Author Topic: High Deductible Health Insurance plan with 2 small kids - worth the risk?  (Read 20295 times)

EJ

  • 5 O'Clock Shadow
  • *
  • Posts: 22
My work offers the following healthcare options:

1. low deductible plan - $500 max deductible, $4k max out of pocket.  $20 copays, 90% coverage after deductible
2. high deductible plan - $3,200 max deductible, $6k max out of pocket. no copays, 80% coverage after deductible. Company provides first $1,200 toward any doctor visits/health care.

difference in monthly premiums = $83.  Annual savings from premium = $1000

Two children (newborn, 2yo) and stay-at-home wife.

Is it worth the risk of saving $1k in premiums to chance paying much more in deductible/max out of pocket?  Thanks in advance.

Zaga

  • Magnum Stache
  • ******
  • Posts: 2592
  • Age: 40
  • Location: North of Pittsburgh, PA
    • A Wall of Hats
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #1 on: November 14, 2012, 07:42:47 AM »
I would go for the low deductible plan in your case because I like to minimize the out of pocket maximum.  That's just how I decide though, $1,000 hopefully won't have the ability to break you so if may be worth the risk to go with high deductible.

Done by Forty

  • Stubble
  • **
  • Posts: 211
  • Location: Tempe, AZ
    • Done by Forty
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #2 on: November 14, 2012, 07:56:28 AM »
I guess it depends on how much medical care you might have as a family with two infants. 

As the company pays the first $1,200 of care in the high deductible plan, and you're getting $1,000 in savings with that plan, that is the option I'd go with.  In the event of something really catastrophic, you'd pay more.  But when you're talking big medical expenses, even then the difference would be splitting hairs, relatively speaking.

madage

  • Bristles
  • ***
  • Posts: 405
  • Location: TX
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #3 on: November 14, 2012, 09:20:18 AM »
In the event of something really catastrophic, you'd pay more.  But when you're talking big medical expenses, even then the difference would be splitting hairs, relatively speaking.

I don't think that's right. In the case of something really catastrophic, assume you'll hit the OOP max for both plans. The OOP max difference between the two is $2,000. The company is giving you $1,200 and you're saving $1,000 in premiums. It appears to me you come out ahead by $200 with the high deductible plan, though it might actually be a wash after considering $1,000 isn't really $1,000 due to tax savings.

EJ - it really depends on how the split between individual deductibles and OOP max vs. family deductibles and OOP max breaks out, which you didn't provide. I suggest looking at your total medical spending, including premiums. I found that the HDHP my company offers, with higher deductibles and higher OOP max than your offering, was still better for my family (children aged 21 months and 4 and a stay at home wife at the time I signed-up) in terms of total cost. Adding the tax advantages of the HSA on top was gravy, though with your deductibles and OOP max your plan might not be HSA-eligible. Your newborn well-baby care and everyone's preventive care should be covered 100% on either plan, so it probably comes down to how many times a member of your family visits the doctor for non-preventive care. I assume you're not planning to have another baby next year.

When I decided to switch, my choice was based on total out of pocket cost derived by downloading my last year's worth of claims, putting them in a spreadsheet and figuring out how much I would pay out of pocket, including premiums, under both plans. For the newborn, you could go back to when your older child was a newborn to estimate the number of doctor visits, if you have access to those claims.

jpo

  • Pencil Stache
  • ****
  • Posts: 518
  • Age: 33
  • Location: North Carolina
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #4 on: November 14, 2012, 10:30:25 AM »
In the event of something really catastrophic, you'd pay more.  But when you're talking big medical expenses, even then the difference would be splitting hairs, relatively speaking.

I don't think that's right. In the case of something really catastrophic, assume you'll hit the OOP max for both plans. The OOP max difference between the two is $2,000. The company is giving you $1,200 and you're saving $1,000 in premiums. It appears to me you come out ahead by $200 with the high deductible plan, though it might actually be a wash after considering $1,000 isn't really $1,000 due to tax savings.
Very much this. In fact, it sounds like the HDHP is better in just about every case, even if you max your OOP.

It's open enrollment season for me as well, it's amazing how many people are so afraid of going to the HDHP/HSA instead of the PPO.

madage

  • Bristles
  • ***
  • Posts: 405
  • Location: TX
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #5 on: November 14, 2012, 10:35:54 AM »
It's open enrollment season for me as well, it's amazing how many people are so afraid of going to the HDHP/HSA instead of the PPO.

No kidding! I was floored when my dad called me (we work for the same company) and wanted to pick my brain about costs under the HDHP. After I made my case, he signed up for it.

Use it up, wear it out...

  • Stubble
  • **
  • Posts: 224
  • Location: Brooklyn, NYC
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #6 on: November 14, 2012, 11:05:20 AM »
It's open enrollment season for me as well, it's amazing how many people are so afraid of going to the HDHP/HSA instead of the PPO.

