Author Topic: Am I crazy for not thinking the HDHP is amazing?  (Read 4033 times)

StacheInAFlash

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Am I crazy for not thinking the HDHP is amazing?
« on: December 11, 2015, 10:18:24 AM »
With open enrollment winding down, I'm still confused about the benefit of the HDHP vs the PPO. I'd start by saying that I have really, really good insurance so maybe that is the issue here with why I just don't see the benefit of the HDHP. Everything below is for employee only, not family or +1 or anything else. Also, pay periods are biweekly, so 26 total per year.

PPO: $24 per pay period / $100 annual deductible / 100% Coverage Preventative / 100% Coverage After Deductible for all else / $2500 Annual Out-of-Pocket maximum / $15-$50 misc. copays (walk-in, Urgent Care, Eye Exam, MRI, etc.)

HDHP: $25 per pay period / $1500 annual deductible, $750 provided by employer / 100% Coverage Preventative / 90% Coverage After Deductible for all else / $3000 Annual Out-of-Pocket maximum / No copays, just the 90% Coverage after met deductible / HSA is with Wells Fargo...just assuming that is bad, I haven't looked to see the investment options.

Other factors:
1) I'm generally healthy, with plans to only go to doctor for annual physical (free regardless of plan), but it seems like the past few years I've always ended up going a 2nd time in the year (bad sprain requiring MRI and physical therapy, influenza another, weird rash, etc.). In some cases, I went because I knew I have awesome insurance and it wouldn't cost anything.
2) No ongoing medications or anything like that. If I did, the PPO has a separate pharmacy annual out-of-pocket maximum of $750 and $10-$75 copays. HDHP is again, 90% after deductible with no separate annual out of pocket max.
3) My paycheck is maxed out as it is for tax-deferred savings so I really can't put any more money away in the HSA.
4) Hope to retire in 8-11 years, roughly around age 40
5) My partner has own awesome, cheap PPO insurance too.

So, am I crazy for not thinking the HDHP at my job is amazing? Why am I paying more money each pay period to have the luxury of potentially paying more money out of pocket each year? I was reading a thread yesterday where the OP said his PPO was $446 a month and the HDHP was $116 a month...that makes financial sense to me to go with the HDHP, but to pay more each month for it? I get that I have the $750 in free money to basically cover anything minor that comes up, but if something even slightly more serious happens, I end up paying the $1500 easy and potentially the $3000 out-of-pocket max pretty easily. Does 8-11 years of socking away the $750 given and blowing through $1500 or even $3000 every now and again really mean I'd come out so far ahead that is worth the "hassle" of the HDHP.

Am I missing something critical here?? Thoughts or advice please!

Paul der Krake

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Re: Am I crazy for not thinking the HDHP is amazing?
« Reply #1 on: December 11, 2015, 10:23:36 AM »
Your problem is that you can't afford to put money in your HSA. If you could, you would get roughly $1000 (depending on your tax bracket) of tax savings, on top of the $750 of your employer.

But you are right in thinking that the HDHP is poorly prices, or that the PPO is amazingly priced, depending on how you look at it.

AZDude

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Re: Am I crazy for not thinking the HDHP is amazing?
« Reply #2 on: December 11, 2015, 10:37:56 AM »
Assuming you are a single man with no family, the difference is negligible, so might as well go with the better insurance. Most employers give a certain amount of money toward a premium, regardless of the actual cost. So say a single man's insurance is $150 a month. The employer pays $125.  But, add spouse and children and suddenly its $750 a month, and the employer pays $150.

Suddenly that premium is excessive, and the HDHP with the lower premium and HSA with employer contribution makes more sense.

Basically, you have a situation different than most people.

StacheInAFlash

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Re: Am I crazy for not thinking the HDHP is amazing?
« Reply #3 on: December 11, 2015, 10:42:11 AM »
Assuming you are a single man with no family, the difference is negligible, so might as well go with the better insurance. Most employers give a certain amount of money toward a premium, regardless of the actual cost. So say a single man's insurance is $150 a month. The employer pays $125.  But, add spouse and children and suddenly its $750 a month, and the employer pays $150.

Suddenly that premium is excessive, and the HDHP with the lower premium and HSA with employer contribution makes more sense.

Basically, you have a situation different than most people.

It is sounding like I just have a unique situation then. In both the +1 and Family versions, it is still $1 more per pay period for the HDHP, and in those cases they give me $1500 but the deductible and out of pocket max would go up to $3000/$6000.


