Author Topic: Health Insurance - High Deductible Plan  (Read 4546 times)

tooqk4u22

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Health Insurance - High Deductible Plan
« on: October 11, 2012, 07:38:45 AM »
Obviously this topic is on the minds of a lot of people - some worry that they can't retire because of health care and others ignore it - I don't want to debate it here whether you can or can't retire because of healthcare because it doesn't affect one's ability to retire, but it might affect the amount you need.

So on to that.  HDHP's seem to get the most support on FIRE sites and by MMM with the premise that I will have a low monthly premium but because I am healthy I will never incur another cost.  Obviously this is a falls notion.

So last month (not coincidentally shortly after school started) my three kids had bad coughs/congestion and had to take them to the doctor to get checked - the cost of thes visits totaled $680 at the insurance/doctor preferred discounted member rate.  Keep in mind we don't rush them to the docs at every sniffle, in this case we waited a week or so before taking them (generally speaking a normal cold/virus will work itself out in that amount of time or at least start showing improvement).

Nevermind that the doctor saw all three in the same room in about 15 minutes - DW will talk to them to have the bill reduced.  Point is a couple of these things throughout the year add up.  I still think they are better plans but there can be a cost.

For those that use HDHP plans has anyone thought about what amount (0-100%) of the deductible/coinsurance they assume is recurring for FIRE?

arebelspy

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Re: Health Insurance - High Deductible Plan
« Reply #1 on: October 11, 2012, 08:04:17 AM »
My projections are: 4-5k max yearly deductible (avg of 2k/yr actually spent OOP), and 350/mo premium = 6,200/yr = 517/mo.

Others more risk adverse than I may just want to plan for the whole deductible every year and any not spent is gravy.
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bo_knows

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Re: Health Insurance - High Deductible Plan
« Reply #2 on: October 11, 2012, 08:07:41 AM »
So last month (not coincidentally shortly after school started) my three kids had bad coughs/congestion and had to take them to the doctor to get checked - the cost of thes visits totaled $680 at the insurance/doctor preferred discounted member rate. 

Holy crap. Not to get too far off topic, but that sounds like a crazy terrible "member rate".  What procedures were done here, throat cultures? Since I've been on a HDHP, I've never seen a visit that was $200 or more per person. This includes physical therapy sessions, etc.  Crazy.

I haven't specifically planned for healthcare, simply because it is too far ahead in my plan... and things can/will change in the next 7-10yrs.  I think that HSA's are currently playing a huge role in mitigating some of these expenses.

fiveoh

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Re: Health Insurance - High Deductible Plan
« Reply #3 on: October 11, 2012, 08:23:34 AM »
My plan WAS to contribute the max per year to my HSA(currently I think its 3100 a year) for the next 10 years and invest that in dividend growth stocks.  By my calculations with a modest 4% return I should be around 40k in 10 years.  40k should easily give off 1500 per year in dividends, which I was hoping would cover my health costs without touching the principle. 

Note this was before obamacare, soon I might not be able to keep my hdhp+hsa.

tooqk4u22

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Re: Health Insurance - High Deductible Plan
« Reply #4 on: October 11, 2012, 08:38:07 AM »
Arebspy - yeah that is kinda where I am thinking, somewhere in the middle.

bo-knows - yes it is crazy, it was basic pediatrician visit, there may have been four visits though and not three. For basic visits like this I was expecting around $100 hopefully the DW is successful.

fiveoh - that is good way to look at it. Instead of including it in the FIRE #, plan for it in a separate pot so there is no confusion.  Money is fungible but sometimes it helps to compartmentalize things.  Can't solve for Obamacare though.

MooreBonds

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Re: Health Insurance - High Deductible Plan
« Reply #5 on: October 11, 2012, 08:28:55 PM »
My plan WAS to contribute the max per year to my HSA(currently I think its 3100 a year) for the next 10 years and invest that in dividend growth stocks.  By my calculations with a modest 4% return I should be around 40k in 10 years.  40k should easily give off 1500 per year in dividends, which I was hoping would cover my health costs without touching the principle. 

Note this was before obamacare, soon I might not be able to keep my hdhp+hsa.

This is also my plan (although I've had my HSA for a while).

One benefit you're missing is that the HSA contributions are tax-deductible regardless of your income, AND the earnings are tax-free (if withdrawn for healthcare expenses). It's a savings vehicle like no other!

And remember that a family plan has a higher HSA contribution than an individual (individual is $3,100, a family HDHP is like $5,000+). If you are putting in $5,000 into the HSA for your family plan, you are reducing your taxable income by $5k. So what's your combined Federal/State/City tax rate? Maybe 30%? If so, your taxes are reduced by $1,500, so reduce your health insurance policy costs by that amount.

And do that calculation again when calculating withdrawals from the HSA - in your example, that $1,500 in annual dividends pulled out of the HSA for healthcare is tax free, so it's actually equal to earning perhaps $2,000 in dividends before they are hit by taxes.

I realize that Missouri is currently one of the lower cost states for health insurance, but my annual $3,100 HSA contribution is worth about $1,000 in income tax savings - and my annual HDHP premiums  for a $5,100 deductible policy only total $600....so I'm actually getting paid by the gov't to take the HDHP and gamble that I don't need healthcare. Yes, I'm taking a risk, but I tend to take care of myself and am healthy, so it's more than paid off so far.

