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Health insurance conundrum
December 10, 2013 8:52 AM   Subscribe

I am totally paralyzed with indecision about the health insurance options I have at work this coming year. Halp! High deductible plan with an HSA vs tried-and-true HMO.

Option 1: High Deductible Plan (PPO) with HSA
Deductible: $3000
HSA: employer contributes $2000 at the start of the year, rolls over year to year
Copays for preventative care are $30
After deductible copays for prescriptions run from $20-50
After deductible copay for ER is $100
After deductible all in-network services (excluding preventative care, prescriptions, and ER copay) are covered 100% (out of network services have 20% co-insurance charge, I do not anticipate needing to go out of network)
Preventative care and prescriptions do not count towards deductible
Out of pocket max is $10,000
Monthly premium is $135 and I would add $100/month to the HSA

Option 2: HMO
Copays are $25
Prescription copays are about the same as above
ER copay is $100
Inpatient copay is $1000 but employer reimburses about ¾ of that
Monthly premium is $286/month

Other relevant facts- Both are offered by Blue Cross, I’m in Massachusetts so Blue Cross is accepted almost everywhere. This is family coverage for myself, husband, and our 3 year old. So far we have all been very healthy. No chronic illnesses or chronic prescription needs, a few sick visits a year, usually a couple of antibiotic prescriptions a year, that’s usually it. But I know that especially with a kid, an ER trip is just one playground mishap away, and kid is in daycare so is exposed to a lot of illnesses all year.

We’ve always had the HMO option, and it works just fine for us, but the potential savings with the high deductible plan are pretty attractive this year. I keep thinking that there must be a gigantic catch that I am not anticipating. Researching high deductible plans and HSAs leads me to a lot of insurance/HSA company propaganda about how great they are, and lots of better supported arguments about why high deductible plans can sometimes unexpectedly cost you way more out of pocket than you think when you sign up for them. It seems like a gamble for only saving $50/month, but then I start thinking that if we have another healthy year and don’t use up all the HSA funds, we’ll have started a decent little health emergencies fund. Also, with the HSA I could be paying copays with pre-tax money, as opposed to paying HMO copays post-tax.

What are the catches to high deductible plans that I am not thinking about? In this situation is the tax benefit of the HSA actually worth the risk?
posted by banjo_and_the_pork to Health & Fitness (32 answers total) 1 user marked this as a favorite
The "catch" to a high deductible plan is in fact that you... might pay the high deductible. It's all about that gamble: Will you really probably be healthy again for the full year? Or will a single bad kid-illness or playground accident eat it all up at once?
posted by Tomorrowful at 8:54 AM on December 10, 2013

In my experience the "catch" is a lot of paperwork. Have you ever used an FSA or HSA before, or any similar system where you have to apply for reimbursements? For some people paperwork ain't no thang and you will reap all the benefits of the plan... but for me any such arrangement results in panic and shame about failing to use it appropriately come December, and all of the savings has evaporated because I didn't follow the rules meticulously.
posted by telegraph at 9:01 AM on December 10, 2013 [1 favorite]

I don't know if it's universal or not, but with the HSA plans I've seen, you can't spend the money until it's been accrued in in your account. If you could cover the deductible this year out of pocket in case of something catastrophic, then the ability to save HSA money from year to year might make it worthwhile for 2015 and beyond.

Also, do you not have an option for a flexible spending account (FSA)? You mention paying co-pays for the HMO post-tax, but if you contributed to an FSA then that would also be payable with pre-tax dollars. That's use it or lose it though.
posted by cabingirl at 9:01 AM on December 10, 2013

I always figured HSA plans were really best for single, young, healthy-but-not-overally-athletic men, and then two such young men told me their horror stories of one ER visit for a minor something-or-other costing them a ton out of pocket. It's a gamble I wouldn't take for two adults and a toddler.
posted by ThePinkSuperhero at 9:04 AM on December 10, 2013 [3 favorites]

I would _never_ have a high-deductible plan with a kid unless I had no other option. We had to take my son to the ER with croup a year or so back and it was $4200. FOR CROUP.
posted by KathrynT at 9:05 AM on December 10, 2013 [4 favorites]

Does Blue Cross have an online calculator for figuring out average costs or the like? When we were making a similar decision we made a spreadsheet and did the math - this is how much each plan costs in a typical year, here's how much it would cost in a year with, say, two ER visits, or a surgery, etc. etc. The fact that your employer pays 2/3 of your deductible at the start of every year makes the HSA plan pretty attractive. However, if I'm reading it correctly there is zero prescription drug coverage until after the deductible is payed? That could end up being very expensive if, say, one of you develops acid reflux or some other common maintenance drug need.
posted by muddgirl at 9:08 AM on December 10, 2013

Last year, I had to consider new plans from our awesome PPO to a lower quality plan because the PPO was becoming unaffordable. My choices were an HMO or an HMO deductible plan (a much lower deductible than yours, though), and I went with the HMO for two reasons:

1. Not knowing what would happen. And, hey, guess what? I ended up in the hospital a few months ago for two days.


2. Paperwork. I have a child who receives a lot of services, and the deductible plan would have meant reams of paperwork while we met his individual deductible.

