Does a High Deductible Health Plan (HDHP) make sense for me?

[nico08]

Hi:

Open enrollment for health benefit coverage will be starting soon at my employer. I am trying to figure out if a High Deductible Health Plan (HDHP) makes economic sense for me. I am single. I do not regularly take any prescription drugs. I am a 41 year old male.

I included an attachment to this post that identifies the health plans available, the annual premium cost, and the plan features.

I typically do not make a lot of use of the medical system. This year, however, was a little atypical. I checked my health insurance claims submissions for 2011 and the claims submitted by health care providers to the health insurer totalled approximately $4,205. Acccording to the health insurer, I may be responsible for a total of $534 on these health claim submissions. I currently have the Aetna Point-of-Service (POS) plan of insurance and the annual premium that I pay for that is approximately $1,092 (but I do get a $150 rebate off the cost of this annual premium by engaging in various healthy behaviors).

Thank you for your advice and feedback.

 

[ziggy29]

Unless you want the additional tax deferral of an HSA, if I could get the "Cadillac" plan for $91 a month I'd be all over it. Having said that, from a pure numbers standpoint it depends on a number of factors -- what you expect to pay in a typical year, your ability to "self-insure" a worst case (in this case, $5000 out of pocket with the HDHP minus the savings in payroll deductions) and what your income is (that seems to determine your OOP maximums in the lower deductible options).

As I mentioned, though, the ability to open an HSA and put premium savings into it tax-deferred might also be attractive. My Megacorp's insurance structured the rates in a way that makes the HDHP/HSA option a no-brainer for most folks (in fact we get a $1000 annual employer contribution into our HSA when we choose the HDHP option which effectively reduces its cost by $1000); this one isn't quite as much a slam-dunk based on how little you pay for even the lowest deductible option.

 

[panacea]

Unless you want the additional tax deferral of an HSA, if I could get the "Cadillac" plan for $91 a month I'd be all over it. Having said that, from a pure numbers standpoint it depends on a number of factors -- what you expect to pay in a typical year, your ability to "self-insure" a worst case (in this case, $5000 out of pocket with the HDHP minus the savings in payroll deductions) and what your income is (that seems to determine your OOP maximums in the lower deductible options).

As I mentioned, though, the ability to open an HSA and put premium savings into it tax-deferred might also be attractive. My Megacorp's insurance structured the rates in a way that makes the HDHP/HSA option a no-brainer for most folks (in fact we get a $1000 annual employer contribution into our HSA when we choose the HDHP option which effectively reduces its cost by $1000); this one isn't quite as much a slam-dunk based on how little you pay for even the lowest deductible option.

+1... This could be a tough call because the options are all super cheap. If you don't expect much for medical expenses in the coming year and you've got a higher tolerance for risk, I might lean toward the HD plan... particularly if you've maxed all your other pre-tax savings opportunities (401k/403b and IRA) and have surplus cash left over to max the HSA account (of course you'd have the savings from the lower premiums to start with). The other factor for me would be tax bracket. If you are in the 25% federal tax bracket (or higher) the HSA deduction would be much more valuable than if you were in the 15% bracket. One last thought... if you can invest the HSA funds in something that could generate a decent long-term return (like a low-cost balanced fund rather than a checking account), and then cover any medical expenses out of pocket to let the HSA grow, it would be like having another Roth IRA (exept with pre-tax dollars). Not sure if any of this necessarily makes sense for you, but these are some of the things I worked through when making the same decision. The big difference for us was the premiums were MUCH higher for the low deductible plan (an incentive to get everyone on to the HD plan).

 

[ziggy29]

The big difference for us was the premiums were MUCH higher for the low deductible plan (an incentive to get everyone on to the HD plan).

Yeah -- here's a few things about our choices which made it an easy choice to go the HDHP/HSA route:

1 -- Difference in premiums. For the HDHP option ("employee + 1" option for my better half and me) we pay $142 a month instead of $238 for the PPO. So right there we pay $1152 per year less for the HDHP.

2 -- Employer HSA contribution of $1000 to those who take the HDHP option. So combined with the premium difference above, that's $2152 per year in favor of the HDHP/HSA option.

3 -- The difference in annual deductibles between the plans is $1700 ($800 for the PPO and $2500 for the HDHP). So if we use all the deductible in the HDHP Option -- as we did this year when my wife had a kidney stone that needed treatment after hours -- we're still more than $450 ahead based on difference in our share of the cost, employer HSA contribution and difference in deductible.

4 -- the out of pocket maximum for the HDHP is $4000, so even after the deductible our worst case is another $1500 out of pocket (actually less since there is still some cost sharing above the deductible in the PPO). We can easily self-insure this.

So really, our options were structured in a way that made it an easy choice. But if I could get the "premium" option for only $91 a month and there was no employer contribution to an HSA, that is pretty tempting regardless of the numbers.

 

[nvestysly]

When I was at megacorp the HDHP was a no brainer for me. DW and I typically fall into the category of relatively little health care visits/prescriptions so the company match, lower premium (and the host of other reasons noted in the posts above) made me a believer.

A co-w*rker found his situation quite different in that he and his wife have quite a few medical expenses - mostly prescriptions. Interestingly, the HDHP worked well for him as it capped his maximum out of pocket expenses.

Don't forget... when you FIRE, you take the HSA with you - so all that company match, tax deferred savings, etc. is yours. Now that we've FIREd we signed up for a HDHP on our own and the HSA is right there for us. We'll add to if needed, but most of the money in the plan came from megacorp! FREE money! Well.... okay it's not exactly free - I traded some of the my life energy working for megacorp - but it's close to free.

 

[easysurfer]

During my last year of w*rking (actually, only one month as I left at the end of Jan), the October open enrollment the previous year, I purposely chose the HDHP with an HSA instead of the traditional type health care with copays. I was getting my ducks in line knowing that if I decided to leave, the HSA belonged to me.

 

[dgoldenz]

You didn't say what your income level was. The POS and PPO options have sliding scale out of pocket maximums, while the HDHP is fixed. Therefore, I would say if your income is high, choose the HDHP. If your income is on the lower end of the scale, choose the POS or PPO. The benefits schedule does not say how prescriptions are covered or whether they count towards the OOP max for the PPO/POS plans.

 

[Brett_Cameron]

DW has had significant medical expenses each year for the last 7 years and will for the foreseeable future. We have an HDHP & HSA with family deductible of $3k and maximum out of pocket of $10k/year. We always hit the $10k limit. The earliest has been March 31 and latest in mid-December.

Every year during open enrollment I compare worst case out of pocket expense for the offered plans, two PPO plans and the HDHP. Based on my premium costs and the plans' limits, the HDHP maximum out of pocket is generally $8-$12 per year less than the PPO plans.

YMMV.

 

[utrecht]

I will just say this.....WOW...my health coverage SUCKS compared to yours!

 

[Brett_Cameron]

DW has had significant medical expenses each year for the last 7 years and will for the foreseeable future. We have an HDHP & HSA with family deductible of $3k and maximum out of pocket of $10k/year. We always hit the $10k limit. The earliest has been March 31 and latest in mid-December.

Every year during open enrollment I compare worst case out of pocket expense for the offered plans, two PPO plans and the HDHP. Based on my premium costs and the plans' limits, the HDHP maximum out of pocket is generally $8-$12K per year less than the PPO plans.

YMMV.

fixed it