Question on Employer-Provided Health Benefits

Goldenbarqs

So I just got a promotion at work and am now eligible for health insurance, which is something that I should definitely get as I've never been insured before. I've been pretty healthy so far and nothing accident related has come up... but you never know. So I went to look at the two different plans that are offered and I was looking at the brochure and was just getting confused. I thought I understood the basic principles of how copay and deductibles and all that worked, but then I wasn't sure and they started throwing in HSAs and HRAs and such and I am just drawing a blank here.

Would anyone be willing to give a quick glance at this pdf? It has a couple charts that look like they have all the main info for the two different health plans (dental and vision are separate, but they're only $15 and $5 a month respectively so I'm definitely getting those as well) and I just want to make sure I pick the best plan for me during my fresh enrollment in health benefits.

https://uminfopoint.umsystem.edu/sites/hr/Benefits/2012/2012 Annual Enrollment Brochure.pdf

Let me know if for some reason that link isn't working.

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Edit: I don't seem to see this on the summary so:

The myChoice Health Plan premium is $130.20 a month
The myOptions Health Plan premium is $84.96 a month
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I live in Missouri and am 25 if that makes any difference anywhere.

Thank you all for your time and help in advance.

khain

Plans: (all numbers are going to be in network and single)
myOption - This is the cheap plan, aside from preventive visits you cover 100% of medical costs up to the deductible and then 10% up to the out of pocket max. Basically this health insurance is for people that don't go to the doctor for anything other than ruinous medical expenses as you'll be paying for normal non-preventative visits, but the max you'll pay in a year is 3k. Note that the university contributes $250 + $100 which do contribute to the deductible limits though that money can also be used for dental/vision I believe.
myChoice - This is the expensive plan. You basically pay the first $250 in medical expenses plus copays for each visit so if you go to the hospital a lot then this plan will save you money over the cheap one.

The three spending accounts they talk about are basically ways to spend money on medical expenses pre-tax and they are split based on which plan you choose. Brief overview is as follows:
HSA - Only applies if you go with the cheap plan, the university contributes money for you to spend on medical expenses every year and you can contribute more if you want. This account rolls over every year and if you leave you keep it.
HRA - Only applies to the expensive plan, and the only way to get money in it is to take the survey, which I would reccomend doing regardless of your choice since it's a free $100 for medical expenses.
HFSA - Only applies to the expensive plan and you would contribute pre-tax to spend on medical benefits. The downside to this account is that any money in it at the end of the year disappears.

I don't know what the monthly costs are for options, but it should basically play out that if you rarely go to the hospital you want myOption and if you have some sort of medical condition, kids, or anything else that requires you to go to the hospital regularly then you want myChoice. If you go with myOption then there really isn't a downside to putting money in the HSA since it's pretax and you'll eventually go to the hospital. If you go with myChoise then how much you contribute to the HFSA should be carefully calculated since it goes away at the end of the year, but once again you don't pay tax on contributions so even if you don't use it all you should save money.

Daenris

Well, as the summaries about "who selects this plan" mentions, the myOptions plan will cost you less per paycheck. But you're responsible for paying the first $1500 of medical expenses in a given year. After that, it covers 90% of your costs until you've spent a total of $3000, and then it covers 100% for any remaining. So if you don't have any major problems, you'll likely pay less with that plan, but if you have some big unexpected medical issue you'll be stuck paying a big chunk of it.

The myChoice plan will cost more per paycheck, but has an annual deductible of only $250, so after your first $250 of medical expenses it pays 100% (though not really since you have a co-pay for each visit). This plan will likely cost you less in the long run if you're going to the doctor/hospital more frequently, and any major unexpected issues will be almost completely covered (except for the co-pay).

If you pick myOptions, you'll have a Health Savings account. Your employer puts a bit of money into this that you can use for medical expenses that aren't covered by your insurance. You can also contribute money from each paycheck that should be a pre-tax contribution. This money rolls over from year to year.

If you pick myChoice, you get a reimbursement account with $100 from your employer. You can submit to get reimbursed for up to $100 in medical expenses. Then you also have a health flexible spending account. You can contribute to this (pre-tax) just like the health savings account above; however, this money does NOT roll over from year to year, so if you don't spend it in a given year you lose it.

Goldenbarqs

Okay, for some reason seeing your guys' explanation seems to work better.

So, if I'm on a more limited budget, but in relatively good health, haven't really needed a hospital visit ever (at least since I was a kid on my parents' insurance), it looks like the cheaper plan would be better, because that way I'm not spending as much month to month, but then if something disastrous or unexpected happens, even though I'll pay more than if I'd had the expensive plan, it's still not as bad as if I had no insurance at all, correct?

Feral

Goldenbarqs wrote:

Okay, for some reason seeing your guys' explanation seems to work better.

So, if I'm on a more limited budget, but in relatively good health, haven't really needed a hospital visit ever (at least since I was a kid on my parents' insurance), it looks like the cheaper plan would be better, because that way I'm not spending as much month to month, but then if something disastrous or unexpected happens, even though I'll pay more than if I'd had the expensive plan, it's still not as bad as if I had no insurance at all, correct?

Yes.

The cheaper plan also enables you to use a Health Savings Account (HSA).

