Deciding between PPO and HDHP+HSA health plans with a potential birth?
November 14, 2019 10:14 PM   Subscribe

My life is undergoing some changes in the near future which may affect which health plan to select and I am looking for some advice.

I am trying to decide between an In-Network Only PPO plan versus a HDHP+HSA plan open enrollment election for next year for my wife and I. Historically I have just enrolled in the single person HDHP and have been very healthy. My life is undergoing some changes in the near future which may affect which health plan to select and I am looking for some advice.

Upcoming life changes: I plan to put my wife on my health insurance in the upcoming year as she is quitting her job and losing her health insurance. We will also be trying for a pregnancy/child.

PPO Plan Details:
Cost: $470/month or $5,640/year
Deductible: $1,500
Maximum out of pocket: $6,000
Co-insurance: 80%
Office Visits: Small Co-Pay
Prescription Drug: Co-pay

HDHP+HSA Plan Details:
Cost: $300/month or $3,600/year
Deductible: $4,500
Maximum out of pocket: $6,000
Co-insurance: 80%
Office Visits: Plan pays 80% after deductible
Prescription Drug: Plan pays 80% after deductible
HSA allows tax sheltering of up to $7,100 including a $1,000 contribution from my employer

The price difference between the plans is $1,968 or since my employer will contribute $1,000 to the HSA $2,968.

Without a potential pregnancy/birth, I would lean towards the HDHP+HSA since both my wife and I are healthy. Is a pregnancy/birth likely to max out either plan? With both plans have a maximum out of pocket expense of $6,000 which would make the HDHP+HSA make sense to me. There is no guarantee of pregnancy or the timing however. If my wife is pregnant but does not give birth during the upcoming year we might not hit the out of pocket maximum and in that case, it might make sense to go with the PPO because of the lower deductible and office visit co-pay. She is likely to need a large number of doctor visits if she becomes pregnant.

Any advice on which plan to pick or things to think about?
posted by cycleback to Work & Money (11 answers total) 1 user marked this as a favorite
10 years ago my baby’s week long stay in the NICU was over $20,000. I have no idea how exorbitant the cost of my c-section and my own hospital stay was. I also needed additional specialist visits during the pregnancy. I was young and very healthy!
posted by gryphonlover at 10:27 PM on November 14, 2019 [1 favorite]

Having had both types of plans my biggest thing is now do you have $4500 to spend? Assume the worst case scenario that you have to pay it all at once. Are you prepared to do that? That being said im pretty sure pregnancy and birth will definitely max you out either way. You can either hit your out of pocket max before paying $4500 first or not. To me the bigger premium is the least bad option because the money comes out of your paycheck and you never even knew it was there. You have to make fewer hard decisions about where to put your paycheck.

THAT being said does in-network only mean they won't pay for anything out of network? That could be disastrous for a hospital visit. That factor makes that plan extremely dangerous.
posted by bleep at 11:06 PM on November 14, 2019 [1 favorite]

I'd look at how prenatal care and birth/hospital admission is covered under each plan. I'd also take a look at the individual out of pocket max vs the family out of pocket max.

Is there an HMO option? You'd have less flexibility in doctors, but it can be way, way cheaper for pregnancy/birth. Most people who pay coinsurance hit their out of pocket max when they give birth - an uncomplicated vaginal delivery can easily be 20k, even minor complications can double that. I've given birth twice and had (different) HMOs each time. In both cases all prenatal care was 100% covered and hospital admission for the birth was a flat copay regardless of the length of stay or actual cost.

(Also - three years ago, my kid's unexpected four day NICU stay was around 50k before insurance.)
posted by insectosaurus at 11:08 PM on November 14, 2019 [1 favorite]

The HDHP seems better at all cost points, if I'm understanding the plans and doing the math correctly.

If you have zero health expenses, then the HDHP is $3,040 cheaper ($5,640 − $3,600 + $1,000; not sure how you got $2,968).

If you have very high health expenses such that you would max out either plan, then the HDHP is still $3,040 cheaper (since both plans have the same out-of-pocket maximum).

Suppose you have moderate medical bills, say $6,000. In that case, your total PPO expenses would be $8,040 ($5,640 + $1,500 + 0.2⋅($6,000−$1,500)) plus copays. Or your net HDHP expenses would be $7,400 ($3,600 + $4,500 + 0.2⋅($6,000−$4,500) − $1,000). HDHP still wins.

In general, I think your total costs are given by:

PPO = $5,640 + min(x, $1,500 + 0.2⋅(x−$1,500), $6,000) + copays
HDHP = $3,600 + min(x, $4,500 + 0.2⋅(x−$1,500), $6,000) − $1,000

If you graph these two formulas (even with copays = 0), you will see that PPO always has a higher cost no matter the value of x. This is before you even consider the tax benefits of the HSA.

I'm probably making some mistakes or misunderstanding the plans in some way (maybe I'm misunderstanding how the copays and coinsurance work on the PPO?); please check the math for yourself. But even if I'm off on the specifics, I'd think the circumstances in which the PPO is cheaper would have to be pretty narrow.
posted by Syllepsis at 11:12 PM on November 14, 2019 [4 favorites]

In the united states you will hit your out of pocket max for the year even with a normal birth and minimal prenatal care. And remeber the child will be on that plan and have a hospitalization as well (even if it's just a well nursery stay). You will pay the entire deductible for the plan you are on.

