I was recently asked by a broker I work with to help her with an enrollment meeting. The group had two options available to employees – a traditional PPO plan and an HSA-compatible plan – and I was asked to explain how the HSA worked and answer any questions that might come up.
Unfortunately, the employer had decided to pay the full price for both of the plans and had chosen to pocket the savings from the HSA plan rather than deposit it in the employees' accounts. This makes the HSA option much less attractive for employees since there is no premium savings to pay for up-front expenses like doctor visits and prescriptions. So instead of talking about the benefits of a health savings account, I decided instead to talk about the value of the insurance.
"There's a lot of stuff on the benefit summaries in front of you," I began, " but what I've found is that people tend to focus on a few key items when deciding which plan to go with." One of these is price, I explained, and another is the deductible. In this case the price was the same – the employer was paying 100 percent of the premium for both options – but the deductible was lower on the traditional copay plan.
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"Unfortunately, the deductible usually isn't the full amount you have to pay," I continued. On the copay plan, employees would pay the first $2,000 and then pay 20 percent of the bill until that 20 percent added up to another $3,000 for a total of $5,000 in out-of-pocket exposure. On the HSA plan, the member pays the first $3,000 and then the insurance company picks up 100 percent of the cost – there is no additional out-of-pocket exposure.
And, as is often the case when comparing a copay plan with an HSA plan, the difference is even greater if the employee is covering his family members. The copay plan has a 3x family limit, I told them, so if the entire family is in a car accident, you could be out as much as $15,000. With the HSA plan, it's a 2x family limit, so your total in-network exposure as a family is only $6,000. Plus, the employee doesn't supplement the cost of dependent coverage, so for anyone covering their family members the HSA plan is actually less expensive.
Now, the traditional PPO plan does have one advantage: up-front expenses like doctor visits and prescriptions are covered by a predictable copayment – that's a big plus for a lot of people. With the HSA plan, you get the discount the insurance company has negotiated with the provider, but it's often going to be much higher than the cost of a copayment. The good news is that this amount counts toward your deductible and out-of-pocket expense on an HSA plan; copayments usually don't apply to either of these amounts on a traditional PPO plan. That's a pretty good tradeoff if you ask me.
So, in summary, the traditional copay plan is much more predictable for low-dollar expenses like doctor visits and prescriptions, but the out-of-pocket exposure is less predictable since copayments continue even after the plan's deductible and out-of-pocket maximum have been reached. An HSA plan is less predictable for the low-dollar expenses, but the total out-of-pocket exposure is capped and is much lower than on the copay plan. Personally, I'd rather purchase insurance to protect me from the big "what-ifs" than from the little "what-ifs". I'd rather know what my worst-case scenario is than know how much it's going to cost if I need to visit the doctor or get a prescription filled.
That was enough to get everyone's attention, and I hadn't even started talking about the HSA. Yes, there are a lot of reasons to set up and contribute to a health savings account, but even if you never choose to do that, the high deductible health plan is definitely an option worth considering.
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