Article on high deductible health plans - and the math

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dm200
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Article on high deductible health plans - and the math

Post by dm200 » Fri Jun 14, 2019 1:54 pm

Article (and the math behind them) on High deductible health plans.

https://www.msn.com/en-us/money/healthc ... li=BBnbfcN

OUCH!! :dollar :dollar

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FIREchief
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Re: Article on high deductible health plans - and the math

Post by FIREchief » Fri Jun 14, 2019 2:13 pm

Well, the whole idea behind them was to discourage over-use of healthcare resources. Little surprise that there are some unintended consequences. :oops:
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

runner3081
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Re: Article on high deductible health plans - and the math

Post by runner3081 » Fri Jun 14, 2019 2:17 pm

Unfortunately, sums up a chunk of Americans.

1) People don't have a high level of financial literacy (choosing lower premiums because they are cheaper without realizing the trade-offs)
2) People can't save money

Of course, I would guess that the family referenced at the beginning (and other families referenced) probably spend more than their deductible on cell phones, cable tv and other wants :)

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Re: Article on high deductible health plans - and the math

Post by TomatoTomahto » Fri Jun 14, 2019 2:18 pm

Not.Going.To.Be.Political.
ETA: Nor.Going.To.Call.Out.Blaming.The.Victim.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Re: Article on high deductible health plans - and the math

Post by HawkeyePierce » Fri Jun 14, 2019 2:54 pm

I currently use a high deductible plan, though it's only a $1500 deductible. My employer picks up the entire premium. I'm young and relatively healthy so I'm willing to take the gamble. Even a lot of my older coworkers use the HDHP in order to take advantage of the HSA. We are the small minority for whom the HDHP pays off.

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Re: Article on high deductible health plans - and the math

Post by dcabler » Fri Jun 14, 2019 3:01 pm

Similar to a poster above. I'm now working for my first company that only provides a HDHP plan + HSA and they pay 100% of the premiums for my family of 3. Every time I start to complain, I remember the spreadsheet analysis I did for our usual medical expenses with my last company with a traditional PPO plan where I paid part of the premiums. For us, it was a wash.....

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Re: Article on high deductible health plans - and the math

Post by Big Dog » Fri Jun 14, 2019 3:06 pm

actually, the article does not show the math. If it did, it would have inquired with Robyn Hogdon's husband's plan and found out how much she is saving on monthly premiums in comparison to a $500 or $750 deductible plan. OTOH, if that is the only plan that her husband's company offers, the proper comparison is the monthly premium for the HD plan vs. a low deductible ACA plan.

As expected in today's so-called journalism, the article is missing a key component, and therefore one-sided.

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Re: Article on high deductible health plans - and the math

Post by MichCPA » Fri Jun 14, 2019 3:33 pm

I can really see this both ways.

When I had an HDHP a couple of years ago, our company had the minimum deductible to qualify for an HDHP (like $1200 at the time) and gave us a $500 incentive for doing a yearly blood draw and questionnaire. The premium was super cheap so I actually made money after the incentive and I built up an HSA balance because my only medical expense is contact lenses.

However, what I will call ultra-high deductible plans (UHDHP) are a recipe for personal financial disaster. A 15k deductible for means that even fairly routine medical items are a crisis the average (65K a year) family. I don't want to know what dealing with a pregnancy and losing and income, but adding an insane level of cost would mean to that type of family.

From a policy perspective, I would advocate that an HDHP deductible over a certain amount come with a mandatory employer HSA contribution. As personal advice, I would rarely recommend a family with young children have a UHDHP.

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Re: Article on high deductible health plans - and the math

Post by Coltrane75 » Fri Jun 14, 2019 3:49 pm

I have mixed feelings about these plans; I'm in one too. It offers opportunity to build wealth with the HSA so long as one is financially literate and can afford the deductibles comfortably (with Wall Street sneaking in to skim some money off the HSA). I could see some people getting attached to their money as it grows and can be come miserly at their own peril.

But for those on the lower end of the income and/or financial literacy scale; its just about like not having health insurance. Bad for them, great for the health insurance companies.

In the long run I worry about deductibles going up even for the upper middle class...why wouldn't they if the companies need to keep growing profits....

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Re: Article on high deductible health plans - and the math

Post by megabad » Fri Jun 14, 2019 3:58 pm

Not sure if this is more Personal Finance or more Theory...

To make this actionable, I fully agree that everyone should run the numbers on whether an HDHP makes sense in their situation. I think for many folks, an HDHP can be a positive and certainly helps increase the transparency of costs in the healthcare industry (which is near zero in the US). There are other cases where it might not be as advantageous. I do not believe that one anecdotal story should be enough evidence for anyone to draw a reasonable conclusion.

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Re: Article on high deductible health plans - and the math

Post by OnTrack2020 » Fri Jun 14, 2019 4:25 pm

runner3081 wrote:
Fri Jun 14, 2019 2:17 pm
Unfortunately, sums up a chunk of Americans.

1) People don't have a high level of financial literacy (choosing lower premiums because they are cheaper without realizing the trade-offs)
2) People can't save money

Of course, I would guess that the family referenced at the beginning (and other families referenced) probably spend more than their deductible on cell phones, cable tv and other wants :)

People can save money, but there is only so much to go around, especially if you have any type of health conditions within a family, as the family did within the article. And coming up with thousands of dollars upfront to pay for medical bills is not that easy for many people, even if they have money saved.

Let's face it--the system is broken and has been for some time.

Typically, these plans would be great for those who are younger with children who are junior high or above. Unfortunately, younger kids are always at the doctor because they pick up so much stuff when they are in school.

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Re: Article on high deductible health plans - and the math

Post by runner3081 » Fri Jun 14, 2019 4:36 pm

OnTrack2020 wrote:
Fri Jun 14, 2019 4:25 pm
runner3081 wrote:
Fri Jun 14, 2019 2:17 pm
Unfortunately, sums up a chunk of Americans.