Psychstache

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Re: Am I crazy for not thinking the HDHP is amazing?
« Reply #4 on: December 11, 2015, 10:50:20 AM »
Assuming you are a single man with no family, the difference is negligible, so might as well go with the better insurance. Most employers give a certain amount of money toward a premium, regardless of the actual cost. So say a single man's insurance is $150 a month. The employer pays $125.  But, add spouse and children and suddenly its $750 a month, and the employer pays $150.

Suddenly that premium is excessive, and the HDHP with the lower premium and HSA with employer contribution makes more sense.

Basically, you have a situation different than most people.

It is sounding like I just have a unique situation then. In both the +1 and Family versions, it is still $1 more per pay period for the HDHP, and in those cases they give me $1500 but the deductible and out of pocket max would go up to $3000/$6000.

I guess your employer is covering a significant amount of the monthly premium, making the PPO a very attractive option. I've never seen it that close in real life or any case study. (My employer options of HDHP vs. PPO vs. fancy insurance is 76 vs. 208 vs. 289 monthly premium for example.)

smella

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Re: Am I crazy for not thinking the HDHP is amazing?
« Reply #5 on: December 11, 2015, 10:52:48 AM »
Wow, that's an incredible price for the PPO!   My spouse would have $200 per pay period taken out for a PPO, which is why we are on HDHP.  We also max out HSA.

Jack

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Re: Am I crazy for not thinking the HDHP is amazing?
« Reply #6 on: December 11, 2015, 11:07:48 AM »
Let's consider some possibilities:
  • You're healthy and use nothing in a year other than your free physical. In this case, you pay $1 * 26 pay periods = $26 more in premiums, but get $750 back (plus Paul der Krake's assumed $1000 back in tax savings if you actually contribute to the account). Result: HSA comes out ahead by $724-$1724
  • You have some kind of catastrophic injury or illness such that you'd hit your max OOP with either plan. In this case, you pay $26 more in premiums, $500 more in the OOP max difference, and still get the $750 + tax benefits back. Result: HSA comes out ahead by $224-$1224
  • You have some relatively minor health issue that causes you to go to urgent care, where they charge you $1500 under the HSA, but only a $15 copay under the PPO. This is more-or-less the worst-case scenario (there could be one even worse, but I don't have enough information -- or care enough -- to figure out what it would be). In this case, you pay $26 more in premiums, $1485 more in care, and still get the $750 + tax benefits back. Result: if you did not contribute to the HSA, it costs $761 more than the PPO. But if you maxed the account, the HSA still manages to come out ahead by $239.

Conclusion: even though your PPO is exceptionally good, the HSA wins if you have either really good health or really poor health. Only in the mediocre-health case does the PPO do better, and even then the HSA still wins if you max it out for the tax deduction.

(By the way: somebody please check my math!)

Psychstache

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Re: Am I crazy for not thinking the HDHP is amazing?
« Reply #7 on: December 11, 2015, 11:11:19 AM »
Let's consider some possibilities:
  • You're healthy and use nothing in a year other than your free physical. In this case, you pay $1 * 26 pay periods = $26 more in premiums, but get $750 back (plus Paul der Krake's assumed $1000 back in tax savings if you actually contribute to the account). Result: HSA comes out ahead by $724-$1724
  • You have some kind of catastrophic injury or illness such that you'd hit your max OOP with either plan. In this case, you pay $26 more in premiums, $500 more in the OOP max difference, and still get the $750 + tax benefits back. Result: HSA comes out ahead by $224-$1224
  • You have some relatively minor health issue that causes you to go to urgent care, where they charge you $1500 under the HSA, but only a $15 copay under the PPO. This is more-or-less the worst-case scenario (there could be one even worse, but I don't have enough information -- or care enough -- to figure out what it would be). In this case, you pay $26 more in premiums, $1485 more in care, and still get the $750 + tax benefits back. Result: if you did not contribute to the HSA, it costs $761 more than the PPO. But if you maxed the account, the HSA still manages to come out ahead by $239.

Conclusion: even though your PPO is exceptionally good, the HSA wins if you have either really good health or really poor health. Only in the mediocre-health case does the PPO do better, and even then the HSA still wins if you max it out for the tax deduction.

(By the way: somebody please check my math!)

Sounds right, but OP said he has no more money to save in the HSA, so no savings there unless he can come up with the $3350 to save.

AlwaysLearningToSave

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Re: Am I crazy for not thinking the HDHP is amazing?
« Reply #8 on: December 11, 2015, 11:23:46 AM »
Wow, that's an incredible price for the PPO!   My spouse would have $200 per pay period taken out for a PPO, which is why we are on HDHP.  We also max out HSA.

Which is still a pretty darn good price for a PPO!