This is a bank account that works and acts just like a checking account. Your employer deposits money directly to it. You may use this money for any health-related expenses and it is tax-free. It does not expire. (You may choose to use that money for non-health-related purposes like, say, car repairs, or Xbox games, or booze and strippers. However, if you do, you will have to pay taxes on it as if it were regular income, and the tax burden can be rather hefty.)

HSAs are good for young & healthy people because it is basically free income that is yours forever and as long as you save it and don't spend it on stupid shit, it'll remain in the account waiting for the day when you actually do become sick or injured.

You can also contribute up to $3100 per year of your own money to it. If you choose to do so, you get a tax break for that money too.

Only people with high deductible health plans (like your employer's cheap plan) are eligible for these tax breaks.

Also, on any plan, cheap or expensive, you are eligible for one free visit with a physician per year for "preventative care." No copays or extra fees. You can thank Obamacare for that.

Feral

The official legal name for the cheap plan is "High Deductible Health Plan plus Health Savings Account," or HDHP+HSA for short.

If you choose to enroll in the HDHP+HSA, then my suggestion is to try to save some money in the HSA if you can. If your employer offers an option where you can contribute a small amount from your paycheck, then utilize that option.

If you can build up $3000 in your HSA, then you are completely covered in case something terrible happens. Even building up $1000 or so can help a lot in the case of an emergency.

I know it's hard to save, especially when you're just starting out at a job. But this is tax-free money. All those tax withholdings you see on every paycheck? They don't apply to HSA contributions. If you get paid every two weeks, then just $40 a paycheck will turn into $1000 in a year - and if you didn't save that money, and spent it instead, then you'd only be getting about $30 per paycheck after taxes are withheld.

Goldenbarqs

Thanks guys! That was all really helpful.

Bowen

I absolutely recommend the cheaper play with HSA if you're young and relatively healthy.

Deebaser

Don't go MyOptions unless you are going to contribute at least the difference between high plan and the low plan into your HSA until you hit your deductible or preferably your OOP max.

If you're completely healthy and your company kicks in 250 a year, that'll take you a bit more than 2 years.

Cheaping out on your insurance, but not taking advantage of the HSA is a bad idea.

Feral

Deebaser wrote:

Cheaping out on your insurance, but not taking advantage of the HSA is a bad idea.

Yep. I know I harped on this point above but it can't be stressed enough.

Money in your HSA is yours and it is tax-free and it will sit and wait for you to get sick or injured (which will happen someday). (Also, every HSA I've ever seen has been interest-bearing.)

It is greatly to your benefit to contribute a little bit to it every paycheck.

Ganluan

One other benefit of HSAs is that even if you become ineligible to contibute to it at some point (i.e. you become covered under a health plan that is not a HDHP) you can still use the HSA funds tax-free.

Deebaser

Feral wrote:

Deebaser wrote:

Cheaping out on your insurance, but not taking advantage of the HSA is a bad idea.

Yep. I know I harped on this point above but it can't be stressed enough.

Truth. With an HDHP you're basically self insuring up to the max out of pocket. Also, unless things have changed (Im not an expert on the ACA), your deductible and OOP are calendar year based, not rolling. You could find yourself in an extreme situation where you get yourself effed up to the point where you are $6000 poorer.

I'm not trying to scare you off the HDHP, but you have to use it right and assume the responsibility to fund your HSA.

Basically, if you go down that route, don't be the guy that's all "ABLOO ABLOO. I owe the hospital $TEXAS. WTF was I paying my $80 a month for!?"

Build your account. If you're only socking away the difference and in good health, in a few years your deductible will be covered.

Bowen

Medical bills can be drawn out with $1 a month payments if you are destitute too.

Deebaser

Yeah, but then you're destitute.

Bowen

They don't know my financial obligations. Medical bills are funny like that though, the only time I think they're allowed to even touch your credit is if you default on them... which means 0 payment for x months.

tinwhiskers

Also HSA money can also be used for all kinds of stuff.

http://www.irs.gov/pub/irs-pdf/p502.pdf

List all the qualifying expenses, but dental work is a qualifying expense as is optometry stuff, including LASIK. Even though I am past my yearly insurance deductible,I keep putting money in because it will eventually let me get LASIK with a 30% discount(fuck you taxes).

Remember with the HSA money since its pre-tax it effects your paycheck less than you think. $150 a month into an HSA is only about $100 out of your take home. You may also want to check with you HR on restrictions for changing the amount withdrawn(some places prefer you only change it quarterly/annually etc), because it may make sense to try and push a bit of extra $ into it early to build the buffer effect quicker.


Also there's some stuff you can do with an HSA to use it as a second IRA account. I'm just starting to look into that myself; as earning .5% a year on my Health Savings Account, while health care costs grow at 5%+ doesn't really strike me as a great long term strategy.


Also the fee for withdrawing for non-qualifying expenses is now 20%+taxes owed so don't do it like ever.

zepherin

Also if you have an HSA, you can do what my friend does. He contributes 50 bucks a week to his FSA, and his company does 500 to a HSA, and with the HSA he uses that for dental because his health plan offers a dental discount, but it's not dental insurance however he ends up with 300 or so at the end of the year that rolls over. With his FSA he uses that for day care, but because that you want to make a conservative guess with (use it or lose it) he ends up paying extra to day care at the end of the year, but not too much. Although his FSA is pretty limited to skirt around regs on that so that is not likely a good option for you.