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HSA/HDHP vs PPO Health Insurance Math

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  • HSA/HDHP vs PPO Health Insurance Math

    Hi there,

    Just hoping for any advice/a quick double check of my brief math when calculating whether the PPO plan vs the HDHP with HSA makes more sense for my family for 2018.

    PPO math:

    $144.74 per pay period (every 2 weeks) x 26 = $3,763.76 gone no matter what

    Deductible: $1,000

    Out of Pocket (OOP) max: $6,000

    20% coinsurance rate

     

    HDHP/HSA math:

    $52.22 per pay period x 26 = $1,357.72 gone no matter what

    Deductible $5,400

    OOP max: $8,000

    10% coinsurance

    Max contribution for 2018 = $6,900. Employer puts in $2,500 free (woo hoo!). My additional $4,400 contribution (at 35% marginal rate) saves me $1,540 in taxes.

     

    So, I compare them as such:

    Costs just to be on the two plans, spending no healthcare dollars: PPO -$3,763/HDHP +$2682.68 (includes tax savings + free money - cost per pay period)

    Cost of the two plans to hit the full deductible:                            PPO -$4763/HDHP -$2717.72

    Cost of the two plans to hit OOP max:                                        PPO -$9763.76/HDHP -$5317.72

     

    It seems like the HDHP wins across the board, is there something I'm missing here? An additional benefit would be the HDHP has a 10% coinsurance rate while the PPO plan has a 20% one.

    We have a baby due March 2018, so we may very well hit the deductible/OOP max numbers (or go beyond).

    Thanks for any and all advice in advance. I would probably just try to cash flow the expenses and continue to save/invest the HSA money as a 'stealth IRA' (already have ~$12,000 in there, $11,000 invested in Vanguard LifeStrategy Moderate Growth Fund/VSMGX).

  • #2
    Hi DermRes, you're looking at this correctly in terms of what are the sunk costs (and potentially costs

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    • #3
      Misfiring on the phone tonight, sorry. Let's try that again:

      Hi DermRes, you’re looking at this correctly in terms of taking the sunk costs (i.e. premiums) and potential costs (i.e. OOP max) and adding the employer HSA contrib and tax savings from your contrib. And yes, HSAs often win out, which does seem odd in principle/theory but may be an anomaly (or perhaps purposeful creation) within our current medical insurance set up. I couldn't get my wife to believe my math until I made a fancy spreadsheet to show her!

      Congrats on the forthcoming baby! Are you planning on taking a maternity/paternity leave? I don't know much about this but I'd just make sure if you do that you would still meet the eligibility reqs for contributing fully to the HSA, otherwise you may have to forego part of your contribution.

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