Is your employer placing part of that premium in a health savings account for you? My husband’s employer requires us to pay, for example, $200/month, but they “pass through” $125 into an HSA. That money is ours to keep and use for medical expenses.

It’s hard to figure it out. If your premiums are twice as high and you can’t see a good reason why, the traditional plan might be the way to go.

This totally counters what the literature my company has given me states as the rate on the HDHP plan is twice the rate of the PPO. I cannot make heads or tails of it at all as the benefits also look like you pay more out of pocket on average.

Don’t forget also that any money you put into your HSA is saving you on taxes. Depending on your tax bracket, this can be significant.

It’s not an easy answer, but you’d be surprised how often the HDHP is the better deal. It’s just that you “get there” in a different way. Kind of like the difference in paying $1,000 for a car with two $500 bills (HDHP)or paying with ten $10s, 30 $20s, 2 $100s, and 2 $50s (PPO Copay plan). You got to the same location, but one probably felt less shocking.

The number you get should tell you which plan is best. As for the question of having kids, my personal opinion is that it can work very well in that circumstance for the same reasons addressed above. If you’re worried about the accidental stuff, get a supplemental accident plan. You can have those and still contribute to an HSA.

When you do your exercise, do a worst-case scenario. If the worst happens and you have a big surgery or radiation treatment, etc., which plan will cost you more? Maximum out-of-pocket is the significant number, and you have to keep in mind that on traditional plans you will almost always have copays to pay even after you meet your maximum. That is not the case on HDHPs. Good luck! Sometimes this exercise can be quite eye-opening.

I’m not a fan of the HDHP. Especially when employer’s give below standard cost of living raises every year, no wonder our economy is in the toilet!

And obviously you’ve done the right thing. You were saving money on premiums and thought it through enough to put that savings in an HSA. It really does work!

All the scenarios we come up against are affected by plan design, which makes it hard to “pin it down.”

Point, too, is that a carrier is going to have to pay for the bill, no matter if you’ve only paid one month’s premium or not. On traditional insurance they accept more of the risk, so they get to keep more of the money.

Clearly you are assuming more risk on a HDHP. You are betting you will be one of the 80% that do not meet their deductible in any given year. We do that with property insurance all the time; we weigh our risk tolerance against our monthly outgo. I can go 5 years without a loss, and the month I change my deductible from $100 to $1000 to save money I could have an accident. That’s what insurance is – a balance of how much I want to/can pay against the risk I am willing to take. So if you have the money to spend on premiums for a low-deductible plan, and you don’t mind that even if you’re healthy the carrier keeps the money – choosing traditional is best. If, on the other hand, you feel you can bear the risk, you pay less in premiums (and put the difference in a pre-tax HSA for a rainy day). In the good years you keep the overage. In a bad year you are protected. You did say “to tackle risk.” Much like investments in your 401k where you determine what risk/reward spread you are willing to take, you alone can decide if the tackle is one you want to take.

On many plans the question boils down to this. If something bad happens (car accident, cancer, etc.), does it make a difference if I pay $2,500 FIRST, or if I pay $2,500 spread out over 3 months (total maximum out of pocket)? And if I’m going to pay $2,500 either way (again, we’re talking plan design), wouldn’t it make sense to take the plan with lower monthly outgo?

I stand by my assessment that HDHPs can be a very good benefit plan. Premiums are an out-of-pocket expense and part of the picture so should not be forgotten. I would encourage everyone to put their options side-by-side and run through their standard usage and a worst-case scenario. HDHPs are not always the best option, but more often than you think they save you money – even when something big happens.

Last – statistics tell us that people are utilizing preventive visits at a higher percentage on HDHPs, and while their using of preventive meds is going up, they’re doing it at less cost because they’re learning to shop for the best deal.

Doing the math is great, but any insurance decision has to involve subjective concerns too. Mathematically, all insurance is a losing proposition: total premiums are always greater than total payouts (that’s how the insurer makes money), so on average you’re better off paying out of pocket. People buy insurance because they want to reduce their risk (at the cost of paying more on average), and HSA+HDHP plainly does not reduce risk to the same extent as traditional insurance.

Also, I take issue with the description of HSA+HDHP as “a very good benefit plan”. It’s only good if the company pays your deductible (i.e. fills your HSA up front). Otherwise, what happens if you break your leg the week after you sign up? Time to dip into the 401(k) or take out a second mortgage, right? If you have the pre-existing savings to absorb that risk without taking drastic measures, then congratulations, you’re among the 10%.

A successful argument in favor of HSA+HDHP has to tackle risk. Does the average person actually have more savings than I thought? Is the prospect of being hit by a car before the HSA fills up really so unlikely that I shouldn’t be worrying about it, even though I might be rendered destitute if it happened?

