Another Insurance Question (HDHP w/potential pregnancy)

[CougStache]

I got some great feedback yesterday on life insurance, so I figured I'd ask again for health care.

Here's the rundown:
PPO
$173.94 per pay period ($4522/year) for the wife & I
$1000 annual deductible
$6000 coinsurance maximum
$12,700 out-of-pocket maximum
Generally an 80/20 plan, obviously with preventative care covered 100%

HDHP
$126.96 per pay period ($3301/year) for the wife & I
$3000 annual deductible
$5000 out-of-pocket maximum
Employer to contribute $600 to HSA; $6750 max HSA contribution

Major differences in the coverage:
Urgent care center visits are $50 copay with PPO; 20% after deductible with HDHP
ER visits are $200 copay with PPO; 20% after deductible with HDHP
Lab & path tests are 100% covered with PPO; 20% after deductible with HDHP
Pre- and post-natal care is 100% covered with PPO; 20% after deductible with HDHP

Pregnancy is a real possibility next year, but otherwise we generally don't have too much in terms of health care costs. So it's really that last difference I'm concerned about.

Does it make sense for us to go with the HDHP and save on premiums, snag the tax benefits of HSA and likely hit a lower out-of-pocket maximum? It seems like a no-brainer, but there's a good chance I'm missing something. I'm trying to run some numbers today, but you all are much smarter than I on these matters.

Cheers

[Sibley]

My thoughts: If you're planning on having a baby next year, then the HDHP would be much more expensive, even with the HSA. For one reason alone: Pre- and post-natal care is 100% covered with PPO; 20% after deductible with HDHP

No baby? HDHP.

ETA: Oops, I mixed them up. Yes, given the out of pocket maximum, the HDHP would be better. Win-win-win.

[ABC123]

I was kinda thinking the opposite -- the out of pocket max is much lower with the HDHP.  With a pregnancy, even a completely normal one with no extra issues or costs, you will probably go well over $5k.  So you would be better with the HDHP.

[mandy_2002]

Looking at the out of pocket maximums for the plans, it appears as if it may be a no brainer.  Do you know others on either plan that have gone through the birth process?  Most people in my life say that even though birth is a covered event, there are still many unexpected medical costs with standard insurance that can add up.  Since the out of pocket max on the PPO is so high, I think I'd go with the HDHP.  Since you can put more money in the HSA than your OOP Max, it seems like a good choice. 

How often do you use non-preventive care services?  That was a big decision maker for me.  I do everything in my power to not see a doctor, so I haven't paid a cent out of pocket for years (since my last sinus infection; the nurse at work gave me the prescription, so I didn't have a co-pay for an appointment, but the drugs did cost about $4).

According to ACA requirements, preventive care should be covered 100% on the HDHP, and many parts of the pregnancy process are also at least partially covered.  Getting experience plan users input would be valuable to see how these costs come out.   

[seattlecyclone]

I think the 100% covered maternity care on the PPO may be too good of a benefit to pass up. You may want to get clarification on exactly what that means though; is it just for consultations with the physicians and the birth itself, or are related services (blood draws, ultrasounds, etc.) covered under that as well?

With the PPO, assuming all the care you might need is covered under the 100% maternity care benefit, your total cost is $4,522/year in pre-tax funds.

With the HDHP, assuming the pregnancy will cost enough to blow through your out-of-pocket maximum, you pay $3,301 in premiums plus $4,400 to put enough in your HSA to cover the out-of-pocket max (after the $600 employer contribution), for a total of $7,701. You also get to save an additional $1,750 pre-tax above and beyond what would be needed for the out-of-pocket max. The tax savings here will reduce the difference between the two plans, but won't eliminate it.

The big variable here is how likely is it that either of you will need care that is not covered by the special 100% maternity care benefit that the PPO offers. In the above comparison, you've already blown through the HDHP out-of-pocket max, so any additional care you might need would be essentially free if you choose that plan. Under the PPO you haven't paid anything toward your deductible or coinsurance for the pregnancy, so any extra care you might need would narrow (and possibly eliminate) the cost difference between the two plans. The HDHP is essentially a known quantity: you pay a maximum of $7,701, a number you're reasonably likely to hit if you have a baby next year. The PPO starts at $4,522; any additional non-maternity care will cause your cost to go up, and these costs would need to be paid from post-tax funds (unless you have an FSA or a pre-existing HSA balance).

