To HSA or not

[Clover5]

I have a chronic condition with pharmacy costs well past 100k annually. I had been thinking a Gold ACA plan was the way to go until I read a bogleheads posting about a HSA and started to look at the plans closer. In my mind HSA plans were for healthy people with occasional catastrophic medical costs.

Comparing a $1900 monthly Extended Bronze HSA plan with a $6800 deductible, where I max out the deductible annually, and the plan pays all cost after deductible. Versus a Gold plan at $3200 a month with no deductible but with some cost sharing like 10%. It certainly seems like the HSA certainly saves me at least $6k a year with same level of care in a BCBSFL EPO.

Am I missing something?

 

[Out-to-Lunch]

Just clarifying: By an "HSA plan," do you really mean a high-deductible healthcare plan (HDHP)? From context, I think so, but am not certain.

 

[Clover5]

Just clarifying: By an "HSA plan," do you really mean a high-deductible healthcare plan (HDHP)? From context, I think so, but am not certain.

Believe so, here is the plan name I was looking at: BlueOptions Bronze (HSA) 1705 ($100+ in Rewards / $4 Condition Care Rx) - EPO

 

[BrianB]

Since you anticipate high medical costs, you should consider your Maximum Out Of Pocket (MOOP) and total cost (total cost = MOOP + premiums) for each plan.

A couple of years ago Walkinwood posted a spreadsheet for comparing ACA plans. Here is their original post, and the spreadsheet link:

Here's the spreadsheet I created to compare a few health plans. It simply compares the costs of several plans for a given level of medical charges for the year, assuming you pay premiums, a deductible, and then coinsurance amounts, with a maximum out of pocket amount that includes both the deductible and coinsurance. Not a lot of detail. You enter the plan data and it creates a table that shows you costs for various levels of medical charges. It's pre-loaded with real plans I was looking at directly from BCBS.

You can see one plan is best with low medical charges, one is best with high charges, one or two are best within a particular range of charges, and one was actually not too far off from the best at all charge levels.

https://www.early-retirement.org/forums/attachment.php?attachmentid=17409&d=1383350542

I've used it to compare plans and for us it seems that if our expected medical costs are under $10k or over $50k, the Bronze plan is best. Between those two the Silver is best - but only by about $2k worst case. We have used the Bronze each year and our medical costs have either been very low or very high so the decision was the best. YMMV.

BrianB

 

[RunningBum]

The benefit of an HSA is the tax break of taking an reduction of taxable income with your HSA contribution, and being able to withdraw it tax free with medical expenses. For my $4600 HSA contribution, it gets me a tax break of 12% on federal taxes and 5.75% state, so 17.75% or $817. It is worth an additional amount if that income reduction is the difference between an ACA subsidy or not. That either applies to you, or it doesn't.

Then I incorporate that into a spreadsheet like the one referenced above.

I agree with BrianB that Max Out of Pocket is a big factor for you. Run the numbers for each plan with $100K+ of pharma and see which comes out ahead after premiums, deductibles, co-pays, and Max OOP. Of course the non-monetary of factor as to which doctors are in which plans also factor in for you.

I'd think you'll have a clear winner since you know your expenses will be high. Many of us have to guess about whether we'll have a low, medium, or high usage which could indicate using different plans for each case.

 

[Clover5]

Ran the calc in the spreadsheet and the difference is about 8k more annually for the gold and I’d have a bunch of co-pays for the gold plan whereas on the Bronze hdhp HSA they all stop at the MOOP. I am shocked that it’s that huge a advantage for the HDHP, I didn’t think it was supposed to work that way. We have passive income that’s going to take us over ACA limit for subsidy for at least a couple years so this is great news.

 

[pb4uski]

The HSA is a second order effect to the decision.

The important thing is to compare annual premiums and in your case, Rx deductibles and copays for the specific drugs that you need. I think that Rx may work different in these plans than major medical, so do careful due diligence.

 

[Clover5]

Yeah it looks like there is a small co-pay that is outside the deductible, though it is less than the gold plan co-pays.

 

[BrianB]

We too were surprised how the Bronze plan was lower total cost for us than the supposedly better Silver or Gold. We've also been surprised how quickly medical bills add up. Just one hospital stay, or a course of visits & treatments, can jump into 6-figures.

As RunningBum said, be sure your doctors are in the plan you choose. Call the insurance company to verify. Don't rely on a printed list because clinics & physicians change all the time.

Also be sure that the list of covered drugs includes what you need. Different plans within the same insurer can have different covered drug lists!

And on HSA's: They are awesome. No earned income requirement so as long as you both have an HSA compatible HDHP you can contribute $7200 plus $1000 each (if you're over 55) = $9200 total every year. Since we are over 59.5 years old, we take a $9200 withdrawal from an IRA (adds to taxable income) and then deposit it into our HSA's (subtracts from taxable income). I think of it as a no-tax way to convert taxable IRA money into tax-free spending money each year, although the spending is limited to healthcare costs.

BrianB

 

[pb4uski]

We too were surprised how the Bronze plan was lower total cost for us than the supposedly better Silver or Gold. ...

Yup. We have some good friends and the woman was bragging about how they had a platinum plan and didn't have to pay for anything (other than premiums).

I told her that we preferred the bronze plan because the premiums were so much lower and since we were healthy our deductible costs were modest and that we came out way ahead comparing the total annual cost of premiums and deductibles and co-pays combined. I'm not sure she got it but from the pained look on her husband's face I think he did.

