HDHP w/ HCA on ACA, is it worth the extra $ in premium?

[TravelinFamilyMan]

Greetings,

I live in the great state of Illinois. Our family is enrolled in a Bronze Blue Cross PPO plan with a high deductible ($17,100 / family and $6,100 / individual). Has some perks like two $40 office visits and the usual preventative things are no charge, like all ACA plans.

There is another, nearly identical plan BCBS PPO which is $150 / month more than the previous plans, but as would be expected, has lower deductibles ($13,500 family / $4500 individual) This plan, however qualifies for HSA which my current plan does not.

We are all relatively healthy and DW and me have typical issues of folks in mid 50s. We did have to take DD to the ER last year and have about $3,000 in out of pocket expenses! (yuk, hopefully that won't happen again).

Is it worth the additional $1800 in premium payments to reduce the out of pocket risk a bit (no in my opinion - it basically a wash) AND to get to put money in an HSA which has triple tax advantages? (not sure) Note our top tax bracket for 2021 will be at 22% for about $10,000 of that top income.

Thanks !

 

[RunningBum]

$7200 family contribution *.22 fed = $1584 benefit for the HSA contribution. Another ~$356 if Illinois allows the income reduction, which would put you over the $1800. Assuming 4.95% income which may not be right.

If it were a toss up or really close of course I'd take the lower deductible/OOP max, but that sounds like a minor risk in your family. You never know though. Take a look at any other plan differences like drug costs, specialist visits, etc.

For me making the HSA contribution was the difference between an ACA subsidy or not last year. I expect to have more room this year but it's a factor for me.

 

[pb4uski]

I would go with the HSA policy since the tax benefits exceed the higher premiums by a bit and it gives you additional tax-free savings... it is akin to being able to make more Roth contributions since the HSA balance grows tax-free as long as it is used for qualified expenses.

We built our HSA up over the years and currently use it for Medicare Part B and D premiums, dental and vision.

For a HSA provider, check into Fidelity.

 

[TravelinFamilyMan]

$7200 family contribution *.22 fed = $1584 benefit for the HSA contribution. Another ~$356 if Illinois allows the income reduction, which would put you over the $1800. Assuming 4.95% income which may not be right.

If it were a toss up or really close of course I'd take the lower deductible/OOP max, but that sounds like a minor risk in your family. You never know though. Take a look at any other plan differences like drug costs, specialist visits, etc.

For me making the HSA contribution was the difference between an ACA subsidy or not last year. I expect to have more room this year but it's a factor for me.

Thanks and this analysis seems to be SPOT on and leads me to think starting the HSA next year is a good thing. Now, just have to find that $7,200 to contribute!

 

[TravelinFamilyMan]

I would go with the HSA policy since the tax benefits exceed the higher premiums by a bit and it gives you additional tax-free savings... it is akin to being able to make more Roth contributions since the HSA balance grows tax-free as long as it is used for qualified expenses.

We built our HSA up over the years and currently use it for Medicare Part B and D premiums, dental and vision.

For a HSA provider, check into Fidelity.

Thanks and per RunningBum, the lower the income the higher the subsidy too, so that may help here too. Great comment!

 

[fh2000]

Thanks and this analysis seems to be SPOT on and leads me to think starting the HSA next year is a good thing. Now, just have to find that $7,200 to contribute!

For 2021, family contribution amount is $7,200. Each spouse can open individual HSA account and contribution $3,600. If both are older than 55, each can contribute additional catch-up amount $1000. So, the most combined contribution can be $9,200 next year.

https://www.peoplekeep.com/blog/how-hsa-contribution-limits-work-for-spouses

 

[rodi]

As someone who had never been on a HDHP w/HSA until I retired and got on an ACA plan I figured we were healthy and it was all good. Family of 4. First year involved several broken bones and a short hospitalization. Hit the individual max and family max. Second year older son had a weird tumor in his jaw from his wisdom tooth (amelo blastoma). Required surgery with two maxilofacial specialists. Obviously hit his max OOP.

But - did the math - and we still came out ahead vs a traditional copay plan. It was close to break even when adding increased premiums w/lower OOP, vs full pay of negotiated rates up to max deductible and OOP. W/out subsidies the traditional co-pay would have been slightly less total cost. Add in the ACA tax credits (aka subsidies) and we came out slightly ahead with the HDHP w HSA.

One big thing a HDHP gets you is the negotiated rates. You pay 100% of the *negotiated* rate - which is substantially less than the official rack rate. I posted my experience with my son's jaw surgery here.
https://www.early-retirement.org/forums/f38/an-experiment-how-much-will-my-insurance-cover-84341.html

 

[Animorph]

$4500/individual is low for an HSA. Ours is $6900 now, and that should be cheaper monthly if you have the option. Our state has both options from one provider. You might also check directly with the insurer to see if they offer something different that doesn't show up on healthcare.gov .