We finally have a HSA/HDHP!

My employer is finally offering us a high-deductible health insurance plan (HDHP) with a health savings account (HSA) this year. I am strangely excited about this! Now let’s figure out if this makes sense or not.

I’ve definitely ruled out the HMO and the PPO – they are way more expensive than the consumer-driven health plan (CDHP) or HDHP and the premiums just keep going up every year…

I’m still not completely convinced that my birth control pills will actually be free come August 1st, so I’ll do the math both ways.

Here are the commonalities between the CDHP and HDHP choices:

  • Premiums are $X per month on both (same monthly premium).
  • Employer will pay the first $500 of my deductible.
  • Projected total costs for the plan year (not including premiums and before any deductibles or coinsurance amounts kick in) are between $1,000 and $2,300 (higher end assumes paying for birth control pills past August 1st and lower end assumes that stops then, plus taking some other projections off).
  • Past the deductible, I pay 10% in-network and 30% out-of-network.
  • There is a deductible and an out-of-pocket maximum on both plans.

And the differences between the two plans:

  • Both the deductible and the out-of-pocket maximum are $1,000 on the CDHP, but $1,500 on the HDHP. (So the total stop-loss for me is $1,500 on the CDHP and $2,500 on the HDHP – $500 is covered by my employer in each case.)
  • With the CDHP, the portion my employer covers of the deductible ($500) rolls over from year-to-year so long as I stay with the company and disapparates into thin air if I leave. On the other hand, with the HDHP, the portion my employer covers of the deductible ($500) is really that money being put into my HSA, which I can keep if I change employers.
  • With the CDHP, I would put some money into a FSA to cover my base level of forecasted expenses for the year. All of those funds and all of the funds my employer will pay to cover their portion of my deductible are available immediately. With the HDHP and the HSA, however, the funds aren’t available until they have actually been contributed.

Total financial bottom line is as follows for the year, including premiums, deductible, and coinsurance:

  • The CDHP will cost me between $790 and $870.
  • The HDHP will cost me between $1,000 and $1,300.
  • The HDHP will cost me between $210 and $430 more for the year over the CDHP.

Wow! I hadn’t expected the cost difference to be quite that high, but I suppose that is because I am projecting my total costs to be close to or above the deductible, which is $500 higher with the HDHP while the monthly premiums remain the same. With the above numbers, it looks like my best bet is to stick with the CDHP for another year and re-evaluate if the math makes more sense to switch to the HDHP next year.

Since I plan on using my employer’s full $500 contribution if I go with the CDHP, the benefit of them contributing to a HSA on my behalf is null and void. And since I don’t plan on leaving my company within the next year, I think that the CDHP/FSA route is better for me than putting a bunch of money into an HSA. Though the HSA could be cool since I could stock it up this year and then whatever I don’t use rolls over and I wouldn’t have to put as much money into it the following year (versus ending up way underestimating my FSA contributions), but I don’t think that’s worth the extra $500 on the deductible and $500 increased out-of-pocket maximum level.

Readers, does the CDHP choice look like a no-brainer again for me?

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12 thoughts on “We finally have a HSA/HDHP!

  1. I don’t know anything about a CDHP, but have an HDHP and HSA at my work now and love it. The money put into the HSA is pre-tax and isn’t taxed ever as long as it’s spent on qualifying purchases, which is pretty much anything prescribed or charges for visiting a doctor (over the counter medicines like ibuprofen or allergy meds are no longer eligible unless you have a prescription for them). I’m sure you already knew all that, but thought I’d tout those benefits since you didn’t mention the tax advantages. I also like that since I have a separate account for medical expenses, I don’t ever have to budget for stuff like co-pays or dentist visits – it just comes out of that separate fund. Between that and the debit card, it’s really convenient (although annoying to have to keep up with all those receipts). I’m in my 20s and never use as much as I put in so I’m just letting it pile up in case I ever need it – either at a later job or for something unexpected.

