PPO versus HDHP

[livingalmostlarge]

Can you help me figure out a better deal

Family Plan HDHP
-Premium - $133.18/month
-Deductible $3200 individual/$6400 Family
-Max OOP $6000 Individiual/ $12000 Family
-$400 monthly HSA employer contribution

PPO Family Plan
-Premium - $300.61/month
-Deductible $200 Individual / $600 Family
-Max OOP $1500 Individual / $4500 Family

One of our kids is max OOP annually. The rest of us barely hit our deductible. I think it's cheaper for us to use the PPO but does it make sense? I feel like the HDHP would be better if we pay everything now out of pocket and save the HSA. But then we are out of pocket $6000+ a year.

[eigenperson]

You have not given full details on anything (either your family or any of the plans), so any analysis will include a lot of possibly false assumptions.

First of all, is there really a $400 monthly HSA contribution? I've never heard of one that high.

Assuming that's right, combining the HSA contribution and premium, the HDHP starts out $6800 ahead. Assuming your one child would max out the individual OOPM on either plan, this adds a cost of $4500 to the HDHP. It is still $2300 ahead. You haven't stated how many people are in your family but it takes a lot of people who "barely hit" a $200 deductible to add up to $2,300. It appears that the HDHP is better in the average case, even after taking into account one family member who will always hit their individual OOPM.

In a year where you hit the full family OOPM on all plans, the HDHP comes out behind, but only by $700. In a year where two family members hit their OOPM and the others use no healthcare, the HDHP comes out behind by $2,200. So in the worst case, it appears the HDHP is worse.

You have stated nothing about tax rates so I can't estimate the value of the HSA tax exemption.

[jeffyscott]

I think it's cheaper for us to use the PPO but does it make sense? I feel like the HDHP would be better if we pay everything now out of pocket and save the HSA. But then we are out of pocket $6000+ a year.

Well, it's not $6000, it's $6000 + $133 per month - $400 per month (if that's really the employer contribution). That would come to a net of about $3000 per year.

Meanwhile the non-HDHP would be $300 per month + $1500, which comes to about $5100 per year. Seems like the HDHP would be the obvious choice.

However, if the employer HSA contribution is actually $400 per year, then the net cost of that plan would be about $7200. Then there would, perhaps, be some additional tax savings with the HSA. My guess is that's unlikely to be enough to offset the $2100 higher cost, if the employer contribution is actually $400 per year.

[pizzy]

"Worst case" scenario they are close:

Family Plan HDHP: ($133.18*12)+$12,000-($400*12) = ~$8,800

PPO Family Plan: ($300.61*12)+$4,500 = ~$8,100


"Best case" scenario the HDHP plan seems to win:

Family Plan HDHP: ($133.18*12)+$6,000-($400*12) = ~$2,800 + $X (whatever the rest of them family would spend towards deductible)

PPO Family Plan: ($300.61*12)+$1,500 = ~$5,100 + $X (whatever the rest of them family would spend towards deductible)

[livingalmostlarge]

It's $400 a month HSA contribution

There are 2 adults and 2 kids. This year was the first year things happened that DH and DK2 hit max OOP. Typically he doesn't but accident caused needs. DK2 has problem that causes expensive medication that we hit the max in 1 month.

[livingalmostlarge]

It's $400 a month HSA contribution

There are 2 adults and 2 kids. This year was the first year things happened that DH and DK2 hit max OOP. Typically he doesn't but accident caused needs. DK2 has problem that causes expensive medication that we hit the max in 1 month.

Non-HDHP is $167/month. So extra $2004 a year premium. I guess the HDHP is cheaper?

[pizzy]

Non-HDHP is $167/month. So extra $2004 a year premium. I guess the HDHP is cheaper?

Did you read the responses that walked through the math?

[livingalmostlarge]

So the HDHP is a better deal. The problem is that it's a lot more right now OOP since we should contribute the maximum $8300/year to the HSA and not touch it and then leave it for the future. Then we currently handle right now our deductible of up to $12k ourselves every year now while we are working?

[theplayer11]

that's a big gap between the deductible and OOP max. My plan is $6,675/$6,900.
Is there coinsurance after the deductible is met?

