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My employer is forcing us to make a choice and I'm a little bit of a loss as to how to run this analysis so I turn to some of you brilliant FW whiz kids to help:

Choices (in each case for Family coverage, 2 adults, 2 kids):

HSA:

Deductible/Out-of Pocket Max - $2500/Individual/$5000 Family
100% coverage after Calendar Year Deductible Met

PPO:

Deductible - $1000 indv/$3000 Family

Other details - Doc. visits with $25 copay; drugs with $20-$50 in copays
Most services - covered at 100% after cal yr deductible is met

THE NUMBERS:

HSA PPO

Monthly Prem: $569 $840
MoEmployerContrB toHSA $140 $0

Annual Totals $6828 $10080

Difference
(Premuiums + Employer contrib) = approx. $4950

Other factors:
In any full calendar year we would expect to use north of $3500 (or higher in visits to doc. between two young kids who see the doc when sick).

I'm really lost on how to go about evaluating one vs. the other...thanks for any help here.

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I do not understand your issue here what does Health Spending Account has to do with PPO insurances plan?

My work place has Flex Spending Account with HSA and other acount and this is not related to PPO insurances plan.

Maybe I am misunderstood your questions here so please explain what these two has got to do with each other?

Read the FWF HSA thread to get started.

OP, If I understand you correctly, here's what you're telling me

Option 1: A high deductible health plan (HDHP) that allows you to participate in an HSA
Option 2: A non high deductible health plan thus you can't participate in an HSA

We'll call option 1 HSA and Option 2 PPO ok?

So, let's figure out the maximum it could cost you, okay?

HSA

Premium 6,828
MOOP* 5,000
Employer contribution (1,680)
--------
10,148

PPO

Premium 10,080
MOOP* 3,000
Employer contribution (0)
--------
13,080


* Maximum Out Of Pocket

Looks like a no brainer to me, take the HSA option. In addition to about $3000 in savings by going the HSA route, you will also have an opportunity to sock away another 3320(5000-1680)to the HSA. This means a tax deduction of 3320 * your tax rate. Let's say your tax rate is 20%. So, that equals $664. So, deduct another $664 off of 10,164 = 9500. If you don't use all the money in your HSA by year end, you do NOT lose it. In fact, any appreciation on it is tax free. You keep it indefinitely. You can even use it to pay medicare premium when the time comes, that would be very cool.

Clarification: the money you sock away in your HSA is deducted "above the line" to lower your AGI (adjusted gross income) -- it's like a credit.

BUT - you may have to add your contribution back into to your state AGI, together with any interest or other income in the HSA account. It depends whether your state follows federal law for HSAs or not. I know that California makes you add your contributions and interest back into income.

(Assuming, of course, that your state has an income tax)

Thanks a lot for that analysis - I live in Texas so no state income tax.

I'll chime in with some info that helped me make my decision...

So my health in general is very good, however my dental situation is atrocious. I frequently need a lot of complicated dental work in a given year, and I almost always go over my annual dental coverage limit, or need dental work that the plan only covers at 50% (crowns, implants, etc).

In prior years, in order to try and reap some tax benefit, I would have to guess via my FSA how much I'd have to spend out-of-pocket in dental bills. I'd either guess way too high and have to scramble to use the FSA balance by the end of the year, or way too low, and I'd still have a few grand in dental expenses to pay for with after tax dollars.

This year, however, I'll participate in the HSA plan. This way, when I have out of pocket dental costs, I'll still reap the tax benefit, yet be able to roll the balance over at the end of the year if I end up not having to use it.

So the High Deductable plan will save you $3252 in premiums for the year, and it will cost you a max of $3000 more from the differences in deductables. PLUS your employer will kick in an extra $1680 in HSA contributions? Seems like a no-brainer to me (assuming the coverage is the same for both plans, the only difference being the deductable).

Savvyshop I think luvdoublebrats described the situation quite well; I'll just add another $0.02 You stated that the difference in the 2 plans is $4,950 in favor of the HSA; well your total maximum family deductible/out-of-pocket max is $5K. Bottom line is that I can see NO scenario where the PPO is the better option. I personally have an HSA account, and not only are the deductible/out-of-pocket max numbers better each year compared to the PPO; the tax break as previously mentioned; not having to worry about use-it-or-lose-it hassle; but also, when I have out of pocket medical expenses, I actually pay them from regular accounts - I keep the money growing tax-free within the HSA. In effect, I treat it as a 401-k account.

OP,

The premium for your HDHP seems awfully high for an employer sponsered plan. I thought employers typically paid for about 1/2 to 3/4 of the premium, with the balance being paid by the employee. My question to you, would your employer allow you to opt out, and take the cash equivalent? I would think you could buy your own insurance, get the same coverage and save yourself some money. If you're fairly young, healthy, and take a HDHP with an HSA, you should fare well. I buy my own insurance, and I have to tell you it's a little more work up front, but less red tape over all.

All of you Fw'ers have been truly amazing and kind in responding to my specific situation. I now see that there is a really compelling case to be made for the HSA given the numbers at hand.

Here's what's complicating the situation for me - there is a 50% chance that I leave this employer in the next 12-15 mos. and go out on my own. At that point I would definitely want to continue on their COBRA plan and obviously they would stop kicking in the $140/mo. that they contribute to the HSA for employees. I'm not sure if I can continue making my own contributions to HSA while on COBRA.

Thank you all for being so kind and educating me.

Confused in Texas but now less so

corrected: meant HSA not FSA; old habits die hard.

savvyshopper2000 said: Here's what's complicating the situation for me - there is a 50% chance that I leave this employer in the next 12-15 mos. and go out on my own. At that point I would definitely want to continue on their COBRA plan and obviously they would stop kicking in the $140/mo. that they contribute to the FSA for employees. I'm not sure if I can continue making my own contributions to FSA while on COBRA. Error, error, error. When did a FSA come into play? I assume you meant the HSA, which is entirely different than a FSA.

The difference in premiums is more than the difference in the difference in deductable, so even without the HSA contribution, the high deducable plan is still 'cheaper'. And yes, you can contribute to the HSA on your own (Even with the $140/month employer contribution, you can still contribute an additional $3300 on your own). It functions much like an IRA, only you can use it to pay any medical expenses without penalty.

I was on an HSA plan sponsored by my employer in 2006. I got laid off. The cost to stay with the Cobra HSA plan was $450 per month. The cost for an individual HSA plan was $155/month. The plans were basically the same. The only real difference was that the group plan covered Mental Health and Maternity. I don't use or plan on using either of those benefits...so, for me the decision to go with an individual plan was a no-brainer.

The beauty of an HSA is that the money that either you or your employer has contributed is yours. You can take it with you...roll it into another HSA account, even if you get laid off.



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