Health insurance options revisited

When I’m on half pay, I have to pay for part-time benefits instead of full-time benefits which means the university contributes a lot less and we need to revisit our insurance choices.  Previously we’d opted for the family plan from the university which was a bit less expensive than the other options from DH’s company (partly because DH’s company’s plan covers a lot more stuff even if it’s not any more generous with copays or coinsurance).

This year, just to make it difficult, DH’s company has added a second health insurance option.  We can do either their PPO or their HSA.  If this were a “we have lots of extra money” year, the HSA would be tempting on the basis of the way they act as additional tax-advantaged long-term savings.

Based on my calculations the cheapest monthly payments are:
1.  DH’s family HSA:  $494.06
2.  DH cover himself and the children with the HSA I take my insurance:  $584.41
3.  DH’s family PPO:  $611.88
4.  DH covers himself and the children with the PPO I take my insurance:  $660.87
5.  DH covers yourself with the HSA, I cover the children:  $701.09
6.  DH cover yourself with the PPO, I cover the children:  $742.43
7.  I cover the family:  $791.74

Of course, these plans all have different copays and different deductibles and different coinsurances. With only a fraction of the full-time subsidy, my plan is just flat out dominated by DH’s PPO, so we can throw that out. The HSA costs more every time it is used and has a higher out of pocket limit than DH’s PPO.  All three plans have exactly the same provider networks.

So, the difference in monthly payments between DH’s two family plan options is $1413.84 annually. If DC2 stuck a pony bead up hir nose, it would be $3000 + possibly another $170 for the emergency room trip under the HSA and $500 + possibly another $170 for the same trip under the PPO-500.

Do we want a sure savings of $1400 vs. a potential additional cost of $2500 for one emergency trip? That’s a potential out of pocket loss of $1100, not counting the unknown costs of doctors visits under the HSA.

The final piece of information is how office visits are treated.  From the literature they gave us, it is clear that preventative visits are free and office visits for sickness are $25 under the PPO.  With the HSA it wasn’t clear if we had to pay for the entire visit up to the deductible or if they were free without copay.  That could make a very big difference when you have two kids going into a new disease environment for a year.  After googling and looking on the plan’s webpage only produced information from 2009, we called up.  And were told to call again the next day during business hours.  After a lengthy discussion the next morning we determined that we would have to pay the entire negotiated rate for an office visit under the HSA and just the $25 copay under the PPO.  The numbers the lady on the phone threw around for predetermined office visit rates were something in the 100 range, though she wasn’t quoting anything.  (Online rates range from $65 to $380, but I’m guessing the negotiated rates are in the $100-$200 range.  Who knows!)  Because we have children, it’s likely that we will have to visit the doctor’s office for more than just the one annual allowed well-child check-up.

Assuming no emergency room trips and that an office visit is $150, then we would need to visit the doctors office 10 times while sick over the course of the year before we lost monetarily.  Assuming a $200 trip, that would be 7 visits.  Those assumptions put the HSA in as being more beneficial.  But, thinking about it another way, we will need to have at least two visits under the HSA because you always need doctors visits for school and preschool and DC2 won’t quite be three yet meaning ze won’t have tripped onto the allowed annual well-child check-up and DC1 has already has hirs for the year.  So that would really only be a savings of $1100 under the HSA or perhaps $1000, given higher office visit costs.

Really it comes down to risk.  Will DC2 need to use the emergency room?  Will we be way more sick?

We can afford the $3000 HSA max should the worst case scenario happen.  But a sure loss of ~$1000 also isn’t that big of a deal to us if it pays for peace of mind.  Having an HSA account would be nice, but it would also be a hassle given that we’ll only contribute to it for the one year (since my insurance will be more attractive once I’m full-time again).

After a long discussion with DH, we decided we’re risk averse and, more importantly, hassle averse.  We think chances are very high that we’ll be out $1000 for the year but we’d rather not have to think about how much the doctor costs in advance of a visit or what bank to use for an HSA that we will at most put $3000 in.  So, we’re going for the PPO, even though financially the HSA would make more sense.

How do you decide between insurance options?  Do you get any options?  (And are you like me and would prefer not to have options?  That ‘more options is always better’ part of microeconomics is such bunk.)