I’m young, healthy, and have a decent income. I should be a prime customer for HSA+HDHP, from what I’m hearing. But I just don’t see how the added risk is worth it.

HDHPs are allowing companies to keep a very good benefit plan for their employees that covers the big stuff where otherwise they might be tempted to drop coverage altogether. The choice that gets weighed out is dropping all coverage (which we’d agree is bad for all) vs. implementing a plan that 1) has the same potential outlay for a big event as a PPO(max out of pocket) and 2) allows individuals who are willing to do more footwork (shop) a way to keep more money in their pocket. If you have to choose between whats best for 90% or what’s best for 10%, what do you do? Deciding based on the 10% penalizes 90%. Again, it’s not for everyone, but it definitely is a viable alternative. And you’d be surprised the number of chronically ill folks who have discovered a HDHP gives them less out of pocket than a PPO, particularly those individuals whose meds fall in what is commonly referred to as the 4th tier – bio-based or self-injectables (truly “break the bank” stuff). At a potential of $250/month for meds plus office visits or labs, etc., doing the math tells the story for them. In two months they often meet the max out-of-pocket, depending on plan design.

Thanks for the discussion.

The difference is that when there *isn’t* a generic, you don’t have to break the bank to get the name brand drug. (BTW, the last prescription drug I bought cost about $250 for a one month supply, and there is no generic version. I was not able to complete the recommended course of that drug because of the price.)

Saying that HDHPs will work if people put aside money is a little bit of an oversimplification. I would say they work if people can put aside all the money up front or if they don’t get sick before they’ve managed to save up enough HSA money to meet the deductible, and if they are able to quickly refill their HSA in the event that they get sick.

Unfortunately, some people will find through no fault of their own that they don’t fit those criteria, so I would be very hesitant to recommend HSA+HDHP to the general public as a replacement for traditional insurance. It’s really a niche solution to allow people who could pay their medical bills in cash to benefit from the tax advantages of an HSA and the lower charges that an insurer is able to negotiate, with a vestigial “insurance” portion to keep their risk in the five-figure range.

Americans NEED to start thinking twice before visiting their doc. We’ve become a nation of people who go at the drop of a hat “because it’s only $20.” We get the name brand drug “because it’s only $10/$30/$60.” We’ve become so divorced from the cost of our own care we have no grasp on reality, and we think it’s the insurance company’s fault. Some of it is…but we need to take responsibility where it falls in our lap.

The first year we were on an HDHP was the first time my husband EVER talked to the pharmacist about his name-brand drug. He then changed to a generic. That would never have happened as long as the Rx was a copay.

So HDHPs will work if people will put aside money…just like all those folks above mention. Then, when we need to go, we’re covered. I think they’re great, and that’s after a year when we hit the maximum (not a small one). The second year was better, and we are now carrying money over. I hope soon to have enough built up that I won’t be in a panic about a big expense. And if I get to retirement with a chunk set aside – so much the better!

I strongly disagree. Most of us are not hypochondriacs: if we decide not to buy a drug because it costs $250, we’re taking a big risk with our own health. If we decide not to visit the doctor when we suspect we’re sick because an office visit costs $100, we’re taking a risk with our health and everyone else’s (if we might be contagious).

In your case Delbert, it sounds like your HDHP/HSA arrangement wasn’t beneficial for you. However, with the savings in premiums and the ability to invest monies that were put aside in my HSA, I came out much better.

Remember people, all HDHP/HSA’s aren’t the same. Just because one sucked for you, doesn’t mean another plan won’t work for someone else, or maybe even yourself. So the point is, read the benefit booklet, read the coverages and read the deductible amounts. Do your homework, and you’ll be fine.

For a healthy single person this plan SUCKS! Needless to say I decline to pickup the meds. I couldn’t afford them so I suffer with my migraines. I have to be half dead before I will go to the doctor and spend the office call $$

John DeFlumeri Jr

you arent missing anything. in fact, what most people miss is they simply dont have your smarts in saying “i will put my savings into my hsa”.

so they save 3k over the course of a year in premiums, but just spend it on bills or food or whatever strikes their fancy, then complain when they have to pony up money because the HDHP doesnt cover as much.

1. I don’t have a big pile of cash to put into an HSA today. It would take me months or years to save up the amount of the deductible.

2. It turned out that a PPO that has the same high deductible but covers 6 office visits a year (even before meeting the deductible) is actually *cheaper* than an HSA-qualifying plan.

Also – my employer’s high deductible plan has virtually zero coverage for infertility treatment. When I unexpectedly needed this to get pregnant, I had to wait until open enrollment to switch to an HMO plan. The delay meant that precious time was wasted. Carefully check those benefits — even ones you don’t think you’ll ever need!

