HDHP vs traditional, but premiums are the same

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ytrmacire
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HDHP vs traditional, but premiums are the same

Post by ytrmacire » Tue Sep 10, 2019 8:04 pm

For the first time I am being offered a HDHP through my employer. However, the premium is exactly the same as that of the traditional plan offered (annual $2880 total to cover me and my child). The deductible is of course higher at $3000 (vs $2000) but the out of pocket maximum is lower in the HDHP ($9000 vs $13,000). My employer will put $500 in the HSA annually. Can someone help me make sense of why the premiums are not lower in the HDHP?

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Cheez-It Guy
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Re: HDHP vs traditional, but premiums are the same

Post by Cheez-It Guy » Tue Sep 10, 2019 8:27 pm

Increasing cost of healthcare.
Last edited by Cheez-It Guy on Tue Sep 10, 2019 8:28 pm, edited 1 time in total.

TIAX
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Re: HDHP vs traditional, but premiums are the same

Post by TIAX » Tue Sep 10, 2019 8:27 pm

ytrmacire wrote:
Tue Sep 10, 2019 8:04 pm
For the first time I am being offered a HDHP through my employer. However, the premium is exactly the same as that of the traditional plan offered (annual $2880 total to cover me and my child). The deductible is of course higher at $3000 (vs $2000) but the out of pocket maximum is lower in the HDHP ($9000 vs $13,000). My employer will put $500 in the HSA annually. Can someone help me make sense of why the premiums are not lower in the HDHP?
The HDHP is almost certainly better, especially if you'll be maximizing your $7,000 HSA contribution, which you should do via payroll deductions to save on the 1.45% Medicare Tax. The difference in deductibles is effectively $500 ($3000-$2000-$500), you may not hit your deductible every year, and the HDHP has a lower OOP maximum. This is a very easy decision - go for the HDHP.

Please provide your federal marginal tax rate, state marginal tax rate, whether you will be above the social security wage base, and what state you live in (to figure out whether you can deduct your HSA contribution from state taxes).

As for why the premia are the same, your employer may be subsidizing the HDHP more or it may be the lower OOP maximum.

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grabiner
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Re: HDHP vs traditional, but premiums are the same

Post by grabiner » Tue Sep 10, 2019 9:05 pm

ytrmacire wrote:
Tue Sep 10, 2019 8:04 pm
For the first time I am being offered a HDHP through my employer. However, the premium is exactly the same as that of the traditional plan offered (annual $2880 total to cover me and my child). The deductible is of course higher at $3000 (vs $2000) but the out of pocket maximum is lower in the HDHP ($9000 vs $13,000). My employer will put $500 in the HSA annually. Can someone help me make sense of why the premiums are not lower in the HDHP?
Because the employer is using some of that premium to contribute to the HSA.

So that makes the HDHP significantly better. If you are in a 22% tax bracket, you get $500 of free money in the HSA, and a $1430 tax savings on the $6500 you can contribute to the HSA, so the day-one cost is $1908 less with the HDHP than with the conventional plan. It is unlikely that your medical costs will be $1930 higher with the HDHP.
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megabad
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Re: HDHP vs traditional, but premiums are the same

Post by megabad » Wed Sep 11, 2019 11:02 am

are the co insurance coverages or copays the same and do they cover the same things? If so, you would have only a very narrow band of spending where the "traditional" policy is beneficial by a slight amount right around the deductible. If you spend much more than that or much less, the HDHP is likely the better choice.

PS. I hesitate a little to call a policy with a $2k deductible and $13k OOP max "traditional".

Spirit Rider
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Re: HDHP vs traditional, but premiums are the same

Post by Spirit Rider » Wed Sep 11, 2019 1:14 pm

You really should consider everything. Premium difference factoring in employer HSA contribution, deductible, max out-of-pocket (OOP), co-pays/co-insurance and value of the HSA tax benefits over an FSA. Then model scenarios; projected assumed medical costs, lowest deductible across both plans, highest deductible across both plans and max OOP. Then you will have an idea of which is the better choice for you. Pay attention to coverage differences. In my last two plans, the prescription co-pay/co-insurances were far more favorable on the HDHP plan.
Last edited by Spirit Rider on Wed Sep 11, 2019 1:17 pm, edited 1 time in total.

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samsoes
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Re: HDHP vs traditional, but premiums are the same

Post by samsoes » Wed Sep 11, 2019 1:17 pm

Don't forget that with a HDHP, prescriptions are paid fully out of pocket until your deductible is met.
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