PPO vs HSA when PPO is free

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3CheersforLkyJack
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PPO vs HSA when PPO is free

Post by 3CheersforLkyJack »

We are in a unique situation. After a few years on the waiting list, our disabled child now qualifies for a government program that will pay all of the premiums of certain medical insurance plans. Myself, child 1, and disabled child are on my employer's HDHP. Disabled child is also covered by Medicaid. We pay nothing for disabled child's medical expenses since any deductible/OOP from my employer's plan is covered by Medicaid. Wife is on her employer's PPO plan.

We've been using the HDHP and maxing the HSA for years. Financially it has been a huge win. We pay all medical costs out of pocket and have let the HSA grow. We're upper 30s with $75k in the HSA.

The HDHP does not qualify for the program. The PPO plan does. The program will pay 100% of the PPO premiums (including myself and child 1), not just a portion for the disabled child.

HDHP annual premium of $2k less $1k employer HSA match = net cost $1k/yr. Deductible $4k, OOP max $8k.
PPO will be free. Deductible $1k, OOP max $6k.

Seems simple, switch to the PPO since it is free, but wondering if there would be a point that it would make sense to pay more to keep being able to max the HSA annually. Those HDHP premiums are tax deductible so really my cost is <$1k, plus we'd get the tax break on contributions to max the HSA each year.
MrTom
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Re: PPO vs HSA when PPO is free

Post by MrTom »

Can they switch to be on your wife's PPO plan and have her take the credit instead while you keep the HSA?
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3CheersforLkyJack
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Re: PPO vs HSA when PPO is free

Post by 3CheersforLkyJack »

MrTom wrote: Thu Aug 18, 2022 12:11 pm Can they switch to be on your wife's PPO plan and have her take the credit instead while you keep the HSA?
That was my first thought, but her plan is very expensive to add children. The program won't cover it.

I also thought about having my wife switch to her employer's HDHP, but her medical expenses can be high so not a good option.
sobogled
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Re: PPO vs HSA when PPO is free

Post by sobogled »

3CheersforLkyJack wrote: Thu Aug 18, 2022 11:30 am We are in a unique situation. After a few years on the waiting list, our disabled child now qualifies for a government program that will pay all of the premiums of certain medical insurance plans. Myself, child 1, and disabled child are on my employer's HDHP. Disabled child is also covered by Medicaid. We pay nothing for disabled child's medical expenses since any deductible/OOP from my employer's plan is covered by Medicaid. Wife is on her employer's PPO plan.

We've been using the HDHP and maxing the HSA for years. Financially it has been a huge win. We pay all medical costs out of pocket and have let the HSA grow. We're upper 30s with $75k in the HSA.

The HDHP does not qualify for the program. The PPO plan does. The program will pay 100% of the PPO premiums (including myself and child 1), not just a portion for the disabled child.

HDHP annual premium of $2k less $1k employer HSA match = net cost $1k/yr. Deductible $4k, OOP max $8k.
PPO will be free. Deductible $1k, OOP max $6k.

Seems simple, switch to the PPO since it is free, but wondering if there would be a point that it would make sense to pay more to keep being able to max the HSA annually. Those HDHP premiums are tax deductible so really my cost is <$1k, plus we'd get the tax break on contributions to max the HSA each year.
Seems like the pure math here is based on your tax bracket and whether tax savings from hsa exceeds the net premium cost.

That said you have a lot in that hsa, there’s a strong argument for ppo and chill.
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3CheersforLkyJack
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Re: PPO vs HSA when PPO is free

Post by 3CheersforLkyJack »

sobogled wrote: Thu Aug 18, 2022 1:22 pm
3CheersforLkyJack wrote: Thu Aug 18, 2022 11:30 am We are in a unique situation. After a few years on the waiting list, our disabled child now qualifies for a government program that will pay all of the premiums of certain medical insurance plans. Myself, child 1, and disabled child are on my employer's HDHP. Disabled child is also covered by Medicaid. We pay nothing for disabled child's medical expenses since any deductible/OOP from my employer's plan is covered by Medicaid. Wife is on her employer's PPO plan.

