Health Insurance Question: Which Plan?

  I was hoping to get some people’s opinions on something to see if I’m thinking about this correctly, if I’m missing something, etc. Open enrollment for benefits at my company is coming up soon (we’re on a weird benefit calendar). While final prices aren’t in yet and we shouldn’t expect them until about the end of July, we have been told that insurance premiums shouldn’t go up more than 1-2% this year, if at all, and HSA contributions are expected to go up slightly. I am trying to decide how I want to go about benefits this year and wanted to throw some facts out there and see what other might do in this situation.

  My employer offers us all two options for health insurance, a $0 deductible co-pay plan, and a high deductible plan with a family deductible of $2,700, 20% co-insurance after deductible (meds on copay after deductible). My insurance covers myself and my husband. I do not have any medical issues and just see my doctor once a year for a physical. My husband has type-2 diabetes and has a lot of meds, including insulin. Our biggest medical cost comes from scripts.

  I have kept us on the co-pay plan in the past. It costs me about $300 a month for this plan ($149 bi-weekly), and the copays are pretty low. Hubby’s insulin comes in at $15 a month, the rest of his meds are $10/90 days (5 or 6 of those).

  The high deductible plan has no premium for me, it is 100% paid for by my employer. They also contribute about $1600 to an HSA account over the course of the year (bi-weekly contributions would be about $60). Obviously, this way we would need to be able to cover that $2700 deductible, and two months of my husband’s insulin, along with his other meds, would use it up. From a cash standpoint, we are in a position that we could have all that cash together before the start of the new plan year (September). That way the contributions my company makes to the HSA and what I would put in would be to fund the deductible for next year, true expenses style. That way we will always be pre-funded on our annual deductible. Plus, HSA’s are something I can always take with me if I leave my current job. Once an insurance premium is paid, it’s paid forever.

  The hitch is that the cash I would need to use to cover the deductible for this year has been earmarked to pay off our credit card debt, which would wipe it out completely, and get my paychecks a full month ahead. If we cover the deductible, that would put these plans off until the end of the year/beginning of next year at earliest. I’m just not sure what the best long-term solution is. If we wouldn’t be able to cover the deductible, I wouldn’t even consider switching us. But this would put a lot of money back into our pockets on the monthly. I’m still not sure if they payoff is quite worth it.

  Anyway, I’m just curious if there are any thoughts. This will be a big decision that the hubs and I will need to discuss quite a bit, and an outside perspective might give us a new way of thinking about it.

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  • I secretly love looking at stuff like this. I actually do a calculation of the worst case scenario. Take the total premium cost, and add it to the out of pocket maximum for each plan. That is the absolute most you will pay for medical (assuming all your services are covered). With your husbands medical history, it sounds as though you may want to expect to hit the out of pocket. I would take the contribution of the employer out of your total cost as well.

    Here's a breakdown of what I'd add up to calculate your worst case scenario costs:
    (Premium + Out of Pocket Maximum) - employer HSA contribution (when applicable)

    NOTE: You can use the HSA funds to pay for the deductible and any additional out of pocket costs. You usually can't use them to pay the premium. I would also highly recommend, if you go the HSA route, to contribute the IRS maximum as it rolls over and stays with you and lowers your taxable income. If your out of pocket costs will be greater than what you can save in the HSA, that is what you need to fund for in YNAB. I personally don't put my HSA on budget as I only use it for medical expenses. 

    Happy to chat in more detail if I didn't help answer you question.

    Reply Like
    • Heatskitchen Also, I am looking at this solely from the health insurance perspective. Patzer has some great points below regarding the investment option if you are more interested in that end.

      Reply Like
      • Tobias
      • Toviathan
      • 5 mths ago
      • Reported - view

      Heatskitchen Is it terrible I have never even really considered the out of pocket maximum? It's just one of those numbers that I've looked at and thought "that's so high, we would never even reach that," and never gave it another thought.

      I was also thinking that contributing to the IRS limit was the best way to go if we go HSA. Or at least as close to it as possible. I like this way of looking at it though. Gives us the best real number to look at to evaluate quantitatively which method might be better. I keep getting caught on the fact that the high deductible plan has no premium, so keep all of the money to use for medical costs rather than send it all off to the insurance company.

      Thanks for the response!

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      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 5 mths ago
      • Reported - view

      Tobias Bear in mind that the IRS limit includes your employer's contribution to the HSA.  For a clean calendar year in which your employer contributes $1600, you would be able to contribute (IRS limit - $1600).

      The analysis gets a little trickier in your specific case, because your employer is not doing the HSA on a calendar year basis.  So you would need to track how much the employer contributes for each insurance year, split by which calendar year it falls in.

      Reply Like
    • Tobias It's not terrible! A lot of people don't understand anything about how insurance works. 

