Pulaski

Which is where the HSA comes in. ..... If you put the money you save on premiums into an HSA then, assuming you can avoid that catastrophic event for a year or two, you will be completely protected in the event of a catastrophic accident and have tax deductible money in your HSA to pay for all your other health care expenses.

In fact it was a "catastrophic" event that made me realise how my "traditional" (low deductible) insurance was not a good deal. I had a skin ulcer which required an antibiotic drip, three nights in hospital, and minor surgery, about the most minor surgery imaginable that requires general anasthetic, and still ended up with a $2k copay! wbile looking back at that time wd realized that we were never even meeting the $1k deductible on our insurance that was costing us $10k/ year, so we were getting no value at all from the higher premiums required to get us a lower deductible.

My perspective on what "most Americans" do is that they expect their "ideal" insurance to pay for as much of their health care expenses as absolutely possible, and end up overpaying for their insurance. It would be like expecting your car insurance to pay for oil changes and tyres. IMO most people would be better off taking care of their own day-to-day recurring health care expenses, ideally using money set aside in an HSA, and leave the insurance for catastrophic events.

FWIW if we stopped putting money into our HSAs today we could cover our family maximum deductibles for at least six years with the money already in our HSAs. Given that we continue to fund our HSAs it is hard to imagine under what circumstances our HSAs could be exhausted.

A bit of background info: the cost of traditional insurance for us is almost exactly the same cost as HD insurance + maximum HSA contributions, with the difference being that instead of flushing excessive insurance premiums down the toilet, we have accumulated very substantial HSA balances.

kodokan

Many Americans only think of expenses in monthly cash flow terms. It drives me insane when I buy cars, and the salesperson describes the cost as 'only $300 a month!' I've tried explaining total cost to a couple of friends - how it's all dependent on interest rate, term, etc - but they tend to glaze over and go back to 'my new car only costs $270 a month - that's only $40 a month more than my old one!' Sigh...

Consequently they seem to prefer having a fixed healthcare expense of, say, $700 a month rather than having a premium of $200 and a $6k annual deductible, even though these are exactly the same mathematically* if fully deducted. And if you don't need $6k of medical expenses that year - win!

*pretend tax calcs are factored in here

Pulaski

I know a number of my colleagues reached that conclusion, eventually, and entirely unprompted by me, IOW I did not offer unsolicited advice.

kodokan

Hubby's company offers two healthcare plans.

Plan A: traditional health insurance with co-pays in the $20-$50 range for regular doctor visits, pay a percentage of hospital charges and prescriptions, etc. The employee/ family cost for this is around $200 a month.

Plan B: high deductible plan with deductibles of $1200 individual/ $2400 family. The company puts $1k into the employee's HSA. The cost for this plan is $0; it's completely free.

Both are PPOs, same network, etc.

It's not possible to make Plan A the most cost-effective choice even if your health needs are such that you max out the deductible every year. Yet I'm confident there are still people who signed up to it.

mrken30

This is similar to my plan, I get $1400 HSA money and pay $780 a year for family coverage. But max OOP is $6000 in network and $12k out of network.

Russet

We have opted for the HD plan and it has worked for us over the years. The savings we make each month by paying the lower premiums we put directly into the HSA (and it is partially matched by our employer). The money in the HSA is pre tax and the balance has built up over time. We use the pre tax dollars in the HSA to fund out of pocket medical expenses and try to ensure we keep sufficient balance in the plan to meet the full annual deductible (just in case).

The only reason we would look to change to the high weekly payment plan is if we could forsee expensive planned medical treatments in the future - pregnancies/ knee replacements.... Ongoing medical conditions or if health was poor.

You have the option to change each year so try one and see.

sherbert

A quick clarification on this subject please: a HRA plan is probably the worst plan for a person who has a chronic condition that requires in-patient treatment (currently billed to the insurance company at 60,000 every 2 months) right?

Unfortunately, the choice is between a very crappy HMO plan (no problem with HMO, just don't like the provider) and a HRA plan. In my (limited) understanding, HRA is only a good idea if you *think* you will not see a doctor much, have any expensive treatments or get very sick right?

Pulaski

HRA = Health Reimbursement Account, doesn't it? ..... So a way of setting aside some money pre-tax, and nothing to do with the sort of insurance coverage you're buying. Right?

sherbert

So...the choice is then not between the HRA *or* the HMO but the choice is to have the HRA in addition to the PPO? To quote the OP, I'm also very confused.

Pulaski

It's HMO v PPO, and (separate choice) HRA (for a low deductible plan) or an HSA (for a high deductible plan). Both the HRA and HSA are optional, but make good sense if used appropriately.

sherbert

Got it thank you. There's no PPO choice for us this time, just HMO (which has been working fine with previous insurers). Unfortunately, the new provider on offer is Kaiser and I think it's inherently wrong for an insurance company to employ their own doctors (did someone say conflict of interest? I think they did). :s

petitefrancaise

Just to add something here -

it is possible to buy "gap" insurance for use with HD plans. Basically you are covering the possible expenditure of say $6k deductible - figures I saw were about $50 a month for a $6k deductible. However, this insurance isn't covered by the healthcare regulations so things like previous illness/injuries weren't covered.

SanDiegogirl

How does the HRA fund work?

I read that its the employer who puts pre-tax money into this fund to pay for out of pocket expenses for employees.

It's also not mobile ? i.e the employee leaves and the HRA fund stays with employer ?

Pulaski

Employer or employee (and often both) can put money in (it's pre-tax money for the employee, but the biggest drawback is that it is "use it or lose it" money, usually within the calendar year, or by discretion within the three months after the year end. And, yes, I believe that you lose it if you change employers.

Pulaski

I haven't heard of it, but Americans are daft enough to think it's a good idea (see Kodokan's spot-on analysis above). In most cases gap insurance would be largely pointless when most, and in some cases, all, of the "gap" is already mitigated by the reduced premiums (as discussed by Kodokan, above).

The last time I checked we save around $7k in premiums annually by buying HD insurance and have a family deductible of $8k. The "gap" for us is, in an unprecedentedly bad year (if all three of us used our individual deductibles to the max, when to date not one of us has ever done so in any year since we switched to HD insurance), about $1k. ..... Which in any case is now utterly dwarfed by the balances in our HSAs.