We've been using the HDHP and maxing the HSA for years. Financially it has been a huge win. We pay all medical costs out of pocket and have let the HSA grow. We're upper 30s with $75k in the HSA.

The HDHP does not qualify for the program. The PPO plan does. The program will pay 100% of the PPO premiums (including myself and child 1), not just a portion for the disabled child.

HDHP annual premium of $2k less $1k employer HSA match = net cost $1k/yr. Deductible $4k, OOP max $8k.
PPO will be free. Deductible $1k, OOP max $6k.

Seems simple, switch to the PPO since it is free, but wondering if there would be a point that it would make sense to pay more to keep being able to max the HSA annually. Those HDHP premiums are tax deductible so really my cost is <$1k, plus we'd get the tax break on contributions to max the HSA each year.
Seems like the pure math here is based on your tax bracket and whether tax savings from hsa exceeds the net premium cost.

That said you have a lot in that hsa, there’s a strong argument for ppo and chill.
We are in the 22% bracket. When you take fed/state >5%/payroll taxes I figure we get a 30-35% tax benefit so it probably exceeds the premium cost.
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Re: PPO vs HSA when PPO is free

Post by sailaway »

3CheersforLkyJack wrote: Thu Aug 18, 2022 1:37 pm
We are in the 22% bracket. When you take fed/state >5%/payroll taxes I figure we get a 30-35% tax benefit so it probably exceeds the premium cost.
But it isn't just the premium: the deductible and OOP max are less, as well. If you are using the insurance, the taxes aren't going to make up the difference in OOP.
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Lee_WSP
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Re: PPO vs HSA when PPO is free

Post by Lee_WSP »

The HSA only wins if you don't actually use the insurance. At best it's only really worth tax bracket x HSA limit.
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3CheersforLkyJack
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Re: PPO vs HSA when PPO is free

Post by 3CheersforLkyJack »

sailaway wrote: Thu Aug 18, 2022 1:44 pm
3CheersforLkyJack wrote: Thu Aug 18, 2022 1:37 pm
We are in the 22% bracket. When you take fed/state >5%/payroll taxes I figure we get a 30-35% tax benefit so it probably exceeds the premium cost.
But it isn't just the premium: the deductible and OOP max are less, as well. If you are using the insurance, the taxes aren't going to make up the difference in OOP.
Agreed. So far medical expenses for myself and child 1 have been pretty minimal, but one trip to the ER could wipe out that tax savings pretty quickly.
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SmileyFace
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Re: PPO vs HSA when PPO is free

Post by SmileyFace »

sailaway wrote: Thu Aug 18, 2022 1:44 pm
3CheersforLkyJack wrote: Thu Aug 18, 2022 1:37 pm
We are in the 22% bracket. When you take fed/state >5%/payroll taxes I figure we get a 30-35% tax benefit so it probably exceeds the premium cost.
But it isn't just the premium: the deductible and OOP max are less, as well. If you are using the insurance, the taxes aren't going to make up the difference in OOP.
Agreed - OP - if you plan on using the insurance you have a $4K deductible to pay. HSA tax savings isn't going to make this up anyway I can see.
I went thru this debate for years - stuck with the PPO (until I changed jobs and it no longer makes sense). I missed out on many years of HSA savings but paid almost nothing for healthcare during those years. I noticed recently a lot of people here post threads about expensive medical bills they have to pay that shock them - I suspect some of those folks moved from PPOs (where they rarely saw a bill other than a copay) to HDHPs where they were suddenly on the hook for large bills until deductibles are met.
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Re: PPO vs HSA when PPO is free

Post by sailaway »

3CheersforLkyJack wrote: Thu Aug 18, 2022 1:47 pm
sailaway wrote: Thu Aug 18, 2022 1:44 pm
3CheersforLkyJack wrote: Thu Aug 18, 2022 1:37 pm
We are in the 22% bracket. When you take fed/state >5%/payroll taxes I figure we get a 30-35% tax benefit so it probably exceeds the premium cost.
But it isn't just the premium: the deductible and OOP max are less, as well. If you are using the insurance, the taxes aren't going to make up the difference in OOP.
Agreed. So far medical expenses for myself and child 1 have been pretty minimal, but one trip to the ER could wipe out that tax savings pretty quickly.