1) People don't have a high level of financial literacy (choosing lower premiums because they are cheaper without realizing the trade-offs)
2) People can't save money

Of course, I would guess that the family referenced at the beginning (and other families referenced) probably spend more than their deductible on cell phones, cable tv and other wants :)
Unfortunately, younger kids are always at the doctor because they pick up so much stuff when they are in school.
Well, parents who take their kids to the doctor for any little sniff are a whole other problem :)

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Re: Article on high deductible health plans - and the math

Post by vu8 » Fri Jun 14, 2019 4:36 pm

Do you know how much China's universal basic resident healthcare plan for the whole year of 2018 costs? About 29 dollars! For a whole year!

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Re: Article on high deductible health plans - and the math

Post by airborne » Fri Jun 14, 2019 5:31 pm

vu8 wrote:
Fri Jun 14, 2019 4:36 pm
Do you know how much China's universal basic resident healthcare plan for the whole year of 2018 costs? About 29 dollars! For a whole year!
I'm sorry, but China is hardly a helpful comparison.

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Re: Article on high deductible health plans - and the math

Post by jj45 » Fri Jun 14, 2019 6:04 pm

It would be interesting to figure out how to actually compare plans. My company offers a several plans including a HDHP. I compared the premiums, deductibles, and out-of-pocket maximums and decided the HDHP was the winner for our relatively healthy family. Lowest premium. Lowest out-of-pocket maximum (by a small amount). And for the other plans, for family coverage, the premium difference plus deductible was higher than the high deductible in the HDHP. Is this unusual?

So far we've been healthy so the HDHP has been a bargain. The lower out-of-pocket maximum let's me sleep at night without worrying about a catastrophic medical bill. It looks like with moderate medical expenses, the HDHP costs goes up faster than the other plans and reaches the out-of-pocket maximum sooner. But I can't really tell - since we've been healthy I don't have much experience with the Medical Industrial Complex. How should one compare plans? Any good tools?

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Re: Article on high deductible health plans - and the math

Post by thx1138 » Fri Jun 14, 2019 6:45 pm

Replace pension with 401k that requires workers to save on their own leads to similar places as replace low deductible plan with high deductible insurance with an HSA that requires workers to save on their own...

For the average BH it is probably mostly a wash where for different folks one option might be more advantageous than the other. For the average citizen though I suspect one has much more negative outcomes than the other.

A few people in the article clearly get it though - this is catastrophic insurance and not a health “plan”. Just like your car insurance if you are going to crank up the deductible to save on the monthly payment that often makes good long term sense if you have a suitable emergency fund...

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Re: Article on high deductible health plans - and the math

Post by NewOldGuy » Fri Jun 14, 2019 6:58 pm

Up until this year, we've always used my wife's company HDHP as I was self employed. The deductible was $2500 and the company contributed $500 match to HSA. She was laid off, so this year we on the ACA Silver plan $450/mo. that has deductible 3x of her old companies, but miraculously does not count as HDHP?? WTF? Only the bronze plan qualifies with a 5 digit deductible... crazy.

We kept her HSA going and I ignorantly contributed $1500 earlier this year into a non-qualifying health plan HSA. I assumed it was high deductible because of the huge deductible. Now I have to pay a $25 penalty to the HSA to refund my contribution and hopefully not entice the IRS audit.

Sucks to have buy insurance outside of work...

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Re: Article on high deductible health plans - and the math

Post by CoastalWinds » Fri Jun 14, 2019 7:22 pm

My main beef with these plans is two-fold:

(1) they discourage people from going to the doctor to address real problems or concerns (e.g., a lump, an infection, etc.) when they’re still in the early stages and thus more treatable. It’s too bad there isn’t a way to broaden the definition of preventative a bit. Left untreated, some of these can be catastrophic or untreatable later. But at the prospect of several hundred or thousand dollars in OOP costs to have a lump checked, many will pass. That is not in anyone’s best interest.

Case in point: My friends employer gleefully told their employees when they recently switched over to a HDHP ($3K individual deductible), this switch is “designed to encourage you all to take better care of yourselves.” In addition to being a thinly-veiled sales pitch, I really think it has the opposite effect. I know of several people who stopped going in to address fairly serious medical issues like severe groin pain/hernia, a child with undiagnosed autistic tendencies, etc.

(2) They can be quite punitive for people with certain conditions. For example, my friend has type 1 diabetes and, with the switch, he will now hit the annual deductible ($3K) and OOP maximum ($10K) every year just for his medication.
Last edited by CoastalWinds on Fri Jun 14, 2019 7:28 pm, edited 2 times in total.

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Re: Article on high deductible health plans - and the math

Post by LilyFleur » Fri Jun 14, 2019 7:27 pm

CoastalWinds wrote:
Fri Jun 14, 2019 7:22 pm
My main beef with these plans is two-fold:

(1) they discourage people from going to the doctor to address real problems or concerns (e.g., a lump, an infection, etc.) when they’re still in the early stages and thus more treatable. It’s too bad there isn’t a way to broaden the definition of preventative a bit. Left untreated, some of these can be catastrophic or untreatable later. But at the prospect of several hundred or thousand dollars in OOP costs to have a lump checked, many will pass. That is not in anyone’s best interest.

Case in point: My friends employer gleefully told their employees when they recently switched over to a HDHP ($3K individual deductible), this switch is “designed to encourage you all to take better care of yourselves.” In addition to being a thinly-veiled sales pitch, I really think it has the opposite effect.

(2) They can be quite punitive for people with certain conditions. For example, my friend has type 1 diabetes and, with the switch, he will now hit the annual deductible ($3K) and OOP maximum ($10K) every year just for his medication.
People with Type 1 diabetes are now rationing their (extremely expensive) insulin. Some are dying.

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Re: Article on high deductible health plans - and the math

Post by mnnice » Fri Jun 14, 2019 7:38 pm

vu8 wrote:
Fri Jun 14, 2019 4:36 pm
Do you know how much China's universal basic resident healthcare plan for the whole year of 2018 costs? About 29 dollars! For a whole year!
IICR don’t the Chinese pay for most of their healthcare out of pocket?

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Re: Article on high deductible health plans - and the math

Post by grabiner » Fri Jun 14, 2019 9:12 pm

This article is not primarily about the math, but about human behavior. The math is usually in favor of high-deductible plans, but the way people use them is detrimental to both their health and finances.

