High Deductible Plan or PPO?

[El Gringo]

Hey everyone,

I'm trying to determine whether I should get a high deductible plan or a PPO for health insurance. I like the idea of a high deductible plan and being able to open and invest in an HSA, but when looking at the difference in cost between an HDHP and PPO, it doesn't seem that great/worth the risk.

The annual cost of a PPO would be $866, whereas the annual cost of a HDHP would be $601, so I'd only be saving $265. The PPO deductible is $300, whereas the HDHP deductible is $1300. Before I was actually offered the option of an HDHP, I expected the savings to be more than just $265. I do believe that my employer contributes $300 every year to put in my HSA, so there's that to consider too.

I'm a healthy twenty-something and rarely even get a cold. But I do wear expensive insoles in my shoes which my last PPO plan covered (not sure what that would look like under the HDHP) and 99% of my transportation is on my bike in an urban setting. In 4 years of biking, I've never had an accident, but it'll probably happen some day!

On another note, between meeting my 401k match and maxing out my IRA, I'm not sure how much money I'll have leftover for my HSA.

Is this a typical difference between a PPO and an HDHP? Is it a good deal to take the HDHP or is it not worth the risk?

[boarder42]

most if not all preventative care is covered under an HDHP.. there is almost never a question here unless they cost the same... yours dont its 565 difference not 265 ... your company is giving you money that must be considered.  go HDHP

unless you plan on having a lot of injuries or health problems... even then... under the new obamacare you can switch to the PPO and pre existing conditions dont matter... just get married or divorced when you get sick and you can change your health plan

[seattlecyclone]

It all depends on your plan specifics, your risk tolerance, and your current financial situation.

For me, the HDHP was a no-brainer because the premium difference plus my employer's HSA contribution makes the cost of not getting sick much lower with the HDHP than the PPO, the worst-case costs (premiums - employer HSA contribution + deductible + other costs up to max out-of-pocket limit) aren't that much higher with the HDHP than the PPO, I'm generally healthy (haven't needed to see a doctor for illness or injury in several years), and I can afford to pay the deductible if something bad does happen. Your mileage may vary.

[Paul der Krake]

Not to mention that our contributions are not only sheltered from income taxes, but also FICA taxes. For aspiring early retirees it makes a ton of sense to "bank" all those tax free health dollars now, let them grow tax free and slowly spend them over our 50-70 retirement years.

[rubor]

At your age, definitely go for the HDHP. You can't predict the future, but that is the most likely to work out best for you in most scenarios. I would even consider a plan with a higher deductible if that's available.

[Heart of Tin]

Your insoles should be covered under the durable medical equipment (DME) section on you schedule of benefits. How much do they usually cost, and what are the terms of your DME coverage on both the PPO and the HDHP?

Also what are the out of pocket maximums on the two plans?

[Retired To Win]

It was the question of maximum out-of-pocket that sold me on going with a high-deductible plan.  In my case, that out-of-pocket would be $2500.  But after that initial layout, everything would then be covered.  That allows me to cap my worst-case scenario annual health care cost at $5000 (my premiums plus the maximum out of pocket).  And that number works for my financial planning.

As for preventative care, some of it is covered anyway and any further costs count towards that maximum out-of-pocket.  And, anyway, I carry the insurance in case something serious happens, not for ordinary stuff like that.

So, a high deductible plan works for me just fine.

[justajane]

Every year that you don't reach your high deductible, you are saving money on the HDHP. And even if you do reach it, you are not spending that much more than you would on the PPO. It's seems like a no-brainer to go for the HDHP. That also gives you access to the HSA where you can start putting the max amount of money for the future when your medical expenses might be more. Or alternately, you could use it in retirement.

[Penny Lane]

Welcome to the wonderful world of American medicine.  Until the prices are lowered for care, we will all be paying WAY too much for insurance.

