HDHP Advice for 1st Time Parents

Scotty342

Level 2 Member
My wife's employer is moving to an high deductible health plan (with an HSA) for the first time next year. In anticipation of our first child. I am trying to determine how the insurance change will impact me. Side note - in 2014 delivery was 100% covered so my luck that we move to an HDHP the year I actually am going to incur some expenses!

The baby is due in May 2015. Should I just assume that I will be paying the out of pocket max for the year? (The plan is 4K single/8K family OOP max with 10% coinsurance after a 2K single/4K family deductible)

Are there any creative strategies to consider regarding who is on the plan at the time of birth? My thought was that if I only insured my wife as a single employee (2K deductible and 4K out of pocket max) then I would max her out with the delivery costs. Then the baby would be added as a life event after the delivery, thereby reducing the chance of us making it to the 8K family max. Does that theory hold water?

Looking forward to the responses of all the financially savvy parents out there!
 

Matt

Administrator
Staff member
My wife's employer is moving to an high deductible health plan (with an HSA) for the first time next year. In anticipation of our first child. I am trying to determine how the insurance change will impact me. Side note - in 2014 delivery was 100% covered so my luck that we move to an HDHP the year I actually am going to incur some expenses!

The baby is due in May 2015. Should I just assume that I will be paying the out of pocket max for the year? (The plan is 4K single/8K family OOP max with 10% coinsurance after a 2K single/4K family deductible)

Are there any creative strategies to consider regarding who is on the plan at the time of birth? My thought was that if I only insured my wife as a single employee (2K deductible and 4K out of pocket max) then I would max her out with the delivery costs. Then the baby would be added as a life event after the delivery, thereby reducing the chance of us making it to the 8K family max. Does that theory hold water?

Looking forward to the responses of all the financially savvy parents out there!
Ouch, not good timing. Silly question, but are you certain they aren't bringing this on as an opt-in plan? If not and your idea does work (i'd have to look that up) then does this new plan allow changes to family status mid year? HDHPs are great, but I always avoided setting them up for myself due to high medical expenses. They are great at other times though.
 

Scotty342

Level 2 Member
Good question. They are maintaining an existing PPO option however the OOP max is the same as the HDHP (after factoring in the company credit to the HSA) and the premiums are $1,200 more per year. So if we are guaranteed to max out the plan, the HDHP would be cheaper. Also, the policy does indicate that a child birth qualifies as an life event eligible for mid-year changes to the plan.

I could find much out there on my idea but something tells me the insurance company is one that can't be "gamed".
 

Matt

Administrator
Staff member
Good question. They are maintaining an existing PPO option however the OOP max is the same as the HDHP (after factoring in the company credit to the HSA) and the premiums are $1,200 more per year. So if we are guaranteed to max out the plan, the HDHP would be cheaper. Also, the policy does indicate that a child birth qualifies as an life event eligible for mid-year changes to the plan.

I could find much out there on my idea but something tells me the insurance company is one that can't be "gamed".
Yeah the OOP max may be the same, but the coverage you get for the birth, I doubt that would have such a high deductible?
 

Scotty342

Level 2 Member
The deductible for the PPO plan is $500 individual/$1000 family. The delivery coverage is 20% coinsurance after meeting deductible up to $2.5K single/$5K max OOP. So if I am thinking about this correctly $26,000 in hospital bills gets you to the max on the PPO family plan? $5K/.2 = 25,000 + 1,000 deductible. Based on averages am I about there?
 

Matt

Administrator
Staff member
Yep, if you are using $26,000 then:

$1000 deductible
20% * $25K = $5000 OOP

Total cost= $6,000 + premiums

Of course, you have the same question to ask about making it a single plan here, because now you are down to $3K vs $4K with the HDHP.


I feel that the $26K number may be high though.. this resource ranges them from 9-17K (more for complications, more for C section)
http://children.costhelper.com/baby-delivery.html but I'd want a few more data points to be sure about that.

There would be additional costs for prenatal too, which would work towards your deductible.

You would also have 1 post natal check up, and several for the baby (inoculations etc) these will all be 'cheaper' on the PPO.

I'm not certain on the answer, but I wouldn't write off the PPO for the birth year. The key to either will be if she can claim just for herself, which sounds like it is possible...
 

Haley

I am not a robot
I hate to be the wet blanket, but this is a gamble no matter how you look at the numbers.

However I can say for certain that you can add the baby to a single policy, it is a qualifying life event.

Due in May means you need to decide this before the pregnacy mid point. How old is your wife? You?

How many siblings does she have and did her mother have an complications or lose a child (most women never speak of it, I found out as an adult when my doctor prompted me to directly ask my mother). Any complications in 1st degree relations need to be considered a risk factor.

So many things we don't know how hereditary works with, but we see they run in families.

What tests have been run? 3-d ultrasound? Amnio?
Talk to the OB. Without your wife in the room if the question might upset her.

