A reader named Marc recently left a comment asking how our high deductible health plan has worked out for us. Given that November is open enrollment season, this is a very timely question, so I thought I’d tackle it with a dedicated post.
In short, we’ve been thrilled with the HDHP (and the associated HSA) offered through my employer – though it’s important to keep in mind that plan details vary widely, as do individual circumstances. In other words, it’s important to check the details for yourself, and to make your own decision.
In our case, we have a $3000 family deductible vs. $900 if we stuck with the old PPO plan. In other words, we’re facing a possible difference of $2100 when it comes to meeting our deductible. The HDHP also has a higher annual “stop loss” ($6k vs. $2k) but, given the structure of the benefits (we pay just 10% of the usual and customary rate [UCR] once our deductible has been met) it would take some pretty extraordinary bills to be hurt by that.
The balance of the plans is very similar, though the PPO does have a $20 per office visit copay, which doesn’t go toward the deductible, and actually works out to at least double our 10% of UCR payment with the HDHP, so that’s a point in favor of the HDHP. And speaking of points in favor of the HDHP… Our plan also gives us access to a health savings account (HSA). Not only that, by my employer has been incentivizing this plan by matching a portion of our contributions.
Now for the big one… The premiums. Obviously, the HDHP has lower premiums due to the lower level of coverage. But what is it enough to make a difference? Yes, by a long shot. When we first signed up, we were saving $370/month by using the HDHP instead of the PPO. That’s $4440/year, which is far more than the difference in deductibles, and would actually cover a nice chunk of the stop loss difference if we were to need it.
This year, the monthly difference is actually closer to $390, so we’re saving close to $4700/year in premium payments — all for taking on an extra $2100 in deductible, better terms (10% UCR instead of $20 office visit copay) once our deductible has been met. Plus, we get to stuff over $6k/year into an HSA (and don’t forget about that employer match!), which is effectively an additional tax advantaged investment account. Oh, and don’t forget about those matching contributions.
In short, in the two years we’ve had the HDHP, we saved thousands (and thousands!) of dollars over the old school PPO plan. And yes, we’ve hit our deductible in both years. In fact, we hit it within the first six months in both cases, but we’re still making out like bandits. Remember, we have four kids, so things add up quickly.
Why? I’m guessing that consumer behavior changes under a pay-as-you-go model, with the high deductible making people less likely to seek medical treatment for minor, everyday maladies that might otherwise send them running to Urgent Care. This translates into lower healthcare costs, which equals cheaper insurance.
Not surprisingly, I once again opted for the HDHP and am looking forward to stuffing another year’s worth of contributions into our HSA.