One thing you should check is what the "co-insurance" would be for either policy.  My 20-something year old daughter and I just had this discussion last night.  She has a $700 deductable for her PPO ( PPO's don;t require you to have a primary care doctor to refer you to specialists; HMO's do) BUT she has 80/20 co-insurance to a maximum out of pocket of over $4000/yr!!  She had to have her tonsils out, met her deductable and thought she was done, but just received a $1500 bill which represents 20% of the cost.  So she is on the hook for $2500 so far this year and if has any other problems, can still be billed $1500 more.  Check the policies for "out of pocket max" and "coinsurance".

[El Gringo]

So I went ahead and got the PPO short-term at my new job because I knew open enrollment was coming up (now that I think about it, I should've done the high deductible plan and got the employer's match!).  Anyway, the numbers for next year actually are significantly more in favor of the high deductible plan.

PPO premium = $775.06/year
PPO deductible = $500
PPO out-of-pocket max = $5,000
PPO co-insurance = 90/10


HDHP premium = $282.00
HDHP deductible = $1,300
HDHP out-of-pocket max = $5,000
HDHP = 80/20.
HDHP employer contribution = $500

When you do the math, it's almost $1,000 difference starting out (with an HDHP plan, I actually start out +$218 (employer contribution minus premium) and with PPO premium, I'm $775 in the whole).

Unfortunately, these orthodic shoe insoles make things difficult. My previous health insurance at my old job entirely covered one set per year. I just found out yesterday that my current insurance only covers 90% after the deductible (which this year is $300).  With my HDHP plan, I'd have the deductible of $1300.

I've lived my whole life without these shoe insoles until last year, when a doctor told me that they could help prevent my tendency to roll and sprain my ankles. So now I'm tempted to just wear these current insoles until they completely wear out (although they already seem like they just about are worn out!)

[Mother Fussbudget]

Just did this myself - signed up for HDHP + HSA.  HDHP with an HSA is the way to go.  Not sure you saw the great articles on the beauty of an HSA, and  how it can be used as ANOTHER pre-tax FIRE saving method. 

Happy reading:
http://www.madfientist.com/ultimate-retirement-account/
http://www.madfientist.com/hsa/
http://www.bogleheads.org/wiki/Health_savings_account#HSA_custodians_and_options

Oh, and I had orthotic insoles crafted in fiberglass when I was in my 20's, and although the vinyl covers wore off years ago, they're still in use 20+ years later.

[couponvan]

General additional question slightly off topic....

If you use a discount copay card for prescriptions, how does that effect meeting your deductible?  My hubby takes a VERY expensive prescription, but is granted $4,000 of copay assistance rebates each 6 months.

With the high deductible plan, in one month we would meet his deductible on the cost of the prescription.  However, using the manufacturer coupon, our actual true cost is $10. Does the insurance company consider our use of the coupon?  I have heard yes and no.  Anyone else out there factoring in prescription costs and use of coupons to meet their deductibles?

[Lyngi]

Usually when the (outpatient) pharmacy processes a prescription,  the primary insurance (HDHP) is billed first, then the manufacturer coupon is billed for the remainder.    So the manufacturer card picks up part of your copay/deductible. If your insurance won't pay for some reason (prior authorization required, not a covered drug, federally funded plan) sometimes the manufacturer card is billed alone, so nothing would go toward deductible.    Some insurance companies prohibit use of coupons, some require you to notify them.  Make sure to give your insurance card to the pharmacy (even HDHP) so the cost of the drug goes toward your deductible and out of pocket maximum. 
     If you need a brand name medication, make sure to do a Google search for coupons, or discount, free trial before you get to the pharmacy. Use the brand name and look for the MANUFACTURERS website.   There are plenty of "discount" cards out there that are garbage.  You want to end up on Lilly, or Pfizer, or www. drugname .com

[couponvan]

Thanks - another coworker was credited with her deductible  with a copay card, which sounded too good to be true....

[VirginiaBob]

Ran the numbers and the hdhp plan with hsa wasn't for us.  We would have spent the family maximum $10,000 with the twins spending months in the NICU this year.  Also realizing that the twins are at increased risk for a bunch of stuff due to prematurity and our plans to have more kids over the next few years, the conventional plan is the better choice for us.  I really wanted it to work, but the spreadsheet tells me otherwise.