Author Topic: How high a health-care deductible?  (Read 9536 times)

igthebold

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How high a health-care deductible?
« on: May 04, 2012, 07:54:31 AM »
Hi folks,

Question for those of you who manage your own health insurance: How high a deductible should I be comfortable with? I feel like I'm paying a lot of premium for my situation. Some data:
- Deductible is currently $4K for family
- I currently pay around $600/month premium for health insurance
- We're young (31, 33, 3 young kids) and reasonably healthy
- We've never even come close to our existing deductible
- We contribute to our HSA every month, and have never hit $0 with it
- United States

Could I raise my deductible to $10K? What would you recommend?

Jimmy

arebelspy

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Re: How high a health-care deductible?
« Reply #1 on: May 04, 2012, 07:58:26 AM »
It's all going to be about comfort level and what you're okay with.

How much in premiums will you save going from 4k deductible to 10k?

Personally I'd probably keep it at 4k for a few years, depending on how young your kids are.  Basically once the youngest hits 5, then I'd be okay raising it.  But that's my personal comfort level.. YMMV.
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tooqk4u22

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Re: How high a health-care deductible?
« Reply #2 on: May 04, 2012, 08:15:31 AM »
You have already done the hard part to evaluate if makes sense to go with a high deductible plan.  Like arebelspy said it is really about what you are comfortable with and how much can you afford - if $10K is no big deal to your wherewithal/budget then go for it as long as you do the math and get the appropriate trade off in your premiums. 

twinge

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Re: How high a health-care deductible?
« Reply #3 on: May 04, 2012, 09:34:16 AM »
Look carefully at what that deductible really involves.  In some family plans there are requirements for multiple individuals contributing a certain amount towards the deductible.  So, for instance, one person with major needs could exceed the 10K and you still wouldn't qualify until another family member needed 2K or until you reached an out-of-pocket maximum regardless of who contributed.   And then it resets the next year and you have to generate that deductible again.  If someone has a situation where they need that much care one year, it is not unlikely they may have considerable needs the next year, and sometimes indefinitely and you are then in a place where you're less likely to get affordable care with better terms. 

When you have 5 people--even all reasonably healthy--you have much greater range of risk.  And that risk might get compounded because of the interdependency among each individual: A health issue of parent or child may affect the ability of at least one parent to do their income producing activities etc, may increase the needs for childcare, may increase everyone's stress level/reduce energy level so they are not as enterprising with resources etc.

Not to say you shouldn't switch--just make sure you're being thoughtful about the potential risks and your own financial buffer to handle them.

James

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Re: How high a health-care deductible?
« Reply #4 on: May 04, 2012, 09:51:40 AM »
I think the deductible floor is pretty simple.  Your deductible shouldn't be any lower than the average you have in your HSA.  Hopefully you can increase the balance of your HSA every year, and over time increase your deductible to match.


For me personally I have a high deductible plan at around $7000 (I have three young kids also), and I have about $6,000 in my HSA right now (since I just paid a huge chunk for braces).  I'm very comfortable with that, it will be back up around $10,000 by the end of the year.


If your HSA is just starting to build up you might want to stick with $4000, but if you expect your HSA to reach anything close to $10,000 by the end of the year, and you are able to cover emergencies with other liquidity, then I'd think going up to $10,000 would make a lot of sense.  Just make sure you have your HSA contributions at the max so you can build that up for covering increasingly higher deductibles over time.

igthebold

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Re: How high a health-care deductible?
« Reply #5 on: May 05, 2012, 08:13:00 AM »
Thanks everybody. I'm probably going to keep it at $4K for now until I build up the HSA a bit more. We have about $3K in it.

On a side note, it's pretty awesome to have access to a group of people who *actually think* about their financial issues. Thanks.

Jimmy

James

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Re: How high a health-care deductible?
« Reply #6 on: May 05, 2012, 02:49:19 PM »
Sounds wise.  Are your HSA contributions at the max?  That's the only way to get it built up quickly, if you are only putting $3-4k in per year it will take a long time to build it up.  Better to spend a year or two maxing it out, then you can increase the deductible and really save a lot of money.


Do you know the premium difference between the deductible of $4k and $10k?  Just curious.

jawisco

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Re: How high a health-care deductible?
« Reply #7 on: May 05, 2012, 05:29:57 PM »
An HSA is a pretty great long-term savings vehicle - no taxes on the way in, tax-free growth, and no taxes on the way out if used for health care costs.  If you can afford it, consider contributing the max you can to HSA each year and don't use the funds for health care costs - take advantage of the tax-free compounding for future health-care costs...

