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HDHP vs PPO

2,210 Views | 16 Replies | Last: 4 yr ago by coolerguy12
BrokeAssAggie
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Trying to decide which plan will be cheaper overall.

I have a current family of 5 (Kids 9,7 and 4) and I have been on the HDHP the past 3 years with no complaints. We are healthy and just go to the doctor for check ups and the occasional sick visit. However, we are expecting another child, so I am trying to decide if I will be better off switching to the PPO plan this year.

After reviewing this article it seems the HDHP wins out every time.

https://wealthengineersllc.com/hdhp-vs-ppo/

Here's my situation:

HDHP
Annual Premium $4,800
Deductible (Family) $8,000
Out of Pocket (Family) $13,100
Coinsurance (after deductible 100%)
Employer contribution $1,575
Employee contribution $5,425

PPO
Annual Premium $6,300
Deductible (Family) $2,000
Out of Pocket (Family) $7,000
Coinsurance (after deductible 80%)
Employer contribution $0

What would the financially sound folks of the B&I board do?
coolerguy12
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AG
Each year I had a kid I did the same check and my HDHP was always better. Yours doesn't look to be the case. I would just assume worst case out of pocket so premium + out of pocket max for each plan. Your out of pocket is so high for the HDHP that it's possible you may not hit it.

Our first baby was NICU and we hit our max. Our second was C-section and I still don't think we hit our max which was much lower than yours.

It's hard to say without knowing if their will be complications at birth (hopefully not) but the PPO protects you better. I was lucky that my max OOP + premiums for HDHP was less than for the PPO so it was a no brained.
jpd301
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AG
On the plans make sure you have an understanding of how each deductible works.

I have 3 different HDHP HSA eligible plans available to me at work in addition to traditional plans.

On two of the plans the family deductible only applies as a max deductible for the family versus a min. For example, say my deductible was listed as Individual $2k, Family 6k. The way the deductible works on these two plans is such that my son could say break his arm and need surgery - coinsurance would kick in for him after the individual deductible of 2k of spent. So he is in coinsurance at that point for the rest of the year. however, myself or any other family members would still need to hit our 2k before receiving any coinsurance benefits. So basically three would have to hit the deductible to ever actually bring the family 6k value into play.

On the third HDHP HSA plan I have available to me the family deductible is the amount you have to spend prior to any individual in the family qualifying for coinsurance benefits. Thus my son breaking his arm and getting surgery would have been 6k for the family deductible, and then the coinsurance kicks in. But it would be in place for the entire family at that point.

Probably didn't use all the terms right, but for me it changes the risk associated with the HDHP as well as what kind of costs to consider.

Also, make sure you know what counts against the deductible and OOPmax. The HDHP seem better about crediting all spending towards the numbers in my experience.

On our PPO plans, a lot of times it seemed in the past that prescriptions, and co-pays didn't count against either. My wife had some complications fter child birth that required her to go weekly to the doctor and it was always coded as an outpatient procedure which in our case at the time had a $100 co-pay. After the 12th one I was getting really irritated that the $1200 did not count against our out of pocket max at all.

I have been on an HDHP HSA eligible plan for about 6 years now and have usually came out way ahead each year.
BrokeAssAggie
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Below is from our Summary of Benefits. It's not clear to me what they are saying. Did I mention I hate this stuff! I really appreciate the responses and guidance

If you have other family members on the plan, each family member must meet their own individual deductible until the total amount of deductible expenses paid by all family members meets the overall family deductible.

If you have other family members in this plan, they have to meet their own out- of-pocket limits until the overall family out-of-pocket limit has been met.
P.H. Dexippus
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AG
If you max out that HSA each year and treat it as an IRA account that you don't touch until retirement, I bet you come out way ahead.
one MEEN Ag
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AG
Mr. AGSPRT04 said:

If you max out that HSA each year and treat it as an IRA account that you don't touch until retirement, I bet you come out way ahead.
I understand the reasoning behind this, but that is so hard to do. You've got an account that was purpose built for medical use, and takes pressure off the emergency fund/family budget, and right when you need it most you don't want to use it.

And how much money needs to be in an HSA account before you feel comfortable investing it? 10k can easily turn into 5k in a recession. You lose your job, your total bank account is in the crapper, and your ability to afford medical expenses is now at its lowest when you have COBRA.

