The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: ecochica on October 09, 2013, 05:30:21 PM
-
I'm hoping folks can help me with an ACA plan question, as I just started looking at plans in our area.
Previously, we paid $521/month for a high deductible, HSA-qualified plan, and we maxed out our HSA contribution. Under the ACA, an HSA plan would cost us $723/month. There is a higher deductible, cheaper plan available: $597/month, but no HSA. My hunch is that it's worth it to pony up for the HSA eligible plan. $200/month (over our current plan) is a lot of extra money for us and will reduce our ability to max out our HSA contributions, but I'm guessing that even if we reduce our HSA contribution by a bit, reducing our taxable income somewhat through an HSA will be better for us financially? (And... now that I think about it... may increase our ACA tax credit as well.) Thoughts?
-
Here are the numbers, it depends on whether or not you have a sickness. Also, the higher your tax bracket, the better the $723 looks. BUT, you have to be committed to maxing out the HSA contribution. I would pick the $597 monthly plan.
$597 Plan $723 Plan
Yearly cost $7,164 $8,676
Tax Benefit of
Contributing $6,550
and assuming 28.0% federal tax Bracket
Which is income from $143k to $217k ---0---- (1,834)
Net Out of Pocket $7,164 $6,842
-
I'm hoping folks can help me with an ACA plan question, as I just started looking at plans in our area.
Previously, we paid $521/month for a high deductible, HSA-qualified plan, and we maxed out our HSA contribution. Under the ACA, an HSA plan would cost us $723/month. There is a higher deductible, cheaper plan available: $597/month, but no HSA. My hunch is that it's worth it to pony up for the HSA eligible plan. $200/month (over our current plan) is a lot of extra money for us and will reduce our ability to max out our HSA contributions, but I'm guessing that even if we reduce our HSA contribution by a bit, reducing our taxable income somewhat through an HSA will be better for us financially? (And... now that I think about it... may increase our ACA tax credit as well.) Thoughts?
Wow, that's terrible!
I think both options are terrible, can't you keep your old insurance if you like that?
-
Thanks Numbers Man. I am NOT a Numbers Woman, so I appreciate that. So if our income is significantly lower (~$80K), how does that tip the scales?
-
Umbels Man - I think it's gets a little better, HSAs are also pre-FICA
-
Without knowing your tax situation. The back of the envelope calculation would be that you would get a tax credit of $983 with you being in the 15& tax bracket instead of the 28% tax bracket. You would have to pay $723 a month or $8,676 a year plus the HSA contribution of $6,550 (I'm assuming you are married) to get a tax benefit of $983. So you would be paying $14,243 out of pocket or about 18% of your income, albiet the $6,550 would be sitting in an HSA account.
Therefore, the $597 plan would be more economical since you would be paying $7,164 a year or about 9% of your income.
-
Without knowing your tax situation. The back of the envelope calculation would be that you would get a tax credit of $983 with you being in the 15& tax bracket instead of the 28% tax bracket. You would have to pay $723 a month or $8,676 a year plus the HSA contribution of $6,550 (I'm assuming you are married) to get a tax benefit of $983. So you would be paying $14,243 out of pocket or about 18% of your income, albiet the $6,550 would be sitting in an HSA account.
Therefore, the $597 plan would be more economical since you would be paying $7,164 a year or about 9% of your income.
I think it depends on what the deductible difference is and how likely that deductible is of being met.
-
Without knowing your tax situation. The back of the envelope calculation would be that you would get a tax credit of $983 with you being in the 15& tax bracket instead of the 28% tax bracket. You would have to pay $723 a month or $8,676 a year plus the HSA contribution of $6,550 (I'm assuming you are married) to get a tax benefit of $983. So you would be paying $14,243 out of pocket or about 18% of your income, albiet the $6,550 would be sitting in an HSA account.
Therefore, the $597 plan would be more economical since you would be paying $7,164 a year or about 9% of your income.
I think it depends on what the deductible difference is and how likely that deductible is of being met.
I use insurance for catastrophic events. A difference in deductible is a variable expense that only needs to be breached when there are illnesses. In my years of raising kids, I have only hit the deductible about 4 times (3 times due to childbirth) over the last 30 years. So THE op should just write a check to account for any higher deductibles. I would be looking at the total outflow from my budget if I were the OP. BTW - I just read the original post and have no idea what an ACA Credit is.