HSA vs. PPOM – seems like there is no real savings….?
Tuesday, 9. March 2010
Our situation: Self-employed (husband is a contract-only self-employed software architect; I work for his business in an administrative capacity – so techinically, I am his “employee”). Two adults, two small children. All healthy.
Currently we pay for a PPOM that allows for 2 office visits/person/year + $35 co-pay. VERY LIMITED coverage (inpatient only + preventative care such as OB-GYN stuff and well care for kids). Individual deductible = $1000 per person/ $2000 per family, then 80% coverage to $15,000 (our max out of pocket); then 100% coverage. Premium totals over $5200/yr and increases about 18-21% a year (no prescription coverage, of course)
A year ago our accountant advised switching to HSA type health insurance because he said the write-offs would be much greater. Now he’s not sold on the idea. We’d like to better understand where the tax write-offs would be and what the potential savings are in switching (or not switching).
If we switch, the HSA type would cost about $900 less per year in premiums. Family deductible amount (there is no individual deductible) shoots up to $5800.
NO office visits covered. Preventative package would include “covered” services such as OB-GYN w/ mammogram; well-child care consisting only of $500 max limit for vaccinations for kids – but all out of pocket expenses, as they would fall under the deductible first.
We are a healthy family, but this past year we had some unexpected health set-backs (my husband broke his nose, and my son had a trip to the ER for something minor on a Saturday night
What does and does not constitute as going toward the deductible is sometimes quite nebulous, it seems.
My question is: with the numbers in mind – should we switch? Or stick with the PPOM? And why?
Thanks to any insurance and / or accounting expert/professional who takes the time to give us some insight into this whole HSA vs. PPOM thing.
Zarnev Says:
I have an HSA qualified plan and I think they’re great for the right people.
The tax savings with an HSA come from the savings account, which operates just like an IRA except you can withdraw the funds for anything medical (including items that the health insurance does not cover, such as dental and OTC medications). Being self-employed you also have the premium with either plan which is deductible.
With an HSA when you go to the doctor you do not pay the full price of the doctor visit, you pay the negotiated price that the insurance company has with the provider. This discounts the price medical procedures 40% to 70%, depending on the insurance company and the procedure. In my state the doctor visits run me $50 – $70 with my HSA.
Every covered procedure, such as doctor visits, prescriptions, etc. go toward your deductible with an HSA. With your current policy you will have co-pays and/or ER access charges which do not apply toward the deductible. You also have co-insurance of $3000 per person to pay after the deductible. You also still have the co-pays even though you’ve paid the deductible and co-insurance. With an HSA once your family reaches the deductible everything, including doctor visits and prescriptions, are covered at 100%.
Should you switch? Nobody here will know. Visit a local agent that works with all the major companies in your area. The agent can sit down with you and run the numbers to see which plan is better for your situation and budget. They can explain how the HSA plans work and compare that with your current plan. There is no extra charge using an agent.
katiesquilts Says:
I wouldn’t recommend THAT plan. That’s not a very good cost saving on the premium. Most hdhp’s have very low premiums, that’s why they’re so well liked for people who are relatively healthy. You have to have an hdhp (high deductible health plan) in order to have an HSA.
In 2009, the minimum deductible for a high deductible health plan that can be used in conjunction with an HSA is $3,000/$5950 (individual/family). So, the plan that your agent has been showing you will not qualify for an HSA. Look for a new plan or look for a new agent–the ppo plan you have now really stinks. You should be paying a lot less for the benefit.
I would recommend looking around for a better plan if you want to add an HSA to your budget. For additional information on what qualifies for HSAs, check out the website below.
Most studies have shown that households that have annual income of under $80,000 do not do well with HSAs. I don’t think they’re a good idea myself, but I have to look out for the welfare of 400 employees with an average age of 54 years. Not a wise choice for us!
You definitely want to look at a plan that has individual deductibles–since you’re a family of four, you would end up not paying any deductible on two of you, basically, since the family deductible is less than the individual deductible for two. You do NOT have to get the HSA through the same company you get your insurance through, btw. These are individual accounts, so you can get them wherever you feel offers the best investment choices.
HSAs offer a tax benefit since the money can be deducted from payroll and invested on a before-tax basis. Does your husband receive an actual pay check from the business? If so, take advantage of the tax benefit. Funds can also be put in on an after-tax basis, and then deducted from your annual return.
Go back to the drawing board and look at your health plan options. A HDHP will save you money on premiums, and if you’re healthy, that money can go into the HSA. If you need it, it’s there. Last year, you spent $8200 and still had to pay for prescriptions out of pocket. With a HDHP, you could have your premiums, put that money into the HSA, have it to pay for expenses, and still have better coverage than you have now.
Good luck! I would definitely keep looking at different HDHPs–if it halves your premium, than an HSA is probably a good idea. When looking at HSAs, though, make sure you understand what the charges will be for maintaining your account–be sure to ask plenty of questions. Some banks are making a killing on them, because they’re charging monthly fees if the balance is under a certain amount, they’re charging if there are more than a few transactions each month, etc. Like a savings account, you can lose money if you don’t maintain a certain balance.
Insurance Pickle.com Says:
Sounds like you need to switch your plan regardless. You don’t have prescription coverage? What if you get on a drug that runs $500/month…that’s another $6,000 over the course of the year.
It sounds like you’re on a ’saver’ plan and need to change it. The savings on the HSA is all those visits to the emergency room, etc.. because tax deductible whereas now they’re not.
I sell HSAs probably 90% of the time. Do the math and feel free to look at the information on my site about them.
(I’m not providing a link, but…. it’s OK to accompany a good, on-topic answer with a link to your website, blog, or email to offer more information.) Sometimes I just don’t think Yahoo Answers reads the community guidelines…
elmerr Says:
Zarnev sum-ed it up the best.
I have an HSA health insurance I pay $50.00 a month for a $5000.00 deductible. I had to get my appendicitis taken out one year and it costs with hospital stays and surgery about 10K+ but with this plan I only had to pay 5K and for that hole year everything I did was free since my deductible was already met. So I went to doctor a few months after that for checks up and full blood work.
A HSA plan is only good for people that don’t have many medical problems but if you do every have a problem at least you wont be ruined from medical debt like having your appendicitis taken out.
I would do the HSA since you can setup an HSA account and use the tax deduction.
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