Author Topic: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?  (Read 5821 times)

jeromedawg

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Hi all,

So we have a due date of Feb 28 2017 and are currently on an HSA through my work. The deductible is really high and so we're paying full contracted rates for appointments, etc... it's all starting to add up especially for my wife's OBGYN visits. Since the deductible 'resets' after the year, would it be wise and advisable to go ahead and opt for a lower cost HMO (I think ours is an HRA, rather) option or perhaps go with Kaiser (we're in SoCal) during open enrollment in November? That way we would avoid paying a ton of money out of pocket for the labor and delivery costs... I'm afraid if we switch to Kaiser, who we've never been with, that might complicate logistics, etc. There is a Kaiser hospital down the street, but even with the doctors who we're used to who aren't on the Kaiser network, etc, I don't know. The Kaiser option is the lowest cost and I believe the HRA may be the next lowest - I'd have to go back and look. But the HSA/HDHP plans are by far the most expensive as far as deductibles (our's is Silver - there is a Gold level in which I believe the deductible is slightly less but the monthly is higher - still quite expensive though... the deductible for Silver is around $5200 or so and virtually all copays/coinsurance don't kick in UNTIL you hit that).

Any advice or pointers in this situation?
« Last Edit: August 07, 2016, 10:33:05 AM by jplee3 »

v8rx7guy

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That is currently what we are planning on doing. It depends on a lot of factors, but I laid out graphs of each plan to get an idea of total out of pocket expenses including premiums for each option. For any costs above about $5,000 the PPO plan was the better choice. If I were you, I would go with the PPO and set aside a full out of pocket max using the flexible spending account if you have that option available.

ender

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Just make sure you understand the total out of pocket costs per year.

Our HDHP is still cheaper per year when analyzed this way.

ShoulderThingThatGoesUp

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When I did the math my HDHP required $15,000 in medical expenses to be more expensive.

You guys are back for another round? Congratulations!

seattlecyclone

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It really depends on the specifics of the plans available. How different are the premiums between your different plan options? Does your employer kick in some initial money into the HSA? Have you talked at all to the Kaiser doctors? Would you be comfortable switching to them toward the end of the pregnancy?

When giving birth you can probably expect to pay pretty close to your out-of-pocket maximum when you're on an HDHP, so add this number to the total annual premium, then adjust the total by your tax bracket (including payroll tax) since the premiums and HSA contributions will come out of your paycheck tax-free. Compare this number to the premiums plus copays you might owe for the other plans. For what it's worth I've heard pretty good things about Kaiser.

jeromedawg

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This just occurred to me, but what if I were to switch to the plan that would afford me the best coverage as far as low/no deductible (even if monthly payments are somewhat higher) in November. And then after the kid is born (due date end of Feb), as a 'life event' that makes me eligible for enrollment again, I update and switch to something else? I guess the caveat here is making sure we anticipate post-birth doctor visits (for either my wife and or children) and this is also operating under the assumption that there are no complications, etc... but would this probably be the best-case scenario to operate under otherwise?

historienne

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This just occurred to me, but what if I were to switch to the plan that would afford me the best coverage as far as low/no deductible (even if monthly payments are somewhat higher) in November. And then after the kid is born (due date end of Feb), as a 'life event' that makes me eligible for enrollment again, I update and switch to something else? I guess the caveat here is making sure we anticipate post-birth doctor visits (for either my wife and or children) and this is also operating under the assumption that there are no complications, etc... but would this probably be the best-case scenario to operate under otherwise?

