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I’ve always thought of my health insurance as just….well, insurance. Much like car insurance, it’s something I willingly pay for each month to help pay for the result of a catastrophic medical event. If I get cancer, or some other serious disease and require expensive treatment insurance would be there to help take care of the bills. If I have plantar faciitis for a year and finally decide to go see a doctor, I want it to be covered. If my kids aren’t feeling well, I don’t want to have to think twice about taking them to the doctor, because I’ll know that the office visit won’t cost me a cent.
I’ve always thought the purpose of insurance was to protect against the expensive unexpected, and medical expenses are expensive. It’s not something on which I would expect to ever get a positive return. Every year of my eighteen year career, I’ve chosen a low deductible Preferred Provider Organization (PPO). It always seemed to be the best decision because if a member of the Pizel household would fall ill, the bill would very low, if not zero. If there was a major medical catastrophe, the money out of our pocket would be significant, but the least out of all the plan options.
I had never looked into other options, or these health savings accounts that seem to becoming more and more popular these days. My thought process was, I have a good job and can afford good insurance, why not buy the best insurance possible?
Does this sound like you? Have you followed this same stream of logic? If so, you may have been throwing your money out the window unnecessarily just as I have been for the last eighteen years.
I had planned on doing exactly the same thing this year as the time for enroll in our health care choice for 2015 was at hand. However, some hallway talk regarding our options prompted me to scrutinize the options closer. What I discovered made a great case for switching to a high deductible PPO with a health savings account (HSA).
What Would I Lose With A High Deductible PPO:
- My individual deductible would double, going from $1250 to $2500
- Diagnostic office visits go towards deductible instead of being covered 100%
- Prescription drugs go towards deductible instead of being covered 80% with a maximum amount per prescription.
What I would Gain With A High Deductible PPO:
- The high deductible PPO plan is $300 a month cheaper than the low deductible version.
- The high deductible PPO plan can be paired with an Health Savings Account (HSA)
- Money can be deducted from my paycheck and placed in my HSA tax free
- My Employer offers $1,100 healthy living incentives that can be earned and deposited tax free into our HSA.
- I have options as to where my HSA funds are invested to help them grow
- If I were to have the $300 difference in the price of the plans placed into an HSA instead, and fulfilled the employer specified incentives, the account would accumulate $4,700 by the end of the year.
Analysis:
The question is, do I normally have more than $4,700 of medical expenses in a year? The answer is a resounding, “No.” Our family had two non-preventative doctor visits last year (which would still be covered 100% under the high deductible PPO), which is an average year in our family with regards to medical care needs. These two visits would not have added up to $4700 of medical expenses.
What happens To The Money In an HSA?
When the year is over, your money stays exactly where it is. It continues to accumulate gains, and you can continue to put money into it. Some even use it as a form of retirement savings, but you can certainly use it to save for future medical expenses as well.
How Easy Is It To Use HSA Funds?
This is something that is likely different from provider to provider, however I will be supplied with an HSA debit card. When I pay for qualifying medical expenses such as office visits and prescription drugs I simply use the HSA debit card just as I would use my own bank debit card
The fact of the matter is, our family just doesn’t need medical care very often. Therefore, throwing our money towards high premiums for coverage we don’t use is a complete waste. The advantage of switching to a high deductible PPO is that it puts us more in control of our own money, which is always a good thing.
Have you always simply purchased the “best insurance you could afford?” Have you really ever looked into a high deductible plan with an HSA?
Health insurance is a subject that most people don’t want to discuss. It is so important for individuals to take the time and find out what they need and change to a better insurance that suits their lifestyle. As you age, you need to upgrade.
Health insurance is such a complicated thing….while my employer attempts to put together information regarding the plans and ways to determine the best choice for an individual or their family – it is a bit lacking. There needs to be fundamental health care education in our schools. You’re absolutely right though…as you move through life, your needs will likely change. Health care needs to be reevaluated yearly to ensure you’re making the right choice!
If it includes getting access to an HSA than I think you made the right decision Travis. 🙂 There are just too many advantages to it not to take it as an option. As we’re self-employed we really don’t have a good “cheaper” option and just go with what makes the most sense for us. Interestingly enough, that likely means not having insurance here in the near future.
Yup, it does include access to an HSA. The only thing I’m a little hesitant about is the cost of prescription drugs. If someone were to get ill, the office visits will cost us for sure, but I don’t think it’s going to be anywhere near how much the medication could cost. Thanks for sharing!
When we lived in the US we had high deductible plans and an HSA. I look at an HSA exactly like I look at an IRA. I’ve never taken money out of the HSA to pay medical expenses. Why would I use money that’s set to grow tax-deferred to pay expenses when I have cash that’s earning taxable income (theoretically) to pay those expenses? So to me the HSA just extends my capacity to save tax-deferred.
I read a lot about people that do that – which is certainly a good use for an HSA – if you can afford to do both. In the purest form, using HSA funds actually reduces the cost of medical care by being able to pay for them with money that has not been taxed. I plan to use mine as “mixed purpose” fund. if I have the funds, I’ll pay cash out of pocket. If it would be better for me financially I will use HSA funds. I suspect even using it in that manner my HSA balance will grow over time. 🙂 Thanks for sharing, Kurt!
We are switching to a healthcare sharing ministry starting January 1st, but we always had a high deductible plan until now. I didn’t mind the higher deductible because, like you, we could use an HSA. We are also relatively healthy so it made sense for us. It sounds like you made the right decision! Now you can start saving in your HSA! =)
That’s the plan Holly! We’re going to use this year as an experiment of sorts and see if it works out for us. If so, we’ll continue with this approach. If not, we’ll revert back to the low deductible plan – but I have a feeling this is going to be a good move. Thanks for reading!
I went through this decision last year, but since I’m the only one on my plan my break even point ended up being a lot lower. I think just having to go to the doctor 3 times and the PPO would end up being better value than the high deductible plan + HSA . My company had also removed the HSA matching and the fees by the provider were very high! I ended up going to the doctor twice, both times just for antibiotics so I pretty much broke even. This year I’m just renewing in my standard plan as they still have not reinstated the HSA matching/contribution.
It looks like your insurance offers a much more attractive option here though, and the savings as you cover more people only increase. If someone does get sick, you can pull the money out of your HSA or just let it grow and use your own money out of pocket.
Your information is a good example that everyone needs to evaluate their own personal situation and what is offered by their employer or plan they are considering – and it should be re-evaluated each and every year. Thanks for sharing, Debt Hater!
I have heard so many horror stories with the new health care initiative. As I was sitting in an urgent care clinic over the weekend, I couldn’t believe how many people had so many questions.
No kidding, Michelle….in my state (Minnesota), the agency that deals with our state exchange is facing budget cuts, so they’re actually cutting resources (people) to help with upkeep of the website, and customer support. That doesn’t sound like a good idea at all…..
Are you sure you even have an individual deductible anymore? If you’re on a family plan, then you have only the family deductible and no individual deductible.
That’s a good point…I may have to revisit. The plan info says individual/family – but maybe the deductible for “individual” applies only when you are singularly on the plan. Thanks for the tip…..I’ll look into it!