So it’s “that” time of year again. Typo Knig and the spawn are covered under his insurance, and open season for him ends tomorrow (2 weeks before mine even opens, so no opportunity for comparison-shopping). Boo.
And the high-deductible plan caught my eye. Especially now that they have a separate account (aside from the health savings account) which can be used for certain expenses.
TL/DR analysis is below, but we need some ideas as to what to think of when crunching the numbers.
TL/DR:
Ballpark figures from this year’s expenses for them: 16,000 dollars (yeah, ouch. But that includes a couple of expensive prescriptions). Our out of pocket was about 3,000.
Figuring what the new plan would pay, versus the premium savings, we’d be spending about 3600 more out of pocket than we are now.
BUT - we could put aside a lot more in pretax money. 6,550 more. Partly offset by the premium savings of 2200, our post-tax cash flow hit would be about 3,000 a year.
So: we’re spending 3600 more on expenses but saving a chunk on premiums. We’re putting a lot more away pretax (reduced income) and using most of that to cover the difference.
The expenses are close to the out-of-pocket limit. So anything beyond that is free, sort of. We’re actually debating adding me to the policy as well, since the deductible and out of pocket don’t go up any.
Previously was self-employed, had a high-deductible plan we paid for ourselves.
Now: both employed, with a choice of an 80/20 plan or another HD plan. HD plan premiums are less than half the 80/20 plan premiums. Company kicks in about 30% of the deductible in the form of payments into an HSA.
I was expecting the 80/20 plan to be the better, since I’m expensive to keep healthy. But once I crunched the numbers, lo-and-behold, it looked like the HSA would be considerably cheaper.
Sounds like you’ve thought of everything I have: tax savings, lower premium costs, what you’ll expect to pay out-of-pocket. Plus big added bonus if you can add yourself in with little added expenses. Sounds like a no-brainer to me.
Correcting my numbers: the 3600 a year more in expenses is before the premium savings kicks in; it’s actually about 1400 after premium savings (well, a bit more since the premiums are pretax…).
Still a cash flow hit of course, especially if we max out the HSA account. But that, I gather, doesn’t go away at the end of the year.
How do the company contributions work, tax-wise? Do you have to pay taxes on that money when you use it?
Well, it hasn’t actually started for me yet, but I don’t think I have to pay any taxes on the company match. I think it’s like the company portion of the premium; it just gets paid, we don’t have to do anything.
And yeah, we’ll have a cash-flow hit as well, as we fill up our portion of the HSA. I’ll max out my deductible in the first few months, so I’m not worried about anything being left over.
The big question marks for me so far is hoping that everything will be covered; getting a “yes” or “no” out of the insurance company about “is device X or prescription Y covered?” Is like getting blood out of a stone. I’ve resigned myself to waiting and hoping that everything I’ve grown accustomed to will continue. In the meantime, I’m stocking up as much as I can before the 1st, anticipating delays and fights.
Nope. I’ve had a HSA for many years now and never have to report how much I use to anyone. And yes the amount rolls over every year, so you can build up a nice war chest (unless you spend it all like me).
I’m sure that’s why there’s a cap on how much can be put into the HSA - so people’s companies can’t give them tens of thousands of tax-free dollars to spend tax-free. $3050 or whatever is all the government is willing to let you have tax-free (coming or going).
I also read in CNN just this morning that those “use it or lose it” flex spending accounts (not HSAs, but the other ones you can set up and use) are going to allow limited roll-over as well. According to the article, they’re changing things to allow a rollover of up to $500 per year.
Don’t know if that helps anyone, but I thought it was useful information.
What about the out-of-pocket limits on these things? If the deductible is 2700 and the out-of-pocket limit is 3700, does that mean that your total possible hit for the year is 3700? or does the out-of-pocket limit only start to count AFTER the deductible (i.e. you have to shell out 6,400*).
Does your high deductible plan have “coinsurance”? Our new choice of plans does, and I didn’t even properly understand what it was until I attended a meeting about the new plan: on top of the co-pay you have to pay 10% of the costs (silly me, I thought they meant you had other insurance too). So say I have a e.r. bill of $22,000, I’m paying a copay and $2,200 of that if I haven’t reached the yearly max out-of-pocket expense of $6000 yet? No thanks.
Do you mean on top of the deductible you have to pay 10%? If so, say your deductible is 3,000: you pay 3,000 of that ER bill, leaving 19,000, then you pay 1,900. And the 3,000 should count for your out-of-pocket as well so you’re right at 4,900.
