Can someone help me with health insurance? Deductibles, out of pockets, etc.

Trying to figure out what the hell I need, and this stuff is about as clear as mud to me. Before this, I only had to get it for myself, and as a healthy 28 year old male, I never gave it much thought and went for the cheapest option since I never used it anyways. 

Now I will be adding a child (and potentially my wife) to my plan, and this stuff actually matters. I've got it narrowed down to two options, but I'm having a hard figuring out the differences. 

Both of these come with an HSA. Other than what I've noted here, both of these are identical. 

• Option 1
  • $4,500 for family ($375 a month)
  • $2,400 deductible
  • $6,750 out of pocket maximum
• Option 2
  • $2,805 for family (234 a month)
  • $5,000 deductible 
  • $6,750 out of pocket maximum

Correct me if I'm wrong, but I should be looking at this as the total price for the first option is $6900, assuming we rack up $6,750 in medical bills, and the second option is $7800, again assuming we rack up $6750. Is that correct?

Double check that both plans are indeed identical. For me, my selections also varied in what I would pay for generic & brand name meds, and certain preventitive care services.

Does your company provide any money to incentivize either plan? I think along with my and my girlfriends HSA plan being around $90/month, they also kick in something like $1500 per year into my HSA account. You'll also need to compare the percent of coverage on both plans up to the deductible. 

My plan is to keep chucking away money in it, so in another year or so, I'll have enough to cover my out of pocket if something big happens.

In reply to mtn :

I agree with ECM, confirm the percentage each plan pays. Typically the more expensive plan will pay a higher percentage up to your OOP max. 

z31maniac said:

Does your company provide any money to incentivize either plan? I think along with my and my girlfriends HSA plan being around $90/month, they also kick in something like $1500 per year into my HSA account. You'll also need to compare the percent of coverage on both plans up to the deductible. 

My plan is to keep chucking away money in it, so in another year or so, I'll have enough to cover my out of pocket if something big happens.

Yes, that was included in the figures above--i.e. the company kicks in $600 into the HSA, so the actual deductible is $3,000, but the net deductible is $2,400. 

Other than costs and deductibles, these plans are identical down to the letter. 

The way I see it, you pick option 1 if you are fairly sure you'll be using the insurance (and with a kid coming, you probably will) and option 2 if you want to pay less out of your check, hoping you won't go to the Dr enough to risk maxing out the deductible. 

This is assuming they are 100% equal other than the paycheck deduction and max deductible.

Is it an HSA (Health Savings Account) or an HRA (Health Reimbursment Account)?  They work a lot differently.

First plan: Costs you $6,900 before you start seeing a single dollar back.

Second plan: $7,805 before you get anything back.

With a wife and kid to add to the deal, you are probably slightly ahead with option one, as you will almost certainly blow through that deductible.  Now, if you don't plan on using it, that is, if you, your wife and kid didn't go through 5 large in medical last year and you don't think the 3 of you will this year, then the second plan will probably put you slightly ahead.  All other things about the plans being the same.

BTW, make sure that the deductible is pooled among the family members and not individually.  The wife's Blue Cross plan has separate deductibles for each family member, so our newborn son's expenses went to my wife's deductible until we added him and then he now has his own deductible.  Basically, unless something truly terrible happens there's very little chance we'd ever meet our deductible.

Thanks folks. I may not have been understanding it exactly correctly, but ultimately I was coming to the correct conclusion that Option 1 is probably better. 

FYI, it is an HSA, not an HRA or an FSA. We get to "keep" it. 

One common opinion is that you should be contributing the max to the HSA and not taking any out, treating it as a tax-deferred retirement savings like a 401(k).

The difference in the plans is the deductible.  If your total bills are less than the deductible, they don't cover anything.  The more expensive plan has a lower deductible, so you pay more per month, but they start paying for stuff sooner.  If you want a detailed comparison, set up a spreadsheet in excel with the rules in it and plug in some scenarios.  In general:

- if you expect very low medical costs, the cheap premium one is always better because you never hit the deductible in either plan.

- if you expect very high medical costs, the cheap premium one is better because all you pay is the annual out-of-pocket max plus the premium, and the OOP max is the same.

- in the middle there will be a few scenarios in which the high premium plan is more advantageous.  Adding the difference in premiums to the deductible cost, the low deductible plan starts to be advantageous somewhere around $4100/year in costs.  So from there until $6750 in total costs, it'll be better.  The details depend heavily on things like copay and coinsurance amounts, whether copays count towards deductible and/or OOP max, family vs individual deductibles & OOP, etc.

codrus said:

One common opinion is that you should be contributing the max to the HSA and not taking any out, treating it as a tax-deferred retirement savings like a 401(k).

Comes out of pre-tax money, withdrawals are tax-free, any capital gains are tax-free.

If you withdrawal from it after 65 for non-medical expenses there is NO penalty (20% before 65), it will be taxed as income though.

An interesting trick is keeping medical receipts and paying yourself out of the HSA sometime in the future (allowing HSA capital gains).

aircooled said:

codrus said:

One common opinion is that you should be contributing the max to the HSA and not taking any out, treating it as a tax-deferred retirement savings like a 401(k).

 

Comes out of pre-tax money, withdrawals are tax-free, any capital gains are tax-free.

Yeah, there are some solid arguments for it.  One minor downside is that not all states treat it the same way (California doesn't, for example).

codrus said:

One common opinion is that you should be contributing the max to the HSA and not taking any out, treating it as a tax-deferred retirement savings like a 401(k).

 

That's what I do, along with maxing out my HSA contribution (401k is also maxed). It takes awhile, but eventually it does add up to a fairly substantial amount. Lately I've been paying my deductible just out of my regular account.

So for mtn, the HSA contribution should be added to the monthly costs as well. The $600 his employer puts in is subtracted from the $7100 (2019) max, so he could be paying another $541/month.