The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: DanTheYogi on July 29, 2019, 08:04:31 PM
-
Hi everyone
I just turned 26 a few months ago and recently got hired for a new job. So I'll be selecting a health insurance plan for the first time. I'm looking at the numbers and the decision seems shockingly easily to me so I wanted to run it by all of you knowledgeable folk. Actually, there are 2 HD plans and one PPO. I'm actually not sure which HD plan I should choose, but they both seem to be vastly superior to PPO.
Here are the numbers:
Highest deductible:
-deductible: 2500
-bi-monthly premium: 25 (600/year)
-HSA: 3500 max with employer contribution of 1000
-OOP Max: 5500
Middle deductible:
-deductible: 1500
-bi-monthly premium: 37.5 (900/year)
-HSA: 3500 max with employer contribution of 500
-OOP Max: 3000
PPO:
-deductible: 1000
-bi-monthly premium: 122.5 (2940/year)
-HSA: none
-OOP Max: 4750
Now let's compare:
-If I didn't have any medical expenses, I would save 300 dollars by choosing high over mid, 2040 dollars choosing mid over PPO, and 2340 by choosing high over PPO.
-Let's say I have a particularly unhealthy year. I would have to spend 2340 extra before the ppo would be equivalent to the high. Not just total expenses; there would still be copays to consider on the PPO. But there's more: My employer contributes 1000, which bumps that number up to 3340. On top of that, the HSA is tax free. Let's say I contributed the exact difference in premiums to my HSA, 2340. In my tax bracket, that 2340 would be the equivalent of 3000 post tax. That would bring the minimum extra spend required up to 4000 for the PPO plan to be merely equivalent in costs to the HD/HSA plan. (Note: I am a complete novice when it comes to taxes/insurance, so if any of this is off, please let me know!)
Some other things to consider:
-I am single and have no children
-In-general, I live a very healthy lifestyle. I exercise regularly and am quite conscious of what I eat. I don't smoke or drink. I have been to the doctor for physical illness once in the last ~4 years.
-There is a caveat here: I am dealing with 2 different injuries right now, to my foot and my wrist. I've been dealing with them for months and it's possible MRI's and physical therapy may be required. It seems like this is what could be the real different maker here, however I just in this moment realized that even if I saw this as inevitable, the mid-plan is always going to make more sense than the PPO: the mid plan's OOP max is only 60 more than the yearly premium on the PPO. When combined with employer contribution to HSA (500) and HSA tax savings (If I contribute the premium difference, that is 2040, equal to ~2600 post tax), then in a worst case scenario the mid would still cost less than the PPO. I just crunched these numbers and I feel like I must have made a mistake; it seems to me the mid plan is always cheaper than PPO? (Assuming a contribution of at least 1950 to HSA)
-I haven't crunched the numbers but it seems like the high deductible plan would still win out against the PPO too in most scenarios.
-It seems to me the only way this could come back to bite me is if I had a serious one-time medical expense (like my entire OOP max upfront), and didn't have the means to immediately cover it. This is possible, I suppose; I am planning on aggressively paying down student debt, and don't plan on having more than 1-2 grand saved in cash on-hand. Still, with a small safety buffer, I don't think I have anything to fear at my income (~85K gross). I can always use credit cards upfront and pay them off by the next paycheck or 2.
Again, I'm a real novice when it comes to taxes, health insurance, employer contributions and other benefits, etc. So I have no doubt that I'm probably missing something. It just seems like one of the high deductible plans is definitely the way to go regardless of my health. Any thoughts or comments are of course welcome.
-
It looks like you're taking the right approach, at least as far as I can tell. I had the same confusion a few years ago when I ran the numbers and found that the "good" (high premium) plan NEVER saved money compared to the high deductible plans I was offered, whether I never went to the doctor or went every single day. Of course, this assumed the tax advantages of using the HSA, which very few people in general do.
As best as I can tell, the advantage of the fancy high premium plans is psychological -- a lot of money is taken from your paycheck so you never see it, then you get a smaller bill when at the dr. For most people, having their cash flow managed like this for them is what works. Not for mustachians!
So overall I think you've got it -- run the numbers for your specific scenario and expected usage. Agree the only sticky wicket is the MRIs, which are stupid expensive.
-
*Assuming* that each plan has the same actual costs, I'd go for one of the HSA plans. (That's NOT A GUARANTEE - each plan will negotiate with individual providers the price of various services. Until you hit your deductible, that cost may be all on you. If the PPO says a wrist brace is $100, but High HSA says it's $500, guess who's paying the difference there?) In some cases, the lack of transparency means that you have no way of knowing this ahead of time, so we first want to see if your job provides any literature to help with this decision.
My job, and the ones I've had before, have offered a "Summary of Benefits and Coverage". You can find some examples here (https://www.fcps.edu/Medical-Insurance). It goes through overviews (i.e. if there's a different in-network and out-of-network OOP max), how the plan is structured (do you need referrals or can you just go see a specialist?), coverage for various services ($copay or %coinsurance or just you pay 100% of cost until deductible), and possibly even examples of common types of situations and their total costs (fracture, pregnancy, diabetes treatment are the ones here to give different cases). Check if dental or vision is included. Check if there are tiered deductible stages (I had insurance at another job where I was responsible for something like 100% of costs up to $3000, and then 25% of costs between $3000 and my OOP max.)
You also want to know how easy it is to find a doctor who takes each insurance. Go to each company's website and check out the doctor search functions. Can you find, say, a physical therapist in your area? Are there enough primary care physicians where you could choose if one charges too much or if the other isn't accepting new patients?
TBH, I'd probably go with the Middle Deductible one. HSA's are fantastic, but I also like when the insurance company has more skin in the game so they have more incentive to negotiate lower prices. But that's assuming networks are both adequate. That may make the decision for you. I'm curious why the PPO is so high, maybe a much better network or just enough confused customers not asking about prices.