High deductible/HSA insurance plans

Factual Questions
1

(need help fast — deadline for open enrolment ends today)

I’m trying to choose between five insurance plans. The plans and information are available here. Three are PPOs, two are high deductible plans. I’ve created a spreadsheet with each detail of the plans on it to compare from one to the other, and while there are definite psychological differences (e.g., the third plan only covers generic medication), most differences only amount to a few hundred dollars at most and are a small amount compared to overall costs. The big differences are in base premiums and scenarios in which we have $5,000, $10,000, etc. in medical expenses.

Unless I’m doing something dreadfully stupid (please help me avoid that!), it looks as if the $5,000 high deductible plan is the cheapest/most sensible option. It also says it qualifies for an HSA, something we’ve no experience with.

For background, we’re a family with one newborn. We have five grand in liquid assets that can go untouched except for medical reasons. (Can I just walk into a bank and ask to set up an HSA?) We’re self-employed, earning income through an S Corp.

Are high deductible plans really all that straight forward? From the summary/full description, it seems as if once one of us has met the deductible (or both hit the family out of pocket of $11,900), we’re free to hit and hit and hit the doctors as much as we want, up to the benefits maximum. Not that we’re all that fond of going to the doctor, but though the other plans are cheaper at lower levels of expenditure, it takes just one incident to make the high deductible plan much cheaper.

What do we need to be aware of before jumping from a traditional (and comfortable) PPO to a high deductible plan?

Thanks,

Rhythm

2

I thnk you’re overlooking the fact that the PPO plans have an OOP (out of pocket) maximum, meaning once you hit that, they stop taking those 20% co-pays, etc. The PPO1 OOP max looks like 6K/12K, so I don’t see where one of those major incidents would make it the more expensive option for you.

3

That’s where I’m worried about my math skills.

I got there by taking premium + OOP, so:
Plan 1 + individual OOP = 16,692 + 6,000 = $22,692
Plan 1 + family OOP = 16,692 + 12,000 = $28,692
High 5 + individual OOP = 10,884 + 5000 = $15,884
High 5 + family OOP = 10,884 + 11,900 = $22,784

Each direct (individual to individual, family to family) seems to work out in the High 5’s favour. The largest spread, HD family to P1 individual deductible is only a $100 gap – and that only comes about if we end up with awful bills. It’s a $100 gamble that that won’t come to be, against six to about thirteen thousand in expenditures.

Or am I grossly misleading myself and am still overlooking something/adding wrong bits together?

4

That is the way it’s worked for me. I’ve been on a high deductible plan since 2001.

Example: my son was carjacked and went to the hospital. The insurance company paid 100% after the deductible (that year it was $4 k).

A couple of things I’ve learned: the premiums go up every year. You can always switch to another insurance company, but then you’ll have exclusions for pre-existing conditions. That may not matter since the deductibles are so high, but just be aware of that.

Another way to keep the premium down is to go to the next-highest deductible amount. I’m about to switch to a $10k deductible.

The HSA works very smoothly. I’m not sure how to choose a bank - the one I have is a legacy from my first insurance plan, which set it up for me. You put money in, then you pay medical expenses with it. Mine has a debit card associated with it. The nice thing is that you can stay with the same bank account even when you switch insurance companies.

There are caps on how much money you can run through the HSA in a given year. I think for this year, the family maximum is over $5k. The best option is to match your deductible to this amount. I can no longer afford the premium for that, but that’s neither here nor there.

5

Oops … I forgot to include co-insurance amounts.
With $10,000 in expenses (there will be premium + deductible + co-insurance, 20%, 25%, 30%)
Plan 1 $16,692 + $1,500 + $1,700 = $19,892
Plan 2 $12,792 + $2,500 + $1,875 = $17,347
Plan 3 $9,576 + $3,500 + $2,100 = $15,176
HD 5K $10,884 + $5000 = $15,884
HD 10 $6,600 + $10,000 = $16,600

To get to the scenario in which we’re hitting the out-of-pocket maximums, we need to have bills in the range of $50, $90, and $100,000.
NinetyWt, I can only imagine what it was like a few years ago. The open enrollment and premium hike/benefit cut was absurd. Extrapolating backwards just a few years and it looks like we would have been paying peanuts and getting private, personal physicians.

