Author Topic: Should I switch to High Deductible medical plan.  (Read 5613 times)

Davids

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Should I switch to High Deductible medical plan.
« on: November 11, 2014, 06:01:15 PM »
It is open enrollment time and my employer is now offering a high deductible plan. I am wondering if I should move to a high deductible plan. My concern is we have a 6 month old son. If it was just me and my wife then a no brainer to do it but with a 6 month old son I am concerned if I should make the switch or wait.

Here are the details of each. Both plans cover preventive care at 100%

Regular Plan:
Premium per pay period (24 pay periods): $200.00
Deductible (Single/Family): $500/$1,000
Coinsurance: 20%
Copay: $20 primary, $40 specialist
Out of pocket maximum (Single/Family): $2,000/$4,000

High Deductible
Premium per pay period (24 pay periods): $80.00
Deductible (Single/Family): $2,000/$4,000
Coinsurance: 20%
Copay: NA
Out of pocket maximum (Single/Family): $4,000/$8,000
Employer HSA Contribution: $1,000

If I were to do High Deductible plan then of course I would max out my HSA which would be me contributing an additional $5,650 since my employer would contribute $1,000. My concern is with a 6 month old if it is best that I wait a year or 2 before switching to a high deductible plan just to ensure all is well. My wife currently works part time since we have the baby so she cannot qualify for benefits at her company (I wish she did, when she was full time her medical plan was way cheaper and basically same coverage)

Mr. Frugalwoods

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Re: Should I switch to High Deductible medical plan.
« Reply #1 on: November 11, 2014, 06:22:10 PM »
If it were me, I'd keep your current plan until the kid is a bit older.

But it really depends on your appetite for risk as well as your personal feelings towards using healthcare.  If you are the kind of family who takes the kid to see the pediatrician at the first sneeze... then the HD plan would certainly be a poor decision.

But for me?  First child?  6 mo old?  I'd keep the plan that lets me go to the pediatrician as often as I want/need.

MayDay

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Re: Should I switch to High Deductible medical plan.
« Reply #2 on: November 11, 2014, 06:25:26 PM »
Its only a year commitment. I'd probably switch, and if anyone ever developed a chronic condition, switch back the next year.

otherbarry

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Re: Should I switch to High Deductible medical plan.
« Reply #3 on: November 11, 2014, 06:57:04 PM »
Savings on premium after 24 pay periods: $2,880
Adding that $1,000 from your employer and you see an additional $3,880 if you switch to a HDHP. If you foresee spending more than that in copays and such then switching might be a bad choice. Like another poster said you can always switch back, although it might be more expensive if you try that after a chronic condition develops.

oldladystache

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Re: Should I switch to High Deductible medical plan.
« Reply #4 on: November 11, 2014, 07:28:51 PM »
Unless I'm misunderstanding something, looks to me like the high deductible is almost a no brainer.

Assuming everyone stays healthy you'll pay a bit over $4800 a year for the low deductible and 1920 for the high deductible. Most years that will be the case and you'll save up to $2880 a year.

Then when you have a bad year and high expenses, the year will cost you 8800 for the low deductible or 9920 for the high deductible. So the high deductible will cost you an extra 1120 in bad years.

Unless you have bad years more often than good you should save a lot with the high deductible.

200*24= 4800 min + 4000= 8800 max
80*24= 1920 min + 8000= 9920 max

carloco

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Re: Should I switch to High Deductible medical plan.
« Reply #5 on: November 11, 2014, 07:43:22 PM »
Also, The traditional plan has costs also.  you'd still have to pay $25 to see a doctor and it has similar OOP costs.  In my case, we are on some medications and see the doctor on a regular basis, I decided on the HD.  I figure that I'd like to start building up my HSA.

Jon Bon

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Re: Should I switch to High Deductible medical plan.
« Reply #6 on: November 11, 2014, 07:53:35 PM »
 Yes you should!

I feel like most people look at insurance the wrong way, IMHO it is not a situation where you want to get what you pay for.

I love my HD plan anything you put into it comes with a tax benefit as well.

Personally i have had a HD plan for six years, have one child and 2 more on the way. What I like about it is that it's YOUR money, YOU get to control it. After you hit a certain threshold most HSAs allow you to invest it in mutual funds. What's not to like about tax free investments that you can use for health costs if needed? (if ever!)

To me it's a great way to 1) save money 2) avoid taxation and 3) grow wealth


carloco

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Re: Should I switch to High Deductible medical plan.
« Reply #7 on: November 12, 2014, 12:43:04 PM »
For example, With the standard plan a visit to PT would be $45.  With the HD it would be $60 (although the PT billed for $250, the allowed charge is $60).  So I would be paying $15 more.  There is a -$3500 difference that I would need to spend to catch up

Davids

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Re: Should I switch to High Deductible medical plan.
« Reply #8 on: November 13, 2014, 01:02:40 PM »
Thanks. I think i will be switching to high deductible even with a baby. When I think about it I cannot fathom we would spend more than $4k out of pocket and even if we did that $4k out of pocket would probably equate to $1k out of pocket on the regular plan so it would still be a savings when factoring in the premium.

