Should I choose PPO or HSA for my first plan after losing my dad’s insurance?

[impetus34]

I’m going to be losing my dad’s health insurance in the next week or so. I’m not sure if I should be choosing the HSA plan or PPO through my employer. I’m a generally healthy 26 Y/O male. My main concern is that I have a generic adderall script that I take monthly. I also have to go in for a urine test every 6 months to keep my prescription active. I will be the only one on my plan.

The PPO will take $117 bi-weekly. The deductible is $2,500 and also has a 20% co-insurance. Medication co-pay could either be $10/$30/$60 depending on medication. I cannot remember what the packet said the total premium cost was (I think maybe around $3,800)

The HSA will take (at minimum) $77 bi-weekly. The deductible is $5,000 and has a 0% co-insurance. Everything on the HSA plan is 100% covered after deductible is met. The packet also showed that employees that choose the HSA save roughly $1,100 per year on the premium.

Another factor is that I plan on proposing/marrying my longtime GF within the next year or so. Her insurance is great and I would be joining her plan once we are married. So I’m not sure if I should do the PPO for my meds or the HSA for them during the year or so I would be on my own insurance. I’m also obviously new to the whole insurance game so forgive me if my information is lacking or my terminology is not up to par. I also just read that for 2024 the IRS has changed the max deposit amount from roughly $3,800 to roughly $4,700.

I’m not sure which plan would be better financially for the year or so. I would like to save as much as possible but I’m worried that I will just drain the HSA as fast as I build it due to medication cost. Any help or advice would be greatly appreciated!

 

[foreverthankful]

@impetus34 What are the out of pocket Maximums for each plan? And does your employer give any money to the HSA or an FSA for the ppo?

 

[impetus34]

@foreverthankful Is the out of pocket maximum generally a different number from the deductible? Also I don’t think my employer matches any money towards the HSA.

 

[election2019]

@impetus34 yes, very different numbers.

 

[impetus34]

@foreverthankful I see what you mean now, sorry for the confusion. The out of pocket maximum for the PPO is $6,350 and the out of pocket maximum for the HSA is $5,000. I hope this helps

 

[foreverthankful]

@impetus34 So- which plan is better depends on a couple of factors. If you're concerned about which plan may cost you more if you have an "oh crap" year---- you add the annual premiums to the out of pocket max. This will give you your maximum financial liability for all in-network, medically necessary, non-excluded services for the entire year.

PPO- $6350 + $3042 = $9392

HSA- $5000 + $2002 = $7002

So, in an oh crap year where you need a surgery, get a major health diagnosis that requires a lot of care, spend a few days in the hospital, etc. The "best" plan for you is the HSA--- Smaller financial burden for you.

However, it's fair to say that the average person would not have a large claims year (unless you are currently dealing with some health issues already). In that case, you'll need to map out your year- what does it look like? Do you go to the doctor once or twice, do you get antibiotics a couple times a year? Maybe an urgent care visit because you play a sport for fun? Spreadsheet out your typical health insurance needs and figure them out cost wise for the year. Add them up with your premiums and see what a non-high claims year looks like.

If adding everything you use in a typical year is also saying the HSA is cheaper- that's the plan for you. If that test says the PPO is cheaper, then, you'll want to decide where your risk tolerance is. Are you comfortable assuming you'll have a "normal" year? Or do you just want to be ultra prepared in case something catastrophic happens? Are you okay with a max liability of $9392 for cheaper premiums with the PPO or do you think that extra $2400 is a deal breaker and want to go with the HSA?

The other thing to factor in is that with the HSA, you will have to meet that full $5K deductible before the plan picks up anything. That's not to say you don't have insurance discounts. Your PCP may charge $500 for a visit, and with insurance, your discount gets you to $150. But that $150 will track to your deductible and out of pocket max. With the PPO plan, you may just have a $40 copay to see the PCP, but copays typically don't track to the deductible. If you can't fathom the idea of floating the $150 for a PCP visit and need the comfort of a $40 copay, then the PPO plan is for you.

 

[christeveanity]

@impetus34 The total annual premium cost of the PPO will be $3,042 (26 paychecks x $117). The total annual premium cost of the HSA will be $2002 (26 paychecks x $77).

What is the OOP maximum for each plan?

You will save $1,040 in premiums by going with the HSA plan. But, unless you have $5,000 laying around to meet the deductible for the HDHP/HSA plan, every time you go to the doctor, you will be paying a "contracted" rate for a doctor visit. So, if the doctor charges $250, you may pay a contracted rate of $200 or so with the HSA plan versus, I'm assuming, a co-pay amount with your PPO plan (what is the co-pay amount for a doctor visit with the PPO plan)? This may be okay if you rarely go to the doctor. We don't know what medication you are taking or tier level with your plan, so hard to answer that question. If you need to dig deeper, you could ask your HR for a formulary list for prescriptions to see what tier level the prescription is to see how much it would cost.

Do you know how much your co-pay is with the PPO?

If we know the OOP max for each plan, we can estimate the total annual cost for each plan.

Also, when you get married, you are going to want to take a look at staying on your employer's plan also. You'd want to see if it makes financial sense to go over to her plan or each of you staying with your own employer's group health plan.

 

[foreverthankful]

@christeveanity OP Shared them--

PPO- $6350 + $3042 = $9392

HSA- $5000 + $2002 = $7002

 

[jeb711]

@impetus34 I'd go with the HDHP and contribute heavily toward your HSA while on it.

 

[oupajoe]

@impetus34 HSA is generally better anytime I run the actual numbers. The problem is many people don't fund the HSA. You should fund the HSA even if you spend every dollar out of it. You get a tax break just by putting the money in. This essentially makes your meds tax deductible but you don't have to itemize deductions.

The carrier will have a tiered drug list and expensive drugs will be higher tier. That adds to your expenses with the ppo.

If you can make HSA contributions via a cafetería plan then you have the only truly tax free vehicle available. You must be disciplined and actually contribute.

Also, people don't realize how good an accumulation vehicle an HSA is. With a 125 plan, it's better than an IRA or 401k.