Fed trying to decide if I should jump on the HSA bandwagon

[DeniseNJ]

I have NALC right now which is one of the cheapest premiums for family.  Trying to decide if the high deductable plans with the HSA makes sense.  I'd like to lower my taxes and payroll taxes since I live in NJ and can only deduct 10K of my state taxes which are like 3x that much.  I can't deduct the kids--they're too old anyway.  I can't do a Roth or a tax dedcutable IRA, although I can do a rollover.  But tax-wise the HSA sounds great.

But, we defintily use our insurance.  Meds for everybody, DME, psych and therapists, lots of specialists, some out of network.  We'll meet the deductable so I don't want one that is ridiculously high. 

How do you figure out what's best?  I was thinking that total premium plus deductible, minus whatever they put into your HSA equals total cost of the plan?  Is that a good way to compare plans offered?  Anybody got any adivce on or experience with the fed plans?

[use2betrix]

We did HDHP plans the last 3 years and maxed out the HSA each year.

Unfortunately, it’s easy to neglect certain health things when you know you’re going to be paying a lot more for them. I’m switching back to a much more expensive buy-up PPO plan starting November 1st so I can at least spending a year handling everything I’ve been putting off (skin cancer screen, thyroid ultrasounds, knee/shoulder issues, etc.)

[yachi]

How do you figure out what's best?  I was thinking that total premium plus deductible, minus whatever they put into your HSA equals total cost of the plan?  Is that a good way to compare plans offered?  Anybody got any adivce on or experience with the fed plans?

I'm not sure what plans you have to select from, but I've had and HSA plan for the last 6 years.  My favorite high deductible plans cover 100% after the deductible (no co-insurance or other BS, just $40 per office visit after you meet the deductible).  With this plan, it's easy to know how much you'll be paying for health care next year:  Add the deductible, add the premiums, subtract what your employer contributes.  This is the maximum you pay for health care no matter what, and sets the minimum any other plan needs to meet.  Our plan had an "out of pocket maximum" that was irrelevant. (When our deductible was $5,000 after which insurance pays 100% except for $40 office visits, the out of pocket maximum of $15,000 could not have been met with office visits)

A year or two after my employer offered the above plan, they added a version with a lower deductible, but higher premium.  If you added the premium and the deductible the cost was higher than the base plan, so the only benefit came to those who couldn't trust themselves to save for the deductible.  Stay away from these plans, they're not for Mustachians.

if you find a plan that doesn't cover 100% after the deductible is met you have more assumptions to make.  First, add the deductible to the premium, and subtract employer contributions.  If this isn't cheaper than the above plan, run away.  If it's cheaper, figure out how much cheaper it is.  Remember some of those savings will be spent on your coinsurance.  Use https://www.healthcarebluebook.com/ to estimate treatments you might need, and how much your coinsurance would cost you.

[DeniseNJ]

Thanks so much.  It gets a bit more complicated since I have to look up what is covered under prescriptions and such and how much is DME, usually 10%.  My dd has type 1 diabetes.  She uses an insulin pump and a continuous glucose monitor.  and we use lots of meds.  So I have to search out that stuff but I'll check it out.

Any fed plans that are recomended?

[Jon Bon]

Generally HSA's are freaking awesome.

I mean they would be bad if you were on super expensive experimental drugs. Or something like that. WE had a hospital stay, that was damn expensive. But we still have plenty in our HSA. It's a fantastic tax avoidance tool. It gives me a sense of control over my medical expenses. It's not a game where I guess how much the insurance company will pay. I know I am on my own but I have funds for that.

To me it can feel like a form of self insurance.

Your situation might be different with diabetes or some other PEC. I have my family of 5 on it and could not be happier. I just checked the balance I have about 75% of it in the market right now (sweet sweet tax free gains!) It's a great thing to have.

My advice would be set aside some cash and fully fund it the first year (6k or so) So that way you have a nice little cushion that you can add too through payroll deduct. Just be sure not to over fund it.

[missundecided]

I believe NJ still taxes HSAs as regular income. Heads-up in case you hadn't already factored that.

[DeniseNJ]

I believe NJ still taxes HSAs as regular income. Heads-up in case you hadn't already factored that.

NJ is the worse!!!  The also tax 403B contributions AND earnings.

[remizidae]

Meds for everybody, DME, psych and therapists, lots of specialists, some out of network.

My first instinct is to tell you to get it, but when you've got multiple chronic conditions in the family and consume a whole lot of healthcare like this, you're not really the ideal case for a high-deductible plan. Do you expect your health spending to go down in the future or is it going to stay this high?