So in your same position, I went with the straight up HMO, and I don't regret it (though I'd rather have the PPO if it ever became affordable for us again).

I am also in Massachusetts, fwiw.
posted by zizzle at 9:17 AM on December 10, 2013

Here's where I feel really dumb- so assuming we are comfortable reaching the deductible and paying that, wouldn't that mean that a catastrophe would then be totally covered so we wouldn't be a horror story? Like, if on January 2 we ended up with a $4000 ER bill, that would work out to $2000 coming straight out of the HSA, we would front the $1000 to reach the deductible and then reimburse ourselves out of the HSA later in the year, and we'd pay the $100 ER copay, then that's... it? If we then had a January 5 second emergency we'd pay the ER copay, our deductible would be met already, so insurance would have to pay for it all, right? (leaving out preventative care and potential prescriptions in this scenario).

Blue Cross only has online resources for the plan I'm on right now, nothing for comparing to potential other plans. Oh, and we do have an FSA option, but I really don't like the use or lose it aspect and would rather lose the tax savings than deal with an FSA. Thank you so much for the advice so far! I don't know why this is so painfully confusing to me!
posted by banjo_and_the_pork at 9:28 AM on December 10, 2013

What's the OOP max for plan 2?

Does your employer have an HSA debit card system? That makes it a lot easier. How good are you at keeping track of receipts? A lot of HSAs will do random audits and having to retain / produce receipts can be a pain.

Can you talk to your HR (probably benefits rep?) I bet they'd have a lot of insight on what works best for families like yours on these specific plans.
posted by charmcityblues at 9:28 AM on December 10, 2013

the potential savings with the high deductible plan are pretty attractive this year. I keep thinking that there must be a gigantic catch that I am not anticipating

The catch is that "winning" financially requires that you become more clever than the insurance company, which you probably aren't. The insurance company wins by making money on the "float"-- the interval of time between when they receive their premiums and when they pay out their claims. Normally it is the doctors who suffer the wait to get money. But in this case, it is about making you wait while HSA administrators keep your money while you submit the paperwork and wait to get your money back.

I consider the extra money I have to pay for a standard PPO rather than and HSA to be a payment I make to save me paperwork and personal analysis headaches.

There may be some benefit to covering some out of pocket costs with an FSB to supplement your PPO, but that doesn't roll over year-to-year and requires you to be clever about estimating your yearly costs, which if you were good at would have drawn you into being in the insurance industry.
posted by deanc at 9:30 AM on December 10, 2013 [2 favorites]

I think the employer's contribution to the HSA plan tips the balance in favor of that plan on a purely economical basis.

With the HSA you will be spending $1620/year on premiums + $1000 out-of-pocket to hit the deductible. At which point you will get similar ER and prescription coverage, better coverage for routine in-network care, and better coverage in the event of a major medical event due to the $10,000 OOP cap. There's even a good chance you won't even spend anything beyond your $1620 in premiums if all of your medical expenses are less than the $2000 employer's contribution to the HSA. If you do wind up having a few thousand in unexpected medical expenses you will be out $2620 + copays etc.

With the HMO, you will be guaranteed to be spending the $3400 in premiums plus some co-pays even if you just have routine expenses.

Basically, I don't see any scenario (spending less than $3000 in medical for the year, spending $3000-10,000 or spending $10,000 plus) where the HSA plan costs you more than the HMO one, and in the first and third scenarios it would definitely cost you less.
posted by drlith at 9:36 AM on December 10, 2013 [2 favorites]

Charmcityblues- OOP max for plan 2: I am not aware of any max, I don't think there is one. It's a really solid plan and has never given us any problems.

There is a debit card for the HSA, and I am awesome with paper work. I did talk to HR a couple of times, they answer all my questions but don't provide advice about which option to take (probably because they don't want any liability if it turns out to be a bad choice).
posted by banjo_and_the_pork at 9:38 AM on December 10, 2013

A $3000 deductible isn't that high, in my opinion. Although, is that per person or per family? My husband and I have a PPO plan with a $1000 deductible each and a $2500 family deductible, if that is reached first. If you're looking at $3000 each, with no alternate family deductible, then you're really looking at a $9000 deductible.

