High Deductible Health Plans (HDHP)

[Danoff]

Is this the answer to rising health costs?

This is a product of the Bush administration policy change on health savings accounts. Provided that you're not covered by medicare, and provided that you're in an HDHP and not covered by some other health plan, you can now open a Health Savings Account (HSA), which you can contribute to pre-tax (limited yearly). The savings account is basically then used to cover the deductible on the HDHP. The kicker there is that you can roll over unused funds into the next year, and even invest the funds. When you turn 65 you can even cash out of the system - it's practically an IRA.

So what does this change? Well, users of such a system are now directly paying for most of their health care costs (up to the deductible, typically ~$2000/year).

How is that good?
- Doctor choice isn't limited (much).
- Consumers will now make more economical decisions with purchases (hey, the generic drug costs less and since I'm paying for it, that suddenly matters)
- Limits abuse of the health care system by getting consumers to foot a substantial bill up front
- Covers 100% in case of catastrophe (which is what insurance is supposed to be for)
- Doctors actually get paid (rather than being denied by insurance/medicare)
- Puts the consumer back in charge of medical decisions
- Costs less to the consumer than similar PPO plans (because they cost more than the HDHP deductible if you add up the monthly fee)
- Takes advantage of investment growth while the money is waiting to be used.
- Encourages personal saving/responsible financial behavior
- Funds don't need to be authorized to be spent
- Checkups are covered outside of the deductible

The bad?
- It's gonna cost more than your HMO
- You actually have to be responsible enough to put away 2k for your health care deductible
- Not everyone offers it
- Discourages trips to the doctor for checkups that aren't covered which may lead to a condition that isn't caught early.

I think this has the potential to curtail rising health care costs and abuse. All the incentives are in the right place, and it even taps the market for growth. I love it. My wife is signing up for one and I'm going to petition my employer to offer an HDHP. Hell I wonder what it would cost to go with a non-employer sponsored HDHP. Couldn't be much.

Your thoughts?

 

[FoolKiller]

- Costs less to the consumer than similar PPO plans (because they cost more than the HDHP deductible if you add up the monthly fee)

Wouldn't this really depend on how much you use healthcare services and exactly how high the deductible is? Say, for instance, I have an HDHP instead of my PPO. A three day hospital stay cost me a $300 co-pay and my insurance was billed nearly $25,000. I have a $0 in-network deductible. And being that I have BCBS I have yet to find an out-of-network doctor.

For generally healthy people who can actually manage to put away money this would probably be best. But for me my $120 monthly payments into my PPO is much cheaper considering all the tests I have to go through on a regular basis and that heart emergencies randomly pop up. And I don't even want to think what my next surgery will cost.

My thought is that making this an option is great, but unless you want those of us with serious ailments to find ourselves unable to save anything and be sucking on welfare I suggest just making it an option.



That said, this would never catch on as long as unions exist. Just like the general public sees universal healthcare as "free" they will see this as coming out of their pocket. It would take a lot of education to get them to understand. Even then it won't matter because you summed it up when you said people would have to be disciplined enough to put $2000 into savings every year. I believe the recent home loans issues, foreclosures, and amount of debt in this country shows that the general public lacks that discipline.

 

[Omnis]

I say just go to a combination of HSAs and major medical plans.

 

[Danoff]

For generally healthy people who can actually manage to put away money this would probably be best. But for me my $120 monthly payments into my PPO is much cheaper considering all the tests I have to go through on a regular basis and that heart emergencies randomly pop up. And I don't even want to think what my next surgery will cost.

The HDHP deductible that I'm looking at has a $2500 deductible and costs $17/month. The PPO I'm looking at is $250/month.

HDHP = 2500 + 17*12 = $2704/year
PPO = 250 * 12 = $3000/year

The PPO money is gone - and doesn't cover co-pays. The HDHP money is in an account that grow and that you might actually not spend all of. Plus you pay nothing after the deductible.

Yes, it would depend on the deductible and what plan you were offered. But I think generally speaking it's competitive. Under these kinds of plan offerings, even you would be better off with the HDHP. Unless of course you can manage with an HMO - that's the cheapest alternative.

 

[Omnis]

Hospital costs need to come down as well; it's not just insurance. Hospitals have some crazy operating expenses with a lot of the insurance stuff.

 

[Swift]

Hospital costs need to come down as well; it's not just insurance. Hospitals have some crazy operating expenses with a lot of the insurance stuff.

Well, they have to pay for the radical malpractice insurance. No, I'm not justifying the incredible costs. I'm just saying that the frivolous lawsuits don't help costs come down.

 

[Omnis]

Well, they have to pay for the radical malpractice insurance. No, I'm not justifying the incredible costs. I'm just saying that the frivolous lawsuits don't help costs come down.

