Author Topic: Picking Insurance Plan from Employer  (Read 1688 times)

sea

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Picking Insurance Plan from Employer
« on: November 09, 2015, 11:16:49 AM »
Hi Mustachians,

I keep on waffling between the HD-HSA and low deductible plans my employer offers.  I think the low deductible plan is a better value over the short term and the HSA is better for FI reasons if I pay my medical expenses not out of the HSA a la Mad FIentist.  There's also a co-pay plan that I'm not even going to bother considering.

I am 34 and pretty healthy and have no prescriptions besides a Ventolin inhaler I refill once a year.  I do have some possible nerve damage in my right hand (ulnar neuropathy), and a frayed meniscus in right knee so I occasionally have to see specialists.  I see a therapist a couple times a month and go to chiro every week or two.  I do hit the deductible on the "high" deductible plan, but not the out of pocket max.  I still have a few thousand in an HSA from when I had a HD plan the year before last and the previous year.

Details:

Low deductible plan
Annual employee cost:    $364.00
Biweekly employee cost:   $14.00
Deductible: $400.00
Co-insurance after deductible is matched: 80-90%
Out of pocket max: $1500

I used this plan this year and still have $675 to go before hitting my out of pocket max.

"High" Deductible Plan with HSA
Annual employee cost:    $442.00
Biweekly employee cost:   $17.00
Deductible: $1300
Co-insurance after deductible is matched: 80-90%
Out of pocket max: $2000
Employer HSA contribution: $825 annual

I'm leaning toward going back to the high deductible plan with the HSA, but would appreciate any input from a working towards FI perspective.  Thanks!
« Last Edit: November 09, 2015, 11:36:36 AM by sea »

rubybeth

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Re: Picking Insurance Plan from Employer
« Reply #1 on: November 09, 2015, 12:05:02 PM »
Two questions:

1) Is the deductible part of the out of pocket max? For example, let's say you go to the ER for an accident and instantly reach your deductible and out of pocket max in one visit. Is the $400 part of the $1,500 or the $1,300 part of the $2,000? I don't want to assume I understand this aspect.

2) Would you be able to add anything extra to the HSA to make it a good savings vehicle?

On the face of it, I think the higher deductible plan is better because you get the $825 toward your medical expenses in the HSA.

And also, holy shit, your employer must be paying a large portion of the premium costs. Be glad you have such low cost options.

seattlecyclone

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Re: Picking Insurance Plan from Employer
« Reply #2 on: November 09, 2015, 12:22:36 PM »
Best case (premiums only), the low deductible plan costs $364, and the high-deductible plan costs negative $383 after considering the HSA contribution.
Worst case (pay premiums and out-of-pocket max), the low deductible plan costs $1,864 and the high-deductible plan costs $1,617 after considering the HSA contribution.

Maybe there's a scenario in between the best case and worst case where the low deductible plan is a better choice, but the difference will not be large regardless. Add in the tax savings you can get from maxing out your HSA and the HDHP probably wins hands down.

sea

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Re: Picking Insurance Plan from Employer
« Reply #3 on: November 09, 2015, 12:23:10 PM »
@rubybeth

1) Yes, the deductible is part of the out-of-pocket max.  Good question.  Those are also in-network benefits.  Out of network is higher, but I haven't had to use any of that over the last several years.
2) Yes, I would plan on maxing out the rest of my HSA ($2,525) in 2016.

If I went with the HSA, I would try to pay out of pocket completely for medical expenses and not be reimbursed by the HSA to use it as another retirement account and get the tax reduction.  I think the low-deductible plan is less expensive over the short-term, and I could also put what I would have saved in the HSA towards working toward maxing out my 401K which I'm not even close to do since I'm only putting in 5% and working on maxing out my Roth IRA first.  I don't see a lot posted about low deductible plans, and it's so affordable over the short-term.

I'm very grateful to have such good health insurance (single rates are posted - it's more for families) although it may be under the chopping block with the proposed Cadillac insurance plan tax because yes, my employer pays a huge portion of the premium.  I work at a not-for-profit so awesome benefits as a part of total compensation are something I factor in since my salary could be higher working at a for-profit entity.  I'm in Minnesota too.  Hello!
« Last Edit: November 09, 2015, 12:32:20 PM by sea »

sea

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Re: Picking Insurance Plan from Employer
« Reply #4 on: November 09, 2015, 12:32:00 PM »
@seattlecyclone:  Thanks for the clear analysis.  :)  I think the HSA only seems more expensive from a cash flow perspective if I'm not being reimbursed for my medical costs. 

rubybeth

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Re: Picking Insurance Plan from Employer
« Reply #5 on: November 10, 2015, 06:51:25 AM »
Is the low-deductible plan eligible for an HSA? I would probably go high deductible, because if you can max out your HSA, that's even better than putting more into your 401k. And you can always use the funds tax-free to pay for medical expenses as they pop up or if you don't have the cash on hand. That's what DH and I do--except I put all medical expenses on the BarclayCard for the travel rewards, then reimburse myself from the HSA. I might change how I reimburse ourselves as we near FIRE, but that's some years away for us.

I also work for a non-profit type of entity in Minnesota (library), and there's been discussion that our plan may change if it's considered Cadillac at some point. I don't take medical coverage via my employer because I was able to find a much lower cost single plan via MNsure, the state's exchange, and my DH got better single coverage via his employer. I'm able to max my HSA with my benefit dollars, and put my benefit dollars into my 457b as long as I match them from my paycheck, so that's what I've been doing for a few years now. Welcome to MMM! :)