If you have the funds to actually cover the full family deductible (i.e., what you would pay out of pocket if the three of you got in a car accident), without going into debt, that's what I'd choose.
posted by melissasaurus at 9:39 AM on December 10, 2013

Your HR should be able to point you in the direction of the state insurance broker they used to look at the plans in the first place. The insurance broker might be able to help you assess the plans more fully, too.

I'd also say if you're not using your FSA for DAYCARE, then you absolutely should, especially since I KNOW you meet the $5,000 max/year on that one. I never have any left over.
posted by zizzle at 9:42 AM on December 10, 2013

I would also look carefully at the coverage for each plan. The deductible HMO plan in my case didn't cover some things that the HMO plan did --- so when it came down to that difference as well, I took the plan that covered more services over the one that didn't.
posted by zizzle at 9:43 AM on December 10, 2013

You've checked your options under the ACA, right? Just making sure, as marketplace plans will have preventative costs covered at 100% (but may have high deductibles, etc.)

I would probably choose the PPO in your position, but that's because PPOs are awesome--you don't need referrals for specialists, for example. I've found them to be much more convenient and had much less problems having services covered than with HMOs. Though not having your preventative co-pays count toward your deductible is kind of hinky. Also, I'd check to make sure you wouldn't need to transfer your PCP and Pediatrician under the new plan if you choose to switch.
posted by PhoBWanKenobi at 9:44 AM on December 10, 2013

Basically, I don't see any scenario (spending less than $3000 in medical for the year, spending $3000-10,000 or spending $10,000 plus) where the HSA plan costs you more than the HMO one, and in the first and third scenarios it would definitely cost you less.

I think the only case that could end up costing more would be multiple very expensive prescription drug needs, but there are other ways to make up that difference such as pharmacy-specific drug cards, etc.

Definitely also compare coverage. My husband's otherwise-ideal health care plan has a specific exception for surgery to remove nasal polyps. Guess what he developed last year?
posted by muddgirl at 9:53 AM on December 10, 2013

If you go with the HSA, always put your payments through using the "credit card" option at check out-- not debit -- to avoid the debit card fee. (YMMV)

Keep your receipts in case you're called upon to prove the health expenses you paid with the HSA are, in fact, health expenses.
posted by vitabellosi at 10:01 AM on December 10, 2013

In the HSA, what percentage is covered after the deductible is met?

Like, if on January 2 we ended up with a $4000 ER bill, that would work out to $2000 coming straight out of the HSA, we would front the $1000 to reach the deductible and then reimburse ourselves out of the HSA later in the year, and we'd pay the $100 ER copay, then that's... it? If we then had a January 5 second emergency we'd pay the ER copay, our deductible would be met already, so insurance would have to pay for it all, right? (leaving out preventative care and potential prescriptions in this scenario).

If you had a second emergency on Jan. 5, you'd pay the copay, your deductible would be met already, so insurance would have to pay for whatever portion of allowed costs they agree to pay for. On my current crappy insurance, that's 70%. Some plans, it's as low as 50%. So you would be responsible for some percentage of those costs until those percentages (your coinsurance, in the parlance of the trade) added up to $10,000. And any disallowed expenses, you'd be responsible for 100%, even AFTER you hit that $10,000 max. My current insurance doesn't cover outpatient rehabilitative services, for example.
posted by KathrynT at 10:03 AM on December 10, 2013 [1 favorite]

In our case the only major difference was the prescription plan. I did the comparison with no issues, minor issues and major issues and found that the only material difference was the approach was the minor issues when there were large recurring prescription costs.

Your plan is certainly different, but the analysis method probably still works. When you do it don't forget you are probably paying less per month for the HSA plan, the prescription plan might be handled differently and recurring prescriptions would probably be the biggest issue, and that you don't lose any money in the HSA -even after leaving your current company - so in that regard it's significantly better than the FSA (you can also probably contribute more to the HSA)

I think most of the companies want to push people to these plans and are giving generous allocations to the HSA. I suspect in the future these allocations will go down making these plans less good...but if you are lucky you will have built up a nice sized HSA over the years by that time and won't care as much...
posted by NoDef at 10:05 AM on December 10, 2013

Oh! Don't beat yourself up over this decision. There is no knowable "correct" choice. Even this Harvard-educated health economist couldn't get it right.
posted by vitabellosi at 10:10 AM on December 10, 2013 [1 favorite]

Also your deductible does not count towards the out-of-pocket maximum. And I would look very, very carefully as to whether those deductibles and maximums are per-person or per-family. Sometimes there can also be a shitty thing where the deductibles are individual, but the maximums are pooled -- this may no longer be legal, I don't know. but if that's the case, then your expenses can go like this:

Jan 2, you break out in rainbow-colored boils and head to the ER. Total bill after insurance: $3100. Well, now your deductible's met!

