HSA plan has higher premiums!?!

Posted: Wed Apr 22, 2009 09:04 pm Post Subject: I have the same question! Why do QHDHP plans cost more?

I have the exact same question, and after reading all of these responses, I still don't understand why there is such a huge difference. I fully understand the benefits of getting a Qualified High Deductible Plan and getting an HSA. However, when I run the numbers after accounting for higher monthly premiums, its close to a wash with the traditional HDHP plan. I am in Minnesota and have looked at quotes from three major area providers: Blue Cross Blue Shield of Minnesota, HealthPartners, and Medica. Let me provide an example of the Blue Cross Quote comparisons:
Myself (33), My Wife (33) and our Baby daughter (1), all non-smokers, exclude mental coverage.

Personal Blue 80 (Non HSA Qualifying)
Family Deductible: $2500
Family Max Out of Pocket: $4500
Accord Network
Prescriptions: Generics $5 Brands are 20% after deductible
Preventive: First $200 covered
Total Monthly Premium: $390

Options Blue 80 (Qualifying HDHP)
Family Deductible: $2600
Family Max Out of Pocket: $5200
Same Accord Network
Prescriptions: All 20% after deductible (no $5 generics)
Preventive: First $300 covered (instead of $200)
Total Monthly Premium: $506.50

All other plan items are EXACTLY the same. Why does the QHDHP plan premiums cost $116.50 more per month? That’s $1398 per year! Also, the QHDHP plan has a $700 higher out of pocket max. All of the other Insurance plans had very similar spreads between the Qualifying and non-qualifying equivalents.

Now, if I max out my HSA at $5900, and I assume a 30% tax rate, I should see tax savings of $1770 per year or monthly savings of $147.50. So in the end, I am saving $31 a month with the HSA ASSUMING that we eventually spend every dollar in our HSA over our lifetimes.

Being the bleeding-heart liberal that I am, I’m having a tough time deciding if I should just pay the cheaper premiums with the non qualifying plan and let Uncle Sam take my money instead of letting the Insurance Company take it in the form of higher premiums.

Can somebody please tell me I’m doing something wrong? How can this be reality? It’s annoying when all I hear and read about is how GREAT these HSA plans are. They always talk about the tax benefits, but I have never heard anybody talk about how much more expensive the qualifying plans are in relation to nearly identical non-qualifying plans. Am I missing something here?

ONE LAST QUESTION: What are the requirements to make a plan qualify for an HSA? In my example above, why does one plan qualify while the other does not???

Posted: Thu Apr 23, 2009 09:15 am Post Subject:

The HSA qualifying HDHP plans are allowing you put your money in an account where its tax free. Also withdrawals from this account would receive tax benefits. With the HDHP plans you are not only paying higher deductible but are also paying more on monthly premiums.

Now, you haven’t exhausted the amount available at your HSA account, the money would then roll over to the next year and you would continue receiving tax advantages on it.

Some QHDHP plans offer wider rage of benefits once the limit of HSA account is met.

Hope this clears some of your confusions.

Posted: Thu Apr 23, 2009 10:07 am Post Subject:

Another benefit with the HSA plan is that it allows you to save and spend for your healthcare without paying tax on the amount upon your retirement.

Posted: Thu Apr 23, 2009 12:59 pm Post Subject:

Kelvin and Karen,
I'm not sure you understood my post. I fully understand all of the tax shelter benefits of an HSA. My question is this: Why do two plans which are Identical in every respect except for the 'HSA Qualifying' element, price out so differently. Why do insurance companies charge significantly higher premiums on the HSA qualifying plans when comparing apples to apples with traditioal HDHP plans?

Kelvin,
You said ... "With the HDHP plans you are not only paying higher deductible but are also paying more on monthly premiums. "

I'm confused. Are you talking about HSA qualifying HDHP plans, or are you talking about non-qualifying HDHP plans? In all of my research, the HSA Qualifying plan has significantly higher monthly premiums at the same deductible and equal level of benefits. I fully realize that once the tax shelter benefits are priced out, the HSA qualifying plan is slightly cheaper (If you eventually spend every single HSA dollar over the course of your lifetime). However, I am looking for a reasonable explanation for why Insurance companies charge so much more for the HSA Qualifying plans.

