Author Topic: HSA vs PPO  (Read 3701 times)

jamesbond007

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HSA vs PPO
« on: October 21, 2016, 01:12:45 PM »
I understand the benefits of a HSA (pre-tax contrubutions that can be invested) but how do you manage your "piece of mind"? What I mean is that I currently have PPO and I never hesitate going to a doctor when I feel like there is a need. Now, in the last year I've been to a doctor once for a routine annual physical, my wife has gone to her doctor 0 times and we took our doctor to her pediatrician twice (once for her yearly check and once when she had a nurse maid elbow). So I am considering going HSA with high deductible for 2017. We are very healthy overall. But I am having a hard time convincing myself to take a high deductible plan. The whole point of insurance is "just in case". So Just in case I happen to be sick for whatever reason, I know that my PPO pays almost all of it.


I am just curious what do you do and why?


My employer contributes around $1500 per year to my HSA and costs around $15 a month or so and PPO costs me about $200 a month for 3 people (Incl. dental and vision)

Trudie

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Re: HSA vs PPO
« Reply #1 on: October 21, 2016, 01:26:48 PM »
I just analyzed three different plans available to us and decided to stay with the HSA/HDHP.  It is an especially good deal if you are healthy and just need preventive care.  Preventive care services, including lots of great services for children (which includes and expanded vision benefit under the ACA), are covered 100%.  It's quite possible that with no extraordinary issues all you would pay annually is your premiums under an HDHP.

Here's the list of preventive services required to be paid at 100%:
https://www.healthcare.gov/coverage/preventive-care-benefits/

It's hard to comment with just generalities, but I compared the plans side-by-side as follows:

Annual Employee Premium Costs
Less:  Employer Contributions to HSA
Plus:  Deductible
Plus:  Medical Co-Insurance Out of Pocket Maximum
Equals:  Worst Case Scenario Total Costs


Keep in mind that most of us won't even come close to realizing the worst case scenario and that in your case because most of your care is preventive you may not have much beyond your premiums.  And typically, you save alot on premium in the HSA versus the PPO.  (If not, the PPO may help you sleep better at night.)  As you move from top to bottom of this formula the risks change.  You are 100% guaranteed to pay any premiums (offset by employer HSA contributions) but as you pass through the gates to satisfy different expense "buckets" -- the odds are less likely. 

Make sure you find out if the deductible is included in the out-of-pocket maximum.  On my plan these are completely separate buckets.  Sometimes they are combined.  Also, be aware of what your co-insurance percentages are for your medical coinsurance out of pocket maximum.  On my plan, outpatient surgery is covered 100% (and many surgeries are outpatient these days). 

Just do the math... but it sounds like on the face of it you will come out further ahead with the HDHP.  Read up on the benefits of HSAs, which are great retirement savings vehicles.  I won't comment further as there are entire threads on it all over this forum.

boarder42

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Re: HSA vs PPO
« Reply #2 on: October 21, 2016, 01:28:29 PM »
compare worst case typically HSA still wins. 

you need to konw the max OOP to do this and tax brackets maybe the deductible to refine it

take your max OOP for the HSA minus the 1500 your company contributes and thats the max you can spend there.  then subtract 5250*(your top tax bracket federal and state and FICA if you can salary deduct contributions) to get your tax savings annually. 

so now we know the max OOP for each

now to that add 15x12 for the HSA and 200x12 for the PPO ...

whichever number is lower is best in the absolute worst case senario.  if the HSA wins its a no brainer.  if not you have to look at medical bills the last few years.  but your visits you have had so far dont cost anything except the nurse maid elbow ... preventative coverage like annual checkups are free under most insurance plans. 

tharidumuf

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Re: HSA vs PPO
« Reply #3 on: October 22, 2016, 07:37:02 AM »
I just analyzed three different plans available to us and decided to stay with the HSA/HDHP.  It is an especially good deal if you are healthy and just need preventive care.  Preventive care services, including lots of great services for children (which includes and expanded vision benefit under the ACA), are covered 100%.  It's quite possible that with no extraordinary issues all you would pay annually is your premiums under an HDHP.