39 Responses to “Health insurance options revisited”

  1. Leigh Says:

    At my old employer, I decided between them by making a spreadsheet of costs for each year. Every year, the same plan won. Basically, its deductible was the same as the savings in premiums over the HMO and then after that, you paid 10%, which was cheaper than the copays. We had a low deductible PPO, a HMO, a HSA, and a plan that was a PPO, but with a higher deductible (but not as high as the HSA) and the employer paid for part of the deductible.

    At my new employer, I only had two choices. One plan was an HMO and the network was different than I was used to, so I picked the HSA one. My employer puts a decent chunk into my HSA, which is cool.

    • nicoleandmaggie Says:

      That’s bizarre that they would have plans that are completely dominated by another plan.

      • Leigh Says:

        I think it was the cheapest for them. I saw the premiums for all of them when I was investigating COBRA and the premiums the employer pays are all pretty similar, but that plan was the cheapest for the employee (tied with the HSA).

        I think that the math was more complicated if you had a family, but for a single person, I could not find a case in which the HMO or the PPO won. The HMO was better you were pregnant and the general advice was to only pick it then and do the normally dominating one any other year, but then they increased the hospital copays and I think that’s no longer necessarily accurate.

        The HSA one is interesting because it is worse than the previously dominating one in the worst case (deductible is $500 higher, out of pocket maximum is higher), so it clearly has the “I’m a HSA” factor mostly going for it and I’m guessing they’re targeting it mostly at the going single males who never use their health insurance.

      • nicoleandmaggie Says:

        Ah, that’s probably it. The family plan costs do differ a lot from the single plans. I think it would still be cheaper for DH and me to be on our own separate plans instead of his married plan if we didn’t have kids. But as soon as one plan becomes family-ish in any way the prices go way up.

    • bogart Says:

      Haha, Right as I started reading this I thought, “Oh no! Health insurance options!” So. While not formally trained as an economist clearly I am right there with you.

      DH has insurance through his (former — he is retired) employer that, while annoying in its deductible/copay structure (=more expensive than what he’d have on the plan I choose from my work, see below) is a clear winner by virtue of having premiums that are virtually $0 (maybe $20 month? I forget. Much, much less than adding him to my plan would cost). OTOH, adding me or DS to his plan is clearly trumped by what my employer offers.

      My employer is not only a big university but also a big health care system (medical sch., etc.) and all-but-one of the plans they offer say, “Use our providers or else.” That has too much of a company store feeling to me, so I pay for the more expensive “use any number of providers including many who aren’t our employees” plan for both me and DS. The company store angle irks me, and there are providers I want to use who aren’t part of that store.

      With DH’s employer’s retirement system, if I were on his plan and he were (heaven forbid) run over by a bus, I could stay on the plan in perpetuity (assuming I paid premiums, etc.). The ACA makes this less a concern, but I do have this weirdly morbid mental note that if he develops a life-threatening illness I should get on his plan (to have the option of using it if, e.g., as a widow-with-a-dependent-kid I opted to leave FT employment). Even with the ACA in place, being a group plan, I do think it’s pretty clearly better than individual ACA options where I live (though I haven’t dug into this deeply). Of course, in the literal run-over-by-a-bus situation, my mental morbidity won’t help (no time to act). I think DS may have the right to be added to the plan regardless (as a dependent of a retiree/deceased retiree), though I honestly don’t remember for sure. Risk averse or not, in the short run and hoping DH will live long and prosper, paying ~$500/month to be on DH’s plan “just in case” seemed over the top.

  2. Mrs PoP Says:

    Don’t forget in your math to discount any bills that you’d pay using the HSA by your marginal tax rate (including FICA). Mr PoP has an HSA, and we max that account out each year, so his medical bills, though they look larger, are paid with pre-income tax and pre-FICA dollars. So paying $2000 out of our HSA is like paying $3000+ with after tax dollars since our marginal combined tax rate is 35.65%.
    Of course, this analysis is a bit less compelling if you have the alternative to use a Flex Spending Account with your PPO, which would have similar tax benefits, though a “use-it-or-lose-it” structure. But since you didn’t mention an FSA, I’m assuming it’s not an option for you.