No kidding! I was floored when my dad called me (we work for the same company) and wanted to pick my brain about costs under the HDHP. After I made my case, he signed up for it.

So, we sign up for the PPO every year. We have 2 small children, and I have asthma and a heart problem that keep me under regular medical care, including daily prescriptions. When I run the math, it almost always seems to come out about the same for out-of-pocket between HDP and PPO, but with significantly larger downside possibility for HDP. Is there something consideration I'm missing that makes the numbers come out differently? My employer offers to put $1200 for a family into an HSA if you sign up for HDP.


Melissa

  • Stubble
  • **
  • Posts: 160
  • Age: 45
  • Location: Columbus, OH
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #7 on: November 14, 2012, 11:06:28 AM »
I have three children and we have been using a HDHP with HSA for years now.  Even when they have to go to the doctors for an illness it works out to $70/visit and sometimes an Rx which has been anywhere from $4-120.  Since your company covers the first $1200, I say it's a no brainer.

Do they have separate max deductible for individuals vs family?  Ours is $2300 for any individual in the family and $6600 for a family cap.  This year I had to have surgery and everything beyond the $2300 was covered.

jpo

  • Pencil Stache
  • ****
  • Posts: 518
  • Age: 33
  • Location: North Carolina
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #8 on: November 14, 2012, 11:20:08 AM »
It's open enrollment season for me as well, it's amazing how many people are so afraid of going to the HDHP/HSA instead of the PPO.

No kidding! I was floored when my dad called me (we work for the same company) and wanted to pick my brain about costs under the HDHP. After I made my case, he signed up for it.
So, we sign up for the PPO every year. We have 2 small children, and I have asthma and a heart problem that keep me under regular medical care, including daily prescriptions. When I run the math, it almost always seems to come out about the same for out-of-pocket between HDP and PPO, but with significantly larger downside possibility for HDP. Is there something consideration I'm missing that makes the numbers come out differently? My employer offers to put $1200 for a family into an HSA if you sign up for HDP.
If your annual spend would be more than (premiums + employer HSA) it is probably worth running more exact numbers.

If you don't have an expensive ongoing medical condition HDHP is usually a no-brainer in my opinion.

Mrs MM

  • Administrator
  • Bristles
  • *****
  • Posts: 367
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #9 on: November 14, 2012, 11:43:26 AM »
You should do what you and your family feel comfortable with.

If it were me, I'd go for the high deductible.  You said "Company provides first $1,200 toward any doctor visits/health care."  That seems like it would cover all visits for the year for us, but maybe that's not true for you.

Also, wellness (annual visits) and all vaccinations are included in all health plans at no charge (correct me if I'm wrong here, but I think that's true of all plans).  So, your kids are covered at no cost for the mandatory visits.  I'm guessing the only other visits you'd have are for annual colds and other sicknesses.

Like others have said, run the numbers and see what makes the most sense for your own family's situation.

trammatic

  • Stubble
  • **
  • Posts: 218
  • Location: Gettysburg
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #10 on: November 14, 2012, 03:29:49 PM »
Actuary stepping in here...

There's a reason that Gerber life insurance policies are for "children aged 14 days to 14 years".  Specifically, all of the really serious non-disease based illnesses manifest themselves within the first 2 weeks after birth.  Now there are still some nasty diseases that infants are succeptable for, but obviously, that doesn't mean they are going to get any of them.

Personally, we don't use a HDHP because my son has some serious cardiac conditions (diagnosed at 8 days) that require biannual checkups that would bill at 3500 each.  So we'd hit the deductible each year.  But there's a HMO that covers everyone where the cardiac checkups are only $50 each.  We basically treat the 7000 as an automatic charge, and find the plan that minimizes it.

EJ

  • 5 O'Clock Shadow
  • *
  • Posts: 22
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #11 on: November 14, 2012, 07:20:16 PM »
Thanks for all the advice (I need to get some detailed numbers from the prior year and run it under either scenario - will report back after I've gathered that information).  Some additional information (bolded and underlined below):

1. low ded plan - $250 single, $500 family max deductible, $2k single/$4k family max out of pocket.  $20 copays, 90% coverage after deductible

2. high ded plan - $1,600 single / $3,200 family max deductible, $3k single/$6k family max out of pocket. no copays, 80% coverage after deductible. Company provides first $1,200 toward any doctor visits/health care.