As someone who pays the entire premium cost for wife and daughter (because my employer's insurance offerings suck), I am supremely frustrated with the lack of transparency created by the employer-based insurance system.  So many people have no idea how valuable their health insurance benefits truly are.

I'm mostly just frustrated that I am stuck with the situation I have while so many people have so much better options.  My employer wastes quite a lot of money to provide me not-that-good employee-only PPO insurance that I basically never use while I also pay through the nose with after-tax dollars to insure my wife and daughter (because the family health insurance offered by my employer is absurdly expensive for our young, healthy, small family).  I've lobbied my employer to change its offerings but I can't make it happen for reasons beyond my control.  The explanation I've gotten is that the premium cost for HDHPs is about the same as that for PPOs, so why not just offer the PPO?  While I believe them, I wonder why.  Is it just because my employer is a small employer?  Is it because there is not enough competition for health insurance in my area and the dominant insurer prefers PPOs?  Is it because the broker or the person in charge of making these decisions for my employer doesn't know what questions to ask or how to structure things differently?  I just have a very hard time believing that what my employer offers is the best they can do. 

That became much more of a rant than I intended.  Sorry.

Bottom Line: OP, you have an awesome situation and basically can't lose.  Enjoy it while you have it. 

Jack

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Re: Am I crazy for not thinking the HDHP is amazing?
« Reply #9 on: December 11, 2015, 11:30:36 AM »
Sounds right, but OP said he has no more money to save in the HSA, so no savings there unless he can come up with the $3350 to save.

Only in scenario #3. Remember, the employer contributes $750 to the account (which means the max the OP could contribute is really only $2600 anyway).

StacheInAFlash

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Re: Am I crazy for not thinking the HDHP is amazing?
« Reply #10 on: December 11, 2015, 03:18:04 PM »
Thanks for all the food for thought everyone! It is good to know that I'm not completely crazy, although it sounds like if I did contribute up to the full $3350 limit, things would make more sense financially to consider the HDHP. I think I'm going to stick with the PPO again for next year, but maybe revisit for 2017. After just paying off $52K of student loans over the past 21 months, 2016 is going to start off with maxed out 457 and 403b accounts so my paychecks will be really small and my tax liability also way smaller! I figure I can feel that out for the year to see how we adjust and see if we can squeeze some more money out for an HDHP. Of course I can also consider putting that extra money (if there is any) into an IRA instead, which while not having all the same benefits, would still be awesome. Plus that would keep things simplified and 100% in Vanguard. The thought of having to open a Wells Fargo account makes my blood run cold.

MoonShadow

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Re: Am I crazy for not thinking the HDHP is amazing?
« Reply #11 on: December 11, 2015, 03:39:26 PM »

As someone who pays the entire premium cost for wife and daughter (because my employer's insurance offerings suck), I am supremely frustrated with the lack of transparency created by the employer-based insurance system.  So many people have no idea how valuable their health insurance benefits truly are.

I'm mostly just frustrated that I am stuck with the situation I have while so many people have so much better options.

Always, can you refuse the coverage upon yourself, and get a family HSA plan on the open market? It's still less than ideal, but you might be better off in the long run.  What is your skillset, and can it transfer to another company?  What is holding you to that company?

AlwaysLearningToSave

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Re: Am I crazy for not thinking the HDHP is amazing?
« Reply #12 on: December 12, 2015, 07:04:18 AM »

As someone who pays the entire premium cost for wife and daughter (because my employer's insurance offerings suck), I am supremely frustrated with the lack of transparency created by the employer-based insurance system.  So many people have no idea how valuable their health insurance benefits truly are.

I'm mostly just frustrated that I am stuck with the situation I have while so many people have so much better options.

Always, can you refuse the coverage upon yourself, and get a family HSA plan on the open market? It's still less than ideal, but you might be better off in the long run.  What is your skillset, and can it transfer to another company?  What is holding you to that company?

Yes, I explored refusing my employer's coverage entirely to get a family HDHP on the open market. Unfortunately the economics of it don't work out because I would not receive sufficient compensation in lieu of the insurance benefit. When I explained the situation to the powers that be, they were at least understanding of my concern and looked into doing it. I viewed it as expense-neutral because I would refuse coverage and they would pay me what they would otherwise have paid in insurance premiums, less payroll taxes, etc. The employer explained that it would not in fact be expense neutral to the firm because there are other employees who refuse the health insurance (likely because they are covered on a spouses plan) and if they gave that benefit to me, they would have to give it to everyone, substantially increasing total payroll costs.

I'm a business lawyer. Yes, I could look for employment elsewhere, but this is pretty much the one frustrating thing about an otherwise great fit for me and my family. Probably not going to make a change.