Seeking input in choosing health plan

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Topic Author
doob
Posts: 25
Joined: Sun Apr 05, 2020 11:15 am

Seeking input in choosing health plan

Post by doob »

I have the below health plan options at my megacorp.

My analysis suggests that no matter how I look at this, the high deductible plan comes out ahead. But I have heard that high deductible plans are generally only advantageous if you are healthy and relatively less likely to need medical attention during any given year. However, my analysis below seems to indicate that even under the maximum expense scenario the high deductible plan would be cheaper by nearly $4000 relative to the next best plan.

What am I missing?
  • High deductible plan Deductible: $3000 / Out-of-pocket max.: $6000 / Premium (per pay period) $75
    • Note: HSA is available and Megacorp will contribute $1000/year to HSA
  • PPO_1 Deductible: $1800 / Out-of-pocket max.:$7500 / Premium (per pay period): $96
  • PPO_2 Deductible: $600 / Out-of-pocket max.:$6000 / Premium (per pay period): $125
  • PPO_3 Deductible: $0 / Out-of-pocket max.:$4500 / Premium (per pay period): $208
We are in our early 40's and intend to contribute the full $7,200 to the HSA (i.e., additional $6,200 on top of megacorp's $1000). FYI, we are already maxing out all other tax advantaged accounts (401k, IRA, etc.) available to us. Our total marginal tax rate (state+federal) is 30%.

Based on the above, I arrive at the following scenario outcomes (calculations based on estimated tax benefits, premiums per pay period, deductibles, and out of pocket maximums):
  • High deductible plan Minimum expense: -$1488 (i.e., effectively we get paid instead of having to pay) / Expense to get first benefit $: $1512 / Maximum expense: $4512
  • PPO_1 Minimum expense: $1748 / Expense to get first benefit $: $3548/ Maximum expense: $9248
  • PPO_2 Minimum expense: $2278 / Expense to get first benefit $: $2878/ Maximum expense: $8278
  • PPO_2 Minimum expense: $3789 / Expense to get first benefit $: $3789/ Maximum expense: $8288
And this is before even counting any investment growth in the HSA.

Any thoughts you are able to share would be much appreciated.
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FiveK
Posts: 10559
Joined: Sun Mar 16, 2014 2:43 pm

Re: Seeking input in choosing health plan

Post by FiveK »

Looks pretty much the same as what the 'HDHP Analysis' tab of the personal finance toolbox Excel spreadsheet shows.

If your analysis used something else, the likelihood that both are incorrect in the same way is very low, so you should be good to go. :)

Health Savings Account (HSA) vs. Traditional Health Plan is another tool if you want extra confirmation.
BobTexas
Posts: 131
Joined: Sat Dec 30, 2017 11:56 pm

Re: Seeking input in choosing health plan

Post by BobTexas »

I work at a megacorp and while my numbers are different I came to the same conclusion. They seem to be encouraging everyone to get the HDHP

During the year you have to get used to paying $100 for a dr visit, but you still come out ahead if you analyze the numbers
DarkHelmetII
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Joined: Mon Jul 24, 2017 12:25 pm

Re: Seeking input in choosing health plan

Post by DarkHelmetII »

doob wrote: Sat Nov 14, 2020 11:58 pm I have the below health plan options at my megacorp.

My analysis suggests that no matter how I look at this, the high deductible plan comes out ahead. But I have heard that high deductible plans are generally only advantageous if you are healthy and relatively less likely to need medical attention during any given year. However, my analysis below seems to indicate that even under the maximum expense scenario the high deductible plan would be cheaper by nearly $4000 relative to the next best plan.

What am I missing?
  • High deductible plan Deductible: $3000 / Out-of-pocket max.: $6000 / Premium (per pay period) $75
    • Note: HSA is available and Megacorp will contribute $1000/year to HSA
  • PPO_1 Deductible: $1800 / Out-of-pocket max.:$7500 / Premium (per pay period): $96
  • PPO_2 Deductible: $600 / Out-of-pocket max.:$6000 / Premium (per pay period): $125
  • PPO_3 Deductible: $0 / Out-of-pocket max.:$4500 / Premium (per pay period): $208
We are in our early 40's and intend to contribute the full $7,200 to the HSA (i.e., additional $6,200 on top of megacorp's $1000). FYI, we are already maxing out all other tax advantaged accounts (401k, IRA, etc.) available to us. Our total marginal tax rate (state+federal) is 30%.