I keep a PPO for this reason. I need coverage to start sooner rather than later, and I hit my out of pocket max every year.
posted by AlexiaSky at 11:25 PM on November 14, 2019 [1 favorite]

I’m not sure if this is true in all states but in mine the out of pocket maximum is per-person even when the deductible is for the family, which in my (two person) family’s HDHP PPO (it’s complicated!) case means that by the time the deductible is used up, the sicker spouse’s out of pocket is also used up, so effectively we pay the deductible + the healthier spouse’s copays (we do not get up to full out of pocket max). Find out what the individual out of pocket max would be (and how it would apply to a baby). It could change the numbers a lot.
posted by mskyle at 4:26 AM on November 15, 2019 [1 favorite]

Keep in mind that prenatal care should be covered 100% (no deductible) as an ACA "preventive service," but childbirth and complications of pregnancy are not preventive services and cannot be reimbursed until you've met your deductible if you join the HDHP/HSA plan. It's difficult to predict how that might play out given that you can't really control when the pregnancy/birth will fall in a given plan year.
posted by Pax at 5:13 AM on November 15, 2019

Having been a pregnant/childbearing person recently and done it once with the PPO and once with an HDHP/HSA, here's some things I would consider:

  • Most obstetricians bundle the cost of all prenatal visits and the labor/delivery into a single global payment (around here, this runs $1,200-$2,000; the separate hospital bill is the killer at ~$10,000 for a regular delivery). With a PPO, the practice didn't bill me until after the delivery which is how it's supposed to work according to the insurance company. Same practice, next pregnancy - I had an HDHP/HSA and they insisted that we pay up-front, even though they wouldn't bill the insurer until after the delivery (because they coudn't, contractually). They had zero flexibility on this policy and anecdotally this is a thing that sometimes happens because OBs have gotten burned with having to chase HDHP-covered patients after birth and not getting paid. It was a huge headache, because it's not clear that it's totally kosher to take money out of your HSA to pay a provider bill in advance of when the provider actually BILLS the insurance company (although the OB practice insisted everyone did it and it was fine).

  • Hitting the max out-of-pocket is pretty easy to do when you're pregnant, especially if most of the pregnancy occurs in the same year as the birth. I personally tend to look at the worst-case-scenario math (how much would I pay in the worst year, so premiums + max out of pocket) and pick a plan based on that. For you, it looks like the HDHP/HSA would be cheaper in an expensive year, because you'll top out at $3,600 + $6,000 - $1,000 = $8,600. In comparison, under the PPO you'd top out at $5,640 + $6,000 = $11,640, which is quite a bit more. So, going with the PPO is really more about reducing the headache of dealing with insurance and payment stuff, which may or may not be worth ~$3,000 to you.

  • Even though I literally study health coverage and insurance markets as my job, I got surprised by the fact that my newborn's hospital stay rolled over into a separate deductible/max out-of-pocket calculation that started counting towards the family max out-of-pocket. I had been doing all of my calculations about costs based on the assumptions that I was incurring the costs and they were going towards my deductible/max OOP, and just completely overlooked it. That will be true on both the PPO and HDHP/HSA, just worth being aware so you're not caught short.

  • posted by iminurmefi at 7:48 AM on November 15, 2019 [1 favorite]

    I want to stress the earlier point about looking at the family out of pocket max. I thought I hit the max after my kid was born, until I received a $4k bill for the BABY’s hospital stay.
    posted by galvanized unicorn at 9:17 AM on November 15, 2019

    1. Make sure you're comparing Employee+Spouse numbers, not individual numbers. Lots of HDHP's have a family deductible, where you have to hit the whole thing before they pay for anybody, and there's not individual deductibles at all.
    2. There are cash flow issues with the first year of an HSA, because you are building up your balance over the whole year. It's not like an FSA where you get access to the balance up front. If you already have money in the HSA, then you can save money, but if you incur expenses early in the year (which, since you have a big deductible, is the most likely time to do so) you can be paying out-of-pocket and maybe getting reimbursed later. Depending on when your company deposits the $1000, that can help, but it's still not much compared to your deductible.
    3. If you have a baby you get like 30 days to switch from E+S to Family coverage. Deductible might change again, but might not.
    4. As you show in your question, your prescription drug coverage on the HDHP doesn't cover anything before your deductible. See if at least it filters to some "allowed amount", or if a drug that would cost you $30 a month on a PPO will cost you $200 a month on the HDHP until you hit the deductible (and see #2).
    posted by Huffy Puffy at 6:20 AM on November 16, 2019

    Also bear in mind that you will see some very very large dollar amounts associated with childbirth, but since you have insurance you will not be paying them. They will get filtered through your insurance's allowed amount, so instead of paying based on a $30,000 hospital bill (which they will submit!), you will be paying based on "only" like $10,000 or so.

    You will still pay a lot of money at basically all times when dealing with babies and children and, well, forever, but this one isn't quite as bad as it looks. (Day care by contrast is worse than it looks.)
    posted by Huffy Puffy at 6:24 AM on November 16, 2019

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