According to my employer's interpretation of the IRS regulations, this would not work.  You have to switch coverage as of the date of the life event, in this case the birth.  So the birth would be billed to the new insurance, not the old insurance.  I am not 100% sure that this is in fact an IRS requirement, but (for other reasons), I've just spent a lot of time clarifying that it is definitely how my employer interprets those requirements.

jeromedawg

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This just occurred to me, but what if I were to switch to the plan that would afford me the best coverage as far as low/no deductible (even if monthly payments are somewhat higher) in November. And then after the kid is born (due date end of Feb), as a 'life event' that makes me eligible for enrollment again, I update and switch to something else? I guess the caveat here is making sure we anticipate post-birth doctor visits (for either my wife and or children) and this is also operating under the assumption that there are no complications, etc... but would this probably be the best-case scenario to operate under otherwise?

According to my employer's interpretation of the IRS regulations, this would not work.  You have to switch coverage as of the date of the life event, in this case the birth.  So the birth would be billed to the new insurance, not the old insurance.  I am not 100% sure that this is in fact an IRS requirement, but (for other reasons), I've just spent a lot of time clarifying that it is definitely how my employer interprets those requirements.

I think you're right, come to think of it... so really there might be no benefit to be switching insurance prior to the birth date unless we anticipate high costs for something else prior to the birth. Thus, it may be best just to wait until the kid is born and *then* do the life-event enrollment update where we switch to a low/no-deductable plan or at least one where labor/delivery costs would be a lot less than what we're on now. Of course, that still comes with the understanding that we'll be on that same plan through the rest of the year.

EDIT: I was actually just thinking about what you said more and realized a hypothetical conundrum... if what you're saying is true about declaring the life event and the new insurance coverage being billed based on the life event, how would all this work in the case that we're with Blue Cross for instance and then switch to Kaiser per declaring the life event? Surely, the hospital under Blue Cross isn't going to bill things via Kaiser - I'm assuming we would have to pay whatever the associated costs are in full?
« Last Edit: August 09, 2016, 11:36:11 AM by jplee3 »

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As far as labor and delivery costs go, you will end up paying the same overall amount whether you choose bronze, silver, gold or platinum plans from Kaiser. The higher monthly premiums will offset the deductible. Go to Kaiser's website and do the calculations yourself. Financially, you will always come out ahead by choosing the bronze plan. You will pay lower premiums in case nothing big happens. If you end up needing more medical care, you will still end up paying only the Platinum-equivalent amount or less when your deductible and co-insurance is added up.


jeromedawg

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As far as labor and delivery costs go, you will end up paying the same overall amount whether you choose bronze, silver, gold or platinum plans from Kaiser. The higher monthly premiums will offset the deductible. Go to Kaiser's website and do the calculations yourself. Financially, you will always come out ahead by choosing the bronze plan. You will pay lower premiums in case nothing big happens. If you end up needing more medical care, you will still end up paying only the Platinum-equivalent amount or less when your deductible and co-insurance is added up.

We only have Kaiser HMO and Kaiser HDHP as far as Kaiser is concerned. I called my HR dept and asked what would happen if we were on Blue Cross and delivered at a Blue Cross affiliated hospital (not Kaiser) and then switched to a Kaiser plan upon declaring the life event. The rep told me that we would basically have to pay whatever the delivery costs are for the Blue Cross affiliated hospital and it would most likely be out of network. So I don't think trying to do something like this would make much sense.

We may consider switching to Kaiser during the standard open enrollment instead. However, we do have concerns about switching doctors (primary, OBGYN, etc) that late along in the pregnancy when we had already been seeing the Blue Cross counterparts prior. It's more just a logistics concern...   

historienne

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #10 on: August 10, 2016, 12:33:23 PM »

We only have Kaiser HMO and Kaiser HDHP as far as Kaiser is concerned. I called my HR dept and asked what would happen if we were on Blue Cross and delivered at a Blue Cross affiliated hospital (not Kaiser) and then switched to a Kaiser plan upon declaring the life event. The rep told me that we would basically have to pay whatever the delivery costs are for the Blue Cross affiliated hospital and it would most likely be out of network. So I don't think trying to do something like this would make much sense.

We may consider switching to Kaiser during the standard open enrollment instead. However, we do have concerns about switching doctors (primary, OBGYN, etc) that late along in the pregnancy when we had already been seeing the Blue Cross counterparts prior. It's more just a logistics concern...