Suppose you have the choice between an HDHP costing $7000 per year with a $3000 deductible, or a conventional plan costing $9000 per year with a $500 deductible, and you are in a 22% tax bracket. If you max out your Health Savings Account at $3500 (and contribute less to your Roth IRA if necessary), you get $770 back in taxes, so you have only paid $730 more out of pocket ($1170 if the premiums are paid by payroll deduction), If you use the whole deductible under both plans (usually the worst case for comparison), you have $270 less in your pocket under the HDHP but $500 in your HSA which you can either save or spend on things such as dental and vision care.

But this isn't the way most people actually use the plans. The extra $2000 in premiums is something that must be paid, so it gets paid. The savings is not something which gets budgeted.

I actually heard a version of this argument a few years ago on the radio in DC during the federal goverment's open season. One insurer which didn't offer an HDHP said, "Could you afford to pay the $3000 deductible with an HDHP?" In fact, the HDHP with a $3000 deductible cost $1500 less than this conventional plan, and contributed $1500 to your HSA, so the answer should have been a clear "Yes".

One major employer counter to this part of the behavioral gap is for the employer to contribute to the HSA. In the example above, if the employer charged $8500 for the HDHP and contributed $1500 to the HSA, then employees would have money in the HSA for their doctor's visits and prescriptions, and might even realize the tax advantage of contributing more to the HSA to cover current medical expenses (deposit $1000 in the HSA, then withdraw it to pay the $1000 emergency-room bill, and it only costs you $780).

The other problem with HDHPs, which was emphasized in the article, is that people with HDHPs are discouraged from using medical services, whether those services should be used or not.

I have posted regularly on the decision whether to use an HDHP, making a purely mathematical comparison. But I usually add the cautions to the mathematics: the HDHP is better only if it doesn't deter you from using the same medical services when you need them. (Another important concern is that an HDHP and conventional plan may have different networks; if you see a doctor who is outside the HDHP network, you shouldn't switch to the HDHP unless you are willing to switch doctors.)
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Re: Article on high deductible health plans - and the math

Post by Gray » Fri Jun 14, 2019 9:51 pm

I have a High Option Aetna Plan and use health services whenever needed without a second thought. I have High option dental and vision plans with Aetna as well and we use those regularly.

I broke a shoulder last year, had a year of PT (at a location of my choosing) and a surgery—I didn’t notice the impact to my budget. I was able to go to a “Gucci” Surgery Center of Chevy Chase because my in-network surgeon had a deal with them where they would write off whatever insurance didn’t cover. My dentist is on K St in DC and has all the latest dental technologies. My Vision/Health has paid for advanced retinal scans just to check for issues. You only live once and meager healthcare, or not using it, isn’t going to help you—it just helps your heirs inherit sooner.

My wife has MS and RA, but you wouldn’t know it when she’s out mowing the lawn because she’s had cutting edge care and the best medicines to keep her condition stable and asymptomatic.

https://www.afspa.org/filestoreAFSPA/FS ... C)2019.pdf

http://www.aetnafeds.com/pdf/2019/2019% ... Dental.pdf

http://www.aetnafeds.com/pdf/2019/2019% ... Vision.pdf

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Re: Article on high deductible health plans - and the math

Post by fortfun » Fri Jun 14, 2019 10:00 pm

grabiner wrote:
Fri Jun 14, 2019 9:12 pm


The other problem with HDHPs, which was emphasized in the article, is that people with HDHPs are discouraged from using medical services, whether those services should be used or not.
Yes, and sadly, if you bring up anything during the "free" annual physical, you are almost always billed for a separate office visit. It almost make the annual physical laughable, besides the blood work. i.e. Doc says,"Any problems lately?" Patient says, "I've been having some trouble sleeping." Doc, I'll write a prescription to help that. Bam, separate $300 office visit.

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Re: Article on high deductible health plans - and the math

Post by grabiner » Fri Jun 14, 2019 10:10 pm

fortfun wrote:
Fri Jun 14, 2019 10:00 pm
grabiner wrote:
Fri Jun 14, 2019 9:12 pm


The other problem with HDHPs, which was emphasized in the article, is that people with HDHPs are discouraged from using medical services, whether those services should be used or not.
Yes, and sadly, if you bring up anything during the "free" annual physical, you are almost always billed for a separate office visit. It almost make the annual physical laughable, besides the blood work. i.e. Doc says,"Any problems lately?" Patient says, "I've been having some trouble sleeping." Doc, I'll write a prescription to help that. Bam, separate $300 office visit.
It really depends on how things are handled. I have had this experience, but I have also had a doctor listen to my symproms, write a referral to a specialist, and not charge me. (The logic here is probably that the doctor didn't actually treat me for the condition, so he did not have a service to charge me for.)

I also usually wind up having some test ordered by my doctor which is not part of the covered free annual physical.
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Re: Article on high deductible health plans - and the math

Post by Sandtrap » Fri Jun 14, 2019 10:19 pm

dm200 wrote:
Fri Jun 14, 2019 1:54 pm
Article (and the math behind them) on High deductible health plans.

https://www.msn.com/en-us/money/healthc ... li=BBnbfcN

OUCH!! :dollar :dollar
Yes.
This is a landmine!
I fell in it in the past when we were in the transition period to retirement.

And, if you happen to get hit with the ACA Subsidy Cliff Penalty during a retirement transition period, pre Medicare. then. . .
Double Ouch!!! :moneybag :moneybag


Perfect Storm :dollar :dollar :dollar
Last edited by Sandtrap on Fri Jun 14, 2019 10:23 pm, edited 2 times in total.

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Re: Article on high deductible health plans - and the math

Post by fortfun » Fri Jun 14, 2019 10:21 pm

grabiner wrote:
Fri Jun 14, 2019 10:10 pm
fortfun wrote:
Fri Jun 14, 2019 10:00 pm
grabiner wrote:
Fri Jun 14, 2019 9:12 pm


The other problem with HDHPs, which was emphasized in the article, is that people with HDHPs are discouraged from using medical services, whether those services should be used or not.
Yes, and sadly, if you bring up anything during the "free" annual physical, you are almost always billed for a separate office visit. It almost make the annual physical laughable, besides the blood work. i.e. Doc says,"Any problems lately?" Patient says, "I've been having some trouble sleeping." Doc, I'll write a prescription to help that. Bam, separate $300 office visit.
It really depends on how things are handled. I have had this experience, but I have also had a doctor listen to my symproms, write a referral to a specialist, and not charge me. (The logic here is probably that the doctor didn't actually treat me for the condition, so he did not have a service to charge me for.)