    Is the money that the CDHP will cost you pre-tax? You don’t mention anything about the tax benefits here so I’m curious. If I remember correctly, an FSA is pre-tax also but it doesn’t roll over each year.

    • The money I put into a FSA each year is pre-tax, as are my health insurance premiums. I didn’t include tax savings in either of those numbers. I would definitely put more money into the HSA than I would a FSA since it rolls over. Right now, I have savings set aside to cover the difference between my FSA and stop-loss amount for the plan year.

      Hmmm. I don’t think that extra tax savings would make the HSA make more sense with my projected spending though since the deductible is $500 higher and the stop-loss amount $1,000 higher than with the CDHP.

      I’ll update the numbers to reflect the actual post-tax amount and post about that tomorrow.

  2. My work only offers a HDHP with an HSA and it works out really well for us. It ends up being a lot of paperwork, but that is my only complaint.

    With this plan I actually see our Dr bills (with previous health plans I never saw the bills). It is very frightening how much everything costs. Makes me very thankful to have a job that provides any health insurance!

    • I actually saw the doctor bills back when I was on an HMO plan and I still see them. I can’t believe how much everything actually costs!

      I really like the idea of the HDHP with an HSA, but I’m not going to do it when it is the more expensive option.

  3. NoTrustFund and SA, what HSA company does your employers offer?

    Do they have good investment options to invest your HSA contributions (example options)? Are there high fees to be aware of?

    • Interesting food for thought, Pam. I actually know nothing about the company offering our HSA. I think I’m going to stick with the CHDP for this year with the lower deductible, so then next year, I can ask colleagues about their experiences with the new plan :)

      If there are high fees, it might not be worth it.

      • Pam, I can’t remember the name off the top of my head. I think we do have the option to invest it, but I choose to keep this money in cash as we end up using most of the money every year to pay for medical expenses. Maybe once our medical expenses go down I will rethink what we do with the money in the HSA. Having two little ones, especially with their deliveries, ends up being expensive!

  4. Leigh,

    I think the key benefit of HSA is tax deferred growth for any future medical expenditures. You can pay for medical expenses this year out of pocket from your savings and avoid dipping into HSA account. That is where benefit of HSA comes into play.

    In 2013, taxes will increase due to Bush tax reduction laws expiring. Having at least some funds deferred on pre-tax basis will help. Sure, you also get the same benefit with FSA, but those are use it or lose it. With HSA, the funds you contribute are yours to keep (less any investment losses depending on what investment options you choose).

    • Hmmm, that’s an interesting way to look at it, Pam.

      From what I can see off the internet, the investment options available in the HSA my employer is offering really suck – all of the expense ratios are over 1% and many have load fees. I’m trying to get some more information out of our benefits department on that.

      I’m going to keep thinking on this one, but I may end up just going with the CDHP again.

    • Pam, that is a great way to look at it. However, I prefer to pay the expenses out of pocket. I see how it could be a tax savings. I’ll have to look into our investment options more closely. Especially with the tax changes coming up!

  5. I just have a medical HMO and dental PPO. Medical PPO is too expensive and not necessary for me. Everyone pays like $8/week for dental and $11/week for medical. This hasn’t gone up the past few years – employer has absorbed the increases since I started working there. Maybe I just have a really good employer. I’m not very familiar with the other types of plans you referenced. It might be that because the majority of our work force is rank and file minimum wage, that a HDHP or CDHP would not fly for employee morale? It might also be that the insurance brokers make more off HMO…I don’t know?

    • I only have one dental plan, which is super cheap ($5/month). My medical HMO option would be around $60/month, but the CDHP and HDHP options are closer to $20/month. Our HMO monthly premium keeps going up a bit each year, but the other plans have stayed at the same premium cost.

      I think that HMO plans are easier for budgeting. You know that you pay $X/month and $Y each time you go see a doctor. With the CDHP and HDHP plans, it is far more complicated, but it definitely works out cheaper for me overall since I am prepared for the deductible costs.

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