HSA vs PPO Health Plan for upcoming pregnancy?

Submitted by Subliminallly_cool t3_127nqkl in personalfinance

Hello,

Me an my wife are hoping to get some advice on what health insurance plan to choose from.

I am starting a new job this June and will have to enrol for health insurance for me and my wife.

We are planning on start trying to have a baby this Nov/December and we are hoping to have a baby soonest next August/Sept.

The details of the two plans we are considering is:

HSA

  • Deductible: $3,400
  • Premium: $3,360
  • Out of Pocket Max: $6,800
  • Coinsurance: 20%
  • Employer funding: $1,800

PPO

  • Deductible: $1,000
  • Premium: $5,204
  • Out of Pocket Max: $7,000
  • Coinsurance: 20%
  • No HSA available

For the HSA, most hospital bills (in&out patient care, specialist, primary care, ER etc) require coinsurance and deductible.

For the PPO, just in&out patient care require such. The rest is <$50 copay except ER at $150.

There's a few other details.

I would really appreciate any advice or suggestions.

Thanks in advance!

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clearwaterrev t1_jef9jdg wrote

I would assume total medical bills between $10-15k for a healthy pregnancy and hospital birth with no significant complications. That gives you a starting point for calculating coinsurance costs. If your baby is born quite early or needs surgery, then your costs will be much, much higher and you'll almost certainly hit your out of pocket max. 10-15% of babies born in the US spend some amount of time in the NICU, so it's not very unlikely you'll have high costs due to a NICU stay or other complications.

If I assume your total healthcare costs are about $12k before insurance, then your total cost with the HSA plan is $6,680 for the year. If you go with the PPO plan, then it's $8,404 for the year.

If you have meaningfully higher costs due to complications, the HSA is the better pick because the out of pocket max is lower and the premiums are substantially lower.

I'd pick the HSA plan, and max out your HSA so you are spending tax-free dollars to pay your medical bills.

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Bangkok_Dangeresque t1_jefabt9 wrote

Two questions needed from you to be sure;

  • What's your federal and state marginal income tax bracket?
  • How much do you plan to contribute personally to the HSA for the HDHP, or an FSA (if available) for the PPO?
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Subliminallly_cool OP t1_jefnuld wrote

  1. 22%. Income like 150k combined (me 80k, her 70k)

  2. I am hoping to max the HSA. Not exactly sure about how much we hope to contribute to the FSA.

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Bangkok_Dangeresque t1_jeg77fu wrote

Well since you know you have a pregnancy/birth coming up next year, if you do choose the PPO you should certainly contribute something. You know you will have out of pocket medical expenses. May as well get an effective 22% (+whatever your state tax rate is) discount on them.

That said, the math here makes it so that in virtually all scenarios you come out ahead with the HDHP, so long as you do actually max out the HSA.

If you have $0 in healthcare expenses, the PPO will cost you an effective -$3401, while you will actually be +$1510 better off on the HDHP. As in, with the employer HSA contribution plus your tax savings from contributing, you will make money on the HDHP as a starting point.

In the maximal care scenario where you hit the (shockingly similar) out of pocket max for both plans, the PPO effective cost will be -$6,851, while the HDHP effective cost will be -$5,290. So in the worst case scenario you'd be $1,561 better off on the HDHP.

Things can get a little hazier in the middle though. In theory, if most of the care you need is in the form of visits that require a copay rather than cost sharing, it's possible that there's a zone of moderate healthcare usage where the PPO makes you better off. At least in terms of direct out of pocket expenses.

For example, say you have 10x visits to specialists. On the HDHP this might be $2,000 out of pocket towards your deductible (assuming $200 billed per visit), but on the PPO it might only be $350 out of pocket in copays (assuming a $35 copay per visit).

Though even then, while the that extra $1650 out of pocket for the same care might sting your checking account, your overall effective cost accounting for the employer HSA contributions plus your tax savings on the HDHP would be $1561 - $2000 = -$490, while the PPO would be -$3401 - $350 = -$3751.

So still much better off on net. The difference would be even starker if instead of office visits you had coinsurance-eligible care on the PPO, since the 20% rate is the same.

On the other hand contributing to an FSA with the PPO would moderate the differences somewhat.

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shadow_chance t1_jeftqgq wrote

The HDHP wins because you're saving 4200 $3644 in premiums/employer HSA contributions and $3644 is way more than the OOP max differential.

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Subliminallly_cool OP t1_jefugml wrote

Sorry can you elaborate?

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shadow_chance t1_jefw5ir wrote

Sorry I did the math wrong but it's still the overall right answer.

Before you even use any healthcare, you're saving $1844/year in paycheck premiums. Then your employer is giving you $1800/year in HSA contributions.

So you're up $3644 before you ever see a doctor.

In 2024 99% % chance to hit your OOP max. So on the HDHP you're going to pay $3360 in premiums and $6800 for care. Minus the $1800 you got from your employer. Total spend $8,360.

If you take the PPO, total spend $12,204.

The math may be different for 2023 since you won't hit your OPP max most likely but I sort of doubt it. The premium savings and HSA contribution will cover a good chunk of regular medical you care you may get before you're pregnant.

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