I also usually wind up having some test ordered by my doctor which is not part of the covered free annual physical.
Hopefully, this part of the article comes to fruition:
Primary Care Patient Protection Act, a bill that would require high-deductible health plans to include a set of primary care visits each year, without cost or co-pays for the consumer. "If we can at least encourage individuals not to let their health go," said Dr. Munger, "that would be a huge hit."

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Re: Article on high deductible health plans - and the math

Post by Tdubs » Fri Jun 14, 2019 10:23 pm

Gray wrote:
Fri Jun 14, 2019 9:51 pm
I have a High Option Aetna Plan and use health services whenever needed without a second thought. I have High option dental and vision plans with Aetna as well and we use those regularly.

I broke a shoulder last year, had a year of PT (at a location of my choosing) and a surgery—I didn’t notice the impact to my budget. I was able to go to a “Gucci” Surgery Center of Chevy Chase because my in-network surgeon had a deal with them where they would write off whatever insurance didn’t cover. My dentist is on K St in DC and has all the latest dental technologies. My Vision/Health has paid for advanced retinal scans just to check for issues. You only live once and meager healthcare, or not using it, isn’t going to help you—it just helps your heirs inherit sooner.

My wife has MS and RA, but you wouldn’t know it when she’s out mowing the lawn because she’s had cutting edge care and the best medicines to keep her condition stable and asymptomatic.

https://www.afspa.org/filestoreAFSPA/FS ... C)2019.pdf

http://www.aetnafeds.com/pdf/2019/2019% ... Dental.pdf

http://www.aetnafeds.com/pdf/2019/2019% ... Vision.pdf
I'm a fed too, and I used a high option plan for some time till I realized I was paying way too much for exactly the same access to good care as the HDHP option. The only difference is that I save thousands on premiums and have access to an HSA. The deductible is a wash, given the fed contribution to the HSA, and all subsequent expenses are less with an HDHP. If I have a serious hospitalization, I will pay less than the high option. Routine care is less. I too get the best medicines, but I pay less with the HDHP. My family's access to care didn't change one iota when I switched, but my portfolio did.

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Re: Article on high deductible health plans - and the math

Post by Gray » Fri Jun 14, 2019 11:12 pm

As long as the government pays a huge amount of my health care premium, there’s no way I’ll change. When my wife has such expensive drugs, and sees specialists all the time, there is no way we’d come out ahead with high deductible. When you know you will be using it all the time, consistently, high option is the way to go.

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Re: Article on high deductible health plans - and the math

Post by F150HD » Fri Jun 14, 2019 11:29 pm

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Re: Article on high deductible health plans - and the math

Post by willthrill81 » Fri Jun 14, 2019 11:35 pm

We've had a family HDHP for the last five years and have had very good experiences with it. We only pay ~$90 month for it, and my employer pays the other ~$900 of premiums. My employer also contributes $1,400 to our HSA, and we've been maxing out contributions to it for a while now. Despite the fact that we have a four year old, we have not used much healthcare since we've had the policy as we've all been blessed with good health. Annual checkups and vaccinations have been completely free, and other office visits run us about $150. Our family deductible is $2,800, and our out of pocket maximums are $4,200/person and $8,400/family. Only one year did we almost satisfy our deductible within the calendar year.

Yes, there have been several times when we probably would have gone to urgent care if we had a different policy, but having to pay that $150 for a visit really makes us stop and question if it's really needed.

The biggest problem I see with HDHP is that if half of Americans can't lay their hands on $1,000 without going into debt, how on earth can they be expected to cover thousands of dollars in medical expenses for a single year out of pocket?

I see problems with individuals' behavior, the insurance system, the healthcare establishment, the legal system surrounding it, etc. There's plenty of blame to go around.
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Re: Article on high deductible health plans - and the math

Post by harvestbook » Sat Jun 15, 2019 7:12 am

When I became self-employed in 2011, we had private insurance that we very seldom used (mostly just the free annual physical, and my wife rarely even did that). My daughter was also on the plan. Costs escalated 15 percent a year and this year would've been $15,000. So I paid more than $100,000 to that plan and only had one "emergency" which turned out to be a false alarm and insurance covered about $10,000 of it.

Because we invest a lot of our income in tax-deductible, it made sense to move to an ACA HDHP--no premium. We're guaranteed to come out ahead unless the plan ends and we're back out in the wilderness. Oddly, my two cheap medicines and even office visits are actually cheaper now than when I had better coverage...I guess out-of-pocket charges are lower. And we still get our free annual physicals. Meanwhile our HSAs continue to grow. We're blessed with good health but even now, treatment for a non-critical medical issue would feel like a "choice" even though we have plenty of savings.

I know you can't judge the process by the outcome since there are so many unknowns and the luck factor, but it is a no-brainer for us.
I'm not smart enough to know, and I can't afford to guess.

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Re: Article on high deductible health plans - and the math

Post by Olemiss540 » Sat Jun 15, 2019 7:30 am

Big Dog wrote:
Fri Jun 14, 2019 3:06 pm
actually, the article does not show the math. If it did, it would have inquired with Robyn Hogdon's husband's plan and found out how much she is saving on monthly premiums in comparison to a $500 or $750 deductible plan. OTOH, if that is the only plan that her husband's company offers, the proper comparison is the monthly premium for the HD plan vs. a low deductible ACA plan.

As expected in today's so-called journalism, the article is missing a key component, and therefore one-sided.
This precisely. The "bad guy" is not the HDHP which typically ends up being a wash versus low deductible plans once premiums are taken into account (unless you are a low cost user then they can be a blessing). The "bad guy" is the cost of healthcare in general.

I guess an article on high costs of healthcare would have taken way too long to research than some fluff piece to rile up the working class on their employer's offerings.
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Re: Article on high deductible health plans - and the math

Post by MnD » Sat Jun 15, 2019 7:36 am

https://www.npr.org/sections/health-sho ... -treatment

Interestingly, women with high incomes who relied on high-deductible health plans were not immune to such delays — they experienced lags of 0.7 months for first breast imaging, 1.9 months for first biopsy, 5.4 months for first early-stage breast cancer diagnosis and 5.7 months for first chemotherapy, compared with high-income women with low-deductible plans.