If you have an HSA with HSA Administrators, you can put your HSA funds into Vanguard Mutual Funds.

igthebold

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Re: How high a health-care deductible?
« Reply #8 on: May 07, 2012, 07:25:23 PM »
Sounds wise.  Are your HSA contributions at the max?  That's the only way to get it built up quickly, if you are only putting $3-4k in per year it will take a long time to build it up.  Better to spend a year or two maxing it out, then you can increase the deductible and really save a lot of money.

Do you know the premium difference between the deductible of $4k and $10k?  Just curious.

Not maxing it out, so yeah, I should probably do that. To be honest, I don't even know what the limits are. :P I'll look them up.

As to the premiums, a friend of mine has a similar policy with a $10K deductible, and he's paying around $350/month, which is why I started looking in the first place.

arebelspy

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Re: How high a health-care deductible?
« Reply #9 on: May 08, 2012, 08:48:52 AM »

Not maxing it out, so yeah, I should probably do that. To be honest, I don't even know what the limits are. :P I'll look them up.

As to the premiums, a friend of mine has a similar policy with a $10K deductible, and he's paying around $350/month, which is why I started looking in the first place.

Again, go research what it will save you in premiums.

If you can go from 600/mo to 350/mo, saving 250/mo.. that may well be worth going up from 4k to 10k deductible.  You'll save 3k/yr. in premiums.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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James

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Re: How high a health-care deductible?
« Reply #10 on: May 08, 2012, 10:48:38 AM »
You don't mention your overall financial situation, but if you have a decent emergency fund you might chose to not wait until you have close to $10,000 in the HSA before raising the deductible.  The huge down side is that those emergency funds would be post-tax if used rather than the pre-tax HSA.

But if you go to the $10,000 deductible now it will probably completely cover the increase in HSA contributions to get to the max.  So best case would be rapidly increasing HSA value to cover the full deductible over the next couple years.  Worst case would be draining the HSA and then spending post-tax money on health care.  Even if you have the emergency fund dollars available I don't think the answer is obvious, just depends on your preference for security vs risk and everything else you know about the situation.

igthebold

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Re: How high a health-care deductible?
« Reply #11 on: May 08, 2012, 11:34:11 AM »
At this point my e-Fund isn't that robust (< 1 month :P ). I just downgraded my house to improve my situation, but we're still letting things settle a bit. I think, based on where things are, I'm going to work on funding my HSA before I make the change. After I get it up to probably $8K or so, I'll up the deductible.

I'm not posting more detail simply because I'm still in the process of figuring out where I am. I'm a consultant, so my income can vary quite a bit, and there's a bit of a mini shell-game determining what my income is. At least in my mind.

What I really need to do, and what arebelspy pointed out, is go and research what the *actual* numbers and potential changes are. I'll report back when I do, in case it's useful to anyone.

Jimmy

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Re: How high a health-care deductible?
« Reply #12 on: May 08, 2012, 12:51:56 PM »
I've been researching this lately, as we will likely need our own plan soon.  I found that going straight to United Healthcare (my current provider) provided the best rates for a high deductible plan.

http://www.uhc.com/individuals_families/health_insurance_plans/high_deductible.htm

They provided good quotes with a lot of information about what is really included in the plan.  We might have to write a post about the process when we actually make the switch!

arebelspy

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Re: How high a health-care deductible?
« Reply #13 on: May 08, 2012, 02:27:33 PM »
I've been researching this lately, as we will likely need our own plan soon.  I found that going straight to United Healthcare (my current provider) provided the best rates for a high deductible plan.

http://www.uhc.com/individuals_families/health_insurance_plans/high_deductible.htm

They provided good quotes with a lot of information about what is really included in the plan.  We might have to write a post about the process when we actually make the switch!

That would be helpful; I know healthcare is a huge concern for many early retirees.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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igthebold

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Re: How high a health-care deductible?
« Reply #14 on: May 22, 2012, 02:31:48 PM »
Reporting back after calling my health insurance company.

If I boost my family deductible from $4K/month to $10K/month, my premium would go from $608 to $329/month. If I put the difference into my HSA it would take 21 months to fill out the difference. Then I'd have more money for investing.

We're a family of 5 with 3 small kids, all healthy, no major prescription needs, etc.