Of course. That's a huge part of it and then there's also the factor of risk as a whole. Hospitals (at least the ones here) are now carrying a disgusting amount of risk (risk of lawsuits, not getting paid, etc.), which has to be covered by insurance. One day, I'd like to go over and talk to a hospital comptroller (whatever they're called) to learn more about their budgets and everything. I only know what my dad has explained to me regarding insurance because he manages doctor/hospital relations.

Currently, I'm thinking that some kind of undesirable outcomes insurance would be better for hospitals and costs. This way, it can be paid by the patient per operation and maybe the hospital can match it-- kind of like how shipping insurance works.

 

[FoolKiller]

The HDHP deductible that I'm looking at has a $2500 deductible and costs $17/month. The PPO I'm looking at is $250/month.

HDHP = 2500 + 17*12 = $2704/year
PPO = 250 * 12 = $3000/year

The PPO money is gone - and doesn't cover co-pays. The HDHP money is in an account that grow and that you might actually not spend all of. Plus you pay nothing after the deductible.

This definitely shows the case by case basis of the situation. Is that a one time $2500 deductible and you don't have to pay anymore for the rest of the year? If so I call that far from a High Deductible Health Plan and I would definitely sign up for that.

Here's my situation:
The insurance the state offers my wife (she works for them) is $12 a month with a 20% deductible, up to $500,000/year. It sounds very HMO-like but they don't call it that because they don't require referrals and a few other minor differences. My plan is a BCBS PPO at $120 a month with $20 physician co-pays, $25 specialist co-pays, and a tiered pharmaceutical plan. Three of my medicines are $20 total for three months worth, one is $60 for three months worth, and the other is $120 for three months worth (stupid name brand anti-seizure meds).

My PPO health plan is $120 a month.

Now let's take the year I had my hospital visit:
My PPO = $120 * 12 + $300 copay = $1740. After normal $25 co-pays for doctor visits and about $800 for meds co-pays you can probably round that to $2,640. I am pretty sure I claimed something in that area on my taxes. Rates have changed since then and I am thinking on current rates. It may have actually been less. I actually did all the math in the universal healthcare debate thread (which considering I was recently promoted universal healthcare will now cost me even more than I figured then - just a side note), I am rounding here. Definitely cheaper than your plan, and no matter what the hospital visit costs my insurance I still only pay the $300 co-pay.

My wife's plan = ($12 *12) + ($25,000 * 0.2) = $5,144

And then factor in that my plan still offers a health savings plan, which was available long before President Bush initiated his, and so all my co-pays and meds can get covered by that. I can't borrow against it, but I do get any surplus back when I leave my job.

Yes, it would depend on the deductible and what plan you were offered. But I think generally speaking it's competitive. Under these kinds of plan offerings, even you would be better off with the HDHP. Unless of course you can manage with an HMO - that's the cheapest alternative.

I couldn't mange with an HMO. They tend to benefit healthy people the best. Us sickly folks still get reamed.

Hospital costs need to come down as well; it's not just insurance. Hospitals have some crazy operating expenses with a lot of the insurance stuff.

You mean like $80 for Tylenol? Or $25,000 to knock me out, hit me with a defibrillator, and then watch me in a bed for three days hooked up to an EKG? I couldn't believe my insurance confirmation when I saw what they paid. It would have been cheaper for me to do the procedure and then carry a portable heart monitor to a hotel across the street. The food would have been better and cheaper too.

 

[Omnis]

You mean like $80 for Tylenol? Or $25,000 to knock me out, hit me with a defibrillator, and then watch me in a bed for three days hooked up to an EKG? I couldn't believe my insurance confirmation when I saw what they paid. It would have been cheaper for me to do the procedure and then carry a portable heart monitor to a hotel across the street. The food would have been better and cheaper too.

Exactly. They have to make it up somewhere, otherwise they lose doctors/staff and/or go bankrupt. The 3rd party involvement pushes prices.

 

[Danoff]

This definitely shows the case by case basis of the situation. Is that a one time $2500 deductible and you don't have to pay anymore for the rest of the year? If so I call that far from a High Deductible Health Plan and I would definitely sign up for that.

That's the deal. If you spend more than $2500 on practically anything (pre-tax of course), then they cover 100% of everything else. There's a $17 monthly fee for the service.

I realize that HSAs were around before Bush. But he made them much more useful by allowing you to roll money over from year to year.

 

[FoolKiller]

That's the deal. If you spend more than $2500 on practically anything (pre-tax of course), then they cover 100% of everything else. There's a $17 monthly fee for the service.

The real question is: when you say 100% of everything else, does that mean there is no annual limit? Annual limits are a tricky situation as many plans don't mention them, unless you read the fine print, because they may be so high rarely anyone hits them, but those that do are the ones that get screwed by them the most.