For my husband’s (and his deductible is 2700 single, 5400 family) once we hit that, we pay 10% until we hit the out of pocket limit, which is “only” 3700 individual, 7400 family. This, I gather, is much lower than the average.
I did a lot of number crunching today and if it were just the spouse and 2 kids, it’s difficult to make the high deductible plan work even with those figures. . Adding me onto his policy, the premium is almost exactly what I pay (though my work) for “better” (no deducible) coverage. Throw all my expenses on top of his and the kids’ (and my son is a cheap date, health-wise; he’s had one claim this year), and we blow into and out of that 5400-to-7400 “donut hole” quite easily.
It can be pretty hard to hit the out-of-pocket limit (especially with my current insurance, where prescriptions don’t count). I’ve done so once in the past 20 years: the year I had 2 MRIs, surgery, expensive stomach testing, PT for orthopedic problems, and north-and-south endoscopies (I sure hope they did the “north” first ;)).
Yup. On top of a $3,000 in network & $6,000 out of network deductible. Dunno about my coworkers, but I’ll be choosing between the regular HMO and PPO plans.
It’s likely your employer offering are actuarially equivalent. The primary difference will be who pays “first dollar.” With a sort of premium plan, the plan pays that first dollar sooner - at the expense of higher premiums. The high deductible plan will pay that first dollar much later, but at a premium savings.
One thing to consider - the premium payments for that more expensive plan are payed whether you utilize any health care or not. In effect, the money is gone. For a high deductible plan, should you save the difference in premiums in the health savings account and you don’t utilize health care, that money is yours indefinitely.
What I do when calculating my options is figure the bottom line for the worst case scenario. Include your premium payments in your total out-of-pocket expense. Come up with an example which satisfies your full family out-of-pocket maximum amount for the year, including premium payments and compare bottom lines. Then go back and look at what expenses, if any, you may still have to pay once that maximum out of pocket is met. It is likely that you still may be responsible for office visit and prescription drug copays on that “premium” plan, where the high deductible plan you will not.
HSA is not taxed when you get it; if used for qualified medical expenses, no tsx when used. Not lost at end of year & follows you from job to job. HCSA its use or lose , need to guess well. Theres a third one that is for child childcare ( limited use elder care?) onl, also use or lose.
I dont dare advise you further; this is a job for a tax proffessional w/ all the #s. Sorry for the shorthand…
Thanks - yes, familiar with the various types of pretax; we used the childcare version way back when - but with the kids 16 and 19 the IRS doesn’t think much of it, LOL. And it can indeed be used for other dependents who are disabled.
The one new thing this year is the limited-use “goes away at the end of the year” account.
I was surprised that the company’s contributions to the HSA are not taxable. I understand why they do it (it’s an incentive to use the high-deductible plan, which costs them a LOT less).
thatguyjeff, good points. Of interest, things like office copays were not counted toward out-of-pocket maximums under my husband’s current plan (not the new one). Nor were prescriptions. Just things like procedures etc. As of 2014, they would be counted and the plan will also have an out-of-pocket limit on prescriptions.
What I’ve found through number crunching is that if you’ve got either very LOW expenses, or very HIGH ones, the high-deductible plans are better: low because obviously you save the difference, high because at some point they pay a much larger percentage.
But if it weren’t for the type of cap his plan has (the numbers go up when you go from one to two people, but NOT when you go up to three or more), I’m not certain it would be worth it for me to switch: my employer’s premiums for me on the regular plan are basically identical to my husband’s employer’s premiums for me on the high-deductible plan. Practically speaking, we’d never hit the out-of-pocket limit on that one - well, I did one year, when I had a lot of stuff going on - because prescriptions weren’t covered. At 10 bucks here, 40 there, it’s hard to hit 4,000 dollars.
It’s always dangerous to look for logic in tax rules, but the idea is that an HSA usually has a cheaper premium because of the higher deductible. By making employer contributions to an HSA not-taxable , an employer could switch to an HSA and then make up the difference in premiums with contributions to the HSA. It also fits into a logical pattern when looked at in the context of FSA and direct health-reimbursement plans that are also non-taxable.
You’ve noticed the fact that FSA’s are limited-purpose when combined with an HSA. That’s a new rule, and some people get surprised by that.
I think the rest of your math is looking at things correctly… ultimately, you just have to make a best-guess about these things. Without a crystal ball, it’s impossible to say which one will actually turn out the best for you.