HairyUpperLip

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Re: Should I switch to High Deductible medical plan.
« Reply #9 on: November 13, 2014, 01:24:47 PM »
I'm facing the same issue with a 14 month old. My only real concern is no employer contribution so I'm not sure how much I should actually contribute myself - max $6650 or go a little lower... :-/


charis

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Re: Should I switch to High Deductible medical plan.
« Reply #10 on: November 13, 2014, 01:50:11 PM »
I just signed up for a HD plan myself after years of co pay/no deductible.  We have a 4.5 year old and a 16 month old.  I find that I can't ignore the call of the HSA any longer. 

My benefits for the HD plan state that "the plan" contributes an annual $1500 to the HSA (paid out biweekly).  Is that the same thing as employer contributions that you all have been referring to?  And am I correct in understanding that the $1500 goes against my max yearly contribution of $6650 (so I can only contribute $5150)?

Also, since I am switching to the HD plan now, I believe I can conceivably contribute a lump sum of $6550 before Dec 31st for 2014.
« Last Edit: November 13, 2014, 01:53:12 PM by jezebel »

Melf

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Re: Should I switch to High Deductible medical plan.
« Reply #11 on: November 13, 2014, 01:53:31 PM »
I just had to make my healthcare elections for next year and decided to go with the premium CDHP option that I have as opposed to the HD plan because of the lack of major price difference between options.  The HD plan would only save me $416 (26*$16) total over the CDHP plan.  The HD plan does offer the HSA but there is no company match.  I'm just now ramping my savings up to max out my 401K and Roth yearly contributions so I don't feel like I'm going to be wasting too much tax-deferred contribution space for next year.  I'll consider the HD plan for the following year though and hope to max out my 401K, HSA and Roth IRA in that order.  I'll also have a $1500 employer contribution to my HRA account with the CDHP plan for next year that I can carry over to the following year if it's not used up.

Dezrah

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Re: Should I switch to High Deductible medical plan.
« Reply #12 on: November 13, 2014, 03:08:40 PM »
Let me just say that I've been comparing plans on my state's Marketplace and I'd absolutely love to get deductibles and OOP max that low, and we're just a married couple w/o kids.  Seems like a really good deal to me.

I've been on HDHPs for a while and I'll tell you it feels scary at first, but once you save up in that HSA, you feel extra secure when you realize that medical financial disasters really don't apply to you anymore.

Shade00

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Re: Should I switch to High Deductible medical plan.
« Reply #13 on: November 13, 2014, 03:59:11 PM »
I just signed up for a HD plan myself after years of co pay/no deductible.  We have a 4.5 year old and a 16 month old.  I find that I can't ignore the call of the HSA any longer. 

My benefits for the HD plan state that "the plan" contributes an annual $1500 to the HSA (paid out biweekly).  Is that the same thing as employer contributions that you all have been referring to?  And am I correct in understanding that the $1500 goes against my max yearly contribution of $6650 (so I can only contribute $5150)?

Also, since I am switching to the HD plan now, I believe I can conceivably contribute a lump sum of $6550 before Dec 31st for 2014.

The employer contribution does not count against the maximum total contribution to the HSA.

Assuming your plan operates like most others, you have just got through annual open enrollment. That almost certainly means your new plan will not take effect until January 1, 2015. You cannot contribute funds to the HSA until January 1.

carloco

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Re: Should I switch to High Deductible medical plan.
« Reply #14 on: November 14, 2014, 07:24:52 AM »
I just signed up for a HD plan myself after years of co pay/no deductible.  We have a 4.5 year old and a 16 month old.  I find that I can't ignore the call of the HSA any longer. 

My benefits for the HD plan state that "the plan" contributes an annual $1500 to the HSA (paid out biweekly).  Is that the same thing as employer contributions that you all have been referring to?  And am I correct in understanding that the $1500 goes against my max yearly contribution of $6650 (so I can only contribute $5150)?

Also, since I am switching to the HD plan now, I believe I can conceivably contribute a lump sum of $6550 before Dec 31st for 2014.

The employer contribution does not count against the maximum total contribution to the HSA.

Assuming your plan operates like most others, you have just got through annual open enrollment. That almost certainly means your new plan will not take effect until January 1, 2015. You cannot contribute funds to the HSA until January 1.

I think this is a mistake.  The maximum contribution set by the IRS rules are $6650 without regard who makes the deposit.  In other words, in other to know how much you can contribute  you'd have to reduce the amount that your employer deposited(will deposit) in your account to know how much You can contribute.   

Dezrah

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Re: Should I switch to High Deductible medical plan.
« Reply #15 on: November 14, 2014, 08:09:11 AM »
I just signed up for a HD plan myself after years of co pay/no deductible.  We have a 4.5 year old and a 16 month old.  I find that I can't ignore the call of the HSA any longer. 

My benefits for the HD plan state that "the plan" contributes an annual $1500 to the HSA (paid out biweekly).  Is that the same thing as employer contributions that you all have been referring to?  And am I correct in understanding that the $1500 goes against my max yearly contribution of $6650 (so I can only contribute $5150)?