Yeah, this is right.  I switched jobs but COBRA'd my BCBS plan because my new job has Kaiser...but I'm not actually moving to the location of my new job for another few months (I went on maternity leave immediately when I started, and am not moving to the new location until just before I finish my leave).  We don't have any Kaiser options here, so I had to COBRA my BCBS plan in order to have my delivery covered here.  Kaiser would not have paid for it.

On the other hand, in my previous pregnancy, I switched providers in my third trimester (also because of a move).  It was totally fine.  I had gotten recommendations from trusted friends, so I knew that I was moving to a good practice.  And in any case, it's usually not your personal OB/midwife who is there to catch the baby anyway, so it doesn't make much difference for the actual delivery.  Kaiser has a good reputation for low-intervention births, at least in the area I'm moving to; I would not have hesitated to switch to them if we were geographically close enough to do so.

hollyluja

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #11 on: August 10, 2016, 05:23:41 PM »
I'm in the same situation - due early next year.  I ran the numbers and for us, there is no level of medical spending at which the HSA/HDHP is not the better option.  The two big advantages are the tax break and the Out Of Pocket total limit vs the HMO where you just keep paying co-insurance.

Of course, I only have the choice between Kaiser HMO and Kaiser HDHP, so I'm stuck with Kaiser hospital for the delivery either way.  FWIW, Kaiser hospitals have the lowest c-section rate by far in this area, so they'd be my choice anyway.

boarder42

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #12 on: August 10, 2016, 05:35:53 PM »
Based on max oop on our health insurance hdhp with hsa maxed wins hands down. But every plan situation is unique

HotPotato

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #13 on: August 14, 2016, 03:14:05 PM »
A little off topic but how do you calculate if its worth it do go with a high deductible plan? We're currently TTC and don't typically go to the doctors much, maybe 1-2 urgent care visits/ year. In a few weeks we both have our first (ever since being under parents insurance) appointment with a primary care. We're a little late to the adulting game haha. We have the option to switch to a high deductible plan from a $250 deduct but I'm worried about the delivery costs.

hollyluja

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #14 on: August 14, 2016, 07:47:57 PM »
A little off topic but how do you calculate if its worth it do go with a high deductible plan? We're currently TTC and don't typically go to the doctors much, maybe 1-2 urgent care visits/ year. In a few weeks we both have our first (ever since being under parents insurance) appointment with a primary care. We're a little late to the adulting game haha. We have the option to switch to a high deductible plan from a $250 deduct but I'm worried about the delivery costs.


I'm using a spreadsheet like this that calculates zero, expected, and maximum usage, along with combined Fed + State (OR) tax rates, employer contribution, etc.  Maybe it will work for you?

ender

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #15 on: August 14, 2016, 09:18:10 PM »
A little off topic but how do you calculate if its worth it do go with a high deductible plan? We're currently TTC and don't typically go to the doctors much, maybe 1-2 urgent care visits/ year. In a few weeks we both have our first (ever since being under parents insurance) appointment with a primary care. We're a little late to the adulting game haha. We have the option to switch to a high deductible plan from a $250 deduct but I'm worried about the delivery costs.

This gets complicated depending on how your non-HDHP does coinsurance, too. You end up with weird situations where certain ranges are better than others and a plan's optimality switches in different medical expense ranges.

I'm tempted though to switch to our non-HDHP plan. I'm so sick of trying to understand medical bills, etc, and I would love the ability to just go, pay minimal amounts, and pay the difference per year in premiums. The piece of mind is becoming more worth it for me and we don't even have kids, I expect when we have kids it'll make it even more desireable to do that.


historienne

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #16 on: August 15, 2016, 08:21:16 AM »
If the question is about how much labor and delivery costs, the answer is, a lot.  My first birth was billed (at insured rates) at about $12,000.  That's the low end of the spectrum - unmedicated birth using a midwifery practice.  The bills for my second birth are still coming in, but they will be closer to $30,000.  Same midwifes, but I got an epidural this time, and my son was early and had a 4 day stay in the special care nursery.  Throw in a C-section, it would have been well over $50,000.