      For instance, I just changed jobs. I have two young kids, so already hit my OOP max for my old job (which sucks). Moving to my new company I was going between a PPO that had copays (most of my costs are office/sick visits), however, that plan had a $10,000 out of pocket maximum. The HSA (which the company funds some money as well), had an out of pocket limit of $6,000. I'm just planning to fund the HSA to that limit and call it good. I literally wouldn't be able to handle $10,000 without serious work (YNAB would help, of course). Plus, I get to keep the HSA funds if we don't use them :)

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      • RIP_MSMoney
      • FinTech Programmer
      • rip_ms_money
      • 5 mths ago
      • Reported - view

      Heatskitchen  to confirm, is it an hsa or a hca? My company has a similar plan where they contribute half the deductible. This is the plan we have. Ours is a HCA. The difference is the owner. HCA are owned by the company and any fund left in that account when/if I leave stays with the company. If you have that then I would not recommend adding your own money to the pot. Either way (HSA/HCA) are great plans if you can cover the deductible.

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    • RIP_MSMoney Mine is an HSA, so I fully fund it to take the funds with me. I've never heard of an HCA, but assuming it's similar to an FSA, if you expect to have medical expenses, it can be worth the tax savings to contribute up to what you're expecting to spend. There is some risk that you'll lose the money though, of course. THat's just what you have to weigh for yourself.

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  • It sounds like you have all the numbers, and you're looking at the analysis the correct way.  Then there's that prioritization decision, jump now to HSA and defer debt payoff, or pay off debt and hope the same deal is available a year from now.

    Things you didn't mention:  Employer contributions to the HSA do nothing to your tax bill.  Contributions you make over and above the employer $1600 are pre-tax.  How much that's worth to you depends on your marginal federal tax rate, and marginal state tax rate if your state has income tax and follows the federal rules for HSAs with respect to income tax.

    If you find you are able to put more into the HSA than you need for the next year, the excess can grow tax-free.  It will come out of the HSA tax-free if used for medical expense incurred after the start date of the HSA; worst case, current law allows payment of Medicare premiums with tax-free HSA funds.

    An influence on my decision in your case would be the costs and investment choices of the HSA.  Almost certainly you will be stuck with whatever HSA provider your employer has chosen, at least for the employer contribution.  (If this happens to be a firm with the intials HealthEquity, I hate their terms and investment costs.)  You could open a separate HSA at a provider of your choice for the funds you contribute over and above your employer's contribution.  (Fidelity has much more investor-friendly terms and conditions than HealthEquity did; I have not researched other providers in detail.)

    I would lean toward the HDHP and HSA if the total cost to you for the first year is lower, because the benefit will only grow over time; but only you can decide how important it is to retire that debt quickly.

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      • Tobias
      • Toviathan
      • 5 mths ago
      • 1
      • Reported - view

      Patzer The tax item is definitely something I would need to consider. I try to keep my withholding set up to minimize any refunds/tax owed, and losing the premiums out of my paychecks would have some impact on that (depending on how much I wind up funding into the HSA myself comparatively).

      It never even occurred to me that I could open my own HSA account for my contributions...Becuase you are right, the employer contributions at least have to go in the account they open for me, which is held by one of our regional banks that pays 0.01% interest. I'll need to look into other options and see if that would be a good route to take if we go HDHP.

      But thank you for all that, that made me think of some items I wasn't considering as much.

      Reply Like 1
  • Does the company that makes your husbands insulin have a copay assistance program by any chance?  I'm on a very expensive medication with a copay assistance program and essentially i refill it on january 2nd and my deductible is covered AND paid for by the copay assistance from the big pharma company.  Not sure if insulin has something similar.  

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      • Tobias
      • Toviathan
      • 5 mths ago
      • Reported - view

      Herman We found one of those when we were evaluating this last year. The program will pay up to a certain amount, which, before deductible is hit, would take care of about 40-50% of it. It would still be in the neighborhood of $500 per month. That's why I would only want to make the leap into high deductible insurance if we can pre-fund the deductible at least. After that the insulin we would only have to cover at 20%, and the rest of his meds would go to co-pays like they are now.

      If we do our meds through the home-delivery service our insurance company provides, they allow us to get 90-day supplies and then pay for them over the three month period in installments, so we would have to rely on that if we couldn't pre-fund the deductible. That would also make it near impossible to get ahead on the deductible like I would want us to.

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      • Herman
      • herman
      • 5 mths ago
      • Reported - view

      Tobias in my case the portion the coinsurance pays would still count against your deductible, in essence reducing the amount you have to pick up dramatically.  Just another factor in the equation.  in my case the coinsurance doesn't cost anything, it is paid for by the drug manufacturer. 

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    • eloquentz
    • Numbers Wizard (Accountant), Acoustic Artist (Musician) and Jill of all Trades (Wife & Mother)
    • eloquentz
    • 5 mths ago
    • Reported - view

    Just food for thought. I was relatively healthy and only on a couple of prescriptions. Then last year, all of a sudden I was hospitalized.  For FOUR MONTHS! Now, I am Canadian and have public healthcare, so I don't know how much it all cost, but I am sure it was well into the six figures if not into the seven figures for all they did for me while I was in patient.  Previously, I only occasionally visited my doctor as well.

