We had our benefits meeting today

This was just for our medical insurance.  I am currently enrolled in the HMO through Blue Cross.  Our open enrollment is only open until Monday.  I have option of staying in the HMO, changing to the PPO for a $23/month premium, or changing to the "high deductible" HSA plan.  They are all attractive for different reasons.  Here is how I see the pros and cons of each.  I would really appreciate any advice or experiences anyone has with any of the plans:

HMO
Pros:  Cheap, low co-pays, low annual maximum (the most I could ever be responsible for would be $1750).
Cons:  Typical HMO crap - I have to get all procedures approved, can't go to any doctor I choose.

PPO
Pros:  Flexibility - I can go to virtually any doctor, I don't have to ask for approval for tests or procedures, just pay the co-pay.
Cons:  More expensive.  co-pays are higher dollar and percentage of any procedures.

HSA PPO Plan
Pros:  HSA allows $2700 per year contribution to an account tax deductible with tax deferred earnings.  The account may be invested as I please (mutual funds, stocks, CDs, etc.).
Cons:  The deductible is $2,400.  Basically all medical costs are out of pocket until I reach $2,400 per year in expenses.  I have only spent that much once in my life.  That was when I had an emergency appendectomy.

I'm really drawn to the HSA plan for the tax deduction and tax deferred earnings on that money.  It is additional money that I can save for long term, assuming I stay healthy.  So, I suppose it is a risk.

If you are participating in a HSA plan, I would love to hear how you like it.  Thanks!

Comments

[Miserly Bastard]

Interesting problem. I've never known anybody with the HSA PPO option. I agree that this sounds attractive. A few questions I think are relevant:

1. What's your top marginal fed + state tax rate?
2. What investment options do you have?
3. What can the money be withdrawn for?
4. What is your current state of health (e.g., chronic problems, bad back, etc.)
5. What is your family history of health (esp. your father if you are male, or your mother if you are female)?
6. Do you take any prescription medications on a regular basis?
7. Do you have any dependents, or plans to get married and/or have dependents?
8. Do you engage in any activities that create a greater-than-normal risk of physical injury (e.g., rock climbing, riding a motorcycle, etc.)
9. Can the money be withdrawn for any non-medical reasons?
10. What is your age & gender?

One thing I would do ASAP is before switching to the HSA PPO, I would use your existing HMO or PPO coverage to get a comprehensive physical. I'd want a clean bill of health from the doctor before switching.

[lamoneyguy]

Good questions MB. Here goes:
1. 28% Fed, 9.3% state (CA)
2. Need to research, but it appears Schwab offers a plan that allows mutual funds.
3. I believe for any medical expense. However, I would mostly not w/d, instead pay out of pocket, allow money to grow tax deferred.
4. need to lose weight, eat better, otherwise fine.
5. Some heart issues on Dad's side, mom is a breast cancer survivor.
6. No meds.
7. Plan to be married in 2008.
8. Pretty sedentary (see #4)
9. at 59 1/2, like an IRA
10. 32, male.

Your last bit of advice is right on the money. I don't think I have time to get it done this year. The open enrollment ends on Monday. I should probably pass on it this year and reconsider next year.

Great questions though. Really focused in on the issue.

[ciwood]

The HSA may be the best way to save for nursing home care rather than paying a high premium for long term car insurance. Just consider the $2400 each year in lieu of a LTC policy premium and try to build as large a balance as possible with the intent of using it many years from now. Current article in Kiplinger's is downright scary about nursing home costs 20-40 years from now. Would you believe $300,00 a year?

[Bob]

I always wondered why people would rather self insure and pay 100 cents on the dollar when it can be done for so much less with careful planning.

A 32 year old male could fund a $10,000 per month benefit (in or out of an ECF). The benefit begins after 60 days and continues for as long as 5 years. The current $10,000 benefit will continue to increase every year at 5% inflation until it doubles and maxes out at $20,000 per month. If the policy is never used, all premiums are refunded. The annual cost of the plan is a little over $1,000 per year.

Over the next 40 years the insured pays in approximately $40,000 in premiums. Once the benefit is triggered and the 60 day waiting period passes, all monies paid in are recouped by the 4th month of "disability" (2 months without benefit, 2 months receiving benefit). Everything after that is "surplus".

The other HSA funds not used to pay LTC insurance premiums can be used to supplement costs not covered by the LTC policy.

Of course if you never need the plan you are entitled to a full refund of premiums paid.

[mbt shoes clearance]

nice to have you do all of the research for us. It makes our decision making so much easi