Also, since I am switching to the HD plan now, I believe I can conceivably contribute a lump sum of $6550 before Dec 31st for 2014.

The employer contribution does not count against the maximum total contribution to the HSA.

Assuming your plan operates like most others, you have just got through annual open enrollment. That almost certainly means your new plan will not take effect until January 1, 2015. You cannot contribute funds to the HSA until January 1.

I think this is a mistake.  The maximum contribution set by the IRS rules are $6650 without regard who makes the deposit.  In other words, in other to know how much you can contribute  you'd have to reduce the amount that your employer deposited(will deposit) in your account to know how much You can contribute.

carloco is correct.  The 2015 $6550 family limit is for employer+employee contributions.  It is your responsibility (not the HSA broker's) to keep track and not over deposit into your account.

I will further add that there are absolutely zero checks before an audit in how you can cash out the amount.  It's intended to be only for "approved medical expenses" but that definition changes year to year (i.e. over-the-counter non-prescription drugs once qualified but that is no longer the case), so be careful, keep your receipts, and do your best to stay on the right side of the tax code.

I had a coworker with a spendthrift mentality and he kept asking if he could use the HSA funds for gym memberships, bicycles, massages, etc.  I always said absolutely not (unless he had a doctor's written prescription for physical therapy or something).  He's trying to become a US citizen and I tried to emphasize that if he got caught fudging his taxes he risked losing that forever.  Now he says he spends the employer's contribution every month on contact lenses.  I buy contacts too, and I know for a fact they wouldn't cost you as much as he's claiming.  I hope he doesn't get caught.

charis

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Re: Should I switch to High Deductible medical plan.
« Reply #16 on: November 14, 2014, 08:11:49 AM »
I just signed up for a HD plan myself after years of co pay/no deductible.  We have a 4.5 year old and a 16 month old.  I find that I can't ignore the call of the HSA any longer. 

My benefits for the HD plan state that "the plan" contributes an annual $1500 to the HSA (paid out biweekly).  Is that the same thing as employer contributions that you all have been referring to?  And am I correct in understanding that the $1500 goes against my max yearly contribution of $6650 (so I can only contribute $5150)?

Also, since I am switching to the HD plan now, I believe I can conceivably contribute a lump sum of $6550 before Dec 31st for 2014.

The employer contribution does not count against the maximum total contribution to the HSA.

Assuming your plan operates like most others, you have just got through annual open enrollment. That almost certainly means your new plan will not take effect until January 1, 2015. You cannot contribute funds to the HSA until January 1.

My plan is ineffective immediately since I am a new employee, not joining via open enrollment.

charis

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Re: Should I switch to High Deductible medical plan.
« Reply #17 on: November 14, 2014, 08:17:53 AM »
carloco is correct.  The 2015 $6550 family limit is for employer+employee contributions.  It is your responsibility (not the HSA broker's) to keep track and not over deposit into your account.

I will further add that there are absolutely zero checks before an audit in how you can cash out the amount.  It's intended to be only for "approved medical expenses" but that definition changes year to year (i.e. over-the-counter non-prescription drugs once qualified but that is no longer the case), so be careful, keep your receipts, and do your best to stay on the right side of the tax code.

I had a coworker with a spendthrift mentality and he kept asking if he could use the HSA funds for gym memberships, bicycles, massages, etc.  I always said absolutely not (unless he had a doctor's written prescription for physical therapy or something).  He's trying to become a US citizen and I tried to emphasize that if he got caught fudging his taxes he risked losing that forever.  Now he says he spends the employer's contribution every month on contact lenses.  I buy contacts too, and I know for a fact they wouldn't cost you as much as he's claiming.  I hope he doesn't get caught.

I believe the limit for 2015 is increased to $6650.

We plan to pay our medical costs out of pocket and use the HSA as retirement account, unless we incur some significant costs.

Shade00

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Re: Should I switch to High Deductible medical plan.
« Reply #18 on: November 14, 2014, 08:25:35 AM »
I just signed up for a HD plan myself after years of co pay/no deductible.  We have a 4.5 year old and a 16 month old.  I find that I can't ignore the call of the HSA any longer. 

My benefits for the HD plan state that "the plan" contributes an annual $1500 to the HSA (paid out biweekly).  Is that the same thing as employer contributions that you all have been referring to?  And am I correct in understanding that the $1500 goes against my max yearly contribution of $6650 (so I can only contribute $5150)?

Also, since I am switching to the HD plan now, I believe I can conceivably contribute a lump sum of $6550 before Dec 31st for 2014.

The employer contribution does not count against the maximum total contribution to the HSA.

Assuming your plan operates like most others, you have just got through annual open enrollment. That almost certainly means your new plan will not take effect until January 1, 2015. You cannot contribute funds to the HSA until January 1.

I think this is a mistake.  The maximum contribution set by the IRS rules are $6650 without regard who makes the deposit.  In other words, in other to know how much you can contribute  you'd have to reduce the amount that your employer deposited(will deposit) in your account to know how much You can contribute.

Oh my gosh, my apologies - that's what I get for typing a response on my phone. The employer contribution absolutely does count against the max total HSA contribution. I'm certainly not trying to spread misinformation!