Other recent studies have noted similar delays in diagnosis and treatment for complications from diabetes, cardiovascular illness and other conditions. And a report from the Kaiser Family Foundation in 2017 found that 43 percent of adults with health insurance reported difficulties in meeting their deductible — up from 37 percent in 2015.

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Re: Article on high deductible health plans - and the math

Post by investingdad » Sat Jun 15, 2019 8:32 am

For us, the HDHP with HSA works very well.

We regret not utilizing the HSA as a tax sheltered investment vehicle sooner, but we have been for the last 7 or 8 years now. It's invested in two conservative index funds.

That said, my wife and I are both well compensated and fiscally disciplined. I can see how this sort of plan would not work for many.

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Re: Article on high deductible health plans - and the math

Post by MathIsMyWayr » Sat Jun 15, 2019 8:56 am

A while back, my former employer offered a simple health insurance plan. Only one plan, effective on the first day of employment regardless of any pre-existing conditions. It was the norm with large employers then. It was also mandatory for the whole family unless a proof of other comparable coverage was provided. Later on, other employers started introducing insurance choices including plans of lower premiums and even cash incentive for opting out insurance. My former employer could not compete and finally followed the pack. Nowadays, we have cafeteria of plans and take chance with insurance like investment.

Insurance is a form of sharing risk. A pot of money goes in as insurance premiums and out of pocket expenses, and goes out as insurance payments and out of pocket expenses. With more choices, there will be more winners and losers.

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Re: Article on high deductible health plans - and the math

Post by SimonJester » Sat Jun 15, 2019 9:14 am

fortfun wrote:
Fri Jun 14, 2019 10:00 pm
grabiner wrote:
Fri Jun 14, 2019 9:12 pm


The other problem with HDHPs, which was emphasized in the article, is that people with HDHPs are discouraged from using medical services, whether those services should be used or not.
Yes, and sadly, if you bring up anything during the "free" annual physical, you are almost always billed for a separate office visit. It almost make the annual physical laughable, besides the blood work. i.e. Doc says,"Any problems lately?" Patient says, "I've been having some trouble sleeping." Doc, I'll write a prescription to help that. Bam, separate $300 office visit.
This has been my experience as well. Also now my annual blood work is no longer covered under the "free" annual exam. The insurance companies rationale, you are diagnosed with a condition (high cholesterol) so now the blood work is to treat that and not for preventative measures)!
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

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Re: Article on high deductible health plans - and the math

Post by JackoC » Sat Jun 15, 2019 9:24 am

Pricing of ACA plans in some states and situations mean that lower deductible plans virtually can't win. Example, NJ has this page were you can see all private plans and the age factors for pricing, then you can look up the deductibles:
https://www.state.nj.us/dobi/division_i ... s_2019.pdf

For a person 62, the Horizon BC OMNIA Bronze HSA plan costs $9,603.98 per year with deductible $3,000. The OMNIA Silver HSA plan costs $11,125.75 with deductible $1,250. IOW you pay $1,521.77 more to get a $1,750 lower deductible, hard to win on that. If you step up further to OMNIA Gold (no HSA), the cost is $7,686.08 more than the Bronze for a deductible reduction of only $2,500, mathematically impossible to win at least on the deductible, plus you could lose a couple of $k more in income tax from not having the HSA deduction.

Partly this is a function of the system of age rating, the prices escalate with age but the deductible differences are constant. So for a 28 yr old the annual cost increase Bronze to Silver is only $575.76 to get a $1,750 lower deductible, which could make sense. Although for Gold it's still a $2,903.03 premium increase to only get a $2,500 deductible decrease, plus again you lose the HSA deduction.

ACA subsidies would also alter this picture but for us, in the final pre-Medicare years and no chance of ACA subsidy, only the Bronze HSA plan makes any financial sense (among Horizon plans, but other providers don't have radically different prices and are accepted by far fewer providers). IOW the math can be that there's no sensible alternative to high deductible plans if you're going to have health insurance at all.

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Re: Article on high deductible health plans - and the math

Post by Tdubs » Sat Jun 15, 2019 9:29 am

Gray wrote:
Fri Jun 14, 2019 11:12 pm
As long as the government pays a huge amount of my health care premium, there’s no way I’ll change. When my wife has such expensive drugs, and sees specialists all the time, there is no way we’d come out ahead with high deductible. When you know you will be using it all the time, consistently, high option is the way to go.
You might want to look at the comparison tool available to feds called Checkbook. Whether I have low, medium or high use of my plan, the HDHP came out ahead, and my family usage is very, very high. In the fed system, the idea that HDHPs are only beneficial for the healthy really doesn't hold up.

Your point was that your plan gives you access to some club of high quality doctors that others on HDHP do not. That isn't true. There is no "lousy doctor" list for folks on HDHP--the list is the same. My wife has a very serious obscure illness involving surgeries performed only in a few locations around the country, the Johns Hopkins endocrinologist who walked into the examination room was the same guy whose major medical research publications I had been reading on the illness.
Last edited by Tdubs on Sat Jun 15, 2019 11:34 am, edited 2 times in total.

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Re: Article on high deductible health plans - and the math

Post by willthrill81 » Sat Jun 15, 2019 9:36 am

Olemiss540 wrote:
Sat Jun 15, 2019 7:30 am
Big Dog wrote:
Fri Jun 14, 2019 3:06 pm
actually, the article does not show the math. If it did, it would have inquired with Robyn Hogdon's husband's plan and found out how much she is saving on monthly premiums in comparison to a $500 or $750 deductible plan. OTOH, if that is the only plan that her husband's company offers, the proper comparison is the monthly premium for the HD plan vs. a low deductible ACA plan.

As expected in today's so-called journalism, the article is missing a key component, and therefore one-sided.
This precisely. The "bad guy" is not the HDHP which typically ends up being a wash versus low deductible plans once premiums are taken into account (unless you are a low cost user then they can be a blessing). The "bad guy" is the cost of healthcare in general.