And keep in mind that, whatever your intentions and risk profile, you really can't plan on the best case scenario.  My first birth went exactly as planned.  Second time around, I went into labor a month early.  No risk factors, no reason to believe it would happen.  We have a $2,000 per person OOP maximum, and we will definitely hit it. 

JLee

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #17 on: August 15, 2016, 09:10:32 AM »
Just make sure you understand the total out of pocket costs per year.

Our HDHP is still cheaper per year when analyzed this way.

This. It depends on the plan...for me, our HDHP would cost me less no matter what.  No care at all, or maximum out of pocket...it was less either way.

hollyluja

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #18 on: August 15, 2016, 10:24:20 AM »
The other advantage to HDHP is that typically their deductible is also the out of pocket max, whereas an HMO plan can have unlimited co-insurance. 

I like the peace of mind that comes with knowing my medical spend for the year has a hard ceiling.

v8rx7guy

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #19 on: August 15, 2016, 10:51:21 AM »
I posted this once before, but here is a graph of out-of-pocket expenses vs. total heathcare cost (including premium) for our "hi PPO", "low PPO" and HPHP plans.  This is one of the best ways of determining which plan is best for you.  The HDHP is a better option for me up to about $17-18K.  Our last pregnancy ended in a C-section, which billed almost $40K, fortunately we were on the lo_PPO at the time, and we are going to switch to the lo_PPO again for the delivery in 2017.

jeromedawg

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #20 on: August 15, 2016, 01:13:45 PM »
I posted this once before, but here is a graph of out-of-pocket expenses vs. total heathcare cost (including premium) for our "hi PPO", "low PPO" and HPHP plans.  This is one of the best ways of determining which plan is best for you.  The HDHP is a better option for me up to about $17-18K.  Our last pregnancy ended in a C-section, which billed almost $40K, fortunately we were on the lo_PPO at the time, and we are going to switch to the lo_PPO again for the delivery in 2017.

Nice! Do you have the template for this?

HotPotato

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #21 on: August 15, 2016, 08:04:49 PM »
So would you say a HDHP is less appealing if you're not maxing out other pretax investment avenues, ie 401k. I could use the difference in premiums to invest more in my 401k, since I'm not at the max, instead of putting into an HSA, since the HSA funds are very limited use.

One way the HDHP would be beneficial though, was if you had a base savings in the HSA to fully pay for the deductible/OOP max from the beginning, so you wouldn't be stuck with a high bill to pay unexpected. When I was looking up the rules for this, my understanding is that the max is divided into 12, and that's the most you can contribute per month. And you have to prove eligibility every month. So if you were to switch to a HDHP halfway through the year from a qualifing event, you couldn't "catch up" on the HSA. Is this right? Any work arounds?

Hotstreak

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #22 on: August 15, 2016, 10:27:02 PM »
So would you say a HDHP is less appealing if you're not maxing out other pretax investment avenues, ie 401k. I could use the difference in premiums to invest more in my 401k, since I'm not at the max, instead of putting into an HSA, since the HSA funds are very limited use.

One way the HDHP would be beneficial though, was if you had a base savings in the HSA to fully pay for the deductible/OOP max from the beginning, so you wouldn't be stuck with a high bill to pay unexpected. When I was looking up the rules for this, my understanding is that the max is divided into 12, and that's the most you can contribute per month. And you have to prove eligibility every month. So if you were to switch to a HDHP halfway through the year from a qualifing event, you couldn't "catch up" on the HSA. Is this right? Any work arounds?