But they work? Why aren’t they more common? Is it because you need the relative liquidity? Uncommon because they’re relatively new and somewhat daunting to feel like you’re without insurance for a while?

6

They work.

My WAG about them not being common - people don’t like to fork out for treatment. A doctor’s visit for my daughter recently was $185 - she had tonsillitis. A gynecology visit for my neice was $500 (granted, she had a couple of tests done which doubled the fee). Folks are used to paying that co-pay and letting the insurance company pay the rest.

The benefit that I see (besides the lower premiums) is that the money I put into the HSA is tax-free.

7

Thought of another benefit. Some medical offices will give you a discount if you’re paying out-of-pocket. The gynecologist I mentioned above knocked 20% off of the fee if I paid in full that day (which I did). My daughter had a mole removed last year and the doctor knocked 50% off of his fee since we were paying out of pocket.

8

Yeah, that’s part of the problem, too…unless I am mistaken, you don’t get the “negotiated” rates issued by insurnace companies, you get to pay full retail fr the doc’s services, even though in many cases you are going to pay right up front, and insurance companies are going to make them wait 90 - 120 days.

9

It doesn’t help here that you are looking at extremely shitty PPO plans. A good HMO or EPO coudl trim a lot of those costs out, but given that those are not an option, the PPO just doesn’t look very attractive comparatively speaking.

10

When you say the 3rd plan only covers generic medication, does that mean that it makes you get a generic if one is available, or that unless there is a generic available, you have no coverage? If it’s the latter, that’s something I’d avoid like the plague.

I think you’re right about the main reasons high deductible plans don’t catch on - need for liquidity and unfamiliarity.

11

This is a better than average HD plan and worse than average PPO plan. Most of the HD plans I looked at had 10 - 20% co-pays after the deductible is reached.

Let’s look at it this way, comparing PPO 1 and HD 5K. As a family. you would be guaranteed to spend about $5K more on PPO1 over a year. Worst case, if all 3 you spent exactly $5,000 on expenses, the HD 5K would cost you $7,400 more. After this it starts to win, because there is no co-pay. That seems rather unlikely. So this HD plan sounds better, but be aware that you are on the hook for more than the $5K the plan name implies.

I’m assuming that the doctor charges the same for both. In my plan, my small deductible is covered by the insurance company sending a statement saying that a charge has been applied, and then the doctor sends a bill. The billing rate is the same for each. If you don’t file a charge, which I suspect the doctor might have to do, it might not count. If you do pay more for the HD plan, however, that changes the numbers, possibly quite a bit.

So, you have a $5K best case gain, and a $7,400 worst case loss, but the best case seems more likely to me than the worst case.

12

That’s something you’d need to check on, depending on the plan it may function as a PPO/HMO regarding rates. So the 185 “rack rate” may be negotiated down to 100 bucks or so.

I just went through this whole thought process and our company had an online estimating tool - you put in how many visits of each type of service you thought you might have in a given year, and it would give you cost estimates for each of the plans offered. E.G. one outpatient surgery, 20 physiotherapy visits, 5 primary care visits, etc. To my surprise, their figures showed I’d be better off with the high deductible plan even when I put in multiple outpatient surgeries (I am anticipating 2 MRIs, and possibly 1-2 elective procedures, and possibly quite a few physiotherapy sessions so this is of imminent concern).

I wound up not going with their recommendation, for the simple reason that their numbers for the outpatient surgeries bore ZERO resemblance to the figures we actually paid for one such, a couple of years ago. We stuck with a more traditional PPO plan, plus a metric boatload of cash in a flex-spending account.

Re pre-existing conditions: If it’s a group policy, switching shouldn’t be an issue especially if you’re with the same employer.

