High Deductible Health Insurance

[epidural man]

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I make all really really important life decisions based on your advice - so I hope this will be no different.

Thoughts on high deductible health plan (insurance with an HSA)?

I have read that it is good if you don't use health care much. I never use it -

But my wife is starting to need it more and more - so it's hard to tell how that will go.

 

[martvubo]

Devil's in the details. One place I worked, the copay+coinsurance low-deductible plan's premiums were so much higher that the HDHP cost less at every possible amount of spending (up to and including the out of pocket max) because of savings on the premium and employer additions to HSA.

Premiums for the year plus OOP max is the most you would theoretically be able to spend on healthcare costs (edited to clarify: with either plan). If the HDHP premiums are lower by enough of a margin that you predict your healthcare spending will be less than the difference in premiums, then HDHP is better for you.

 

[DirtDocMD]

If you’re young and healthy, it’s a good way to put away some money. If you or your wife or a child are racking up the clinic/hospital visits, or are needing regular high dollar medications, the PPO is usually the better option. Often, it’s the medication expenses (not the hospitalization), that can really be the difference.

 

[deleted87051]

HDHP makes you eligible to open an HSA. The idea is to maximally fund the HSA but never use that money until retirement. Even though it’s called an HDHP, the deductibles are not that high for most doctors ($3k in my case). Pay your out of pocket medical bills with after tax dollars and save your receipts. The contributions to an HSA reduce your taxable income and the money in the HSA then grows tax free. When you withdraw money from the HSA during retirement, that money is not taxed as long as you have enough medical receipts to cover it. So it’s “triple tax free” (tax deductible contribution, tax free growth, and tax free withdrawal). If you’re lucky enough not to have medical bills exceeding the withdrawal amount, the money withdrawn will be taxed as income at the time you withdraw it (so only “double tax free” like a 401k).

 

[deleted87051]

If you’re young and healthy, it’s a good way to put away some money. If you or your wife or a child are racking up the clinic/hospital visits, or are needing regular high dollar medications, the PPO is usually the better option. Often, it’s the medication expenses (not the hospitalization), that can really be the difference.

The options our group gives us are a high deductible PPO, a low deductible PPO, or an HMO plan. So an HDHP and PPO are not mutually exclusive.

 

[DirtDocMD]

The options our group gives us are a high deductible PPO, a low deductible PPO, or an HMO plan. So an HDHP and PPO are not mutually exclusive.

No doubt, but the OP mentioned a high deductible HSA.

 

[deleted87051]

No doubt, but the OP mentioned a high deductible HSA.

Our high deductible PPO plan makes you eligible to open and contribute to an HSA. The low deductible PPO plan does not.

 

[deleted1147063]

A HDHP is worth it in conjunction with an HSA.

An HSA is basically another retirement account (like a 401k, invested in the stock market), with triple tax advantages: tax-free contributions, tax-free growth, and tax-free withdrawals (as long as it's for healthcare expenses). Not only that, but one can deduct the expenses decades later, as long as the HDHP was active in that year. Which is exactly what I am doing: contributing 7K annually with my spouse, and letting it grow. I'd like to have 200K+ in it by the time we need it in retirement. After a certain age (65?) one can withdraw the money for any purpose and pay income tax on it, as with a 401K. Before, there is a 20% penalty if not used for healthcare expenses.

Now, in our case, the math favors the HDHP. The regular plan has a family deductible of about 1700, while the HDHP is 3000. The annual max out of pocket and the co-pays are pretty similar, and the regular plan costs at least 1200 more per year. So the HDHP is a no-brainer for us, even if one of us has about $1000/year in medical expenses.

Now I used to have a cheap healthcare plan with almost zero deductible, with another employer. That one I would not have given up for the HDHP.