I guess an article on high costs of healthcare would have taken way too long to research than some fluff piece to rile up the working class on their employer's offerings.
Healthcare costs, combined with serious flaws in the insurance system, are largely to blame. Most healthcare providers don't tell you what the cost of practically anything is before they provide it to you. Ask your local hospital what the cost of having your gallbladder removed will be, for instance. They'll look at you like you came from Mars. And consumers have been trained to believe that higher cost care is associated with better care, which is obviously not always true. Rather than other types of major insurance, which are primarily intended to protect against catastrophic events, healthcare insurance also includes the prepaid healthcare.

Healthcare insurance today is like buying a homeowner's insurance policy that also covers most home maintenance expenses. And then when you need home maintenance, you don't know (or care) what the costs are; you just want your insurance to pay for it. And then when your insurance premiums increase, you blame your insurance company. Under such a system, are we really surprised that costs have spiraled upwards?
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Re: Article on high deductible health plans - and the math

Post by anil686 » Sat Jun 15, 2019 9:41 am

I agree with others about this being less about the math and more about behavior. This has been well known in medicine for decades - HDHP will cause people to seek less care in order to not pay more OOP. The lower premiums are a direct measure of the lower fiscal responsibility of the insurer and the likelihood of the insured hitting the deductible limits. The higher the deductible limits, obviously the lower risk of exceeding them and thus the lower the premium. But I don't think insureds look at it this way. It is hard to change ways of thinking or behavior - both of which have been ingrained for decades with a previous insurance system. I find it even more interesting that today, many people, despite these obvious articles and complaints I hear in clinic every day, respond to poll questions that they are happy with their health insurance options. Something like 80% like their coverage - which I find absolutely fascinating...

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Re: Article on high deductible health plans - and the math

Post by DWesterb2iz2 » Sat Jun 15, 2019 10:07 am

NewOldGuy wrote:
Fri Jun 14, 2019 6:58 pm
Up until this year, we've always used my wife's company HDHP as I was self employed. The deductible was $2500 and the company contributed $500 match to HSA. She was laid off, so this year we on the ACA Silver plan $450/mo. that has deductible 3x of her old companies, but miraculously does not count as HDHP?? WTF? Only the bronze plan qualifies with a 5 digit deductible... crazy.

We kept her HSA going and I ignorantly contributed $1500 earlier this year into a non-qualifying health plan HSA. I assumed it was high deductible because of the huge deductible. Now I have to pay a $25 penalty to the HSA to refund my contribution and hopefully not entice the IRS audit.

Sucks to have buy insurance outside of work...
Yes, this is an easy mistake to make and I made it too. Most people (including professionals) think that any high-deductible health plan is an HSA qualified plan, and that's not true.

Christine Benz at Morningstar is usually very careful with her language but even she just says HSAs are "available to people with high-deductible plans." I wrote her this note:
I listen every week to the Morningstar Podcast. I know you are very careful, even in your phrasing, when describing investments.

I am curious about the way you described HSA accounts in this last week as being available to anyone with a high deductible policy. I, too, thought that was true. My wife and I buy ACA compliant, high-deductible policies (we each have individual plans with a $6000 deductible).

But we learned that those policies are NOT “HSA Qualified.” Being qualified for an HSA, we were told, involves MORE than just having a high deductible (over $1300). It also involves having an out of pocket maximum of NO MORE than $5000 per individual or $10,000 per family. It makes no sense, but that’s the rule.

My wife and I each have ACA-compliant BCBS of IL Blue Precision Bronze plan. Even though our deductibles are high enough to use an HSA, our max out of pocket expanses are $7,350 each, so that puts us over the $5,000 limit to contribute to an HSA. It’s a flaw in the system. We are EXACTLY the people HSAs were intended to help, but we can’t contribute to one with these ACA-compliant plans.

Here is a link to the rules for qualifying plans:
https://www.bcbsil.com/country/hsa_qualifies.htm

Here is a link to the specs of our plans.
https://www.bcbsil.com/policy-forms/201 ... 083-03.pdf

This topic came up on the Bogleheads board, too. Here is a link to that discussion:
viewtopic.php?f=2&t=239820

If I am wrong about this, please let me know. If I am right, and you can spread the word about this flaw in the law that needs changing.
I recently got this note from Schwab, which calls itself expert advice:
https://www.schwab.com/resource-center/ ... about-hsas
What is a health savings account?
Health savings accounts (HSAs) are tax-advantaged savings and investment accounts available to those with high-deductible health plans.1 Contributions to HSAs are tax-deductible.2 Capital gains, dividends and interest accumulate tax-free.3 And you pay no tax on withdrawals for qualified medical expenses, such as doctor visits, prescription medications, eye exams and dental care (see IRS Publication 502 for a complete list of qualified expenses).
See the foot note? Here is the clarification:
1For 2019, the IRS defines a high-deductible health plan as requiring annual out-of-pocket payments of $1,350 for an individual plan, and $2,700 for a family plan (see IRS Publication 969 for a complete list of requirements).
So they were wrong in the text, and then, in the footnote, offered only one component of the high deductible plan. So they missed it twice. They don't know what an HSA qualified plan is.

When you file taxes on Turbo Tax, it ALSO does not ask if you have a qualified plan. It asks only if you have a "high deductible health insurance" plan. Everyone helps you make the mistake you made. It's terrible. Maybe it will be addressed someday.

Hey, since max out-of-pocket is growing slower than the deductible in the formula to qualify, eventually the max out-of-pocket will be LOWER than the deductible, and no plans will qualify. I hope the formula changes before then.
Last edited by DWesterb2iz2 on Sat Jun 15, 2019 10:57 am, edited 1 time in total.

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Re: Article on high deductible health plans - and the math

Post by Nate79 » Sat Jun 15, 2019 10:56 am

DWesterb2iz2 wrote:
Sat Jun 15, 2019 10:07 am
NewOldGuy wrote:
Fri Jun 14, 2019 6:58 pm
Up until this year, we've always used my wife's company HDHP as I was self employed. The deductible was $2500 and the company contributed $500 match to HSA. She was laid off, so this year we on the ACA Silver plan $450/mo. that has deductible 3x of her old companies, but miraculously does not count as HDHP?? WTF? Only the bronze plan qualifies with a 5 digit deductible... crazy.

We kept her HSA going and I ignorantly contributed $1500 earlier this year into a non-qualifying health plan HSA. I assumed it was high deductible because of the huge deductible. Now I have to pay a $25 penalty to the HSA to refund my contribution and hopefully not entice the IRS audit.