    • Mrs PoP Says:

      Also the family contribution limit for an HSA is $6,650 – and you wouldn’t need to worry about spending all that in this year. Depending how your plan year is structured, sounds like it goes with the academic calendar, you might actually be able to max out for two calendar years on the HSA. Then you could use it to cover health expenses in future years, assured that the costs were all pre-tax. Though maybe putting that much into directed savings during a time when your income is lower feels a bit aggressive.

      Personally, I’m a fan of the HSA. Mr PoP has had one for nearly 5 years, and I would have one if my company didn’t subsidize our health insurance to the point that a PPO only costs me about $5/month more than a HDHP+HSA plan.

      • nicoleandmaggie Says:

        Ok, but if we have an extra $6,650, we’ll put that in a retirement account first. If this were a long-term thing, our decision would be different. The fees on HSA accounts are not trivial. We can’t just set one up with Vanguard (I checked– Vanguard funds can be bought through other HSA accounts, but not directly).

        I thought I read somewhere that the limit for an HSA was the out of pocket max for that HSA. But you’re probably right. In any case, since I’m on half salary and we’re paying 4K/mo in rent on top of the 2K/mo mortgage, we don’t have a ton of extra cash. (And if we end up with extra cash, I really want to spend it on the kitchen when we get back.)

      • Mrs PoP Says:

        Mr PoP’s employer covers any account fees and while the investment expense ratios aren’t Vanguard-low, they still make putting the money away a no brainer since we’ve maxed out our other tax deferred savings avenues.
        But since it’ll be a tighter time cash-wise, I can see why you wouldn’t prioritize it.

      • nicoleandmaggie Says:

        DH’s company doesn’t cover any fees or contribute to the HSA, and we’re talking a small amount of money (smaller if we actually have to use some of it) not being added to over a large number of years, so any fixed costs are actually pretty large, given that our next best option would be to put the money into a retirement account or 529 (both of which are tax-advantaged one direction). Even if we were maxing out our retirement accounts next year, it’s possible that we would be more than willing to pay $1000 to not have to remember to deal with yet another tiny account.

        It would be different if we were planning on keeping the HSA going forward, but next year when I’m full-time, the PPO will be half the price that it is now which will put it in the lead.

    • nicoleandmaggie Says:

      We have an FSA, but since it’s use it or lose it and a hassle to disburse, we don’t bother. Also we don’t actually have any *expected* expenses since well-visits are free (other than most likely those two doctors trips for school).

  3. Linda Says:

    My employer gives me several options for health insurance. One of them is an HDP with an HSA. A couple years ago when it was a new option I took the time to put a spreadsheet together to figure out if it would be a good option for me to switch to that plan. While I don’t consider myself to be an unhealthy person who requires a lot of medical care, the HDP just didn’t make sense for me.

    I think those plans are great for people who rarely or never see a doctor and don’t need to take any medications on a regular basis. I do take a daily maintenance med that costs me about $30 a month. At the time I ran the numbers, I was also seeing a therapist, so regular mental health care visits were part of my monthly costs, too. We also have an FSA available to us, and I would withhold the amount of money needed for co-pays and monthly meds. Since I would have burned through a lot of the allowed HSA funds in the calendar year, the tax-advantaged part of an HSA really held no tax advantages to me.

    I’ve been using the PPO ever since I joined my employer 16 years ago because it makes the most sense for me. I also like that I can visit any doctor I want, as long as I’m willing to pay the out of network costs. Since I have the FSA, that helps with situations where I do end up paying more for a particular doctor. I also seem to be getting to an age where I’m using the doctor a lot more. In the past two years I’ve three ER visits due to abdominal pain (stupid diverticulitis), mulitple visits to the GYN last year for an ovarian cyst, and this year alone I visited the new GYN four times to sort out my menopausal status and symptoms. Last year I also used physical therapy for my ankle fracture and recovery.

    The FSA is very handy for these costs, yet I usually end up spending a bit more out of pocket for co-pays and deductibles because I’m cautious about withholding too much since it is “use it or lose it.” This year I was hoping to get a new pair of eyeglasses, but I’m not sure I’ll have enough in the FSA to cover the full due to how much I’ve used already with co-pays for doctor visits and diagnostic tests.