Jan. 5, your wife comes down with a case of Unicorn Dropsy, and you head back to the ER. No worries! Your deductible's met, right? Well, surprise, YOUR deductible is met -- your wife's hasn't even started. $3300, what a punch in the wallet.

Jan. 11, the baby wakes up with a bad case of Grumbles and Snorts. To the ER, once again -- because of course the baby has a $3K deductible to go through. But alas, what you thought was a simple case of grumbles turns out to be, in fact, Jupiter Grippe, and the CDC and NASA get called in. But at least this can't cost you TOO much, because you have that $10,000 out of pocket maximum, right? WRONG -- that $10K is per-person, and pooled. So the insurance company's 100% coverage doesn't kick in until you've hit $30,000 in coinsurance.

And that's how a $3K deductible and a $10K max out of pocket can lead to you having $39,000 worth of responsibility, not to mention your premiums and disallowed expenses, before the insurance company lets go of one cold, thin dime.
posted by KathrynT at 10:16 AM on December 10, 2013 [12 favorites]

You should check the policy carefully, as I don't believe I could "reimburse" myself out of the HSA for anything the last time I had that type of policy.
posted by summerstorm at 10:30 AM on December 10, 2013

I buy insurance on the individual market for my family of four.

In 2011, we switched from an all-inclusive PPO with a premium of around $1300 a month to an HSA with a premium of around $350 a month.

We had a good amount of money in our savings, so we completely funded our HSA account to the maximum limit allowed by law at the beginning of the year -- $6150 I think it was. It's more now. Our deductible was around $11000 I think.

In my mind, the math worked out like so:
"Even if we spend all of our HSA, we'll still be spending less than we would have in premiums on the PPO." And I figured that we wouldn't use it all, so over time we would eventually build up a large enough reserve to handle the entire deductible.

As it turned out, we did spend it all, thanks to a couple of hospital visits for my son. And this year, we've spent it all again because I decided to get allergy shots. Plus our plan had to be replaced as it wasn't ACA-compatible, so the new premium is going to be like $750. (ouch!)

Even so, I still think it's the right choice for us because we are able to set aside the money in advance, and we are generally very healthy. This year we would have ended with extra money in the account if I hadn't decided I was sick of having barely usable itchy eyes every spring. And even so, we are still spending less than we would have in premiums on a non-catastrophic plan.

So think of it this way: if you are not able to pay off the entire amount of the deductible without being financially destroyed, you should probably do the HMO plan. However, if you can fund your HSA fully in the beginning, and keep filling it each year until your deductibles are covered, and you are healthy, then over the long run it could be a good deal.
posted by rouftop at 10:43 AM on December 10, 2013

You should check the policy carefully, as I don't believe I could "reimburse" myself out of the HSA for anything the last time I had that type of policy.

HSA plans should allow for reimbursement, as long as the expense is incurred after you sign up for the plan. One of the benefits of an HSA plan compared to an FSA is that they offer lifetime reimbursement, as long as you hold on to your paperwork. You can't reimburse yourself using the debit card - you have to submit paperwork,. My company has a webform for submitting paperwork but I still have to collect EOB statements and receipts, sometimes scan them, and upload them to the form.

Here is a very in-depth FAQ on HSA plans.
posted by muddgirl at 10:55 AM on December 10, 2013

Sorry - that web form was for an FSA. The rules are different for an HSA so I don't know what paperwork would be required.
posted by muddgirl at 10:57 AM on December 10, 2013

Over the past seven years or so, I've had both HMO plans and high-deductible plans (for myself -- I'm a healthy woman in my twenties). For what it's worth, with such a relatively small difference in premiums, I would definitely go for the HMO (and I think you're already getting your HMO at a deep discount).

My experience with high deductible plans has been similar to KathrynT's, though I'm not sure if/how the ACA has since affected the costs associated with pre-existing conditions and annual max out-of-pocket spending.