Want to make sure I'm understanding the fairly elementary logic of single vs family max deductible (let's exclude the $1,200 company funded under the HDHP in this case).  E.g. If one family member has $10k worth of medical care you'd pay $250 under LDHP or $1,600 under HDHP.  Meanwhile, if you had 4 family members each receiving $10k worth of medical care you'd pay up to the family max deductible ($500 LDHP, $3,200 HDHP).  Is that correct?

madage

  • Bristles
  • ***
  • Posts: 405
  • Location: TX
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #12 on: November 14, 2012, 09:19:18 PM »
Want to make sure I'm understanding the fairly elementary logic of single vs family max deductible (let's exclude the $1,200 company funded under the HDHP in this case).  E.g. If one family member has $10k worth of medical care you'd pay $250 under LDHP or $1,600 under HDHP.  Meanwhile, if you had 4 family members each receiving $10k worth of medical care you'd pay up to the family max deductible ($500 LDHP, $3,200 HDHP).  Is that correct?

1) If one family member needed $10k worth of medical care:

- LDLP: You'd have to cover the first $250 for your deductible, then the next $9,750 would be covered at 90% by your insurance, for a total out of pocket cost to you of $1,225.

- HDHP: You'd have to cover the first $1,600 for your deductible, the next $7,000 of the bill would be covered at 80% by your insurance and you'd hit your personal out of pocket max of $3,000. Your insurance would completely cover the final $1,400 of the bill 100% and cover the rest of your health care bills for the remainder of that plan year.

2) If four members needed $10k worth of medical care:

- LDHP: You'd cover the first $500 for your deductible, then the next $35,000 would be covered at 90% by your insurance, for a total out of pocket cost to you of $4,000. Your family's covered expenses for the remainder of the plan year would be paid 100% by your insurance because you reached your out of pocket max.

- HDHP: You'd cover the first $3,200 for your family deductible, then the next $14,000 would be covered at 80% by your insurance, for a total out of pocket cost to you of $6,000. The final $22,800 for this event and your family's covered expenses for the remainder of the plan year would be paid 100% by your insurance because you reached your out of pocket max.

Note that in both cases, when considering the $1,200 given to your by your employer and the $1,000 difference in premiums, your total out of pocket costs are lower with the HDHP. Your HDHP offering also makes you eligible to stash $6,450 tax-free in an HSA, which you can either use to pay for medical expenses or not use and watch it grow.

chucklesmcgee

  • Pencil Stache
  • ****
  • Posts: 613
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #13 on: November 14, 2012, 10:30:49 PM »
Insurance is a tax on people who can't afford the consequences of something. At every plan price, insurance companies tend to take in more in premiums than they pay out in claims. If you can afford the high deductible plan in a catastrophe, chances are you'll come out ahead. Basically that would come down to assets/income.

EJ

  • 5 O'Clock Shadow
  • *
  • Posts: 22
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #14 on: November 15, 2012, 11:58:24 AM »
more great advice from Madage - thank you for that.  After looking back to the prior two years medical costs, the costs out of pocket would have been roughly the same and thus we would've saved money on the premiums.

This has been eye opening and I'm planning to go with the HDHP and (hopefully) save $1k in premiums.

Use it up, wear it out...

  • Stubble
  • **
  • Posts: 224
  • Location: Brooklyn, NYC
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #15 on: November 16, 2012, 11:01:10 AM »
This thread got me reconsidering whether I should take the HDP from our company.

However, when I looked at the investment offerings (no easy thing to find out, believe me!) all of them are load fee mutual funds with annual expense rates around .60, and none are index funds!!! Any decent return would still be a benefit, because of the tax savings, but now I'm not so sure - do I want to invest in bad mutual funds to get the tax savings?

What do people think? I should mention I have to decide today :-)

jpo

  • Pencil Stache
  • ****
  • Posts: 518
  • Age: 33
  • Location: North Carolina
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #16 on: November 16, 2012, 11:11:27 AM »
This thread got me reconsidering whether I should take the HDP from our company.

However, when I looked at the investment offerings (no easy thing to find out, believe me!) all of them are load fee mutual funds with annual expense rates around .60, and none are index funds!!! Any decent return would still be a benefit, because of the tax savings, but now I'm not so sure - do I want to invest in bad mutual funds to get the tax savings?

What do people think? I should mention I have to decide today :-)
You don't have to invest within a HSA, in fact the way mine is set up you can't unless you have a certain balance.

madage

  • Bristles
  • ***
  • Posts: 405
  • Location: TX
Re: High Deductible Health Insurance plan with 2 small kids - worth the risk?
« Reply #17 on: November 16, 2012, 11:13:21 AM »
However, when I looked at the investment offerings (no easy thing to find out, believe me!) all of them are load fee mutual funds with annual expense rates around .60, and none are index funds!!! Any decent return would still be a benefit, because of the tax savings, but now I'm not so sure - do I want to invest in bad mutual funds to get the tax savings?

You don't have to use your company's custodian for anything other than the payroll tax savings. You can contribute the max through your employer then transfer the funds to another custodian once every 12 months (see http://www.irs.gov/publications/p969/ar02.html#en_US_2011_publink1000204068). I would imagine your employer offers a money-market option for limited or no fee. For investing, I've heard good things about hsabank.com, but I haven't used them.