Of course, if I change the deductible something ominous happens having to do with ObamaCare that I haven't figured out yet. My plan becomes non-grandfathered. I plan on reading this: http://www.healthcare.gov/law/features/rights/grandfathered-plans/ but I won't bore you with the results. I hate having to learn this stuff.

grantmeaname

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Re: How high a health-care deductible?
« Reply #15 on: May 22, 2012, 02:36:08 PM »
The big picture summary says that the older plans are grandfathered out of consumer protections. If that summary accurately describes all the provisions, wouldn't that mean you're gaining services for free? Now your plan has to be more lenient with appeal processing and provide certain free preventative tests that it wouldn't before.

arebelspy

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Re: How high a health-care deductible?
« Reply #16 on: May 22, 2012, 03:48:06 PM »
If I boost my family deductible from $4K/month to $10K/month, my premium would go from $608 to $329/month. If I put the difference into my HSA it would take 21 months to fill out the difference. Then I'd have more money for investing.


Per month, or per year (on the deductible.. the premium is obviously per month)?
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
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igthebold

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Re: How high a health-care deductible?
« Reply #17 on: May 22, 2012, 03:52:43 PM »
If I boost my family deductible from $4K/month to $10K/month, my premium would go from $608 to $329/month. If I put the difference into my HSA it would take 21 months to fill out the difference. Then I'd have more money for investing.


Per month, or per year (on the deductible.. the premium is obviously per month)?

Ah, that would be per year on the deductible.

arebelspy

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Re: How high a health-care deductible?
« Reply #18 on: May 22, 2012, 03:54:04 PM »
If I boost my family deductible from $4K/month to $10K/month, my premium would go from $608 to $329/month. If I put the difference into my HSA it would take 21 months to fill out the difference. Then I'd have more money for investing.


Per month, or per year (on the deductible.. the premium is obviously per month)?

Ah, that would be per year on the deductible.

Okay.  I figured, but wanted to double check.   ;)
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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igthebold

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Re: How high a health-care deductible?
« Reply #19 on: May 22, 2012, 04:15:57 PM »
Just for grins/grimaces, here's a bit of extra info: I have a pipe. I smoke very seldom. When I was signing up for my plan back in 2009 I answered their tobacco question, which was worded something like, "Have you smoked any in the past year?" honestly, saying Yes. I think it might have been 2 times. Big Mistake.

In their books I'm now a smoker. If I want to get that taken off my policy ($45/month) I have to:
- furnish 5 years of medical records (I haven't been to the doctor for *anything* in 6 years)
- have a urine test done for nicotine
- submit a letter in writing to their individual risk assessment people

Sigh. They asked the wrong question and got the wrong answer. Needless to say I'm going to do this, but the fact that I'm a smoker in their system is amusing in a wry, pathetic sort of way.

arebelspy

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Re: How high a health-care deductible?
« Reply #20 on: May 22, 2012, 05:30:01 PM »
So your whole family's premium would be $45/mo. less without that?

(563, or 263, maybe a bit more, with the higher deductible?)
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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igthebold

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Re: How high a health-care deductible?
« Reply #21 on: May 22, 2012, 06:02:43 PM »
The $45/month number came off my current $608/month premium ($4K deductible).

Presumably, it would be proportionate to the new premium at the higher deductible. So, $24/month. In theory, after all is said and done, I'd be at around $305/month. That leaves $303/month out of my current cash flow I can use to fund my HSA up to the new deductible.

That's a much more palatable number to me, though I don't want to be penny wise.

James

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Re: How high a health-care deductible?
« Reply #22 on: May 22, 2012, 07:30:30 PM »
Reporting back after calling my health insurance company.

If I boost my family deductible from $4K/month to $10K/month, my premium would go from $608 to $329/month. If I put the difference into my HSA it would take 21 months to fill out the difference. Then I'd have more money for investing.

We're a family of 5 with 3 small kids, all healthy, no major prescription needs, etc.

Of course, if I change the deductible something ominous happens having to do with ObamaCare that I haven't figured out yet. My plan becomes non-grandfathered. I plan on reading this: http://www.healthcare.gov/law/features/rights/grandfathered-plans/ but I won't bore you with the results. I hate having to learn this stuff.


The up side is that if you switch to the higher deductible then that plan gets grandfathered?  A plan that cheap will probably not be available once ObamaCare mandates take effect.  If you are wanting the cheapest plan going forward then you might want to get on this one while you can, but having that $10k liability is something you obviously have to weigh.

Mr Mark

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Re: How high a health-care deductible?
« Reply #23 on: May 22, 2012, 08:44:59 PM »
I had a quote for a 10k deductable declining to a 5k deductable (over 3 years if you didn't hit the limit), for $300, where they paid 100% over the limit, from United Healthcare. A better one was same scheme, but starting at $5k, declining to $2.5 for $400/mnth.

You def. need to consider though, if you're faced with that 10k/yr for several years, it's a lotta money and the last thing you'll want is to be stressing out over having to front 30-50k from your 'stash.

In those situations a Canadian passport would sure come in handy...