Hello folks! I’m back after a short hiatus to finish up my last semester for my bachelor’s degree. I’m FINALLY done! What most people accomplish in 3 to 5 years took me 21 after graduating high school. Now I didn’t go to school all 21 of those years, that’s just how long it took me from high school graduation to bachelor’s graduation. I took a break after high school. I picked up some certifications and an Associate of Science in there along the way as well. What really slowed my progress these last few years was starting a family, and the slower progress was well worth having a little bit of time for them as well. Between all of the kids doing online classes due to Covid-19, my own online classes, working from home full time, my wife still needing to go into work as a nurse, and a few medically necessary Covid tests, this was a really nerve wracking last few months, but we survived! And we’re stronger for it!
I wrote a post last year about how I made my health insurance decision based on the plans offered through my employer, and we have a new plan option this year that warranted some investigation, so I will walk you through my process again. I hope you see something that you can apply to your own situation to make a little more informed of a decision!
Our 3 plans this year were an HSA, a “Saver” HSA, and a PPO. The HSA and PPO haven’t changed much from last year, but the Saver option is completely new. It offers lower premiums than the regular HSA option and no “deductible” on that mid way to the out-of-pocket max, so no co-insurance. Lets go through their numbers one at a time so that you can see how I came to my decision.
The basic HSA plan for my family has premiums of $160.76 bi-weekly. Premiums for the year come in at $4179.76. My employer deposits $1000 into the HSA account to assist with out of pocket expenses. It has a deductible of $3000 at which point 20% coinsurance kicks in. 20% coinsurance then runs up to the yearly out-of-pocket maximum of $7000. Prescription drugs are simply part of the out of pocket expenses and count toward the deductible and yearly out-of-pocket max, they’re also 20% coinsurance after the deductible.
The PPO plan has bi-weekly premiums of $271.96, totaling $7070.96 for the year. It has a $1500 deductible at which point 20% coinsurance kicks in, and a yearly out-of-pocket max of $4500. It offers copays on office visits for doctors, specialists, emergency rooms, and prescription drugs at all times. My employer does not provide any out of pocket funds, and the plan is not HSA eligible.
The new Saver HSA has bi-weekly premiums of $108.81, meaning the yearly premium comes out to $2829.06. My employer contributes $1000 to the HSA account for out-of-pocket expenses. There is NO DEDUCTIBLE with this plan, and thus no coinsurance. All expenses are full, 100% out of pocket until you hit the yearly max of $8000.
Armed with these numbers here’s how I look at it, how much am I spending to reach the deductible and out of pocket max for each plan, and then what is the nuance on the way there? I like to look at each plan as if I were using the same amount from each paycheck, so lets start with the PPO since it requires the highest premium. We know that yearly premiums for the plan are $7070.96, and that there’s no HSA and no employer money toward expenses, so to reach the $1500 deductible would be all out of pocket after those premiums, meaning to hit the deductible would be $8570.96. At that point there would be coinsurance of 20% up to the $4500 max, so another $3000 out of pocket, making total personal investment between premiums and out of pocket of $11570.96 to hit that max. The $3000 between deductible and max would be 20% of overall medical expenses, so we would be getting $15000 worth of care for that $3000. Add the $1500 to deductible and we’re getting $16,500 worth of care (of course the insurance company has negotiated rates on services, but the three plans are through the same insurer, so this is the best way to compare them,) for $11,570.96 for the year.
If we analyze the HSA the same way, but put the difference between premiums of the HSA and PPO into our HSA account to fund it, it looks something like this. $7070.96 PPO premiums – 4179.76 HSA premiums = $2891.20 deposited into HSA account. My employer also deposits $1000 for a total of $3891.20 automatically sent to the HSA account for expenses throughout the year. (We can argue fully funding an HSA as an investment later, this is purely looking at the plans comparably for healthcare.) With the $3891.20 already directed to the HSA account, we hit the $3000 deductible with no extra out of pocket, and would have $891.20 left over. To go from the $3000 deductible to the $7000 out of pocket max would then take $4000 – $891.20, so $3108.80. For the total healthcare we get, we’d get $3000 worth to the deductible, and then $20,000 worth for the coinsurance from deductible to max out of pocket. Total invested to hit the max would be $4179.76 premiums + $2891.20 HSA deposits + $3108.80 out of pocket = $10179.76. Two things here beat the PPO plan. We hit the deductible and start 20% coinsurance for nothing out of pocket. We then have $891.20 worth of 20% coinsurance covered with nothing more out of pocket. And then if we go over that toward the max, we can get up to $23000 worth of healthcare for $10179.76, that’s $6500 more healthcare for $1391.20 LESS expense. Without even looking at all the other benefits of an HSA (which you should check out the Mad FIentist’s POST for more on those,) the HSA is outperforming the PPO plan. It would even be less out of pocket if my employer wasn’t contributing to the HSA account!
Lastly we have the new Saver HSA. $7070.96 PPO premiums – $2829.06 Saver HSA premiums = $4241.90 deposited to the HSA account. My employer then deposits $1000. We would then have no deductible to meet, and no coinsurance, all medical expenses would be 100% on us. We would get $5241.90 worth of healthcare for the $5241.90 already funding the HSA. We would get another $2758.10 in healthcare of the $2758.10 out of pocket to reach the max. This would put our total investment at $2829.06 premiums + $4241.90 HSA deposits + $2758.10 out of pocket at $9829.06 in order to receive $8000 worth of healthcare. Now granted, everything for the year after that $9829.06 total is 100% covered by the insurance company, so lets figure out where this evens out with the regular HSA. We’re paying $10179.76 total for the regular HSA, if we took that down to the same total as the saver, we would lose $350.70 worth of 20% out of pocket health care, or $1753.50 worth of health care. This means for the same total out of pocket as the Saver plan, the normal HSA we would get $21246.50 worth of health care, where as the Saver HSA gets $8000 worth of health care.
So after all of this analysis, what have we really learned here? We learned that going PPO just to have copays for Dr. visits may end up costing you a lot more in the end. You can get a lot more healthcare out of the HSA for a lot less cost, especially if you need the hospital, an outpatient procedure, or an advanced surgery. We learned that if you think you will not need to use your healthcare benefits, the saver HSA both costs less overall to hit the out of pocket maximum, and puts more money into your HSA account for less total cost. However, if you’re going to have or are worried about having (aka have kids…) any healthcare events that could cost a few thousand to $21000, the regular HSA is going to be the cheaper plan for more healthcare. If you know you need a procedure that will cost $25000+, the Saver plan would be the way to go that year. The saver is meant to be catastrophic only coverage, and it does a good job of that for not too much more cost compare to the other 2 plans. It’s amazing that even in a catastrophic event, it would cost you less than the PPO plan!
Since I’m married with 5 kids and we almost every year have a broken arm or a tonsillectomy, the regular HSA wins for us, just like last year. What are your plans and what criteria do you use to decide? Did this thought process help you at all with your own decisions? Stay safe and healthy out there!