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.
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.
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.
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.
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.