Author Topic: Evaluating HDHP vs traditional plan with new child (need advice)  (Read 1207 times)

Swat

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My wife is due with our first child in under a month and it also happens to be open enrollment for our health insurance plans and I am evaluating which makes the most sense in our situation. Prior to this life-changing event (and my wife's pregnancy), in the past few years we always did HDHP so we could contribute to the HSA (maxed out last 3 years). Part of this was because my wife and I are extremely healthy and both in medicine (resident, physician assistant) so we can also diagnose basic things without having extra office visits. However...new year, new plan and more importantly, new child so trying to evaluate what makes the most sense from those with children who have gone through similar debates.

Background
-My wife and I are on separate health plans with different employers due to a "surcharge" if I am added to her plan.
-For 2017, I will be maxing out my individual HSA at $3400.
-Our child will be added to my wife's plan, and thus she would qualify for the "family HSA" plan if we want to go that route.
-However, since we are "married, filing jointly" we must add the cumulative HSA's together, so she would only be able to contribute $3350 (6750-3400) to her plan. However, her employer will contribute $800, so her personal contribution will only be about $2550.
-If we chose the HDHP, we would max it out.
-Our collective income for 2017 is expected to be $100-110k.

Comparing the HDHP vs the traditional plan
HDHP:
-Annual cost via payroll deductions: $1360
-Deductible: $3500
-Coninsurance: 15% (up to out-of pocket max)
-Out of pocket max: $11,100
-Prescription coverage is immediately applied to the deductible (not copays or coninsurance) regardless of what tier it is on
-Preventative care: $0; no deductible

Traditional Plan:
-Annual cost via payroll deductions: $3185
-Deductible: $1000
-Coninsurance: 10% (up to out of pocket max)
-Out of pocket max: $6000
-Prescription coverage: pretty decent coverage; $4-45 seems to be the range for the "lower tiers"

Number crunching (my math)
-If we don't utilize any medical services for the entire year (unrealistic), the HDHP is ~$3255 better via the following math
Payroll difference: $1825 (3185-1360)
Employer HSA contribution: $800
Tax savings on ~$2550 employee HSA contributions at 25% tax bracket: ~$630

Questions
-From my math, it seems like starting ~$3k better for the HDHP is the better option, especially if we don't use many medical expenses throughout the year. However, I know children can be expensive so I'm anticipating they will get sick. There is of course, the off-chance that something significant occurs and we will approach the out of pocket maximum which is much higher (although we could afford it if need be). I'm sure other people have experienced this similar decision and I'd be interested in feedback.
-Also, has anyone used "WageWorks" for the HSA servicer? That's the new plan with my wife and I'm in the process of trying to get a list of their (hopefully low-cost) investment options.

Thanks!

jamesbond007

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Re: Evaluating HDHP vs traditional plan with new child (need advice)
« Reply #1 on: October 25, 2016, 02:35:44 PM »
You should also take into account the fees for your HSA and what investment options are available. The whole point of HSA is that you will be able to invest but most investments have an expense ratio of around 0.5% - 2% which are very expensive compared to the 0.04% on Vanguard. This is where even I have a trouble understanding the benefits of HSA. Sure I am saving abour $1000 or so in taxes but at what cost? I decided that my peace of mind is worth more than $1000 and went with a PPO.  Had my investment option were better, then I'd definitely take a another look but that's not the case with most HDHP/HSA plans.


acroy

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Re: Evaluating HDHP vs traditional plan with new child (need advice)
« Reply #3 on: October 25, 2016, 04:40:34 PM »
Similar options here!
HSA all the way. We have saved quite a bit. Sock it away.
Yes kids get sick... and they normally get over it by themselves with no doctor visit in 1-3 days ;). For the kids, we do the annual checkups, and see the doc maybeee 1-2 times a year otherwise. It's been cheap. The nastiest thing we've had was a case of misdiagnosed pneumonia and a fractured wrist. Not bad.