HMO or HSA (in the context of a family of four)

[jeromedawg]

Sorry guys, this question has probably been asked countless times. I was wondering though, for those of you with kids in particular, what has made more sense for you...

This past year we had our second kid and I regret not going to HMO because we spent a *ton* of money on the hospital/maternity/delivery costs etc. Is it generally OK to 'pause' your HSA if you think you'll be incurring a lot of medical costs in favor of going to HMO? I figure there's a loss-value in doing this as you're not actively contributing and investing to the HSA. I guess the trouble I'm having is figuring the opportunity cost either way.

The other factor is that we'd be switching providers from Blue Cross/Blue Shield/Anthem over to Kaiser. I'm in Southern California. I've generally heard good things about Kaiser but it would be a huge switch having to get all new doctors, etc. Since Kaiser is a bit more centralized though, it would also make things easier? We've never been on Kaiser either so we don't have a good gauge as to how they do things and how the care compares to the doctors we currently have.

I have developed some sort of inflammatory arthritis in my left hand index finger, which hasn't been fully diagnosed yet in terms of the actual cause. And of course we have our random mishaps with the kids where they may suffer a minor injury (broken collarbone) or incidental illness resulting in office/specialist visits that aren't "preventative." In short, especially with kids, it seems our trips to doctors' offices has increased in frequency in general. Is all this enough to 'warrant' just going back to HMO regardless? As I said, being on an HSA is great but with high deductibles and out of pocket expenses, it's kinda crazy too... with the HSA I currently have all the funds invested in an S&P500 fund.

[seattlecyclone]

I've heard good things about Kaiser as well. The money piece all depends on what plan options you have available to you. If you get your insurance through your employer, they'll likely be subsidizing a large portion of the cost. Different employers vary on how much they subsidize the HDHP option compared to other options; at my employer there's almost no scenario where going with the non-HSA plan is a better deal, but I know that's not the case everywhere.

[jeromedawg]

I've heard good things about Kaiser as well. The money piece all depends on what plan options you have available to you. If you get your insurance through your employer, they'll likely be subsidizing a large portion of the cost. Different employers vary on how much they subsidize the HDHP option compared to other options; at my employer there's almost no scenario where going with the non-HSA plan is a better deal, but I know that's not the case everywhere.

For example, the deductible for our current HSA-Silver with BCBS is $3k for individuals and $5700 for the family. Per pay period (26 of them) premium is $105. We are responsible for paying 100% for anything but preventative care and once the deductibles are met, then either 10% or 20% of the cost of the service from there on out. Out of pocket max is $5k/$9500 for individual/family

In contrast, Kaiser HMO deductibles are $300 and $600, respectively with $172.69 being the per pay period premium. Copays of $25 (PCP) and $50 (Specialists) and then 20% after-deductible costs for outpatient/surgery/etc services. Out of pocket max is $2500/$5000 for individual/family.

[charis]

This is a math question.  Compare your costs under the HSA for the year to what they would have been under the HMO.  Account for the tax savings for your HSA contributions and any employer contributions.  Run the prospective numbers for the upcoming year.   We are a family of 4 on a HSA plan that have had three ER visits, weekly doctor appointments for most of the year, and a surgery and I'm very glad that we had the HSA (but our deductible is 3k with 10% thereafter and 1500 employer contribution).

[seattlecyclone]

Worst case scenario with the HSA plan you pay $105 * 26 = $2,730 in premiums plus $9,500 out-of-pocket max for a total of $12,230. Subtract a bit to account for the tax benefits of HSA contributions. If you're in the 25% bracket and can contribute to the HSA through payroll to avoid FICA, the maximum $6,750 HSA contribution saves you about $2,200 in taxes, bringing the total worst-case cost down to a hair over $10,000.

Worst case scenario with the HMO you pay $172.69 * 26 = $4,490 in premiums plus a $5,000 out-of-pocket max for a total of $9,490, about $500 less than the HSA plan.

Best case scenario, where nobody in your family needs to visit the doctor for non-preventive reasons, the HSA plan costs you $2,730 - $2,200 = $530 and the HMO plan costs you $4,490.

The HMO looks about $500 better in a terrible health year, while the HSA plan looks about $4,000 better in a perfect health year. Most years you'll fall somewhere in between. Take your own guesses about where you'll most likely fall on that spectrum and come to a decision.

[jeromedawg]

This is a math question.  Compare your costs under the HSA for the year to what they would have been under the HMO.  Account for the tax savings for your HSA contributions and any employer contributions.  Run the prospective numbers for the upcoming year.   We are a family of 4 on a HSA plan that have had three ER visits, weekly doctor appointments for most of the year, and a surgery and I'm very glad that we had the HSA (but our deductible is 3k with 10% thereafter and 1500 employer contribution).

Doh, you reminded me of the HSA employer contribution! I think it's about the same around $1500 for us too? I'm not sure what, if anything, we get along the lines of employer contributions for the HMO.

[jamesbond007]

If you are considering not going HSA, why not take a PPO instead of a HMO? I am philosophically opposed to HMOs (Kaiser, etc.). They own the insurance, they own the hospitals, they own the doctors. The conflict of interest makes me uncomfortable. That's just my personal opinion. But you could argue that all insurances are the same at the end of the day and I wouldn't disagree.

[jeromedawg]

If you are considering not going HMO, why not take a PPO instead of a HMO? I am philosophically opposed to HMOs (Kaiser, etc.). They own the insurance, they own the hospitals, they own the doctors. The conflict of interest makes me uncomfortable. That's just my personal opinion. But you could argue that all insurances are the same at the end of the day and I wouldn't disagree.

Only reason I was considering HMO was the potential cost savings. SeattleCyclone broke it down pretty well though, and it seems like there's more cost-benefit sticking with the same HSA/HDHP we've been on. HMO would have probably been good for this year as we would have likely saved a lot on hospital bills from the birth.

That does make sense though in terms of avoiding where there's a potential conflict of interest... I guess most of us have been wired to trust our healthcare system. But when it comes down to costs, I guess it's something not worth penny-pinching over either.

[charis]

This is a math question.  Compare your costs under the HSA for the year to what they would have been under the HMO.  Account for the tax savings for your HSA contributions and any employer contributions.  Run the prospective numbers for the upcoming year.   We are a family of 4 on a HSA plan that have had three ER visits, weekly doctor appointments for most of the year, and a surgery and I'm very glad that we had the HSA (but our deductible is 3k with 10% thereafter and 1500 employer contribution).

Doh, you reminded me of the HSA employer contribution! I think it's about the same around $1500 for us too? I'm not sure what, if anything, we get along the lines of employer contributions for the HMO.

If you don't have an HSA, what is there to contribute to (apart from premiums, to which employers usually contribute regardless of the plan type).

[jeromedawg]

This is a math question.  Compare your costs under the HSA for the year to what they would have been under the HMO.  Account for the tax savings for your HSA contributions and any employer contributions.  Run the prospective numbers for the upcoming year.   We are a family of 4 on a HSA plan that have had three ER visits, weekly doctor appointments for most of the year, and a surgery and I'm very glad that we had the HSA (but our deductible is 3k with 10% thereafter and 1500 employer contribution).

Doh, you reminded me of the HSA employer contribution! I think it's about the same around $1500 for us too? I'm not sure what, if anything, we get along the lines of employer contributions for the HMO.

If you don't have an HSA, what is there to contribute to (apart from premiums, to which employers usually contribute regardless of the plan type).

You're right. There's no added-benefit of doing the HMO since the employer doesn't give us any more money whereas with the HSA we get the $1500-1600 (upon completing health-related activities). I think we'll just stick it out with HSA again.