Author Topic: Would you choose an HSA even if it isn't cheaper than PPO plan???  (Read 803 times)

BDJ_AG

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My company just restructured our premiums to be a % of salary, which for most people lowers the premiums fairly significantly. In the process of restructuring they made the PPO plan and the HDHP plan the same cost. The PPO plan has no deductible in-network so essentially every doctor visit is a $25 copay with some other things like emergency room visits and outpatient surgery being $0. The out of pocket max for the family plan is $5k (same for HDHP), although I can't fathom how anyone would reach that with the PPO.

The HDHP has a $3,000 deductible for the family plan, and after the deductible is met there is $0 out of pocket costs for everything except prescriptions that go to a small copay. The company will contribute $1,500 toward your HSA account if you choose the HDHP option.

I have a young family (kids are 4 and 2) and we may have another soon, so doctor visits and things tend to be fairly regular and I am mentally prepared to reach my deductible most years. With that said, is the HSA still worth the  out of pocket cost each year for the tax savings in the future? I would plan to max out my savings therefore would save approximately $1,200 in taxes, but i would also plan to cash flow my expenses and not touch my HSA fund.

EvenSteven

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Re: Would you choose an HSA even if it isn't cheaper than PPO plan???
« Reply #1 on: November 11, 2019, 11:23:00 AM »
The only way to know for sure which one would have been mathematically optimal is with hindsight knowing how much health care you used that year.

That being said, with the plan covering 4 people (with 2 kids), I would take the better coverage. I assume you are maxing out 401k and IRA?

BDJ_AG

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Re: Would you choose an HSA even if it isn't cheaper than PPO plan???
« Reply #2 on: November 11, 2019, 12:04:47 PM »
Yes, maxing out 401k and 403B options as well as IRA options.

By better coverage do you mean the PPO (No Deductible) plan?

EvenSteven

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Re: Would you choose an HSA even if it isn't cheaper than PPO plan???
« Reply #3 on: November 11, 2019, 12:08:31 PM »
Yeah. I think you'll come out ahead by saving the 3k per year vs getting a little extra into tax advantaged instead of taxable. Another reason, at least for me, is what I mentioned in another HSA thread this morning:

This helps with the psychology of not worrying so much about doctors costs when thinking about providing health care to the kid.

charis

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Re: Would you choose an HSA even if it isn't cheaper than PPO plan???
« Reply #4 on: November 11, 2019, 12:21:01 PM »
Did you actually do the math all the way through? If your plan gives you 1500 and you save 1200 in taxes, you aren't "saving" $3k, you are saving 300 by choosing the PPO, and only if everything else is equal, which is unlikely.

What is the difference in the premium costs for the year? What's your coinsurance after you meet the deductible? How does that compare to your copay under the PPO? You cant do an exact estimate but you can get close enough to make a decision.

BDJ_AG

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Re: Would you choose an HSA even if it isn't cheaper than PPO plan???
« Reply #5 on: November 11, 2019, 12:37:25 PM »
Did you actually do the math all the way through? If your plan gives you 1500 and you save 1200 in taxes, you aren't "saving" $3k, you are saving 300 by choosing the PPO, and only if everything else is equal, which is unlikely.

What is the difference in the premium costs for the year? What's your coinsurance after you meet the deductible? How does that compare to your copay under the PPO? You cant do an exact estimate but you can get close enough to make a decision.

Yes, I had done that math, I think EvenSteven said $3k since I stated my plan was to cashflow expenses vs. using HSA money. Clearly I don't have to do that and could use HSA money to cover the deductible where it would be a $300 savings to go with the PPO as you correctly stated.

There is no cost difference in premium, and there is no coinsurance on the HDHP after the deductible is met (it covers 100% with no copays other than prescriptions). Copay on PPO is $25, no prior deductible to be met.

terran

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Re: Would you choose an HSA even if it isn't cheaper than PPO plan???
« Reply #6 on: November 11, 2019, 12:47:54 PM »
If they're contributing $1500 to the HSA then they don't cost the same, premiums are the same.

While the PPO has $25 copays, how much does it cover on procedures? That's probably how you'd hit the OOP max.

Sounds like as usual the HSA would win if you had very low expenses (get a tax deduction and get to keep what goes in the HSA) or very high expenses (hit the OOP max with either plan, so at least you get the tax deduction) and the PPO plan would come out ahead if you have medium expenses and/or lots of office visits but few procedures. This is how it usually shakes out, and my gut says it's the same for you, but as everyone else has said the only way to know for sure is the do the math (and even then you're just guessing, so you'll only really know after the fact).

charis

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Re: Would you choose an HSA even if it isn't cheaper than PPO plan???
« Reply #7 on: November 11, 2019, 01:32:55 PM »
It's still only a $300 savings whether it goes in your pocket or you keep it in the HSA. With no coinsurance, the HSA is clearly the winner unless you spend less than 300 on copays under the PPO, which is possible but seems unlikely for a family.

BDJ_AG

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Re: Would you choose an HSA even if it isn't cheaper than PPO plan???
« Reply #8 on: November 11, 2019, 02:03:20 PM »
If they're contributing $1500 to the HSA then they don't cost the same, premiums are the same.

While the PPO has $25 copays, how much does it cover on procedures? That's probably how you'd hit the OOP max.

Sounds like as usual the HSA would win if you had very low expenses (get a tax deduction and get to keep what goes in the HSA) or very high expenses (hit the OOP max with either plan, so at least you get the tax deduction) and the PPO plan would come out ahead if you have medium expenses and/or lots of office visits but few procedures. This is how it usually shakes out, and my gut says it's the same for you, but as everyone else has said the only way to know for sure is the do the math (and even then you're just guessing, so you'll only really know after the fact).

The PPO is a 100% policy so procedures are essentially just a copay...delivery and all hospital costs for my 2nd kid was $25. Going to the emergency room for a swimming pool "incident" cost $0.

I think Charis is correct, doubtful the fam only goes to the doctor 12 times in a year, so I will probably spend more than $300 on copays with the PPO in any given year. So then the HSA becomes the winner.
« Last Edit: November 11, 2019, 02:15:59 PM by BDJ_AG »

TomTX

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Re: Would you choose an HSA even if it isn't cheaper than PPO plan???
« Reply #9 on: November 11, 2019, 05:45:10 PM »
How do I get on that PPO?