HSA for high-use big family?

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Danzangdc
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HSA for high-use big family?

Post by Danzangdc »

Does an HSA, which requires a high-deductible health plan, make sense for a big family with small kids? We probably access medical care 20+ times per year between annual checkups, tests for strep and ear infections, prescriptions, and the occasional emergency room visit or hospital procedure. Or is an HSA only beneficial when you don't expect medical expenses that will have to be run through the HDHP? Thanks.
02nz
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Re: HSA for high-use big family?

Post by 02nz »

HDHP/HSA is generally best for those who use little medical care (beyond annual checkups that are covered by any ACA-compliant care) as well as those who use a ton of medical care well beyond the deductible amount. But you really need to tally up what you use (say for the last couple of years) and see how much of it would be covered by the specific HDHP available to you versus how much by the current plan, and what the potential tax benefit would be.
TBL_IA
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Re: HSA for high-use big family?

Post by TBL_IA »

Danzangdc wrote: Mon Dec 30, 2019 10:07 am Does an HSA, which requires a high-deductible health plan, make sense for a big family with small kids? We probably access medical care 20+ times per year between annual checkups, tests for strep and ear infections, prescriptions, and the occasional emergency room visit or hospital procedure. Or is an HSA only beneficial when you don't expect medical expenses that will have to be run through the HDHP? Thanks.
It depends. Does your employer contribute at all? Can you cash flow medical expenses and invest the funds for future use?

A place to start

https://www.aarp.org/health/medicare-in ... alculator/
Jags4186
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Re: HSA for high-use big family?

Post by Jags4186 »

It's an impossible question to answer because we need to know what your options are. Where I work, the copay plan really doesn't make any sense. The premiums are so high that unless you were to hit your out-of-pocket maximum year after year on the HSA plan it doesn't make sense to have the copay plan. I remember doing the math and if you had to have >$10,000 in annual medical expenses for the copay plan to make sense and the HSA plan had a $12,000 OOP max. So it was really a small area of $10,000 - $12,000 where the copay plan was better than the HSA plan.
Last edited by Jags4186 on Mon Dec 30, 2019 10:18 am, edited 1 time in total.
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Tamarind
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Re: HSA for high-use big family?

Post by Tamarind »

It depends on the HSA. HSA's are predictably best for folks with very low expected health costs, because the premiums are lower.

But some HSA plans have relatively low out-of-pocket maximums, comparable to or even lower than the average non-HDHP. With these plans, you may also save money compared to the non-HDHP if you expect to exceed the OOP max, because the plan covers all costs after that point. That's why this board sometimes recommends people make the switch to a HDHP before a birth or major surgery.

In your case, which is better will likely hinge on how the per-person vs family maximums stack up. Since premiums don't usually increase with additional children, I suspect the non-HDHP will make more sense for you, but only you can determine this for sure.

To find out if you're in one of the situations where an HDHP is better, you'll need to do some math with an "average" year's worth of visits, running it through each plan.
sailaway
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Re: HSA for high-use big family?

Post by sailaway »

It depends on the plan. Ours has so little difference between the deductible and the OOP max, plus employer contributions, that it would make sense for most users. Even if we spend more than the employer contributes, it is a means of transferring funds into a tax sheltered account.
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Danzangdc
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Re: HSA for high-use big family?

Post by Danzangdc »

Thanks for the thoughtful responses. I will try to sort through the plan options and be more specific. But the plans are with the fed gov't, if that helps at all. I am trying to decide which one to elect.
OnTrack2020
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Re: HSA for high-use big family?