[mandy_2002]

With the HDHP, assuming the pregnancy will cost enough to blow through your out-of-pocket maximum, you pay $3,301 in premiums plus $4,400 to put enough in your HSA to cover the out-of-pocket max (after the $600 employer contribution), for a total of $7,701. You also get to save an additional $1,750 pre-tax above and beyond what would be needed for the out-of-pocket max. The tax savings here will reduce the difference between the two plans, but won't eliminate it.
...
The HDHP is essentially a known quantity: you pay a maximum of $7,701, a number you're reasonably likely to hit if you have a baby next year. The PPO starts at $4,522; any additional non-maternity care will cause your cost to go up, and these costs would need to be paid from post-tax funds (unless you have an FSA or a pre-existing HSA balance).

This is a good point.  Assuming a 25% tax rate, the HDHP cost becomes $6,601; taking into account the additional savings on the $1,750, that's another $437.50 saved.  (Of course this assumes that any out of pocket spending on the PPO is not from an FSA; it would then be apples to apples.)  Comparing the two with this tax savings gives a difference of $1,641.50.  I think the extent of the covered pre- and post- natal care is important to know.  Not the paperwork definitions, but the experiences of others. 

[GoldenStache]

Coworker just ran the numbers comparing if her PPO was better

Total out of pocket for pregnancy PPO -$720
$20 copay for initial checkup (Yes you are preggos)
$700 -$100 a night for overnight stay for child after born (spent 1 week in NICU)
(If child would have spent 50 days in NICU, HDHP would have been better)

If she would of had HDHP - $5k  -YMMV on this one, 3k usually upfront, and 2k is squeezed into it for a total of 5k

[CougStache]

All fantastic info--thanks everyone!

I agree the 100% prenatal/postnatal care coverage is attractive, and am currently in the vortex of HR/provider to get some specifics. However, my hunch is this is 100% of office visits (excluding initial copy), not additional services like ultrasounds, blood work, etc. We had the same blanket statement with our coverage this year but were charged some fees for prenatal visits (sadly, very early miscarriage) even though we were on the PPO.

EDIT: confirmation that 100% coverage means office visit only. Labs, ultrasounds, etc. are subject to deductible/co-insurance. With the HDHP, once the deductible is met, pre- & post-natal care is covered at 80% until the out-of-pocket max. Proof that those handy pamphlets HR sends out can be a bit misleading.

Some of my coworkers who have recently had babies also voice their preference for the HDHP with a maxed HSA.

I still like the idea of a lower out-of-pocket max & lower premiums. If we don't get pregnant and don't need non-preventative medical care (which is our standard), the savings are pretty clear.

[bord]

The wife and I did all of our (3) pregnancies this way - HDHP. Worked out great.

[seattlecyclone]

This is a good point.  Assuming a 25% tax rate, the HDHP cost becomes $6,601; taking into account the additional savings on the $1,750, that's another $437.50 saved.  (Of course this assumes that any out of pocket spending on the PPO is not from an FSA; it would then be apples to apples.)  Comparing the two with this tax savings gives a difference of $1,641.50.  I think the extent of the covered pre- and post- natal care is important to know.  Not the paperwork definitions, but the experiences of others. 

This math isn't quite right. Premiums can be paid pre-tax on either plan, but you're comparing the post-tax cost of the HDHP with the pre-tax cost of the PPO.

A more accurate comparison, assuming 25% tax bracket and 7.65% payroll tax:
HDHP: $7,701 pre-tax to meet out-of-pocket maximum = $5,186.62 post-tax cost. Additional tax savings on $1,750 of additional HSA contributions = $571.38. Net post-tax cost is $4,615.24.
PPO: $4,522 pre-tax for premiums = $3,045.57 post-tax. Any services covered at less than 100% would add to this number.

This all assumes that you'll be paying for your medical expenses directly from the HSA. If you're able to max out all of your retirements and choose to pay for medical bills with post-tax funds, I think this acts in the HDHP's favor because the tax-free HSA contributions get to compound for a while. Simulating this is left as an exercise to the reader, because it makes my head hurt to think too hard about it.