Need help understanding health ins. plans..

[ApplePersonFreak]

Hi guys,

I'm about to pick a new health insurance plans, but am presented with a few options that I'm unsure which option is the best way to go.

The choices are $2,000 deductible w/copay, $2,000 deductible with HSA a co-insurance. The other plans are the same just with higher deductibles, like $4,000 deductible with copay, etc.

I'm in my early 20's and am fairly healthy. I do go to the doctor for checkups every now and then and I feel like the plans with the co-insurance is not beneficial for someone like me because I don't go to the doctor enough to be able to pay $2,000 out of pocket.

Anyways, those of you who have a better understanding on how these work, I'd love to hear your input on which one to choose.

 

[shinji]

It really depends on how much the premiums would be for each of these plans. You might want to consider an HSA for the tax benefits, as it's triple tax exempt (contributions are tax-free, earnings grow tax-free, and qualified withdrawals are tax-free).

 

[ApplePersonFreak]

It really depends on how much the premiums would be for each of these plans. You might want to consider an HSA for the tax benefits, as it's triple tax exempt (contributions are tax-free, earnings grow tax-free, and qualified withdrawals are tax-free).

I'm glad I asked, because I had no idea that HSA had tax benefits. The HSA plans are a bit cheaper than the ones with co-pay. It's through my employer, so would it still be tax free if I took it out pre tax?

 

[shinji]

I'm glad I asked, because I had no idea that HSA had tax benefits. The HSA plans are a bit cheaper than the ones with co-pay. It's through my employer, so would it still be tax free if I took it out pre tax?

You get a tax deduction for the amount you personally contribute to the HSA, and you also don't have to pay income tax on whatever amount your employer contributes to it (if any). If you need to make a withdrawal for a qualified medical expense under age 65, it doesn't affect your tax deduction, but it has to actually be a qualified medical expense (otherwise, 20% penalty).

HSA plans are almost always cheaper and have tax benefits, but there are risks. If you suddenly end up in the ER or need treatment for some reason, the math may very well change in favor of another plan, especially if the HSA plan has a higher max out of pocket.

You also can't just compare deductibles and copay/coinsurance amounts either because some plans will cover doctor visits before the deductible, some have a separate prescription drug deductible, some have a fixed copay for the ER but a deductible for everything else, etc.

 

[ApplePersonFreak]

You get a tax deduction for the amount you personally contribute to the HSA, and you also don't have to pay income tax on whatever amount your employer contributes to it (if any). If you need to make a withdrawal for a qualified medical expense under age 65, it doesn't affect your tax deduction, but it has to actually be a qualified medical expense (otherwise, 20% penalty).

HSA plans are almost always cheaper and have tax benefits, but there are risks. If you suddenly end up in the ER or need treatment for some reason, the math may very well change in favor of another plan, especially if the HSA plan has a higher max out of pocket.

You also can't just compare deductibles and copay/coinsurance amounts either because some plans will cover doctor visits before the deductible, some have a separate prescription drug deductible, some have a fixed copay for the ER but a deductible for everything else, etc.

Yeah, that's the dilemma I'm going through as far as which plan to pick. It's tough because I don't use my insurance often but for the once a year doctor's visits but then you just never know when something will come up.

 

[Huntn]

Although no guarantee, looking at your historical annual medical bills is worthwhile. $4k deductible is like paying cash and designed to cover any unexpected big expense, however you'd still benefit from negotiated rates. I like HSAs for the reasons stated by Shinji.

 

[ejb190]

I've been on a high deductible HSA plan for a number of years. In my case, the employer contributes a fair sum to the HSA. Also my plan covers "preventative" services (physicals, mammograms, some blood work, etc) 100% (as long as the doctor codes it right!). So all in all, my out of pocket is pretty low compared to the traditional plan.

Here's how you compare some of these different plans:
Calculate your Maximum Exposure (i.e. Worst Case Scenario)

Annual Employee Premium (Do not include Employer share)
+ Maximum Out of Pocket
- Employer Contribution to HSA (if any)
= Maximum Exposure

In my case, the traditional PPO Single Coverage looks like this:
Premium - $8484
Out of Pocket - $3000
Employer HSA - $0
Max Exposure - $11,484

While one of the HSA plans looks like this:
Premium - $756
Out of Pocket - $4000
Employer HSA - $-1001
Max Exposure - $3755

Kind of a no brainer when you put it like that. The HSA costs a lot less no matter if you use it or not.

Something else to consider are things like "non-smoking" or "Fitness Initiatives" that come along with insurance plans. If you opt for one of these, be sure you fully understand it. For instance, our Non-smoking agreement discounts the insurance by $35 every 2 weeks, but makes you subject to random drug tests. If you come up positive for tobacco, you not only pay back the entire discount, but you could loose your job.

