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Health Insurance Update: Why We Chose a High Deductible Plan with an HSA

Two weeks ago I wrote about my need to leave COBRA. It has been nearly 18 months since I lost my job and I need to find a new health insurance plan before my COBRA coverage expires. I found a plausible solution that I think will work and I’m hopeful that my wonderful readers will provide comments if it sounds like a bad idea.

So here it goes…

We will switch from a POS plan to a high deductible insurance plan. The maximum deductible per individual is $1,300 and the maximum per family is $2,600. The plan sets out-of-pocket limits at $2,600 and $5,200 respectively.

Preventive services are covered 100% with no coinsurance or co-payments, so my son’s well-child care visits will be covered as well as physicals for my husband and I. The plan also covers routine gynecological visits and cancer screenings like Pap tests.

Everything else requires us to meet our deductible before insurance will kick in. This includes services like visiting the doctor when we’re ill, diagnostic testing, hospitalization and urgent care.   We won’t pay coinsurance if we stay in network, but we will owe co-pays for visiting doctors or emergency rooms after our deductible has been met. I believe the co-pays are comparable to what we currently pay.

So here are the numbers that helped us choose the HSA plan.

Current Monthly Premium: $1525
New Monthly Premium: $765
Monthly Savings: $760
Yearly Premium: $18,300
New Yearly Premium: $9180
Yearly Savings: $9120

That’s right by switching plans we will save $760 per month in premiums and $9120 over the course of a year!

According to the IRS we can contribute a maximum of $6,450 to our HSA. Since we’re already paying a ridiculous amount towards health insurance we won’t miss the money and will do our best to set aside each and every penny of the maximum this year.

If you divide $6,450 by 12 months it works out to $537.50 per month. Believe it or not when you add the monthly premium to the HSA contribution you still end up with a $224.50 monthly difference between our current plan and the new high deductible plan with HSA.

In the best scenario we won’t have too many unexpected medical expenses this year, we’ll pay the lower premiums and we’ll bank the rest of the money in our HSA. In the worst case scenario we pay a total of $7800 after meeting our family deductible and out-of-pocket limits. If we continued with our current plan, (which isn’t an option anyway), we would pay $9,120 more in premiums this year. So it appears that even in the worst case scenario we still make out better with the new plan.

I will, of course, point out that the plans are not entirely equal. Our current plan covers some medical items that the new high deductible plan won’t cover and vice versa, but without being able to predict the future we have to move forward with a plan that simply might not be as robust as our current one.

We do have the option of moving forward with a POS or PPO plan that is similar to the one we currently have, but we would continue to face $1500 monthly premiums and after running the numbers I’m not sure that makes much sense. With the new plan if we don’t use the money it can remain in our HSA. With the POS or PPO plan we fork over $1500 each month even if we never go to the doctor.

So what do you think? Is there anything about this plan that doesn’t make sense? Am I failing to think about anything important? If you have any thoughts on the issue please leave a comment below.

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