- You can contribute your maximum HSA amount in any way you wish, including 100% during January.  Eligibility is tested once per year (look at the answer you put on your tax return).
- HSA has broad uses, mostly the fact that you can use it to pay for medical expenses for your entire life.  Also the fact you can withdraw these without penalty, for any use, after age 65.  https://www.betterment.com/resources/life/truth-about-hsas-and-retirement/

JLee

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #23 on: August 16, 2016, 08:13:31 AM »
So would you say a HDHP is less appealing if you're not maxing out other pretax investment avenues, ie 401k. I could use the difference in premiums to invest more in my 401k, since I'm not at the max, instead of putting into an HSA, since the HSA funds are very limited use.

One way the HDHP would be beneficial though, was if you had a base savings in the HSA to fully pay for the deductible/OOP max from the beginning, so you wouldn't be stuck with a high bill to pay unexpected. When I was looking up the rules for this, my understanding is that the max is divided into 12, and that's the most you can contribute per month. And you have to prove eligibility every month. So if you were to switch to a HDHP halfway through the year from a qualifing event, you couldn't "catch up" on the HSA. Is this right? Any work arounds?


- You can contribute your maximum HSA amount in any way you wish, including 100% during January.  Eligibility is tested once per year (look at the answer you put on your tax return).
- HSA has broad uses, mostly the fact that you can use it to pay for medical expenses for your entire life.  Also the fact you can withdraw these without penalty, for any use, after age 65.  https://www.betterment.com/resources/life/truth-about-hsas-and-retirement/

Just keep in mind that the only way for HSA contributions to be pre-FICA is if they are payroll deductions.

So would you say a HDHP is less appealing if you're not maxing out other pretax investment avenues, ie 401k. I could use the difference in premiums to invest more in my 401k, since I'm not at the max, instead of putting into an HSA, since the HSA funds are very limited use.

One way the HDHP would be beneficial though, was if you had a base savings in the HSA to fully pay for the deductible/OOP max from the beginning, so you wouldn't be stuck with a high bill to pay unexpected. When I was looking up the rules for this, my understanding is that the max is divided into 12, and that's the most you can contribute per month. And you have to prove eligibility every month. So if you were to switch to a HDHP halfway through the year from a qualifing event, you couldn't "catch up" on the HSA. Is this right? Any work arounds?

IMO an HSA is the first account you should max (after 401k to employer match).  You avoid all taxes, including FICA, and you can withdraw compensation for qualifying health expenses at any point in the future; e.g. if you have $1000/year for ten years in medical expenses that you pay out of pocket, after ten years you can take $10k out of your HSA without any penalty or tax.

hollyluja

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #24 on: August 16, 2016, 12:15:39 PM »
When I was looking up the rules for this, my understanding is that the max is divided into 12, and that's the most you can contribute per month. And you have to prove eligibility every month. So if you were to switch to a HDHP halfway through the year from a qualifing event, you couldn't "catch up" on the HSA. Is this right? Any work arounds?

I contributed 100% in January 2016 this year, over the 2 paychecks.  It took HR a few tries to get it right though.  Apparently I was the only one who did this in  my company.

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #25 on: August 16, 2016, 05:57:21 PM »
I contributed 100% in January 2016 this year, over the 2 paychecks.  It took HR a few tries to get it right though.  Apparently I was the only one who did this in  my company.

That's great to know! I'll have to talk to HR about doing that.

If you are on a single +1 HDHP, are you subject to the single or family contribution limit?

hollyluja

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Re: Should we switch from HDHP HSA to HMO/PPO if expecting after next yr?
« Reply #26 on: August 17, 2016, 09:56:16 AM »
I contributed 100% in January 2016 this year, over the 2 paychecks.  It took HR a few tries to get it right though.  Apparently I was the only one who did this in  my company.

That's great to know! I'll have to talk to HR about doing that.

If you are on a single +1 HDHP, are you subject to the single or family contribution limit?

I have husband and 2 kids on my plan, so I did the family contribution limit.