    Some of the new friends I’ve made here in CA rave to me about Kaiser Permanente and how I should see if it is an option when I have open enrollment this year. The more I learn about it, though, I don’t think I’d want to switch to that system. It seems that it’s good for families, but I personally don’t like the idea of being stuck with a certain network of doctors. I guess I’m just a PPO person!

    • Leah Says:

      I was on an HMO for awhile, and I liked it in the sense that it was super easy to get appointments with a specialist. You didn’t even always have to go through your GP, and everything was all in-house, so I felt like my care was fairly seamless. But I wouldn’t switch into an HMO if you have docs you like. It was nice when I moved somewhere and could just do one-stop shopping for docs.

  4. Leah Says:

    We sit down and run a bunch of numbers. At our employer, the insurance is structured such that the HSA is the cheapest except for a small window. So, even with having a baby this year, I saved more money by using the HSA. Every other plan requires a premium, but our HSA is fully covered in our benefits package. We have a $6k deductible, but the school covers the first $1k and the last $2k, so it’s really like a $3k deductible.

    It’s worked out well for us. It’s sometimes a pain to have a big, huge bill, but that’s why we save. We use our HSAs but often pay out of pocket anyway. But your comment above about fees on HSA accounts makes me want to go look at that in more detail. Might be better to pay out of the HSA each time and put more toward another retirement vehicle.

    The one weird bummer is that we can’t combine to a family HSA (at least according to our HR). We could, but then one person’s contributions would not be tax deductible. So we each have a separate HSA account.

    My fav health insurance ever was one that came with a VEBA account. My employer covered premiums for singles AND put our deductible in a VEBA account. So, it was a high deductible plan, but the deductible was in that account. Very small expenses for me that year — just a $20 copay on office visits.

  5. Miser Mom Says:

    So, this whole topic is an eye-opener to me. Pre-tenure, when I extended a semester-long junior faculty sabbatical-ish thing by taking an additional Leave of Absence for another semester, I had to pay for my whole insurance bill the semester of my “leave”. But nowadays when I go on a regular (post-tenure) full-year sabbatical, I get full benefits even though I get reduced pay. I hadn’t even thought about how lucky I am that I don’t have to scrape up more money for insurance and such. Huh!

    • nicoleandmaggie Says:

      Yeah, my chair wanted to give me full-benefits using their funds, but got shot down at upper administration. Something about it being against state policy. Who knows.

  6. jane Says:

    AND, the biggest take away message is: Health insurance/medical care totally absolutely should in no way be connected to your employment/employer.
    If nothing else see the absolute inequity of income that happens when one employee has children/dependents and another does not and the difference in what the employer pays towards the employee’s insurance coverage…………. yes indeed.
    Who really believes a GED or High School drop out person is as well equipped to deal with all these complexities that give pause to PhD’s?

    • nicoleandmaggie Says:

      ABSOLUTELY. And I *teach* this stuff from time to time.

      • middle_class Says:

        I just had to add “I AGREE!” I know so many people who get screwed by the system due to unnecessary complexity. And this is just for signing up for a plan in the first place. Dealing with insurance once you have it is a whole other issue that requires an understanding of legal terms, economics, etc..!

  7. femmefrugality Says:

    I’m the same way when it comes to health insurance. No employer sponsored plans in our house, so to the marketplace we went. I really don’t see the point in bronze plans. They just seem like a way to avoid tax penalties. We pay $100 more for a silver, actual benefits that we can use, and the peace of mind for ER trips.

  8. Debbie M Says:

    First–I hate WordPress. I tried starting a web page with them, but it can’t do what I want. And now it won’t ever let me comment on your blog unless I log in with them. WTF? And it thinks I don’t know my own password. So finally I reset it and it still lost my comment. So let’s try this again.

    At first I thought that because you can generally count on needing doctor visits when you have kids, I would go with the PPO. But then you said the HSA would be cheaper even with quite a few doctor visits so long as there were no hospital trips. So now I’m wondering how visits to minor emergency clinics fit in. It seems like most kid emergencies can be treated at minor emergency clinics rather than hospitals.

