HMO vs HDHP

[ultragc]

Hi All,

My work started the open enrollment for 2017 this week. I have always been on HMO for years but my work is starting to push HDHP/PPO alot more these days. Before I decide, I want to evaluate if it is cost effective given my current situation. I have done a lot of research on how HSA works but can't seem to figure out if it is worth it for me. This is why I am asking for some inputs.

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ABOUT ME
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- Married with 2 childs (under 12 years of age)
- Reside in California
- Tax bracket 25%
- Estimated 2017 doctor visits (Family=12, specialist=10) at $42 average per copay. Under HMO, this would approx equal $600 copay.
- Estimated medications $800
- Estimated other medicals expense $1300

HMO
----------------
- Monthly Premium: $343/month
- Annual deductible for HMO is $0
- Annual max out-of-pocket is $7000
- Coinsurance? I don't see it in the plan so I assume $0
- Flexible Benefits (FSA): I can take out $2,550/year

HDHP
----------------
- Monthly Premium: $403/month
- Annual deductible is $3000
- Annual max out-of-pocket is $8000
- Maximum contribution to HSA is $6750 (include employer contribution)
- Employer contribute $1000
- HDHP coinsurance is 20%
- Flexible Benefits (FSA): With HSA, I can take out only $1,500/year to be used for Dental/Vision only.


I am looking for suggestions on whether I should switch.

Thanks in advance.

[disneysteve]

- Tax bracket 25%
- Estimated 2017 doctor visits (Family=12, specialist=10) at $42 average per copay. Under HMO, this would approx equal $600 copay.
- Estimated medications $800
- Estimated other medicals expense $1300

HMO
----------------
- Monthly Premium: $343/month
- Annual deductible for HMO is $0
- Annual max out-of-pocket is $7000
- Coinsurance? I don't see it in the plan so I assume $0
- Flexible Benefits (FSA): I can take out $2,550/year

HDHP
----------------
- Monthly Premium: $403/month
- Annual deductible is $3000
- Annual max out-of-pocket is $8000
- Maximum contribution to HSA is $6750 (include employer contribution)
- Employer contribute $1000
- HDHP coinsurance is 20%
- Flexible Benefits (FSA): With HSA, I can take out only $1,500/year to be used for Dental/Vision only.

You estimate 22 doctor visits at an avg copay of $42, but then say that would come to $600. It would actually come to $924, or did I misunderstand you?

If the HMO has no deductible and no coinsurance, how would you ever get to the $7,000 max OOP? I think you're missing something there.

Do you fund the FSA yourself? Does your employer contribute? Is that "use it or lose it" money?

[ultragc]

Hi Steve,

Thanks for the comment. You are right, the office visits would total $920. The FSA is is funded by me pre-tax... a use or loose it thing. [link removed]

[HundredK]

I just went through the same decision making process, and in the end I went with the HMO option because we are trying to pay down debt, and should something catastrophic happen, the HMO will be far less out of pocket. So, assuming you have the resources to do either, I think it comes down to personal preference.

HDHPs can be great because you can typically choose to see any provider you want, specialist or otherwise. You have to be careful though about choosing in network vs out of network because you usually have to pay more for the latter. So it could be great if you need to see a particular person and don't want to deal with the red tape of an HMO (you usually have to do everything through your PCP with an HMO and wait for referrals). You also get the HSA which rolls over to future years, and sounds like in your case you get the limited purpose FSA. And if you don't go to the doc a lot, that HSA can build up over time, very nice.

HMOs are great because of the limited out of pocket costs. It can also be nice that HMOs tend to have everything under one roof, so if you need xrays, you maybe go to a different floor in the same building. Then you maybe get your flu shot and grab any prescriptions on your way to the car. Very convenient.

Truthfully, I'd prefer to have the HDHP with HSA (and employer contribs) and that is what we'll do when we are on better financial footing. But I think it's a very personal decision overall, and depends on each person's circumstances.