I get the appeal of set it and forget it 6.9k at a time, but that strategy requires at least 3 years of accumulation with low risk investing before you could really treat it like any other investment account.





P.H. Dexippus
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AG
It's like any other retirement contribution plan- you trade off liquidity for a tax shelter. It takes prioritizing and discipline, and is easier for some people depending on financial circumstances than it is for others. Never think about it being your money again until age 65. I began maximizing contributions as a single 25yo, and it's grown significantly since that time based on investments. Pay out of pocket for expenses not covered by insurance. Save your medical receipts for the rest of your life and use them to offset withdrawals later.
OasisMan
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AG
one MEEN Ag said:

Mr. AGSPRT04 said:

If you max out that HSA each year and treat it as an IRA account that you don't touch until retirement, I bet you come out way ahead.
...And how much money needs to be in an HSA account before you feel comfortable investing it?...
yes it is definitely an individualized decision
how much the family is bringing in, how much is saved, job stability, overall health of the family, etc...
gigemhilo
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AG
It doesn't matter if you use it for investment or not... the HSA is giving you a deduction that you otherwise would not get. If you were going to use the money for medical anyway, you are getting a deduction for it that you would not otherwise get through itemized deductions..

So if you spent 6900 on medical for the year, but put it in an HSA first, you would get a deduction for $6900 off your income. In a 20% bracket, that's $1380 in savings.

So think of it as getting a rebate on your health insurance / health expenses.
jpd301
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AG
Mr. AGSPRT04 said:

Save your medical receipts for the rest of your life and use them to offset withdrawals later.
Wait, so I could reimburse myself with HSA money years down the road for expenses incurred this year?

2019 - pay $2000 out of pocket i.e.paid from non hsa funds for medical expenses
2040 - withdraw $2000 and use it to reimburse against a receipt from 2020 in order to not have to pay taxes on it?
gigemhilo
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AG
jpd301 said:

Mr. AGSPRT04 said:

Save your medical receipts for the rest of your life and use them to offset withdrawals later.
Wait, so I could reimburse myself with HSA money years down the road for expenses incurred this year?

2019 - pay $2000 out of pocket i.e.paid from non hsa funds for medical expenses
2040 - withdraw $2000 and use it to reimburse against a receipt from 2020 in order to not have to pay taxes on it?

technically - yes. in practice, that would be crazy.

But reimbursing yourself in 2010 for expenses incurred in 2019, that sounds a little more likely.
P.H. Dexippus
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AG
"Reimburse Yourself for Earlier Expenses
An HSA doesn't require you to take a distribution to reimburse yourself in the same year you incur a particular medical expense.The key limitation is that you can't use an HSA balance to reimburse yourself for medical expenses you incurred before you established the account. So keep your receipts for all healthcare expenses you pay out of pocket after you establish your HSA. If, in your later years, you find yourself with more money in your HSA than you know what to do with, you can use your HSA balance to reimburse yourself for those earlier expenses."
https://www.investopedia.com/articles/personal-finance/091615/how-use-your-hsa-retirement.asp
ac04
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wish i had an option for HDHP so i could get that sweet triple tax protected goodness. one of the main things i miss about my last job.
BrokeAssAggie
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PincheDriller
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AG
Sheet isn't public...
BrokeAssAggie
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https://docs.google.com/spreadsheets/d/1EzbKIbU5MGzevr6Rncp5UmFVzFjZIksNJJ3RGqEhz2E/htmlview
BrokeAssAggie
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See if that works
coolerguy12
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AG
jpd301 said:

Mr. AGSPRT04 said:

Save your medical receipts for the rest of your life and use them to offset withdrawals later.
Wait, so I could reimburse myself with HSA money years down the road for expenses incurred this year?

2019 - pay $2000 out of pocket i.e.paid from non hsa funds for medical expenses
2040 - withdraw $2000 and use it to reimburse against a receipt from 2020 in order to not have to pay taxes on it?


Yes, this is the appeal of it. That $2000 grew for 21 years and was tax free in and tax free out.

I also want to take this opportunity to issue a PSA to the board. Anytime you pay a medical bill call them and ask if they will offer a discount if you pay lump sum that day. I usually receive around 20% off just for calling. I used to work with a girl who would hang up and call right back if she didn't get a discount and ask the next person which usually worked for her. Taking 20% off your medical expenses for the year is pretty significant.
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