You might also consider that whatever you spend on medical care doesn't necessarily eat into your deductible. Any lab work in conjunction with a check up, for example -- your pap smear, any blood drawn for a run-of-the-mill test, any diagnostic tests, whatever -- is going to get charged entirely to you, is likely done by a lab "out of network" (I've actually never heard of an "in-network" lab outside of an HMO, though maybe they exist), and paying those bills won't have anything to do with your deductible at all. For me, those bills have been about $100-$300 per check-up/doctor's visit, even going to "in-network" doctors and places that give subsidized care, like Planned Parenthood.

With the prescription drug deductible/co-pay, though, you might also want to look to see if there's a separate deductible for prescription drugs. When they say "co-pay after deductible," the prescription drug deductible might be listed separately, and might be much lower than (and have no affect on) the regular deductible. In my experience, the prescription drug deductible is usually a few hundred dollars.
posted by rue72 at 11:07 AM on December 10, 2013 [1 favorite]

Also your deductible does not count towards the out-of-pocket maximum.

This is not true. PPACA limits out-of-pocket cost (on "essential health benefits," which means most services), including deductibles, coinsurance and copays. However the deductibles and OOP maxes for HDHPs that go with an HSA are already limited by statute.

The overall cost-sharing limits for plan years beginning in 2014 are the same as the maximum OOP maxes for self-only and family coverage for HSA-compatible HDHPs for taxable years beginning in 2014 (which are $6,350 for self-only coverage and $12,700 for family coverage).

Still, those are very high OOP maxes. After you meet your deductible, you could have cost-sharing (e.g. 20% coinsurance or $20 copays) for any services (except preventive, for other PPACA reasons) until you meet your OOP max, which could be anything up to $12,700 for family coverage.

Also, what rue72 says about separate deductibles for prescriptions is not that simple. While there is a transition rule that might allow separate cost-sharing maximums for certain plan designs, they basically have to feed into one OOP max:, Q2
posted by Pax at 11:25 AM on December 10, 2013

I feel for you! I do. Had to read through 6 plans (3 for husbands work and 3 for mine) to make our decision.

I just switched away from a HSA plan. The HSA was great but my employer is contributing less to it this next year.

The deciding factor for me was that with the HMO plan I'd be out $5400 ( deductibles and premiums a year) vs HSA being $4000 per year.

Are you a saver or a spender? HSA was great in that my monthly paychecks were bigger but that money really needed to be saved for emergencies. Also, January and February suck when you have an HSA. My prescription med cost $300 in January, like $20 by June and $0 in December.

My HSA had $1600 individual deductible and family deductible of $3800. So it wasn't doubled or tripled per member, but you'll want to check your plans numbers.

Never had a problem getting reimbursed from my HSA. I think most of them will mail you a debit card. And mine sent a checkbook. When I needed to repay myself for something I'd swiped on my debit card I wrote a check to myself. Was handy at the end of the year when I had money still in the account that I used for glasses.
posted by MadMadam at 11:58 AM on December 10, 2013

I have an HSA/HDHP, and I quite like it. I just use the debit card, so I've never had to reimburse myself. The plan is a regular POS plan, so out-of-network coverage is pretty good. At this point, I've got enough in the HSA to cover my deductible twice over.

Two other good things about HSAs:

1) Once you reach a certain age - I think 65 - any money in your HSA can be rolled over into a retirement account.
2) The money in them can be used to pay COBRA premiums if you lose your job (although with ACA now in effect, and COBRA being as expensive as it is, I'm not sure I'd want to use mine for this purpose).

All that said, I'm the proverbial young, not-too-athletic, healthy male and I spend almost nothing on healthcare expenses aside from very occasional doctor's visits and over-the-counter allergy pills. I'm not sure I'd be comfortable with an HSA plan if I had a small child, unless I already had a big chunk of money in the account.
posted by breakin' the law at 12:11 PM on December 10, 2013

I switched from an HMO plan to a HDHP/HSA years ago [two adults, two kids] and my logic was, with made-up numbers:

Family coverage for the HMO was $500/month. Assuming none of us go to the doctor, my healthcare costs for the year are $6000. If we go to the doctor a lot, our costs are $6000 + copays.

HDHP coverage was $125/mo. I put the $375/mo into a HSA. If none of us go to the doctor, my healthcare costs for the year are $1750. If we go to the doctor a lot, the OOP maximum on our plan was $6500.

So, I figured that at worst we were no worse off with the HDHP/HSA and at best I kept $4250 for use next year in the HSA.

The risk, as mentioned, is a big bill right away that you have to cover.
posted by chazlarson at 12:34 PM on December 10, 2013

Thank you guys so much! I now have even more questions to ask HR and will look over all the details carefully. This has been really helpful.
posted by banjo_and_the_pork at 5:30 PM on December 10, 2013

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