[ultragc]

Thanks. The HSA is what attracts me. However, with estimated $3000 expense, the math show that HMO is still better... or at least I am somewhere in the middle between the two plans.

[disneysteve]

estimated $3000 expense,

Do you mean the deductible? Keep in mind that it isn't actually $3,000. Your employer is contributing $1,000, so that knocks it down to $2,000. And you would be paying that with pre-tax dollars from the HSA so it's really only $1,500 of post-tax income.

As HundredK said, one appeal of the HSA is that unlike the FSA, that money is yours forever. If you don't use it fully each year, it remains in your account.

We just switched to a HDHP/HSA plan in September and right now I've got $2,600 in the HSA. And that's after we've sent about $1,600 out of that account so far.

[disneysteve]

It can also be nice that HMOs tend to have everything under one roof, so if you need xrays, you maybe go to a different floor in the same building. Then you maybe get your flu shot and grab any prescriptions on your way to the car.

I'm not sure where you live but this is definitely not the norm. An HMO is just an insurance plan. It has nothing to do with how the doctors or other healthcare services are physically located.

My practice participates in probably a dozen or more HMO plans. We are a private practice in a residential neighborhood. If you need an x-ray, we give you a referral and you go to the radiology site. If you need a prescription, you go to the pharmacy of your choice. We only provide the doctor services. That's the way it has worked in any practice I've ever been involved with and I've been doing this for about 25 years.

[HundredK]

I'm not sure where you live but this is definitely not the norm. An HMO is just an insurance plan. It has nothing to do with how the doctors or other healthcare services are physically located.

My practice participates in probably a dozen or more HMO plans. We are a private practice in a residential neighborhood. If you need an x-ray, we give you a referral and you go to the radiology site. If you need a prescription, you go to the pharmacy of your choice. We only provide the doctor services. That's the way it has worked in any practice I've ever been involved with and I've been doing this for about 25 years.

I live in the land of Kaiser Permanente. Everything under one roof.

[disneysteve]

I live in the land of Kaiser Permanente. Everything under one roof.

Ah. Interesting. So there's no such thing as a private practice or neighborhood doctor's office? All doctors practice in a large medical center?

[HundredK]

That's correct. They are all Kaiser employees. They have enormous campuses with all the different departments functioning in the same location. There are some smaller campuses too, but at a minimum, all the ones I've seen have physician offices, pharmacies, radiology, and labs.

[disneysteve]

That's correct. They are all Kaiser employees. They have enormous campuses with all the different departments functioning in the same location. There are some smaller campuses too, but at a minimum, all the ones I've seen have physician offices, pharmacies, radiology, and labs.

Well as I said, that is definitely not the norm. Also, that is not an HMO. It is an integrated delivery system. An HMO is just the insurance plan. In the rest of the country, having an HMO means you choose a primary care doctor who accepts that plan and can be referred to facilities and specialists who also accept that plan but they are not geographically located in the same place.

[HundredK]

Well as I said, that is definitely not the norm. Also, that is not an HMO. It is an integrated delivery system. An HMO is just the insurance plan. In the rest of the country, having an HMO means you choose a primary care doctor who accepts that plan and can be referred to facilities and specialists who also accept that plan but they are not geographically located in the same place.

Yep, fair point. Although it definitely is the norm where I live. But fair point that the HMO does technically refer to something different.

[LivingAlmostLarge]

Why is the HDHP higher? Usually because they cost more OOP they are lower premiums than HMO

[disneysteve]

Why is the HDHP higher? Usually because they cost more OOP they are lower premiums than HMO

I was wondering that too. It was the same way here for a while which kept me from switching to an HSA plan years ago. This year it was finally cheaper so we switched.

[ultragc]

Thanks all for the input. I live in California. Unfortunately, my company's HDHP/HSA premium cost more than HMO. Even with them contributing $1000 and my estimated medical expense of $3,000 in 2017, HMO seems to be a better option for me.