This year’s open enrollment period is really exciting to me because my birth control will finally be covered. It is a huge portion of my health insurance expenses for the year, so this is a really awesome development. Other than that, the plans my employer is offering look pretty similar to last year’s choices and I’m again deciding between the consumer-driven health plan (CDHP) or high-deductible health plan (HDHP).
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.
- I have zero expected health expenses for the year since I don’t have to pay for my annual physical or my birth control pills.
- 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. Since I have zero expected health expenses, the HSA is more attractive in this sense.
- With the CDHP, I would put some money into a FSA to cover my base level of forecasted expenses for the year, except that is zero. 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. Advantage: HDHP since I can max out the HSA and keep the money when I leave the company and it’s not use it or lose it. This will net me a non-state tax savings of 28% (marginal federal tax rate) + 1.45% (medicare tax) = 29.45% or saving me $809.875 on my taxes by maxing out the HSA.
Total financial bottom line is as follows for the year, including deductible, and coinsurance (ignoring premiums since they’re the same):
- The CDHP will cost me between $0 and $1,500.
- The HDHP will cost me between $-500 and $2,500.
The HDHP could cost me more money, but the additional tax savings between it (maxing out the HSA) and the CDHP is $809.875, which is $190.125 short of the difference in out of pocket maximums between the two. The likelihood of hitting the out of pocket maximum on either is reasonably low since that would be either $11,000 or $16,500 in total health expenses for the year.
I’m definitely leaning towards taking the HDHP for this year, maxing out the HSA at $3,250, and then re-evaluating again next year. I would use the HSA funds to pay for medical expenses throughout the year, which would be great as a budgeting tool for that. Who knows, maybe it would make sense to switch back to the CDHP next year if I have a bunch of planned health expenses. And then I can transfer my HSA to a credit union or other institution, earn some interest on it, and use it to pay for expenses. In retrospect, this exact same math on the tax savings existed last year since there is no difference in the two plans from last year, but the fact that I had planned expenses that would get me over the CDHP deductible made me want to go for it instead.
Readers, do you have an HDHP/HSA plan at work? What do you think about it?