[jeffyscott]

So the HDHP is a better deal. The problem is that it's a lot more right now OOP since we should contribute the maximum $8300/year to the HSA and not touch it and then leave it for the future. Then we currently handle right now our deductible of up to $12k ourselves every year now while we are working?

Just use the ACA to pay bills as you get them. Not everyone buys into to the idea of saving receipts for 30 years to have a slightly more optimal outcome. In addition, not using the HSA to pay bills only makes sense if you are already maxing out all other tax deferred accounts and still have money left over to pay the bills. Also, since your employer is putting $4800 in, your maximum contribution is going to be $3500. The employer contribution counts toward the $8300

You don't need to leave the HSA untouched for the HDHP to be the better plan. Using your estimate of $6000 out of pocket, plus the $133 per month, minus the $400 per month employer contribution means your net cost is about $3000 per year. That's the case even if you were to only put $6000 total in the HSA (so just $1200 contributed by you) and immediately use it to pay the $6000 in bills.

The non-HDHP would be $300 per month + $1500 under your assumption that one family member hits the out of pocket maximum. So that comes to about $5100 per year, $2100 more than the HDHP.

Even in the worst case scenario, with multiple family members hitting the out of pocket max, the HDHP is only behind by $700. And that difference would be even less if an after tax analysis were to be done, since paying bills from the HSA uses pre-tax money but with the PPO plan you would be using after tax dollars for at least some of the unexpected expenses.

With the PPO you might be able to use an FSA to pay some out of pocket costs with pre-tax money, but since those funds have to be used within the year or shortly after, any unexpected out of pocket costs will likely be paid with after tax money.

[deltaneutral83]

Can you help me figure out a better deal

Family Plan HDHP
-Premium - $133.18/month
-Deductible $3200 individual/$6400 Family
-Max OOP $6000 Individiual/ $12000 Family
-$400 monthly HSA employer contribution

PPO Family Plan
-Premium - $300.61/month
-Deductible $200 Individual / $600 Family
-Max OOP $1500 Individual / $4500 Family

One of our kids is max OOP annually. The rest of us barely hit our deductible. I think it's cheaper for us to use the PPO but does it make sense? I feel like the HDHP would be better if we pay everything now out of pocket and save the HSA. But then we are out of pocket $6000+ a year.

Your employer contributes $400 a month to your HSA? This isn't even close. HDHP ($133.18x12) +6,400 -4,800 = $3,198.16 (plus you can contribute triple tax free an additional $3,500 in 2024). PPO = $3,607.32+$4,500= $8,107.32. Where did you come up with the PPO being better, it's over 200% more expensive AND no triple tax free additional contributions?

[quantAndHold]

So the HDHP is a better deal. The problem is that it's a lot more right now OOP since we should contribute the maximum $8300/year to the HSA and not touch it and then leave it for the future. Then we currently handle right now our deductible of up to $12k ourselves every year now while we are working?

You “should” contribute the extra $3500 to the HSA ($8300, minus the $4800 your employer is contributing), and then leave it forever, but the HDHP is still a better deal even if you contribute $0 of your own money, and use the HSA to pay your current medical expenses.

If you get into a situation where you have a lot of medical expenses, the provider (hospital, etc) will take a payment plan. The only reason I would go with the PPO is if you’re expecting to have high medical expenses next year, for example if you’re already pregnant.

[livingalmostlarge]

Okay so using the HSA works even if we don't leave it to invest. Yes we max out all of tax advantaged fund. We can contribute more.

Yes they are contributing $400 to the HSA. Last year they did nothing so I wasn't sure if the HSA was worth it. I think I calculated without the contribution it wasn't worth it.

I think co insurance is 20% but we are capped at $6k. That's a big deal because my one kid will max that out in first month with her medications. So She's done after January. We pay $6k and are done for the year.

So me and DK1 and usually DH don't even hit our $200 deductible. But DK2 is the problem. She's max out everything.

So we would be $3000 premium plus $1500 OOP for 1 person and say $600 deudctible. So $5100 PPO

HDHP is $1596 premium plus $6000 max OOP for 1 person and $600 (probably a bit more since it's 20% coinsurance) - $4800. So I need to be below $2304 for the 3 of us with 20% co insurance. Ugh I need to check how much our costs were this year.