I am not sure when the counter resets, etc. I have switched jobs a lot and by moving from VA into DC my employer switched my insurer so I assume that the counter resets when you change your plan, even if it’s the same insurer.

I only point out the maximums because you just never know and I think people don’t really understand what kind of costs they can incur with a really dire illness. (My dad’s stroke is not bankrupting my parents, but I know that they were paying $800/mo in premiums for him because he was a lifelong smoker.)

I’ve heard that in the end, an HDHP and regular PPO end up being the same costs for most people on an annual basis. Playing your statistical chances of getting ill has a lot to do with it. Routine care vs catastrophic. I suppose that has to factor in.

At my company the HSA is also the better option easily. It wins in both min & max costs.

My assumption is that insurance companies and/or employers are purposefully making the high deductible / HSA plans appealing so that people will sign up for them cause it saves them money in the end. The higher deductible plans force us as consumers to be more prudent in what we use insurance for so it ends up helping to keep costs lower since we’re more accountable for the expenses.

my main question/concern is, what really happens when we visit our pediatrician or PCP for an infection?
will they look up our HDHP coverage and ask for the full office visit upfront? if yes, will they charge me the negotiated amount for an office visit? or will they charge me lower (since i’m paying cash on the spot and they don’t have to go through the arduous process of billing the insurer et all) or will they charge me the full list price?
will we have to start negotiating prices when we go visit the Dr’s?

The above scenario is for the first visits when we are not even close to meeting our family deductible.
what happens when the Dr sends us out for an xray or a blood test to another clinic? do we ask for prices upfront? or will we automatically get billed negotiated rates?

you can judge where I’m going with this…..
if someone can please relate their real life instances, I would very much appreciate it.

That’s true, but the risk is limited. From what I’ve seen at least, an HDHP starts picking up 100% of expenses once you reach a certain point.

The end result (again, from what I’ve seen) is that worst-case scenario with an HDHP is only a few thousand more for the year than what you’re automatically paying with your current plan.

Run the numbers and see what your maximum out of pocket is with the HDHP, and compare that to what your premiums are with the current plan. The difference is probably not catastrophically large.

At my recent open enrollment, I calculated our actual expenses for the previous plan year, and what we would have paid under each plan, and the HDHP+HSA wins by a landslide. Plus, each year you accumulate more funds lessens your risk of having to pay out more in deductibles than you have in the HSA.

The real payoff is if you don’t need to pay the $3000 deductible, then you’re WAY ahead. Low deductibles are a bet that you will need the coverage, but if you’re family is generally healthy, a higher one is the way to go.

One thing you might want to check to be sure of is if the deductible is a family deductible or an individual one. Most have three deductibles per plan, husband, wife and one child (even if there are more). If it’s per person, then you could end up paying more in the awful event that two family members have large claims.

$3000 is actually pretty low for a high deductible plan. They can go at least as high as $10,000.

We did a pretty in depth comparison and couldn’t convince ourselves to stay on our old plan, paying much more in premiums and not getting much other than a little more peace of mind.

For the next year, my wife and I will:

Pay $210/mo in premiums
Have a $500 annual deductive (together)
Have a $500 maximum out-of-pocket expense limit
Get 100% coverage on every service listed in the benefits plan
Pay a deductible only for home health care, extended home health care, supplies for that, in-patient and out-patient hospital and surgical issues
Have a $5 million lifetime max per family member (last year, it was unlimited)

So basically, getting really, really sick this year will cost us no more than $500 + copays and $2400 in pretax income for premiums. If I had access to the same HDHP as you, I think I’d pay the $1600 each year for the $500 stop loss that I get. OTOH, if my PPO was costing me $4000 extra in premiums like yours is, I’d likely take the HDHP.

As far as prescriptions go, we still have coverage there (at 90% vs. a $10/$25 copay with the PPO). There are a small number of meds where we’d come out behind, but it would have to be over $100 for a generic prescription or $250 for name brand to do worse.

John DeFlumeri Jr

I was 31, slender, good blood chemistry, exercised 5-6 days a week, ate well, didn’t smoke or drink … and I was diagnosed with Hodgkin’s lymphoma. Holy crap.

Three weeks in the hospital, six months of chemo (concurrent with six months of many many other things including two lung drains, two PICC lines, three months of home nurse visits, more meds than I’ve taken the whole rest of my life put together, x-rays, PET scans, blood draws, doc visits for the cancer and the side effects of the chemo), a month of radiation. Since then, more doc visits, PET scans, blood draws, x-rays.

I paid my doc copays, and I paid whatever the rates were for meds, and that’s all. Even if I pay a higher premium for the rest of my life, it was worth not struggling with whether or not we could afford tests or treatments that I needed.