1 in 10 newborns go to the NICU. Average cost is $3k a day, average length of stay is over 13 days. If you go with a birthing center that doesn't have a NICU you are also looking at transportation costs. 1 in 10 is based on all births.

Since we count funny in the States real risk is slightly lower, your OB may be unwilling to say you are at lower risk but willing to say there is no current risk factor, so reword the question as needed.

And out of pocket max might not mean what you think it means.
Some things may not count towards oop max, prescriptions, immunizations, some co-pays.

Sorry, I'm rambling here.

TL/DR: I'd say stick with the best coverage you can buy, which is never the HD plan until after the baby is born (or 3 years old, to be honest).
 

El Ingeniero

Level 2 Member
Unfortunately, my employer doesn't offer any but the HDHP, but there are 2 to choose from, one not having such a high deductible. I of course am maxing out my HSA and spending out of pocket for things like dental work and prescriptions.
 

Scotty342

Level 2 Member
I want to thank everyone that has taken the time to responded so far. This health insurance stuff thoroughly confuses me. Matt - Thanks for that link. I put together some scenarios based on those averages and I keep coming up with the HSA being the cheaper answer no matter what numbers I use (by almost 50% on average!). Here is a link to my spreadsheet if anyone has the time to validate my conclusions. If not, hopefully this analysis helps others in a similar situation.

https://drive.google.com/file/d/0BzWMLO2ErfMGWjNfbFNBd0IzWk0/view?usp=sharing
 

MickiSue

Level 2 Member
Supporter
Have you looked at your state's version of the national healthcare website? We have coverage (our kids are grown, so just employee and spouse) through TLofML's employer. But if that fell apart, we'd still be able to get equivalent coverage from MNCare for nearly the same cost.
 

Matt

Administrator
Staff member
I want to thank everyone that has taken the time to responded so far. This health insurance stuff thoroughly confuses me. Matt - Thanks for that link. I put together some scenarios based on those averages and I keep coming up with the HSA being the cheaper answer no matter what numbers I use (by almost 50% on average!). Here is a link to my spreadsheet if anyone has the time to validate my conclusions. If not, hopefully this analysis helps others in a similar situation.

https://drive.google.com/file/d/0BzWMLO2ErfMGWjNfbFNBd0IzWk0/view?usp=sharing
Good work on that- I must have missed that $3000 employer contribution when discussing earlier, that is a game changer for sure.
 

Scotty342

Level 2 Member
Yeah that fact was hidden in my "OOP max was the same in either scenario". HDHP - 8K max - 3K employer contribution = 5K. PPO = 5K OOP w/ no employer contribution. It looks like this may just be the rare case where a HDHP actually beats a PPO because of the employer contribution.
 
Interesting discussion, as my wife and I are currently having the a very similar debate.

One thing to add re: HDHP: There is an extra benefit for those of us paying off student loans under the Income-based repayment (IBR) plan, since the pre-tax HSA contribution reduces your AGI and therefore your loan payments. Effectively, it's an additional 15% savings for every pre-tax $$$ contributed.
 

Matt

Administrator
Staff member
Interesting discussion, as my wife and I are currently having the a very similar debate.

One thing to add re: HDHP: There is an extra benefit for those of us paying off student loans under the Income-based repayment (IBR) plan, since the pre-tax HSA contribution reduces your AGI and therefore your loan payments. Effectively, it's an additional 15% savings for every pre-tax $$$ contributed.
That's interesting. I've not looked into it, but are you 100% sure, I ask only because a lot of AGI dropping tools are baked back into other deductions like this which are based on a MAGI to prevent the extra savings.
 
That's interesting. I've not looked into it, but are you 100% sure, I ask only because a lot of AGI dropping tools are baked back into other deductions like this which are based on a MAGI to prevent the extra savings.
Yeah. I mean I'm pretty sure. I've been doing this for a few years now...

HSA / FSA / Maxing out pre-tax retirement = Way to drop your AGI = Way to lower your monthly IBR student loan payment.

And here (for example): https://studentaid.ed.gov/sites/default/files/income-driven-repayment.pdf
You can see that your payments are calculated based on AGI, NOT MAGI.

This is most useful for people who plan on completing the 10 year public service loan forgiveness (PSLF) by working full time for a government agency or non-profit. Because then you lack incentive to pay off your loans early, despite the fact that interest is accumulating. In addition to that, I think the IBR plan includes a 20 year forgiveness benefit for all borrowers regardless of employment, but I'm not certain.

Anyway, the student loan servicers will annually re-certify your repayment amounts, generally by looking at the AGI on your tax returns. The formula is basically AGI - (150%*federal poverty level for your household size) *.15 = annual repayment.

So that's how every dollar saved via pre-tax retirement or HSA (or FSA, etc.) is worth an extra 15 cents when you consider student loan repayment.

And to circle back to the OP, this is why one might have an additional incentive to go with a HDHP versus a PPO or alternative (assuming one has a choice).
 
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