13

The problem with the HSA and high deductible plans is that they remove the younger healthy people from the insurance pool Sure, they save a bundle, but insurance is a pooled risk pool, and when the ones who have the lowest costs pull out, the ones with the higher costs suffer an increase in premiums.

This might be okay, but much of the risk is simply due to age. Older people have more health problems than younger people. When a person is young and is in good health, and isn’t in the insurance pool, the costs of insurance and medical care in general shoot up. By the time that young person isn’t so young and healthy anymore, they can’t afford the insurance pool.

14

How do they remove younger healthy people from the insurance pool?

15

My experience as a young single male:

I’ve been on a High Deductible plan from 2008 on:

2008 - I visited a doctor once, for a nasty cough. That one visit completely negated that benefits I had from the HDHP. I think I had to pay about $150 out of pocket; considering I only saved about $11/mo on the plan it was about a wash.

I got screwed by my HR dept. that year. I asked them for the paperwork to set up an HSA; They gave me a FSA signup sheet. It looked wrong, I asked them again - are you sure this correct? I want a Health Spending Account, not a Flex Spending Account. They assured me it was correct. Whelp, fuck, I ended up with an FSA. Meaning I had to spend it all before 2008 was up. I ended buying like $200 in OTC medicines in December to avoid losing it. Damn them.

2009 I had a HDHP again. This time I was bitter and cautious about any tax-deferred savings accounts. I probably ended up a bit ahead, just because I never needed to see a doctor. No tax-deferred savings though.

I signed up again for a HDHP in 2010. I figure I have a good chance of not needing a doctor this year (I’m still young, healthy). This time I did opt to put $500 over the year into a HSA (and I triple-checked this signup). So it might end up benefitting me.

Thoughts:

If you’re young and single, HDHP doesn’t save much (at least at my company). Sure, you save maybe $11 a month, but premiums are so low that it doesn’t matter much, and the benefits vanish almost immediately if you need even one doctor visit.

I like the idea of an HSA, but the implementation is still poor. At least at my company (is this a federal thing?) you don’t earn interest on an HSA until you have at least $2000 invested. This is a huge amount for somebody young and starting out (me, for example). Plus, if you’re like me - hell, I spend at least $200 on a pair of eyeglasses every year. I can put maybe $500 in a HSA each year. I’m not gonna hit that magic $2000 limit for a long time. This is BS. The system should encourage people to get money in early so it can bear interest and help them late in life.

My company pushes the HDHP pretty hard - no doubt because it saves THEM money. The benefit between HDHP and a standard health care plan should be larger if they really want to get workers on it.

16

Search for prior threads. We had a good one on topic about 6 months ago. I don’t have time to do that for you now.

17

That’s not my experience. I have an HDHP through Humana, and when I take my daughter to the doctor, he bills the company $80, to which they reply, “Sorry, we pay $35” and then I get a bill for $35.

18

At my work, for next year we have the option of two HD/HSA plans and one traditional PPO plan. Considering all costs (note that the premiums for the traditional plan are more than that for the HD plans), one of the HD/HSA plan works best for my family. That’s assuming we use the medical services a lot, which expect we will, with a newborn baby and all.

19

(Insurance agent checking in)

That means that unless you get a generic drug, you are not covered - period. This is the single worst trap that insurance consumers fall into and should be avoided at all costs.

PPO3 covers nothing but generics and will screw you badly in the long run. PPO2 doesn’t cover non-formulary brand names and will screw you only slightly less. Were you my client, I would recommend the HD10,000 plan.

Actually, were you my client, I’d ask if you had any significant health issues, had been hospitalized in the past five years or were currently taking any medications. Without any health problems, you can get better, cheaper coverage than this in the individual market. Hell, even with a few issues you’ve got even odds of coming out ahead. These are some truly shitty options.

If you’re self employed and you and your spouse are individually drawing income from your S-corp, then you may even be able to set up your own group plan covering just the two of you (depending on the state) and you’d get infinitely better coverage than this.

20

Our company funds our HSA with a substantial chunk of the high deductible, so that if we do get caught with a simple doctor’s visit, but are otherwise healthy, it doesn’t actually come out of our own pocket.