For example, I knew a woman who had cancer and was undergoing some very expensive treatement. It was such an aggressive treatment that in a year the expenses got over $1 million. What she didn't know was that her insurance had a $1 million a year limit. She found out when the bills started showing up.


Also, on that HDHP, how much extra is it to add a spouse? Children? Is it $2500 per person?

Can you tell I have examined way too many health plans in my day? I feel sorry for interviewers when I do job interviews, because I ask healthcare questions they never considered.

If it is just $2500 then it would definitely be something I could look in to.

 

[Danoff]

The real question is: when you say 100% of everything else, does that mean there is no annual limit? Annual limits are a tricky situation as many plans don't mention them, unless you read the fine print, because they may be so high rarely anyone hits them, but those that do are the ones that get screwed by them the most.

For example, I knew a woman who had cancer and was undergoing some very expensive treatement. It was such an aggressive treatment that in a year the expenses got over $1 million. What she didn't know was that her insurance had a $1 million a year limit. She found out when the bills started showing up.


Also, on that HDHP, how much extra is it to add a spouse? Children? Is it $2500 per person?

Can you tell I have examined way too many health plans in my day? I feel sorry for interviewers when I do job interviews, because I ask healthcare questions they never considered.

If it is just $2500 then it would definitely be something I could look in to.

Yea the benefits are unlimited. To add a spouse is another $2500, but the monthly payment is substantially higher. I'm not sure we'll go with that option.

What I really like about this is that it re-establishes insurance for what it is supposed to be for - major medical expenses. Most people seem to think that every single little health expense should be paid for by someone else. I much prefer a situation where the insurance isn't even contacted until it gets serious.

 

[Swift]

Yea the benefits are unlimited. To add a spouse is another $2500, but the monthly payment is substantially higher. I'm not sure we'll go with that option.

What I really like about this is that it re-establishes insurance for what it is supposed to be for - major medical expenses. Most people seem to think that every single little health expense should be paid for by someone else. I much prefer a situation where the insurance isn't even contacted until it gets serious.

That's a good point. I'm actually surprised there aren't more plans out there for young adults, without children, like this. I think I've been to the doctor 4 times this century. But I've been paying for insurance almost the entire time.

Even if I was only paying 50$ a month in insurance(and it's been below and above that) from the turn of the century it costs me $4,200. That's serious money.

I would much rather pay just a bit, have a higher deductible and through out 75$ when I don't feel bad, but I would've saved much more the 2,500 especially with interest.

 

[Omnis]

Yea the benefits are unlimited. To add a spouse is another $2500, but the monthly payment is substantially higher. I'm not sure we'll go with that option.

What I really like about this is that it re-establishes insurance for what it is supposed to be for - major medical expenses. Most people seem to think that every single little health expense should be paid for by someone else. I much prefer a situation where the insurance isn't even contacted until it gets serious.

So what are the benefits of this compared to a standard major medical plan? Sounds like something I should consider after my HMO group expires when I turn 21.

 

[Danoff]

So what are the benefits of this compared to a standard major medical plan? Sounds like something I should consider after my HMO group expires when I turn 21.

Well, if you're healthy then it doesn't cost you much of anything at all. If you're unhealthy, it can still save you money overall, but not if you could make do with an HMO.

Benefits compared to standard health plan:
- You get to pick your doctor
- No need to get approval before funds are used
- Interest on the savings account
- Roll over unused funds into the next year
- Can cost less than comparable PPO plans (depending on your plan)
- Covers 100% in catastrophic cases.

 

[Omnis]

Well, if you're healthy then it doesn't cost you much of anything at all. If you're unhealthy, it can still save you money overall, but not if you could make do with an HMO.

Benefits compared to standard health plan:
- You get to pick your doctor
- No need to get approval before funds are used
- Interest on the savings account
- Roll over unused funds into the next year
- Can cost less than comparable PPO plans (depending on your plan)
- Covers 100% in catastrophic cases.

Isn't that exactly the same as existing major medical plans paid through an HSA?

 

[FoolKiller]

That's a good point. I'm actually surprised there aren't more plans out there for young adults, without children, like this. I think I've been to the doctor 4 times this century. But I've been paying for insurance almost the entire time.

Because if you pay a higher monthly payment you pay for people like me to be covered.

Now, employers on the other hand woudl probably prefer you to get an HDHP as it would cost them less. Of course when you have people that can't save looking for a good health plan as part of their job they would avoid an employer with this because they see the $2500 deductible and don't bother calculating the difference.

 

[Danoff]

Isn't that exactly the same as existing major medical plans paid through an HSA?

If you can pay for a PPO through an HSA the only difference is the deductible and how much the monthly charge is.

 

[Omnis]

Yeah but a PPO is a managed care plan. I'm talking about just straight up insurance. Bare with me, lol.