The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Aleks on November 19, 2014, 08:04:43 AM
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Hi all, I was wondering if you could check out my logic/math on something before my wife goes ahead and locks in her health insurance elections for the next year.
I currently have health insurance for the both of us through my work. The premium is $117.65 per month for a HDHP (high deductible health plan) which allows me to have a HSA (health savings account) that my employer will match up to $1,800 dollar-for-dollar (the max contribution per year is $6,650). The deductible is $5,400.
My wife recently got a job at the same company so she has the ability to enroll under the same plan and open her own HSA with the same match. Alternatively, we can both elect for individual coverage only. This would result in a premium of $51.00 per month (per person) and a deductible of $2,700 (per person). The caveat is that our employer will only match up to $1,200 (per person) for the HSA and our max contribution would be $3,350 (per person).
My dilemma is figuring out which above the two options would be the better one, or, if it would be better to have her waive any insurance and just continue to be covered under my plan. I prepared 1040’s for all three situations (as best as I could estimate) and included below a summary of the plans and some key numbers.
Option 1 – Plan with highest HSA contribution
Employee Match: $3,600
Premium paid: $2,824
Taxes paid: $8,225
Income after taxes: $80,884
Total: $84,484
Option 2 – Plan with smaller HSA contribution
Employee Match: 2,400
Premium paid:$1,224
Taxes paid: $8,582
Income after taxes: $83,264
Total: $84,664
Option 3 – Only one HSA
Employee Match: 1,800
Taxes paid: $8,459
Income after taxes: $82,444
Total: $74,191
It looks like Option 2 comes out ahead but I’m wondering if I’m missing something. Shouldn’t there be something to be said for tax savings? Or the fact that the extra money contributed to the HSA will earn “income” since it can be invested in mutual funds?
Any feedback would be appreciated.
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If you're young without any health issues then your health savings account can grow over time, especially if you can afford to pay any medical bills out of your pocket instead of through your health savings account.
If you're older than you'll have less time to take advantage of compounding interest on your health savings account. If you have more yearly medical bill expenses than having a high deductible would be more expensive even if your insurance premium is lower, but you have to crunch the numbers to make sure.