Regarding your particular example, is there a reason that you didn't try someplace like a Take Care Clinic at Walgreen's, where they might charge $65/person? The Nurse Practitioner there could likely have subscribed them something...although, the best course is that unless they are experiencing extreme symptoms, give them 8 days to get over it without drugs. Your body does have a natural immune response to various virus floating around out there, but it takes 7-10 days to heal itself. And many times it can do it on its own without any help from a pill - it just takes time, rest, and a proper diet.

fiveoh

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Re: Health Insurance - High Deductible Plan
« Reply #6 on: October 12, 2012, 04:46:40 AM »
My plan WAS to contribute the max per year to my HSA(currently I think its 3100 a year) for the next 10 years and invest that in dividend growth stocks.  By my calculations with a modest 4% return I should be around 40k in 10 years.  40k should easily give off 1500 per year in dividends, which I was hoping would cover my health costs without touching the principle. 

Note this was before obamacare, soon I might not be able to keep my hdhp+hsa.

This is also my plan (although I've had my HSA for a while).

One benefit you're missing is that the HSA contributions are tax-deductible regardless of your income, AND the earnings are tax-free (if withdrawn for healthcare expenses). It's a savings vehicle like no other!

And remember that a family plan has a higher HSA contribution than an individual (individual is $3,100, a family HDHP is like $5,000+). If you are putting in $5,000 into the HSA for your family plan, you are reducing your taxable income by $5k. So what's your combined Federal/State/City tax rate? Maybe 30%? If so, your taxes are reduced by $1,500, so reduce your health insurance policy costs by that amount.

And do that calculation again when calculating withdrawals from the HSA - in your example, that $1,500 in annual dividends pulled out of the HSA for healthcare is tax free, so it's actually equal to earning perhaps $2,000 in dividends before they are hit by taxes.

I realize that Missouri is currently one of the lower cost states for health insurance, but my annual $3,100 HSA contribution is worth about $1,000 in income tax savings - and my annual HDHP premiums  for a $5,100 deductible policy only total $600....so I'm actually getting paid by the gov't to take the HDHP and gamble that I don't need healthcare. Yes, I'm taking a risk, but I tend to take care of myself and am healthy, so it's more than paid off so far.

Regarding your particular example, is there a reason that you didn't try someplace like a Take Care Clinic at Walgreen's, where they might charge $65/person? The Nurse Practitioner there could likely have subscribed them something...although, the best course is that unless they are experiencing extreme symptoms, give them 8 days to get over it without drugs. Your body does have a natural immune response to various virus floating around out there, but it takes 7-10 days to heal itself. And many times it can do it on its own without any help from a pill - it just takes time, rest, and a proper diet.

Out of curiosity, what are you investing your HSA in?  With a username of moore bonds, I figure maybe bonds haha.(I apologize if thats your name, I thought it was a clever play on words)  Nice way to look at it with the tax benefits included!

tooqk4u22

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Re: Health Insurance - High Deductible Plan
« Reply #7 on: October 12, 2012, 07:18:27 AM »
Regarding your particular example, is there a reason that you didn't try someplace like a Take Care Clinic at Walgreen's, where they might charge $65/person? The Nurse Practitioner there could likely have subscribed them something...although, the best course is that unless they are experiencing extreme symptoms, give them 8 days to get over it without drugs. Your body does have a natural immune response to various virus floating around out there, but it takes 7-10 days to heal itself. And many times it can do it on its own without any help from a pill - it just takes time, rest, and a proper diet.

This is the first year for us with one of these plans so we are learning as we go, and unfortunately I learned when the bill came.  Thanks for pointer we will definitely look into NP or PA - not sure how exactly but it makes sense.

As for timing, as I said we waited a week, maybe a bit more, and usually do unless it is really bad.

MooreBonds

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Re: Health Insurance - High Deductible Plan
« Reply #8 on: October 12, 2012, 01:40:00 PM »
Out of curiosity, what are you investing your HSA in?  With a username of moore bonds, I figure maybe bonds haha.(I apologize if thats your name, I thought it was a clever play on words)  Nice way to look at it with the tax benefits included!

LOL...actually, it is a dual play on words: both a reference to my favorite Bond (Roger Moore), as well as my user ID change on the ER forum back in early 2008, when I thought I was going to be taking a more conservative portfolio shift as I neared ER by plowing new money into fixed income (of course, that was using the 2005-2008 portfolio returns and back when you didn't express interest rates with large negative exponential digits - and before the market humbled my portfolio in late 2008-2010).

Since then, I've been a little hypocritical by plowing new money into equities, with a focus on International/Emerging Markets. :)

As far as the HSA goes, back when they first came out, there appeared to be just one company that even allowed you to link your HSA Bank Account w/ an investment account to buy anything (HSA Bank). The investment account is held by TD Ameritrade.

Since then, there might be a few others that allow you that freedom, but I'm leaving it there for now.

The only bad thing is that - like nearly every other HSA provider - they rake you over the coals on fees. I pay $2.25/month for having a bank balance lower than $5,000, and another $3/month or so for the privilege of having the TD Ameritrade investment account (they only started the $3/month fee last year). However, after maxing out my HSA contribution for 7 years or so, the earnings are far more than enough to justify paying the damn $5+/month to HSA Bank.

I should perhaps take a more selective view of what I invest in for which account, but my only guideline is keeping most of my preferred stocks/bonds in tax advantage accounts, and all international holdings (most of which give you a foreign tax credit) in my taxable accounts.

And as luck would have it, my HSA account - the least accessible account I have for withdrawing money - has been the only account that has had stellar investment returns for the past 10 years, up something like 60% (excluding contributions) since I opened it, while my other accounts have putzed around and don't have as great of a return!