Posted: Thu Apr 23, 2009 03:20 pm Post Subject:

Ed, you are asking an excellent question. I understand what you are asking. Unfortunately, my expertise is life, DI, and LTCi, and I farm our my health insurance. I would like to know the answer to your question. Hopefully, there is a reasonable explanation other than, "They charge more because they can."

Posted: Mon Feb 28, 2011 09:32 pm Post Subject: max out of pocket

Family Max Out of Pocket: $4500 vs Family Max Out of Pocket: $5200

Keep in mind that one of the most important factors for premium is the max out of pocket. Read your benefit descriptions carefully. Some literature will name the out of pocket maximum including the deductible, some will not include the deductible. Typically the HSA's have a lower out of pocket maximum 0% co-insurance than the equivalent co-pay plan. For example both plans may have a deductible of $5000, and the HSA has a higher premium because the copay plan has 80/20 co-insurance after the deductible. A common out of pocket maximum is 4500 on top of a 5000 deductible. Your exposure will be higher when you pay lower premiums. You get what you pay for with insurance, it always balances out, pay it now or pay it later. I hope that helps.

Posted: Sat Mar 05, 2011 02:05 pm Post Subject:

Oregon? that's why God created Ehealthinsurance.com....lol

Posted: Mon Mar 14, 2011 09:28 pm Post Subject:

I have same question and called the insurance company for an explanation.

I was comparing 2 plans each had same coverages with 10,000 deductible and 25% co-pay.

The explanation seemed reasonable enough. Here is what I was told:

The HSA eligible account has a Max "out of pocket" expense of 30,000 per family. The non-"HSA Eligible" ploicy has a max "out of pocket of 10,000 per individual.

It is more likely with a "Catastrophic policy" that 1 individual will reach the 30,000 limit than that 3 individuals will each reach a 10,000 limit. Also, the holder of an HSA is more likely to spend money going to the Doctor than someone who doesn't already have the cash saved. So, from an insurance company's perspective, a policy with a 30,000 deductible (per family) is more likely to cost them money than the non HSA plan with a 10,000 deductible - per individual).

What they charge for coverage is directly related to what they expect to eventually have to pay out...

I think this was probably over-simplified. But it sort of made sense while it was being explained...

Posted: Thu May 12, 2011 06:12 pm Post Subject: Doublespeak

By my reasoning, what the the insurance company told movingmars makes no sense whatsoever.

It is more likely they will have to pay on the non-HSA 10,000 per individual than a 30,000 shared deductible.

Furthermore, what does it matter if someone is more or less likely to go to the doctor if they have the cash saved. In either case the insurance company is paying for nothing.

There seems only one explanation for the higher cost of HSA plans, they do it because they can.

These are for-profit companies now making record profits. 20-30% of every dollar you send them goes to profit (not to mention the amount they spend on sales and advertising). In the end, probably less than 50% of what you pay to them goes to administration and healthcare. Compare that to medicare, where almost every dollar spent goes to administration and healthcare.

Draw your own conclusions.

Posted: Mon May 16, 2011 12:44 am Post Subject:

The information posted about $10,000 individual and $30,000 family deductibles under High Deductible Health Plans (HDHP) which are companion to Health Savings Accounts (HSA) is entirely incorrect.

2011 Minimums and Maximums for HSAs and HDHPs (All the Same as for 2010)

Maximum Annual HSA Contribution: individual $3,050; Family $6,150

Minimum HDHP Deductible: individual $1,200; Family $2,400

Maximum HDHP Deductible: individual None; family None

BUT . . .

Maximum HDHP Out-of-Pocket Expense (excluding premiums) Individual $5,950; Family $11,900

So even though federal law does not specify a maximum annual deductible, the federal Out-of-Pocket limit prevents the kind of outrageous deductibles described above. Many HDHPs have lower deductibles and out-of-pocket maximums than allowed under federal law.

No family covered by an HDHP would be exposed to a $30,000 deductible. But they could be exposed to $11,900.