It isn't just emergencies. My husband gets us to OOP with his physical therapy alone.
HomeStretch
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Re: PPO vs HSA when PPO is free

Post by HomeStretch »

In general, it seems like government programs that provide financial assistance are hard and lengthy time-wise to be approved for. With that in mind, have you considered whether there are other reasons to take the government benefit now - for example:
(1) what would happen if you all stayed on the employer HSA plan (which is not eligible for the government assistance) and in the future your employer changed solely to the PPO plan? Would you be able to reapply and be approved for the government benefit quickly and easily?
(2) does taking the government assistance now make it easier in anyway for your child to maintain good coverage when they age out of being covered by your employer plan?
Last edited by HomeStretch on Thu Aug 18, 2022 4:45 pm, edited 1 time in total.
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3CheersforLkyJack
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Re: PPO vs HSA when PPO is free

Post by 3CheersforLkyJack »

HomeStretch wrote: Thu Aug 18, 2022 1:55 pm In general, it seems like government programs that provide financial assistance are hard and lengthy time-wise to be approved for. With that in mind, have you considered whether there are other reasons to take the government benefit now - for example:
(1) what would happen if you all stayed on the employer HSA plan (which is not eligible for the government assistance) !and in the future your employer changed solely to the PPO plan? Would you be able to reapply and be approved for the government benefit quickly and easily?
(2) does taking the government assistance now make it easier in anyway for your child to maintain good coverage when they age out of being covered by your employer plan?
(1) Medicaid is the program that really matters for disabled people. Our child is now covered by Medicaid regardless of our income, which is what we had to wait years for. This extra program (HIPP) only covers the premium of the primary insurance with no impact to Medicaid. We can choose to use it one year, not another, and then go back on with no wait.
(2) Very likely that our child will be on Medicaid/SSI for life. So when they age out of my employer plan, Medicaid would cover everything.
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Re: PPO vs HSA when PPO is free

Post by 3CheersforLkyJack »

Another thought was that we already have $75k in the HSA. Leaving that alone, by retirement that could be $250k-$300k. I love having the HSA but at some point maybe we could have too much in there. I guess if not used for medical we could draw similar to a traditional IRA and pay tax.
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Re: PPO vs HSA when PPO is free

Post by anon_investor »

3CheersforLkyJack wrote: Thu Aug 18, 2022 1:47 pm
sailaway wrote: Thu Aug 18, 2022 1:44 pm
3CheersforLkyJack wrote: Thu Aug 18, 2022 1:37 pm
We are in the 22% bracket. When you take fed/state >5%/payroll taxes I figure we get a 30-35% tax benefit so it probably exceeds the premium cost.
But it isn't just the premium: the deductible and OOP max are less, as well. If you are using the insurance, the taxes aren't going to make up the difference in OOP.
Agreed. So far medical expenses for myself and child 1 have been pretty minimal, but one trip to the ER could wipe out that tax savings pretty quickly.
Get the free PPO. Even if your kid is healthy with no cronic medical condition, kids do stupid stuff that require ER, urgent care or doctos visits. I have 3 small kids and every year someone has to go to the ER (broken bones, stitches, concussion, etc.). One of my kids fell and bumped his head when he was playing (nothing crazy). We took him to the ER after he started throwing up. He needed a CT scan to make sure it was not more serious. He also needed a follow up visit with his doctor. The total damage was $1.5k+ out of pocket on our HDHP since we hadn't hit the deductable, and that was with no major complications, god forbid he had a more serious head injury.
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