total up to $7,000

Baby planning may be tough to time perfectly, but this scenario assumes having a pregnancy in next 1-2 years.

I really enjoy the HSA option, I like how the money carries over year after year, I like how it is a stealth IRA. My employer also puts in $1,000, so I like to think of having a deductible that is $1,000 lower --> $1,700 instead of $2700. We would max out the HSA every year and use it to pay for services.

I am just not sure if switching to HSA/PPO with lower premiums and higher deductible would save us a significant amount of money than staying in our current PPO plan with no deductible and higher premiums. It's so hard to guess the numbers because there are so many assumptions.

Scenario:
Assuming cost of pregnancy is $10,000 (is this even a safe assumption?)

PPO plan
-Premium is $6480/year
-No deductible
-Assuming 2 doctor office visits per month during 9 month period, that is 18 visits and each time its $20, so that is $360
-Inpatient stay for delivery: $250/admission
-Total is about $610 (this is really rough estimate, i'm sure i'm missing other variables and cost) for the pregnancy. With the yearly premium added it is about $7,090 ($6480+$610)

HSA/PPO plan
-Premium is $2437/year
-Deductible is $2,700, but with the employer HSA $1,000 contribution it is like a deductible of $1,700.
-After meeting deductible, it is 20% co insurance until yearly max. So cost of pregnancy is ($10,000 - $2700) x 20% = $1460.
-Total is: Premium ($2437) + deductible ($2,700) + coinsurance ($1460) - employer HSA contribution ($1000) = $5597

So the HSA plan seems to be cheaper in the end, are these assumptions correct? What else am I missing?

Of course this is routine pregnancy, if there are complications I don't even know where to begin that calculation!
As a health insurance broker, I would say that you should definitely choose the HSA. First of all, you mention the PPO has an out of pocket of $8700, I would assume there has to be some coinsurance? No way anyone would approach that out of pocket with $20 copays.

Secondly, your one year premium savings and employer HSA contribution is $5,000 which is almost your entire out ok pocket max!

Furthermore, someone in your tax bracket is probably getting a “effective” tax rate savings of 35% for every dollar you contribute to the HSA.

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