Post by OnTrack2020 »

We have four children (teens through college-age) and for the past few years had a HDHP with HSA. To us, it just simply wasn't worth it. Now, you haven't mentioned what your salary is, but just remember that you won't be paying a small co-pay to see the doctor. Plan on at least $100-$125 minimum per visit for the kids and probably $100-$200 for adults until you meet your deductible. Urgent care, of course, will be more. We usually never met our (high) deductible until later in the year--late 3rd or 4th quarter. Your well checks should be covered, but regular appointments with a follow-up appointment you will definitely be paying more. I would never recommend HDHP with HSA for a family with small kids because they catch everything at daycare or school. I would maybe recommend for when your kids are older--college-age--because college kids tend to not go to the doctor. We simply could not save enough in the HSA and never got to the point where we could invest the funds because we needed to use the money for health care, it's that simple. We also used the money for dental care and eye appointments, even though we have a dental plan and vision plan. Unless you have a good amount of disposable income, sorry, I would not recommend, even with the employer match.
02nz
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Re: HSA for high-use big family?

Post by 02nz »

Danzangdc wrote: Mon Dec 30, 2019 10:56 am Thanks for the thoughtful responses. I will try to sort through the plan options and be more specific. But the plans are with the fed gov't, if that helps at all. I am trying to decide which one to elect.
Aha, that probably shifts things in the HDHP/HSA's favor. The federal government makes a sizable HSA contribution every year (I forget the exact amount) if you go that route. You still need to go through the details but I suspect it will come out in favor of the HDHP/HSA.
UnLearnYourself
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Re: HSA for high-use big family?

Post by UnLearnYourself »

Danzangdc wrote: Mon Dec 30, 2019 10:07 am Does an HSA, which requires a high-deductible health plan, make sense for a big family with small kids? We probably access medical care 20+ times per year between annual checkups, tests for strep and ear infections, prescriptions, and the occasional emergency room visit or hospital procedure. Or is an HSA only beneficial when you don't expect medical expenses that will have to be run through the HDHP? Thanks.
What is the base premium cost for the non-high deductible options?

For me the options would have cost over $6k or $9k just for the premium for PPO 90 or PPO 100.

For my high deductible plan the base premium was around $2,500, less a $1,1250 contribution from my employer. Max out of pocket is $5k. So for me in a WORST case scenario the premium + max out of pocket was flat out less than then PPO 100, and close to a break even for the PPO 90. However a normal year we won't come close to that much out of pocket so then I get to bank the difference in my HSA and enjoy the tax benefits. The ONLY argument I could possibly see for choosing the 90 or 100 with my company is if you don't have the cash or discipline to cover the deductible and out of pocket expenses, whether that's straight cash or from the HSA. Not sure if I over simplified it but seemed like a no brainer to go HSA.

My goal is to not spend a penny of the HSA and let that grow over 30 years to cover a significant chunk of medical expenses in retirement.
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grabiner
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Re: HSA for high-use big family?

Post by grabiner »

02nz wrote: Mon Dec 30, 2019 5:28 pm
Danzangdc wrote: Mon Dec 30, 2019 10:56 am Thanks for the thoughtful responses. I will try to sort through the plan options and be more specific. But the plans are with the fed gov't, if that helps at all. I am trying to decide which one to elect.
Aha, that probably shifts things in the HDHP/HSA's favor. The federal government makes a sizable HSA contribution every year (I forget the exact amount) if you go that route. You still need to go through the details but I suspect it will come out in favor of the HDHP/HSA.
I have worked this out for the DC Bogleheads. If you are in a fairly high tax bracket (most DC Boglehead government employees pay about 30% combined federal and state tax), the government's contribution to the HSA plus the tax savings on your own contribution are about equal to the deductible. Thus, if you use the whole deductible under the HDHP and would have paid nothing under the conventional plan, you break even; in almost any other situation, the HDHP comes out ahead.
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02nz
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Re: HSA for high-use big family?

Post by 02nz »

UnLearnYourself wrote: Mon Dec 30, 2019 5:33 pm My goal is to not spend a penny of the HSA and let that grow over 30 years to cover a significant chunk of medical expenses in retirement.
And don't forget Medicare premiums. That means even if you're perfectly healthy in retirement there'll be a good tax-free way to draw from your HSA.
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grabiner
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Re: HSA for high-use big family?