[secondcor521]

I believe NJ still taxes HSAs as regular income. Heads-up in case you hadn't already factored that.

And CA as well.

[DeniseNJ]

Meds for everybody, DME, psych and therapists, lots of specialists, some out of network.

My first instinct is to tell you to get it, but when you've got multiple chronic conditions in the family and consume a whole lot of healthcare like this, you're not really the ideal case for a high-deductible plan. Do you expect your health spending to go down in the future or is it going to stay this high?

I don't expect it to go down.  The regular therapy and psych visits will continue until everybody stops being crazy--so forever.  And the meds too, forever. The diabetes DME and meds also, and unfortunatley, forever.  Since I usually meet the max out of pocket, that's probably the most important thing I should consider.  So premiums, minus HSA deposit, plus max oop for care and meds if separate, would be my total cost.  I think if I'm going to be paying to my max, I'd rather do it before taxes.

[DeniseNJ]

OK, I think I got it.  I've figured the least I can spend would be the net premium (wkly premium x 26) plus the net deductible (deductible minus HSA contribution).  And the most I can spend is the net premium plus the oop max.  Out of pocket max does include copays and co-insurance and deductible, but not premiums. NALC has a separate out of pocket max for drugs, which we use plenty of. 

Looks like GEHA is the winner. Min I will spend with them is 5,100 (8,100 out of network) and the max is 13,900 (17,900 out of network). 

For MHBP it's 5,578 (5,578) and max is 15,978 (18,978).   The min in network is about the same as GEHA but the max is higher.

For comaparison though, NALC has a minimum or 5,488 (no HSA) and a max of 12,988 (of which 3,100 is a max oop for drugs bc it's separate).  Same min but 14,988 max out of network. 

And none of this includes the sweet payroll tax break.

[erutio]

Does your agency also add money to your HSA just for being on the HDHP?

I get $150 per month, for a total of $1800 for the year.   It's basically free money. 

[DeniseNJ]

Does your agency also add money to your HSA just for being on the HDHP?

I get $150 per month, for a total of $1800 for the year.   It's basically free money.

Yes, but I consider that a lower deductible, so the net deductible is less by that amount, just to compare the plans more evenly.  The money I would pay myself would then be tax free as opposed to what I pay now.  Sweet.

[Beach_Stache]

I'm a Fed w/3 boys (11, 9, 7) and DW.  We are all healthy (luckily) and don't have any underlying conditions.  I've always been so intimidated by an HSA, and we just keep BCBS each year as it seems "safe".  I don't understand people who say "I love my insurance".  I HATE insurance, I don't want to think about medical conditions, have to think about insurance when you are in need, think about going to x or y hospital or doctor, think about how much to put in Flex Spending each year and try to guestimate.  I have $1k left over from our $2k we put in this year and I'm scrambling to buy sunscreen and tylenol and stuff since I can only carry over $550.  I just hate the entire process, I want to try my best to stay healthy and then pay what I need to pay w/o thinking about any of it.  That being said, I've kept BCBS b/c it's safe and I don't have to think about it, but know we pay a lot.  With COVID I'm even more scared to go to an HSA but realize w/the math it's probably best to do an HSA and then max out, but also no clue what will happen to insurance over the next 5,10,20 years, carrying it into retirement, etc.

Should I take the plunge as well and go to HSA, or w/my current fears is it best to just stick to BCBS, throw in $1k/year for flex spending for medical and call it a day?  I have no worries about losing or gaining $5k/day in the market, but Medical Insurance just seems like a crap shoot at best with so many unknowns about what is the best bang for your buck.  And if you did have an accident that needed an ambulance or a week stay in the hospital, is your HSA going to ruin you?  Or is a healthy family of 5 w/3 young boys the poster candidate for HSA's?

[Peachtea]

I'm a Fed w/3 boys (11, 9, 7) and DW.  We are all healthy (luckily) and don't have any underlying conditions.  I've always been so intimidated by an HSA, and we just keep BCBS each year as it seems "safe".  I don't understand people who say "I love my insurance".  I HATE insurance, I don't want to think about medical conditions, have to think about insurance when you are in need, think about going to x or y hospital or doctor, think about how much to put in Flex Spending each year and try to guestimate.  I have $1k left over from our $2k we put in this year and I'm scrambling to buy sunscreen and tylenol and stuff since I can only carry over $550.  I just hate the entire process, I want to try my best to stay healthy and then pay what I need to pay w/o thinking about any of it.  That being said, I've kept BCBS b/c it's safe and I don't have to think about it, but know we pay a lot.  With COVID I'm even more scared to go to an HSA but realize w/the math it's probably best to do an HSA and then max out, but also no clue what will happen to insurance over the next 5,10,20 years, carrying it into retirement, etc.