Based on the above, I arrive at the following scenario outcomes (calculations based on estimated tax benefits, premiums per pay period, deductibles, and out of pocket maximums):
  • High deductible plan Minimum expense: -$1488 (i.e., effectively we get paid instead of having to pay) / Expense to get first benefit $: $1512 / Maximum expense: $4512
  • PPO_1 Minimum expense: $1748 / Expense to get first benefit $: $3548/ Maximum expense: $9248
  • PPO_2 Minimum expense: $2278 / Expense to get first benefit $: $2878/ Maximum expense: $8278
  • PPO_2 Minimum expense: $3789 / Expense to get first benefit $: $3789/ Maximum expense: $8288
And this is before even counting any investment growth in the HSA.

Any thoughts you are able to share would be much appreciated.
HDHP. Premium savings, $1000 from employer, tax advantages ... and max out of pocket is not out of line (even favorable in some circumstances) to "PPO" plans.
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jeffyscott
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Re: Seeking input in choosing health plan

Post by jeffyscott »

doob wrote: Sat Nov 14, 2020 11:58 pmMy analysis suggests that no matter how I look at this, the high deductible plan comes out ahead. But I have heard that high deductible plans are generally only advantageous if you are healthy and relatively less likely to need medical attention during any given year. However, my analysis below seems to indicate that even under the maximum expense scenario the high deductible plan would be cheaper by nearly $4000 relative to the next best plan.
I don't think that is unusual, mine comes out similarly. I think it is pretty common for the HDHP to be better, if you either have nearly no medical expenses or if you hit/exceed the max out of pocket. The traditional plans may commonly be better for someone in between or, in the case of a family, if one person has high expenses and the family plan has a per person max out of pocket.
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grabiner
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Re: Seeking input in choosing health plan

Post by grabiner »

doob wrote: Sat Nov 14, 2020 11:58 pm My analysis suggests that no matter how I look at this, the high deductible plan comes out ahead. But I have heard that high deductible plans are generally only advantageous if you are healthy and relatively less likely to need medical attention during any given year. However, my analysis below seems to indicate that even under the maximum expense scenario the high deductible plan would be cheaper by nearly $4000 relative to the next best plan.
This depends on how the plans are subsidized by your employer. The US Government has a similar arrangement; it pays 75% of the cost of most insurance, including 75% of the cost of an HDHP making a contribution to your HSA. The result is that the cost difference between conventional and HDHP plans from the same insurer, including the tax benefit on your HSA contribution, is about equal to the deductible.
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Topic Author
doob
Posts: 25
Joined: Sun Apr 05, 2020 11:15 am

Re: Seeking input in choosing health plan

Post by doob »

Thank you everyone for your inputs. Much appreciated. They were very helpful in distilling my decision regarding which plan to pick.
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Watty
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Joined: Wed Oct 10, 2007 3:55 pm

Re: Seeking input in choosing health plan

Post by Watty »

doob wrote: Sat Nov 14, 2020 11:58 pm What am I missing?
Two things to consider;

1) The networks of in-network doctors may be different. When I was looking at ACA policies that was an important issue since some of the networks did not look very good. In particular it would be good to know if your current doctors are in-network in the plans you are looking at. I have seen situations where a doctor is in-network in one blue cross plan but not in-network in a different blue cross plan.

2) The formularies that the plans use may be different. The formularies are list of drugs that are divided into different tiers which this insurance pay pay different amounts for. This can make a huge difference if you take any expensive medications and if you need a drug that is not in the firmularie you may need to pay all the cost for it, use an alternative medicine, or try to get the insurance company to make an exception with is possible.
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