    I generally use the free pretty good insurance my employer provides. But when I was unemployed and underemployed I preferred the plan that let me have an HSA because I love HSAs (and have savings, and still rarely need the doctor).

    When I got my 30 hour/week job, I could just barely qualify to get an HSA instead of my employer’s half-paid for insurance but I didn’t do it because I wanted to be open to additional part-time jobs (with that employer) which would have bumped me into being able to afford the employer insurance and thus not qualified for the HSA insurance. So I opted for the pricy employer insurance (I have no spouse)–and then never got other work. Oh, well, it might have been a bureaucratic mess anyway.

    My HSA has no fees. It’s with Alliant Credit Union (I think you have to contribute $20 to a particular charity to qualify to become a member). It pays 0.65% interest (even though their regular savings account has gone up to 0.9%).

    • chacha1 Says:

      My HSA also has negligible fees (it’s with Mellon Bank). I think the fees may be contingent on whether you choose to actively invest the funds in your HSA, or just leave it in “money market” which is what I’ve done.

      Also important to note re: health savings accounts, once you’re 55 you can use the funds for any purpose, so in effect it is just like having another IRA.

      I’m a fan. You get the tax credit when you make a contribution, you pay your o-o-p cost with pretax dollars, and whatever you can manage to hang onto is yours no matter what you do with employment, and none of that use-it-or-lose-it bullshit you get with flexible spending plans.

      • nicoleandmaggie Says:

        If it’s in a money market account (or a savings account), then it would seem to me that in our case the double tax-advantage of the HSA over retirement accounts is less relevant because there aren’t going to be many earnings to tax on the way out. If we were going to be doing this long-term (so we had a lot of money to stick in the stock market in the HSA) and were already maxing out our retirement options, this would be more attractive.

      • Debbie M Says:

        Good point. But not only do you not pay taxes on the earnings, you also don’t pay taxes on the principal–ever. So you get a tax cut to contribute now (especially nice if you’re in a high tax bracket), and then you’re done paying taxes on it forever (which is handy because I suspect you’ll always be in a high tax bracket). Still, even a whole year’s contribution is such a small amount of money that other issues are probably more relevant.

      • nicoleandmaggie Says:

        Yes, but I don’t pay taxes on the principal in a traditional 403b or 457 plan either, and I already have accounts for those with lower fees. So if we have extra money, it makes sense to put it in there first.

  9. Omdg Says:

    Went with my work insurance yesterday. I’m in a pool with other residents who are young and don’t have time to go to the dr. $180 per month for the whole fam. $25 for non preventive office visits. Not a dime for the surgery I recently had. Only catch is I have to receive my care at my institution from my co residents and attending md bosses. I can live with that.

  10. chacha1 Says:

    My blanket advice is, if the literature offered to explain the plan is unintelligible, go with a plan you can understand – even if, like a PPO, it costs more per month than a high-deductible plan that you can use with a health savings account (HSA). If a company can’t describe its offerings I wouldn’t have much trust in how they honor them.

    And if anyone in the family has health issues (such as being a child or adolescent) that create uncertainty about annual healthcare costs, I would also advise a PPO – right up to the point where holding aside money in an HSA doesn’t represent a threat to cash flow. For us, a tax-advantaged savings account makes more sense than lower out-of-pocket costs, because the amount of healthcare we generally need is minimal.

    I’ve had HDHP (high deductible health plans) for years – approximately 2002-present – with just one year when the firm where I was working didn’t offer one. Also one year we insured ourselves through Kaiser’s HDHP rather than take a firm-sponsored PPO that cost nearly $300/mo. more. ($3600 is worth some hassle.) During that year, I had ONE doctor’s visit – urgent care for bronchitis – which cost $50.

    In my current HDHP, annual wellness visits are covered from the first dollar thanks to the ACA. Physician services copays for the consults and tests leading up to my surgery were $15 or $30.

    Until this year, our *average* annual expenditure on direct health care was less than three hundred dollars. I stocked up my HSA with enough to cover the out of pocket maximum (not just the deductible; these are two different numbers) and then left it alone. This year I had to use it to cover o-o-p costs for my hysterectomy. The associated HDHP still costs +$200/mo. less than any PPO or HMO in the firm’s plan.