Here's the list of preventive services required to be paid at 100%:
https://www.healthcare.gov/coverage/preventive-care-benefits/

It's hard to comment with just generalities, but I compared the plans side-by-side as follows:

Annual Employee Premium Costs
Less:  Employer Contributions to HSA
Plus:  Deductible
Plus:  Medical Co-Insurance Out of Pocket Maximum
Equals:  Worst Case Scenario Total Costs


Keep in mind that most of us won't even come close to realizing the worst case scenario and that in your case because most of your care is preventive you may not have much beyond your premiums.  And typically, you save alot on premium in the HSA versus the PPO.  (If not, the PPO may help you sleep better at night.)  As you move from top to bottom of this formula the risks change.  You are 100% guaranteed to pay any premiums (offset by employer HSA contributions) but as you pass through the gates to satisfy different expense "buckets" -- the odds are less likely. 

Make sure you find out if the deductible is included in the out-of-pocket maximum.  On my plan these are completely separate buckets.  Sometimes they are combined.  Also, be aware of what your co-insurance percentages are for your medical coinsurance out of pocket maximum.  On my plan, outpatient surgery is covered 100% (and many surgeries are outpatient these days). 

Just do the math... but it sounds like on the face of it you will come out further ahead with the HDHP.  Read up on the benefits of HSAs, which are great retirement savings vehicles.  I won't comment further as there are entire threads on it all over this forum.

And what about my lineup for family plans? Prices are all for in-network providers

HDHP:
$290/month premium
$3,000 deductible
$1,500 annual employer HSA contribution
$10,000 OOP max
*In 25% tax bracket, so I save $25 in taxes for every $100 of medical expenses I pay for using HSA

PPO
$358/month premium
No deductible, mostly $25-$35 copays a unless it's for surgery ($150 copay) or inpatient room and board ($175/day up to $875)
$7,000 OOP max

« Last Edit: October 22, 2016, 07:39:56 AM by tharidumuf »

boarder42

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Re: HSA vs PPO
« Reply #4 on: October 22, 2016, 08:59:55 AM »
Hsa wins not even close on max oop

ender

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Re: HSA vs PPO
« Reply #5 on: October 22, 2016, 09:09:26 AM »
*In 25% tax bracket, so I save $25 in taxes for every $100 of medical expenses I pay for using HSA

It's actually more since you save FICA too, assuming you have employer withdrawals for your HSA (if you contribute yourself you don't).

tharidumuf

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Re: HSA vs PPO
« Reply #6 on: October 22, 2016, 09:16:14 AM »
Hsa wins not even close on max oop

Could you share your math? I'm trying to follow what you posted earlier but I don't think I'm doing it correctly. This is a new way of thinking for me and I'm trying to understand.


*In 25% tax bracket, so I save $25 in taxes for every $100 of medical expenses I pay for using HSA

It's actually more since you save FICA too, assuming you have employer withdrawals for your HSA (if you contribute yourself you don't).

Yes, I can fund my HSA through payroll deductions.

BeanCounter

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Re: HSA vs PPO
« Reply #7 on: October 22, 2016, 09:18:22 AM »
HSA for sure. Just save the difference in premiums in your HSA account. Don't forget that your unused dollars roll over year after year so once you have the deductible or more built up it's an even better deal.

MissNancyPryor

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Re: HSA vs PPO
« Reply #8 on: October 22, 2016, 09:26:37 AM »
I just signed us up for the maximum-deductible HSA at work.  The company contributes a chunk.  This will either be a great future source of medical expense coverage or it will act as another retirement account when we cash flow our costs.  We are the Evil Rich and have been ineligible to contribute to a Roth for years so I am going for this alternative. 

http://www.madfientist.com/ultimate-retirement-account//

ender

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Re: HSA vs PPO
« Reply #9 on: October 22, 2016, 02:46:01 PM »
And what about my lineup for family plans? Prices are all for in-network providers

HDHP:
$290/month premium
$3,000 deductible
$1,500 annual employer HSA contribution
$10,000 OOP max
*In 25% tax bracket, so I save $25 in taxes for every $100 of medical expenses I pay for using HSA

PPO
$358/month premium
No deductible, mostly $25-$35 copays a unless it's for surgery ($150 copay) or inpatient room and board ($175/day up to $875)
$7,000 OOP max

Your PPO plan seems pretty competitive here. I'm assuming that you have some level of coinsurance up to the max OOP match on both plans? How similar are those coinsurances?

If you spend $1M worth of healthcare expenses your costs end up as:

  • HDHP= 12*290 + 10,000 - 1500 = $11980
  • PPO= 358*12 + 7000 = $11296

The tax advantages of the HSA would bump this in the HDHP's favor in this scenario, but keep in mind with a PPO plan you are much less likely to hit the OOP max.