If you're relatively healthy then the bronze plan is frequently a slam-dunk.

 

[Clover5]

Yup. We have some good friends and the woman was bragging about how they had a platinum plan and didn't have to pay for anything (other than premiums).



I told her that we preferred the bronze plan because the premiums were so much lower and since we were healthy our deductible costs were modest and that we came out way ahead comparing the total annual cost of premiums and deductibles and co-pays combined. I'm not sure she got it but from the pained look on her husband's face I think he did.



If you're relatively healthy then the bronze plan is frequently a slam-dunk.

I thought that it was only for relatively healthy people, my surprise is that it’s cheaper even if you do have to pay the max deductible annually. Even if me and my spouse had to pay max deductible we’d be about the same place as a gold plan all in but his Med expenses are very low generally so we should come out significantly ahead annually with HDHP.

 

[RunningBum]

When I ran my numbers, I was also surprised to see that the Bronze plan worked out best for both very low medical expenses and very high, due to a lower MaxOOP in that plan.

btw, you mentioned being over the ACA subsidy limit. If the recently passed house bill gets through the senate, you may get a subsidy after all. You will have to pay a max of 8.5% of your income for the second lowest cost silver plan. The difference between that plan cost and 8.5% of your MAGI can be applied as a subsidy to any plan. It probably doesn't change the difference between the plans unless you can't use the full subsidy on a lower cost bronze plan, but you may be happy to know your net premium cost may be lower.

 

[Bamaman]

I was fortunate to have a company that allowed me to purchase health insurance from ER at 58.5 years to 65 years when I was Medicare eligible. And I had enough in my HSA to pay all that time.

What you've not said is what health insurance program you've been on in the past? And with that kind of medicine costs, are you actually disabled?

My wife was eligible for Medicare 2 years from the date she became disabled at age 52. I had a good Medicare Supplement thru my work that saved us a fortune.

As we got older, my company set us up with a healthcare advisor to go over our options. Many are ACA or Medicare salesman, but they can easily work out your best route to go. You might see if someone like that is available to help you.

 

[Clover5]

I was fortunate to have a company that allowed me to purchase health insurance from ER at 58.5 years to 65 years when I was Medicare eligible. And I had enough in my HSA to pay all that time.

What you've not said is what health insurance program you've been on in the past? And with that kind of medicine costs, are you actually disabled?

My wife was eligible for Medicare 2 years from the date she became disabled at age 52. I had a good Medicare Supplement thru my work that saved us a fortune.

As we got older, my company set us up with a healthcare advisor to go over our options. Many are ACA or Medicare salesman, but they can easily work out your best route to go. You might see if someone like that is available to help you.

Was on employer health for 27 years, retired 12/31/2020, now on Cobra. 59 years old and not disabled. I have funded healthcare through 65 assuming w/no subsidy and not disabled, part of my departure package. So short of Medicare age getting dropped I am in until 65 w/ Cobra and ACA.

 

[Splash]

DH and I were healthy so we always picked a high deductible plan. Then one year I was diagnosed and treated for breast cancer. The bills were astronomical. I thought for sure that we would have been better off had we chosen a different plan so I did the math to see. Nope, we came out ahead with the HD plan.

You might also want to do the math to compare your ACA options to your COBRA plan. When we retired, we found we had better options on ACA, although we were able to manage our income to get a subsidy so YMMV.

 

[Clover5]

DH and I were healthy so we always picked a high deductible plan. Then one year I was diagnosed and treated for breast cancer. The bills were astronomical. I thought for sure that we would have been better off had we chosen a different plan so I did the math to see. Nope, we came out ahead with the HD plan.



You might also want to do the math to compare your ACA options to your COBRA plan. When we retired, we found we had better options on ACA, although we were able to manage our income to get a subsidy so YMMV.

Thanks, that’s what I believe I am seeing. I did the numbers this am and my Cobra vs ACA (unsubsidized) shows that Cobra is cheaper with my $900 deductible and essentially equivalent premiums. Next year is an interesting question because at 18 months I will replace Cobra with ACA and end up paying the HDHP deductible of 6850 + the 900 deductible from Cobra I believe.

It probably makes sense to go with a silver or gold plan for those 6 months then switch to HDHP on 1/1/23. My next thing to figure out.

 

[Clover5]

So I’ve completed my HSA & ACA setup and wanted to report back and thank everyone for their help. For context I am on medications and supplies that cost more than $10,000 every 90 days so I will blow through any deductible at the beginning of every year. For that reason I originally thought a HDHP plan wouldn’t be viable for me.

Originally I had expected to stay on Cobra ($1890 mo) for the full 18 months then switch to ACA ($3250 mo, no subsidy) until 65yo. I realized back in March that switching to an HSA/HDHP plan ($2000mo) with a $6850 pp deductible was going to save me quite a bit of money annually. Going from $39,000 annually down to $30,850 annually.

Then with the Biden ACA plan changes I was able to get that cost down to $1100 a month for the same HDHP. Then I was able to take one more surprise advantage, one of my meds has a savings card that covers up to $5000 annually of my deductible. I was happily shocked that the $5000 was applied to my $6850 deductible, I had assumed it was a price discount not a deductible subsidy. So now I am at $1100mo + $1850ann for a total cost of $15,050 annually vs original expectation of $39,000 annually.

Thanks to everyone who chimed in and urged me to do the numbers and provided details and context.