Author Topic: Health insurance next year: what should I do?  (Read 738 times)

MVal

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Health insurance next year: what should I do?
« on: October 25, 2017, 09:04:22 AM »
So for the last few years I've had an HSA and been able to max out the contributions. However, I have some health problems I'd like to get addressed and I've been putting them off until I could switch to the "good" insurance in 2018 so my treatment would be covered.

I'm looking at the breakdown of cost on our various company plans and it looks like if I plan on exceeding the total out of pocket cost, any plan I choose is only going to be a couple hundred dollars difference in terms of cost to me. So should I just do the HSA again even though I'm going to get a lot of medical care next year? At least I'd get the $500 from my employer, right?

                                      HSA Plan   PPO Core   PPO Buy-Up
Deductible                          $2,700  $1,500       $600
Coinsurance                          10%    20%         10%
Out of Pocket Maximum       $3,500 $2,500       $2,000
Employer Funding                 $500    $0            $0
Total Out of Pocket Maximum $3,000 $2,500    $2,000
Annual Employee Premiums  $508     $906      $1,328
Total Out of Pocket Exp    $3,508  $3,406   $3,328
« Last Edit: October 25, 2017, 09:08:32 AM by MVal »

Paul der Krake

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Re: Health insurance next year: what should I do?
« Reply #1 on: October 25, 2017, 09:12:34 AM »
Assuming you invest in your HSA and pay cash for your expenses, you need to calculate the tax benefit of contributing to your HSA for a more accurate comparison. The formula is usually

employee_hsa_contribution * (marginal_tax_bracket + FICA_related_bracket)

If you don't contribute to your HSA via payroll deduction (why not?), set FICA_related_bracket to 0.

MVal

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Re: Health insurance next year: what should I do?
« Reply #2 on: October 25, 2017, 09:22:03 AM »
Assuming you invest in your HSA and pay cash for your expenses, you need to calculate the tax benefit of contributing to your HSA for a more accurate comparison. The formula is usually

employee_hsa_contribution * (marginal_tax_bracket + FICA_related_bracket)

If you don't contribute to your HSA via payroll deduction (why not?), set FICA_related_bracket to 0.

I would max out the HSA contribution, which for 2018 looks like it would be $2950 for me since my employer will kick in $500. My income is about $45K, so the highest bracket I ever hit is 15%, I think, and I assume my FICA bracket is 7.65%. So the equation I suppose will be $2950*(22.65%) = $668.18.

So does this mean that if I do the HSA and even if I exceed the out of pocket limit, I'll pay $668.18 less in taxes than if I did the regular insurance?  Of course, my insurance premiums would be untaxed also.

MDM

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Re: Health insurance next year: what should I do?
« Reply #3 on: October 25, 2017, 11:27:00 AM »
Might be worth putting your numbers into a couple of comparison tools, e.g., Health Savings Account (HSA) vs. Traditional Health Plan and the 'HDHP Analysis' tab of the case study spreadsheet.