The problem is with a PPO you have a lot more difficult to estimate actual costs because a lot of your services are copay or "free" when compared to your HDHP plan. For example if you go to the doctor 10x then the PPO plan is probably cheaper, since you likely pay copays instead of the full expense.

tharidumuf

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Re: HSA vs PPO
« Reply #10 on: October 22, 2016, 03:09:07 PM »
And what about my lineup for family plans? Prices are all for in-network providers

HDHP:
$290/month premium
$3,000 deductible
$1,500 annual employer HSA contribution
$10,000 OOP max
*In 25% tax bracket, so I save $25 in taxes for every $100 of medical expenses I pay for using HSA

PPO
$358/month premium
No deductible, mostly $25-$35 copays a unless it's for surgery ($150 copay) or inpatient room and board ($175/day up to $875)
$7,000 OOP max

Your PPO plan seems pretty competitive here. I'm assuming that you have some level of coinsurance up to the max OOP match on both plans? How similar are those coinsurances?

If you spend $1M worth of healthcare expenses your costs end up as:

  • HDHP= 12*290 + 10,000 - 1500 = $11980
  • PPO= 358*12 + 7000 = $11296

The tax advantages of the HSA would bump this in the HDHP's favor in this scenario, but keep in mind with a PPO plan you are much less likely to hit the OOP max.

The problem is with a PPO you have a lot more difficult to estimate actual costs because a lot of your services are copay or "free" when compared to your HDHP plan. For example if you go to the doctor 10x then the PPO plan is probably cheaper, since you likely pay copays instead of the full expense.

HDHP: 5% of plan allowance for most expenses once I hit the deductible.
PPO: most copays are $25-$35

Also, a point of correction, the PPO OOP max is $11,000. I was quoting the wrong plan.

MrSal

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Re: HSA vs PPO
« Reply #11 on: October 22, 2016, 03:13:09 PM »
I wish I could have a HSA but in my case it does not make sense I think.

My wife is a teacher, so she has a good plan that costs us 70 dollars per month in premiums and our deductible is 50 dollars or so!!

The school district pays like 12,000 a year per employee for the plan (this plan covers the whole family).

I inquired them, if we were to drop coverage, how much compensation would go to us... they said her compensation would go up 500 dollars.

jamesbond007

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Re: HSA vs PPO
« Reply #12 on: October 24, 2016, 10:40:40 AM »
Thanks for all the great responses. I will have the plan docs in my hand soon-ish. I will post here with the details. Open enrollment is still a week away so I have plenty of time to make a decision.

jamesbond007

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Re: HSA vs PPO
« Reply #13 on: October 24, 2016, 05:15:40 PM »
Any opinion on HSABank.com. HSABank will be my plan administrator. Anyone know their fee structure and investment options? I don't think they give out these unless you sign up?

gsander10

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Re: HSA vs PPO
« Reply #14 on: October 24, 2016, 05:32:04 PM »
HSA vs PPO is a false comparison.  An HSA can be an HMO, POS or PPO. The network (PPO) has nothing to do with the type of plan. Technically, plans are either HSA-compatible or they are not.  So, you can have an HSA-compatible PPO plan. 

I'm a huge fan of HSAs.  If you are relatively healthy and visit the doctor infrequently, then you will almost always come out ahead.  Even if you meet your deductible and MOOP every other year, you will still be ahead of the game (esp if you are in a higher tax bracket).

Check out their HSA calculator to run the numbers and see how it compares to a traditional copay plan:  http://www.hsabank.com/hsabank/education/hsa-savings-calculator

HSA Bank is a good administrator...just be careful of the fees if your balance is low.  You can check out their fees on their website...you don't have to sign up first.


jamesbond007

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Re: HSA vs PPO
« Reply #15 on: October 25, 2016, 03:57:56 PM »
So I read that I can avoid FICA on my paycheck if I setup a direct contribution from my paycheck. If that's the case, will I be ineligible for Social Security and Medicare when I get old because I didn't FICA?

ender

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Re: HSA vs PPO
« Reply #16 on: October 25, 2016, 04:29:13 PM »
So I read that I can avoid FICA on my paycheck if I setup a direct contribution from my paycheck. If that's the case, will I be ineligible for Social Security and Medicare when I get old because I didn't FICA?

It's only a very small portion of your paycheck that doesn't factor into your FICA eligible earnings.

It will reduce your benefit in the future by a very, very small amount, but to answer your exact question - no.