    To me, the guaranteed multi-thousand-dollar savings annually are very much worth dealing with higher copays. I mean, over 12 years, say we were saving an average of $2400/year … that’s $28,800. For reference, note that we purchased 2.25 acres in the hills for $37,500. If we had been throwing all that extra money down the drain for those 12 years, we might not have been in position to buy the acreage.

    And IMO health-insurance premiums – when you are healthy and have enough income to cover normal preventive care – are definitely money down the drain. Even with that savings we’ve spent well over $70,000 on health insurance premiums. That’s not health CARE. That’s blackmail payments to highly-profitable corporations who have for decades maneuvered our political system to prevent implementation of single-payer healthcare.

  11. OMDG Says:

    Also will point out that a social worker once told me that plans vary widely in terms of how painful it is to get coverage for services. Some reject every claim the first time they see it and rely on the patient/physician to appeal. As you might imagine, this can be quite painful. As I recall, Horizon was one of the worst in terms of this behavior.

    • nicoleandmaggie Says:

      Yeah, that’s something we noticed when we moved from a generous plan (that I was always calling to appeal) to our current super stingy current plan that has never incorrectly denied anything. I’m a bit worried going back to a more generous plan (because DH’s company is a blue-state plan, meaning their coverage is more generous).

      • OMDG Says:

        I think she said that Blue Cross plans were typically decent (distinct from Horizon).

      • nicoleandmaggie Says:

        I’m just saying, personal experience. BC/BS may do great on average, but they’re also the company that I had to send the debt collection agency to when they kept not paying my wisdom teeth bill (the collection ladies sorted things out and it didn’t hurt my credit). And that denied my airport ambulance and emergency room trip because it was out of state and I didn’t get prior approval. And a number of other things, basically every time I had an unusual doctor trip.

      • OMDG Says:

        Yeah, obviously. The report is from 2011, but it’s not like BCBS never denies anything, even if on average it’s ok. I wish I could find the more updated version I saw a few months back.

    • Linda Says:

      Oh, that’s something I completely didn’t think about until I faced it. With health insurance, this has never been a problem for me. With dental insurance…ugh! For years and years I only needed basic cleanings covered, then when I was getting ready for orthodontia I was advised I needed some periodontal work done first. The dental insurer routinely rejected the claims for each of my three periodontal procedures at least once, so I had to cover the cost out of pocket until they finally coughed up the money. Reasons for rejecting the claim were outrageous, such as they needed x-rays to determine if the work was required…um…soft tissue (gums) doesn’t show on x-rays, so what’s an x-ray going to do? The periodontist seemed used to dealing with this crap, but it was infuriating to me.

  12. Revanche Says:

    I do the same as Leigh – spreadsheet all the estimated (generally predictable) expenses and compare, and I’ve always ended up concluding the same plan is best for the money. So unless the plans change in cost wildly, with the PPOs getting cheaper and the HMO getting more expensive, the HMO remains the most cost effective and generally easy to manage option for us. I’ve not needed anything out of network, though, so if that became a variable, we’d have to revisit.

  13. Matt Healy Says:

    Many large employers, including mine, have recently began offering these Health Savings Accounts because the Affordable Care Act has provisions specifically designed to encourage employers to do this. Among the factors pushing change right now: starting in 2018 there will be a 40% excise tax on all employer contributions larger than X dollars per year. Those employers whose current offerings would incur this tax are now in the process of revising their offerings to get below the cap by the deadline: they basically figure doing in stages over a few enrollment cycles will be less shocking to their employees than doing it in one step just before the deadline.

    This law, which should be called HeritageFoundationCare or RomneyCare because its ideas mostly came from Republican sources, was a complicated juggling act intended to (1) get uninsured people covered, (2) avoid losing coverage for people who already had coverage, (3) control costs, (4) improve really bad insurance plans, and (5) do all this without a public option. We’ve seen the “get more people covered” part halfway-implemented thanks to meddling by The Supremes, now we wait to learn whether The Supremes will further wreck the ACA. Now we are beginning to experience the “control costs” part have its effect on our options.

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