Post by grabiner »

UnLearnYourself wrote: Mon Dec 30, 2019 5:33 pm My goal is to not spend a penny of the HSA and let that grow over 30 years to cover a significant chunk of medical expenses in retirement.
This is the right strategy only if you can max out your other retirement savings. If you can't, it is better to spend money from your HSA, and then contribute the money you didn't spend out of pocket to your 401(k) or IRA, to be spent on anything in retirement.
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frugalmama
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Re: HSA for high-use big family?

Post by frugalmama »

We are a large family (relatively healthy, but 13 members) and we have found that we come out better under the HSA for 2 main reasons: 1) The spread between the premiums/cost of the HSA plan and the other plans offered is too large that when working out expected visits, etc. we come out ahead with the HSA and 2) We have more choices in doctors with the HSA than the other plans offered. This is especially true with services such as speech as our provider isn't on the other plans offered and the OOP if we went private pay is way too high.

I would try to work the numbers under both plans based on what medical services you expect to use (getting as much info as you can about each of the plans) as it is a complicated question, but I wouldn't assume you come out better one way or another.
frugalmama
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Re: HSA for high-use big family?

Post by frugalmama »

We are a large family (relatively healthy, but 13 members) and we have found that we come out better under the HSA for 2 main reasons: 1) The spread between the premiums/cost of the HSA plan and the other plans offered is too large that when working out expected visits, etc. we come out ahead with the HSA and 2) We have more choices in doctors with the HSA than the other plans offered. This is especially true with services such as speech as our provider isn't on the other plans offered and the OOP if we went private pay is way too high.

I would try to work the numbers under both plans based on what medical services you expect to use (getting as much info as you can about each of the plans) as it is a complicated question, but I wouldn't assume you come out better one way or another.
RJC
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Re: HSA for high-use big family?

Post by RJC »

We just switched to a HDHP. After doing a lot of research, it appears that we will be on top in most situations. The only downside is the mental hurdle of paying high rates pre-deductible.
theplayer11
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Re: HSA for high-use big family?

Post by theplayer11 »

OnTrack2020 wrote: Mon Dec 30, 2019 12:25 pm We have four children (teens through college-age) and for the past few years had a HDHP with HSA. To us, it just simply wasn't worth it. Now, you haven't mentioned what your salary is, but just remember that you won't be paying a small co-pay to see the doctor. Plan on at least $100-$125 minimum per visit for the kids and probably $100-$200 for adults until you meet your deductible. Urgent care, of course, will be more. We usually never met our (high) deductible until later in the year--late 3rd or 4th quarter. Your well checks should be covered, but regular appointments with a follow-up appointment you will definitely be paying more. I would never recommend HDHP with HSA for a family with small kids because they catch everything at daycare or school. I would maybe recommend for when your kids are older--college-age--because college kids tend to not go to the doctor. We simply could not save enough in the HSA and never got to the point where we could invest the funds because we needed to use the money for health care, it's that simple. We also used the money for dental care and eye appointments, even though we have a dental plan and vision plan. Unless you have a good amount of disposable income, sorry, I would not recommend, even with the employer match.
not sure how you can recommend this without knowing the premiums on the plans. Yes, young children get sick, but no need to run to the doctor every time.
UnLearnYourself
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Re: HSA for high-use big family?

Post by UnLearnYourself »

grabiner wrote: Mon Dec 30, 2019 10:49 pm
UnLearnYourself wrote: Mon Dec 30, 2019 5:33 pm My goal is to not spend a penny of the HSA and let that grow over 30 years to cover a significant chunk of medical expenses in retirement.
This is the right strategy only if you can max out your other retirement savings. If you can't, it is better to spend money from your HSA, and then contribute the money you didn't spend out of pocket to your 401(k) or IRA, to be spent on anything in retirement.
For sure. Have maxed my Roth for years. Am about $3k shy of maxing my 401k, but between my contribution and the additional 6.5% my company is adding in I feel good maxing my HSA now, knowing I'll get those last couple %s into my 401k over the next couple of years (had it maxed, then had a baby last year and another this year and re-routed some of those dollars to 529s)
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