Sucks to have buy insurance outside of work...
Yes, this is an easy mistake to make and I made it too. Most people (including professionals) think that any high-deductible health plan is an HSA qualified plan, and that's not true.

Christine Benz at Morningstar is usually very careful with her language but even she just says HSAs are "available to people with high-deductible plans." I wrote her this note:
I listen every week to the Morningstar Podcast. I know you are very careful, even in your phrasing, when describing investments.

I am curious about the way you described HSA accounts in this last week as being available to anyone with a high deductible policy. I, too, thought that was true. My wife and I buy ACA compliant, high-deductible policies (we each have individual plans with a $6000 deductible).

But we learned that those policies are NOT “HSA Qualified.” Being qualified for an HSA, we were told, involves MORE than just having a high deductible (over $1300). It also involves having an out of pocket maximum of NO MORE than $5000 per individual or $10,000 per family. It makes no sense, but that’s the rule.

My wife and I each have ACA-compliant BCBS of IL Blue Precision Bronze plan. Even though our deductibles are high enough to use an HSA, our max out of pocket expanses are $7,350 each, so that puts us over the $5,000 limit to contribute to an HSA. It’s a flaw in the system. We are EXACTLY the people HSAs were intended to help, but we can’t contribute to one with these ACA-compliant plans.

Here is a link to the rules for qualifying plans:
https://www.bcbsil.com/country/hsa_qualifies.htm

Here is a link to the specs of our plans.
https://www.bcbsil.com/policy-forms/201 ... 083-03.pdf

This topic came up on the Bogleheads board, too. Here is a link to that discussion:
viewtopic.php?f=2&t=239820

If I am wrong about this, please let me know. If I am right, and you can spread the word about this flaw in the law that needs changing.
I recently got this note from Schwab, which calls itself expert advice:
https://www.schwab.com/resource-center/ ... about-hsas
What is a health savings account?
Health savings accounts (HSAs) are tax-advantaged savings and investment accounts available to those with high-deductible health plans.1 Contributions to HSAs are tax-deductible.2 Capital gains, dividends and interest accumulate tax-free.3 And you pay no tax on withdrawals for qualified medical expenses, such as doctor visits, prescription medications, eye exams and dental care (see IRS Publication 502 for a complete list of qualified expenses).
See the foot note? Here is the clarification:
1For 2019, the IRS defines a high-deductible health plan as requiring annual out-of-pocket payments of $1,350 for an individual plan, and $2,700 for a family plan (see IRS Publication 969 for a complete list of requirements).
So they were wrong in the text, and then, in the footnote, offered only one component of the high deductible plan. So they missed it twice. They don't know what an HSA qualified plan is.

When you file taxes on Turbo Tax, it ALSO does not ask if you have a qualified plan. It asks only if you have a "high deductible health insurance" plan. Everyone helps you make the mistake you made. It's terrible. Maybe it will be addressed someday. Because max out of pocket is growing slower than the deductible in the formula to qualify, eventually the max out-of-pocket will be LOWER than the deductible, and no plans will qualify. I hope the formula changes before then.
The Schwab quote you copied looks perfectly fine. The term high deductible health plan (HDHP) is a specific term usually reserved for plans that are HSA compatible and have nothing to do with the general description of a plan with a high deductible. In the second quote they clearly reference to IRS section on the requirements for HSA's.

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Re: Article on high deductible health plans - and the math

Post by Paul78 » Sat Jun 15, 2019 11:22 am

I guess it really depends on your plan/employer.

My HDHP has a 1.5k deductible and after that I pay 5% of the negotiated rate for any additional services with a max out of pocket cost of 5k. Plus it has the $750 of yearly pass through premium that goes directly into my HSA.

For many ranges of yearly health care cost it actually comes out ahead or is a wash with the other plans I have available. Even in the "worse case" where I hit the max out of pocket cost of 5k it would still only be 1k more expensive than a traditional health plan. To me having access to a HSA is more than worth the potential 1k risk. Plus that would only be a one time 1k loss (I mean if I develop some chronic expensive health condition I would simply eat the 1k loss in year one and then switch to a different plan the next year).

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Re: Article on high deductible health plans - and the math

Post by Paul78 » Sat Jun 15, 2019 11:32 am

MichCPA wrote:
Fri Jun 14, 2019 3:33 pm
I can really see this both ways.

When I had an HDHP a couple of years ago, our company had the minimum deductible to qualify for an HDHP (like $1200 at the time) and gave us a $500 incentive for doing a yearly blood draw and questionnaire. The premium was super cheap so I actually made money after the incentive and I built up an HSA balance because my only medical expense is contact lenses.

However, what I will call ultra-high deductible plans (UHDHP) are a recipe for personal financial disaster. A 15k deductible for means that even fairly routine medical items are a crisis the average (65K a year) family. I don't want to know what dealing with a pregnancy and losing and income, but adding an insane level of cost would mean to that type of family.
This. I mean I have one of the HDHP you describe in the first paragraph. It does not really stop me from getting care or make any event a medical crisis. I go about my healthcare as I would if I had any other insurance. Worse case scenario I lose $300-$600 a year compared to having a traditional plan. But there are also years (ie when I just go for yearly physical and nothing else comes up) I make $1,000 by having the HDHP compared to having a traditional one. So it doesn't really deter me from care.

But if I had a 15k deductible that would make me question every single medical choice I make. It would also almost assuredly lead to worse overall health outcomes (ie waiting to address a problem or a discover a problem till it gets significantly worse).

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Re: Article on high deductible health plans - and the math

Post by DWesterb2iz2 » Sat Jun 15, 2019 11:33 am

The Schwab quote you copied looks perfectly fine. The term high deductible health plan (HDHP) is a specific term usually reserved for plans that are HSA compatible and have nothing to do with the general description of a plan with a high deductible. In the second quote they clearly reference to IRS section on the requirements for HSA's.
HIgh deductible health plan, may be "usually reserved for plans that are HSA compatible" in some circles of people who know ACA inside and out, but to send this out to regular clients without explicitly stating that a plan with a high deductible also needs to be an "HSA qualified" plan (which is how BC/BS describes them), is not helpful. They use the term in lower-case and they use it descriptively. If I didn't know better, I'd think from their FAQ, that if my plan met the deductible, I can deposit money into an HSA. And that would be illegal.