Should I take the plunge as well and go to HSA, or w/my current fears is it best to just stick to BCBS, throw in $1k/year for flex spending for medical and call it a day?  I have no worries about losing or gaining $5k/day in the market, but Medical Insurance just seems like a crap shoot at best with so many unknowns about what is the best bang for your buck.  And if you did have an accident that needed an ambulance or a week stay in the hospital, is your HSA going to ruin you?  Or is a healthy family of 5 w/3 young boys the poster candidate for HSA's?

You’re a good candidate. Like OP I’ve come to the conclusion that GEHA HDHP is the best value for my needs. In my area all my preferred doctors and hospitals are in network. If yours are not, the MHBP Consumer HDHP is a close second to look at. Unlike OP, I calculate the difference by subtracting the premium pass through (the plans contribution to the HSA) from the premium not the deductible. Because I get that money for keeps whether I use the deductible or not. I also calculate the tax savings and subtract that from the premium because I only get that savings with a HDHP. Since you have to spend the FSA money it’s not really savings in my mind, vs the HSA that is invested and is actual savings. You really see the difference in savings this way and how much in medical costs you would have to incur to before there’s a wash.

Ex. GEHA family premium pass through is $1800, which leaves $5400 that I can contribute to family HSA. I would save 34.4% in taxes (7.45% FICA, 4.95% state, and 22% fed) on my contributions, $1858. GEHAs yearly premium is then $4135-1800-1858 = $477 compared to BCBS Basic’s $5233 in premiums.

I think what most people nervous about HDHPs don’t understand is the embedded deductible/out of pocket maximum. I didn’t at first. All the fed plans have embedded deductible/ OOP max because they are all ACA compliant. What this means is that within a family plan, the single person deductible/OOP is also applicable until you reach the family deductible/OOP max. This saves you money.

Example: GEHAs deductible is $1500 single/ $3000 family and OOP max is $5000 single/ $10,000 family. So if one son became catastrophically ill, the $1500 deductible would apply for his expenses (not the $3,000 family) and the maximum you would pay OOP for his care that year would be $5,000 (not the $10,000 family). (To reach the max of 5k OOP he would need over 70k in medical expenses.) If second son also broke an arm that year and the cost is $2500 (average), you would pay his $1500 deductible and 5% of the remaining $1000 for a total of $1550. If the third son then also breaks his arm, you pay 5% of the $2500, $125, because your family by son 1 and 2 has already met the $3000 deductible. So a very rough year, but you’re still “only” paying $6,675 vs the 10k family out of pocket, because of the embedded deductible/OOP. If you have a similar tax savings as me, you’d have saved $4756 compared to the BCBS Basic premium that year. Take that years savings minus your OOP expenses = $1,919. You could try to figure out how much you’d pay in copays for all that care under the BCBS plan, but it’s harder because you need to know how many days of care and number of procedures to guesstimate copays. Let’s say $175 ER + $100 diagnostic (X-ray) for each son that broke an arm and three days ($175/day) hospital and one surgery $150 for the catastrophic son: $1200 total in copays. On this very bad hypothetical year you would have saved $719 by going with BCBS Basic. But you can see the crazy amount of medical costs that would have to happen for the HDHP to not be better. And if there were more procedures for the catastrophic event than just one surgery and a 3 days hospital visit, the HDHP would come out ahead (since BCBS copays would go up but your cost under GEHA stay the same as you’ve reached his OOP max).

[dhc]

Not a fed, but maybe still useful in terms of thinking about your options:

Rather than simply looking at "best case" and "worst case" examples, I found it much more helpful for myself while deciding to model a few plausible scenarios for what could happen in a year: best case (only preventative care visits and prescriptions we always take), likely case (average number of office visits and extra prescriptions from the last several years), one or multiple family members having a hospital stay and related costs, and worst case (one or multiple family members hitting their individual OOP maximums). I was surprised to find out that which option was best wasn't just a low usage vs high usage thing; my HDHP ended up better (counting tax savings, anyway) in most scenarios, and wasn't significantly more expensive for any scenario (whereas my PPO option was much more expensive for both the very low end of usage and the very high end of usage, owning to similar OOP maximums, but significantly higher premiums and no tax savings).