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    • eloquentz And this is why I always look at the out of pocket maximum as a worst case scenario. You can run the worst case, and then look at your 'expected' costs and determine the level of risk you're willing to take. But, obvi, you dn't have to worry being in Canada!

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      • eloquentz
      • Numbers Wizard (Accountant), Acoustic Artist (Musician) and Jill of all Trades (Wife & Mother)
      • eloquentz
      • 5 mths ago
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      Heatskitchen Yeah, I was just throwing out there that the decision factor of "I'm fairly healthy" should be left out of the equation.  I was fairly healthy until my body decided to try to kill me this year.

      Reply Like 1
      • Voracious Reader
      • YNAB broke is not the absence of money, but rather the judgment that it has something more important to do.
      • Orange_Cheetah.3
      • 5 mths ago
      • 1
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      eloquentz 

      I am very, very glad you are okay. 

      Tobias  A lot of people never know their out of pocket maximum, but this is an excellent thing to find out. I had some unfortunate health conditions over the past few years, and became intimately acquainted with my oop max. Keep in mind, if you do hit the OOP "Lotto" that if you have to, you CAN call your providers and make some payments over time, usually with no interest. I recognize that's far from ideal, but I'm True Expensing my next year's deductible. I can't realistically True Expense the OOP max at this point...at least not without sacrificing things I am unwilling to sacrifice, as I am still working on old debts too. 

      As far as which plan to go with, I have no expertise. Just wanted to say I have read this thread with interest and learned some things too, so thank you for starting it!

      Reply Like 1
      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 5 mths ago
      • Reported - view

      eloquentz 

      Yes.  This is why I pay annual health insurance premiums that are almost twice the typical total annual amount of my health care cost.  My OOP maximium this year is $6500, I expect to come nowhere near that, and I can't accept the risk of a financially catastrophic health event changing that outlook.

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      • Technicolor Cheetah
      • Not sure when I became a cheetah...but I'll run with it
      • technicolor_cheetah
      • 5 mths ago
      • Reported - view

      eloquentz 

      I have a high needs child.  We've been in the ER multiple times in the last year.  Each time carries the risk of hospitalization.  With no surgeries, a hospital bed can run $3-10k a day, probably more.  Choosing the 70/30% split option might save us a small amount monthly, but the chances are too great we could run up hundreds of thousands of dollars of debt.  And then, with US healthcare, you run the risk of out of network hospitals and doctors.  Ambulances often won't take you to an in-network hospital if there's a closer ER, assuming you even know which ones are in network.  We've been hit multiple times by an out of network specialist at the hospital, that's never fun to find out.

      Honestly, I'd probably go with a more expensive option if it would mean less out of pocket in an emergency, especially if I had a family member with diabetes.  Multiple members of my extended family have diabetes and the risk of diabetes-related illness or injury is too high personally.  Unless the higher cost option was out of reach entirely, there's a lot of things I'd give up before I gave up greater health care coverage.  YMMV, I know a lot of people who are comfortable with more risk than I am.  

      Reply Like
  • In your situation, the HDHP with HSA is a no-brainer, as the premium savings is greater than the deductible, and that savings can be put in the HSA instead. 

    Slow the debt-paydown and fund the HSA as much as you can.

    Reply Like
  • Wow I'm glad I don't live in the U.S. You guys medical system is completely messed up.

    Reply Like 2
      • Technicolor Cheetah
      • Not sure when I became a cheetah...but I'll run with it
      • technicolor_cheetah
      • 5 mths ago
      • 4
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      Forest Green Stallion 

      Cannot disagree.  Don't remember if you mentioned if you have kids or not, but an unmedicated natural birth in a hospital can range from $10,000 to $40,000 or more.  Or at least that was what I found out before I had my last kid 8 years ago.  I think my last was billed to my insurance for $34K and what they would have billed me if I was uninsured.  

      The worst part is that there's no uniform cost chart.  Every hospital sets its own rates.  So the very same procedure can vary by hundreds or thousands of dollars depending on which hospital.  We're talking within the same city even, not the difference between high cost of living areas and low cost of living areas.  In a lot of rural places, the hospitals have dried up and blown away because they can't afford to keep them open, leaving people with long drives to medical care, assuming they can afford it.

      A lot of working people die of fairly easily treated things here.  If you don't have insurance, you're going to ignore that cough you've had for a few months or a few years.  By the time you can't ignore the pain and go to the ER (where you cannot be denied entrance if you cannot pay) and they find the cancer, it's spread.  Hospital boots you out because all the ER is required to do by law is stabilize you - chemo, surgery, anything to treat it you have to show you can pay ahead of time so you can't afford to treat your cancer. 

      People make fun of the teeth of people in the UK but dental insurance is harder to get than regular insurance and usually pays very little for anything beyond cleanings.  So again, if you don't have money, you can't afford dental care.  It's cheaper to pull a tooth than to do a root canal or put a crown on.  

      It's brutal if you can't afford good insurance.  And good insurance can be a thousand dollars or more a month.  

      Reply Like 4
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