So, as a relatively aware Schwab client and ACA insurance consumer, I found it, at the very least, poorly worded, twice.

Edit. The link they now provide in the foot note was not here in the initial note they sent out. I sent them a letter asking for clarification, like I did with Christine and they added it. So, it IS a little better now.

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Re: Article on high deductible health plans - and the math

Post by finite_difference » Sat Jun 15, 2019 12:13 pm

mnnice wrote:
Fri Jun 14, 2019 7:38 pm
vu8 wrote:
Fri Jun 14, 2019 4:36 pm
Do you know how much China's universal basic resident healthcare plan for the whole year of 2018 costs? About 29 dollars! For a whole year!
IICR don’t the Chinese pay for most of their healthcare out of pocket?
There is universal health insurance available but I think not everything is covered. Also it probably does vary somewhat based on things like location, status, employment, etc. And of course having money always helps.

One thing that significantly decreases costs in China is that doctors are paid far less than in the US. In the US, doctors are generally handsomely paid and the medical establishment restricts the number of doctors that graduate each year. Supply and demand. In China, being a doctor is more the equivalent of being a professor or PhD researcher in the US in terms of salary.

Also I think in China the lifestyle on average is generally much healthier in terms of food and exercise than the US (and much of the world for that matter). That would help keep the health costs down on average. But that is changing with the introduction of fast food, sugary junk food, and significant air pollution. And the good old smoking and heavy drinking. At this point you pretty much can’t go outside in most urban areas for most of the year.
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Re: Article on high deductible health plans - and the math

Post by deltaneutral83 » Sat Jun 15, 2019 1:42 pm

HawkeyePierce wrote:
Fri Jun 14, 2019 2:54 pm
I currently use a high deductible plan, though it's only a $1500 deductible. My employer picks up the entire premium. I'm young and relatively healthy so I'm willing to take the gamble. Even a lot of my older coworkers use the HDHP in order to take advantage of the HSA. We are the small minority for whom the HDHP pays off.
You never mentioned the out of pocket max but I suspect it's not much above the deduc. Not sure what "gamble" you are referring to when you have a $1,500 deduc and premiums are 100% picked up by the employer??? That's pretty much utopia. The "small minority for whom the HDHP pays off" is taken out of context because people have neither the mechanical aptitude nor the willpower to not spend every dollar that comes into their account. If you require a lot of medical care via hospital admission the HDHP is going to likely pay off being on the high side, in addition to the low side. Journalists rarely analyze this probably because they don't know how. Out of pocket max on every plan I've ever been offered is significantly higher on PPO than the HDHP in addition to higher premiums. Don't know what PPO options you have but I bet the premium per month you are required to pay isn't better than $0 like the HDHP.
We only pay ~$90 month for it, and my employer pays the other ~$900 of premiums. My employer also contributes $1,400 to our HSA, and we've been maxing out contributions to it for a while now. Despite the fact that we have a four year old, we have not used much healthcare since we've had the policy as we've all been blessed with good health. Annual checkups and vaccinations have been completely free, and other office visits run us about $150. Our family deductible is $2,800, and our out of pocket maximums are $4,200/person and $8,400/family. Only one year did we almost satisfy our deductible within the calendar year.
That is fantastic for your employer to pick up so much of the premium. $1,100 approximately in tax deductible premiums plus $1,400 from the employer in the HSA gets you to $8,400 with $7,000 in tax deductible contributions on your own. $8,100 (tax deductible) in total spend for a family of 3 in network is pretty solid for worst case which as you mentioned isn't going to happen every year.

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Re: Article on high deductible health plans - and the math

Post by dm200 » Sat Jun 15, 2019 2:28 pm

Good discussion :)

Yes - mainly about behavior - I agree.

In addition, I wonder if all the "facts" are correct about such "victims"?

My own leanings/opinions on health insurance is that "reasonable" copays and fees should apply before such high deductibles apply. I don't know what this is - but there is probably a "sweet spot" where copays, at the beginning, at low enough to not deter folks needing such care - BUT high enough to deter overuse.

Medicare supplement plans now (or soon will be) that have no initial deductible are not available.

Our Kaiser medicare plan has an annual maximum out of pocket at $6,700 but very reasonable copays for office visits ($10 PCP and $45 specialist), $250 outpatient surgery, $45 Urgent care (24x7), etc.

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Re: Article on high deductible health plans - and the math

Post by Big Dog » Sat Jun 15, 2019 3:06 pm

I agree with others about this being less about the math and more about behavior.
That's fair, but I still argue that the article is incomplete. It should say, the person chose/has a HD plan that costs xx hundreds less per month than a LD plan. But like many of us, instead of putting that xx hundred away for a rainy day (or a future medical procedure), it's spent on daily living (and fun stuff?). So, it's behavior that makes a bad choice, i.e., personal responsibility.

instead, the gist of article is that HD plan = bad bcos healthy care costs are high. Much different nuance (and article), IMO. Of course, a personal responsibility article would not make it to 'press'.

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Re: Article on high deductible health plans - and the math

Post by willthrill81 » Sat Jun 15, 2019 3:23 pm

dm200 wrote:
Sat Jun 15, 2019 2:28 pm
My own leanings/opinions on health insurance is that "reasonable" copays and fees should apply before such high deductibles apply. I don't know what this is - but there is probably a "sweet spot" where copays, at the beginning, at low enough to not deter folks needing such care - BUT high enough to deter overuse.
I believe that such a form of insurance is likely to be the most effective at improving the current system in its totality. The insured need skin in the game so as to encourage health living and receiving unnecessary healthcare. The quote below from Dr. Jim Dahle is very apt.
White Coat Investor wrote:
Fri Jan 19, 2018 6:41 pm
In order to have a functioning market, most/all of the market participants need to have skin in the game and there must be transparency of prices. Neither of those exists in our current health care "market." Especially transparency of prices.
The more skin in the game that consumers have, the more that healthcare providers will be encouraged and even demanded to increase the transparency of their prices.

Consumers don't want to be told that they need to pony up for more of their healthcare expenses out of pocket, but the reality is that that is exactly what is needed.
“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

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