Can I afford to take this job's high-deductible health care plan?

Question

I don't have the job offer yet, but one of the jobs I'm looking at would offer me only a high-deductible health insurance plan with an HSA (I don't knw what the deductible is exactly yet). However, they pay the premiums 100%, so I would be putting the money I spend on premiums for my family into this. I have to cover myself and my spouse, and we are not healthy people; I have several chronic conditions, and my spouse (while much healthier) needs a lot of prescriptions.

I currently spend $159.50 twice a month on insurance premiums for medical. In addition, I spend 114.58 twice a month to fund my FSA, which is capped out at $2700 and which we usually spend most if not all of in a given year. However, I've never had a HDHP and may not know all the "gotchas" involved. Assuming it's, say, a $5k deductible for the family (googling the company suggests they offer a single-person at $1,500 deductible and family is usually more than double the single-person rate), I would be able to easily afford to fund the HSA that amount and spend most of it in a year, plus I'd have rollover from year to year... but am I missing anything that makes this prohibitive?

Answer 1

My opinion is that, in general, the HDHP+HSA is usually a better option for both the employee and employer than a traditional health plan. But of course, the details vary.

Besides knowing the premium you will need to pay and the amount (if any) that your employer has decided to kick into your HSA, the details you want to look at are:

• The family deductible: Until you hit this amount in a year, you will be paying for nearly all of your medical expenses out-of-pocket (or with your HSA). With a few exceptions, the insurance doesn’t pay for anything until your expenses have reached this point.
• The out-of-pocket maximum: After you have paid this much in medical expenses in a year, you are done paying; the insurance will pay 100% of your medical expenses after that point.
• Coinsurance percentage: Between your deductible and your out-of-pocket maximum, this determines how much of the expenses your insurance pays and how much you will need to pay. For example, if your plan features 20% coinsurance, then after you hit your deductible you will be paying 20% of all of your medical bills until you have reached your out-of-pocket maximum. With some plans, the out-of-pocket maximum is the same as the deductible; in that case, there is no coinsurance.

I have written answers before that demonstrate a method for comparing different HDHP and non-HDHP health plans. Take a look at this question as well as some of the other questions linked to that one. After you look at those, if you are still struggling understanding how to analyze your options, feel free to post a new question with the details of the options you are considering. But in general, the HDHP+HSA is not something to be afraid of, even for someone with high medical expenses. In my family’s health situation, we have had an HDHP for about 15 years now, and we reach our deductible and out-of-pocket maximum almost every year.

Answer 2

First some numbers for 2021 from the IRS:

Annual contribution limitation. For calendar year 2021, the annual limitation on deductions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,600. For calendar year 2021, the annual limitation on deductions under § 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $7,200.

High deductible health plan. For calendar year 2021, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,400 for self-only coverage or $2,800 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $7,000 for self-only coverage or $14,000 for family coverage.

Focusing just on the family plan numbers:

• Deductible $2,800 or higher
• Maximum out of pocket $14,000 or less
• Maximum amount you can put into the HSA $7,200

Here is some info from your question:

• However, they pay the premiums 100%, so I would be putting the money I spend on premiums for my family into this.
• I currently spend $159.50 twice a month on insurance premiums for medical.
• In addition, I spend 114.58 twice a month to fund my FSA, which is capped out at $2700 and which we usually spend most if not all of in a given year.

So looking at your current spending: of $274.08 twice a month, or $6,577.92 per year. That means that you can almost completely fund the HSA with the same money you were spending on the premium and the Flex Spending account. Just like your old plan this will be 100% pre-tax, without the use or lose risk.

You will need to know what happens between $2,800 and $14,000. In the plans I have had access to it has been 20% paid by the employee and 80% paid for by the plan. You should be given this information with or after the offer letter. Please ask for this detail.

If prescriptions coverage is important look to see what they charge for prescriptions before the deducible is met. You shouldn't have to pay full price.

Before the deductible is met you generally pay for everything except the procedures like a annual physical, and other items defined in the Affordable Care Act. But if you are going in-network even for those things you have to pay for, there should still be discounts due to the negotiated rates.

Whenever you are switching insurance providers, and sometimes even when switching plans within the same company, make sure you know if your current doctors and providers accept the new plan. Going out-of-network can be much more expensive in this type of plan.

This answer has completely ignored dental and vision coverage, because it wasn't mentioned in the question. They may have separate premiums, and in your case they are hopefully 100% paid for by the company.

Answer 3

Due to adverse selection the HDHP is almost certainly the better deal. When HDHPs were new the healthy went with them and the unhealthy went with the traditional plans. Insurance companies learned this and have set the premiums accordingly--the additional premiums for the lower-deductible plan are usually similar to the difference in the maximum out of pocket.

If you don't meet the traditional deductible you're clearly paying more for the low deductible plan.

The stop loss is pretty much fixed, if you reach it you again are clearly paying more for the low deductible plan.

This leaves only the range between the low deductible and the stop loss where it's even worth considering. Add up the premium difference and add it to the deductible (it's money you're certainly going to be paying)--and in my experience you get numbers close to the high deductible plan. I've never seen more than a narrow window where the low deductible plan comes out ahead.