 

[ApplePersonFreak]

Is the HSA kind of like a 401K?

 

[A.Goldberg]

Is the HSA kind of like a 401K?

Not really.

Obviously an HSA is used for health expenses at any time. A 401k is used as retirement savings (it can be for medical expenses without penalty if you meet certain qualifications, like being broke or completely disabled, otherwise there's a penalty). An HSA is not taxed at all. A 401k is only taxed when you withdraw the money. An HSA is independent of your employer. A 401k is tied to your employer and you may or may not have control of the investments. Also, if you're lucky your employer will match your 401k contributions, which doesnt happen with HSA's.
[doublepost=1497923126][/doublepost]Maximum exposure is one way to determine insurance plans, but if you don't expect to utilize a lot of healthcare it won't necessarily provide you with the cheapest option.

I'd suggest comparing each of your 3 plans, looking at the details specifically. Come up with an estimate of each plan based on your reasonable expectation of what services you will use.
- You expect a X number of Doctor visits a year. How are the charged? What will it cost you?
- Do you see a specialty doc or utilize behavior health? Do the same.
- Do you get regular prescriptions? Are drugs part of the deductible or not. Do they have their own deductible. Figure out how much it would cost. (Factor in maybe a few Rx's if for the antibiotics or cough medicine for a cold, you can assume tier 1 copays)
- Are there any other medical expenses? If so calculate them.
- Consider the HSA and potential tax savings. Remember that an HSA is mobile and can be used throughout your lifetime but it's money you can't otherwise spend without penalty.
- Add in the cost of your premiums

Then asses your estimated costs versus your maximum exposure calculations. You have your expected costs and worst case scenario costs. You can then decide what level of financial risk you want to take- your estimated cost might be higher but your worst case scenario might cost less. One plan might stick out as a bad deal. One might look good.

 

[ApplePersonFreak]

I've been on a high deductible HSA plan for a number of years. In my case, the employer contributes a fair sum to the HSA. Also my plan covers "preventative" services (physicals, mammograms, some blood work, etc) 100% (as long as the doctor codes it right!). So all in all, my out of pocket is pretty low compared to the traditional plan.

Here's how you compare some of these different plans:
Calculate your Maximum Exposure (i.e. Worst Case Scenario)

Annual Employee Premium (Do not include Employer share)
+ Maximum Out of Pocket
- Employer Contribution to HSA (if any)
= Maximum Exposure

In my case, the traditional PPO Single Coverage looks like this:
Premium - $8484
Out of Pocket - $3000
Employer HSA - $0
Max Exposure - $11,484

While one of the HSA plans looks like this:
Premium - $756
Out of Pocket - $4000
Employer HSA - $-1001
Max Exposure - $3755

Kind of a no brainer when you put it like that. The HSA costs a lot less no matter if you use it or not.

Something else to consider are things like "non-smoking" or "Fitness Initiatives" that come along with insurance plans. If you opt for one of these, be sure you fully understand it. For instance, our Non-smoking agreement discounts the insurance by $35 every 2 weeks, but makes you subject to random drug tests. If you come up positive for tobacco, you not only pay back the entire discount, but you could loose your job.

Thanks for this. Looks like I'm going to pick the HSA plan.
[doublepost=1498337933][/doublepost]One question is.. when you use the money in the HSA, do you have to file it in your taxes?

 

[ejb190]

Thanks for this. Looks like I'm going to pick the HSA plan.
[doublepost=1498337933][/doublepost]One question is.. when you use the money in the HSA, do you have to file it in your taxes?

Yes, you will have to delcair total contributions and distributions - as well as any non-medical withdraws which then become taxable (which is why you keep you hands off the HSA except for medical expenses). But this will come from the tax forms from the bank holding the HSA (1099-SA) and you will have to file an additional tax form (8889) with your 1040. Compared to all the tax stuff I do, this was pretty straightforward to figure out.

Just to clairify - the HSA contributions and distributions are reported to the IRS, but are not taxed unless they are used for non-medical expenses.

 

[ApplePersonFreak]

Yes, you will have to delcair total contributions and distributions - as well as any non-medical withdraws which then become taxable (which is why you keep you hands off the HSA except for medical expenses). But this will come from the tax forms from the bank holding the HSA (1099-SA) and you will have to file an additional tax form (8889) with your 1040. Compared to all the tax stuff I do, this was pretty straightforward to figure out.

Just to clairify - the HSA contributions and distributions are reported to the IRS, but are not taxed unless they are used for non-medical expenses.

Got it. So if I use it for medical expenses then I'll just need to file the contribution amount? Sorry for all the questions, this is a new thing for me.