HSA plan has higher premiums!?!

Submitted by smb on Fri, 11/07/2008 - 05:10

I am recently self employed and shopping for family health insurance for myself (38 yo), my wife (35 yo), and my daughter (6 yo), all healthy. We live in the fine State of Oregon.

I have read Paul Zane Pilzer's book: "The New Health Insurance Solution" and was very interested in his discussion and endorsement of Health Savings Account High-Deductible health insurance plans.

However, in researching different types of plans (including HSA plans) on ehealthinsurance.com, many of the estimated premium quotes I am getting on HSA qualified plans are $50-106 more expensive than a comparable non-HSA plan with a roughly equivalent deductible.

Please see this link below for my quote details (it was too involved to place in this post):

tinyurl.com/6la83j

The only reason I can see is perhaps the difference in the annual deductibles. Although they all tout deductibles in the $2200-$2500 range, the non-HSA plans seem to be indicating that is 'per-person' whereas the HSA plans are 'total family' deductibles.

Am I analyzing this correctly? If so, are HSA's still a good 'value'?

Thanks,
SMB

system edited-link deactivated

Posted: 07 Nov 2008 09:25 Post Subject:

I'm not an expert of health insurance, hence, don't want to misguide you. Hope an expert community member will soon drop into this thread to help you clear the confusion.

Posted: 07 Nov 2008 10:06 Post Subject:

The HSA plans are much less expensive that the traditional health plans, especially when you equate the risks. Its said that policy holders may use their copay health plans more casually than HSA plans, since they want to receive full value of the money. The co-pay plans premium may increase by 30% to 35% in latter years, because of the misuse of the benefits, whereas, the price for the HSA plan may increase only by 4% to 7% depending upon your age and type of plan.

Posted: 12 Nov 2008 01:24 Post Subject: HSA

The HSA has a per-family deductible. I wouldn't pay more for it than a standard 80/20 plan even with the advantage of putting away money pretax for small medical costs.

You need an independent agent in your area to help you discern the plans.

Posted: 25 Nov 2008 08:57 Post Subject: HDHP vs. HSA plan

I have seen this metnioned before and simply do not understand why. There really is no such thing as a HSA Plan. HSA or Health Savings Account is basically a limited use bank account. It is an independant bank account that allows you to take pre tax income and place it in an account that can only be used for qualified medical expenses, Cobra premiums, Long Term Care Insurance, health insurance premiums (only if individual is receiving unemployment comp) or retiree health insurance premiums (medicare). It has nothing to do with Health Insurance in general. Being in a QHDHP or a Qualified High Deductible Health Plan allows you to start a Health Savings Account. You cannot contribute or begin a Health Savings Account without being enrolled in a QHDHP. According to the Internal Revenue Code, in order to qualify to open an HSA, a QHDHP minimum deductible must be at least $1,000 (self-only coverage) or $2,000 (family coverage). The annual out-of-pocket (including deductibles and copays) cannot exceed $5,100 (self-only coverage) or $10,200 (family coverage). QHDHPs can have first dollar coverage (no deductible) for preventive care and apply higher out-of-pocket limits (and copays & coinsurance) for non-network services. These are often referred to as Consumer Driven Plans as the case in Mr. Pilzer's book. And yes, the premiums for such plans are usually much less as the policyholder is reponsible for paying all costs (except preventive care on most plans) until they reach their deductible. Sorry for the long response but I have heard this metnioned several times.

Posted: 30 Nov 2008 06:52 Post Subject:

Keep in mind, that when people mentions HSAs, they are actually referring to the entire contract, not just the side account. Just human nature.

Posted: 01 Dec 2008 04:22 Post Subject: "Entire Contract"

Contract? There is no contract to hold an HSA with a HDHP. I can enroll in an HDHP without holding a Health Savings Account. In fact, there are many circumstances in which I cannot hold an HSA while enrolled in a HDHP(If I am enrolled in a secondary coverage HMO for isntance). Hence my point. They may refer to it as a HSA plan, but they are using incorrect terminology.

Posted: 19 Feb 2009 01:25 Post Subject: HSA premiums vs standard high deductable policy premiums

I have recently encountered the same situation. If you compare apples to apples, an HSA to a standard high deductable plan with no co-pay or prescription cards, the premiums are higher (almost 20% on the quotes I received) for the HSA. Most people that tout the HSA plans as money savers are compairing low deductable plans or plans with prescription cards and co-pay to HSA plans. The difference between standard high deductable plans and an HSA is the out of pocket expense of both plans, which is usually less with an HSA with 2 deductables per family compared to 3 with a standard plan. Also you have tax savings with the HSA as you can pay for many things pre-tax out of your account. But these savings have to be enough to override the increased premiums. Most insurance people tell you an HSA is cheaper, but I got quotes on the same plans, and the HSA premium was always higher! I questioned all 3 agents as to why and still have not received a satisfactory answer. These quotes were for a family of 5 with no pre-existing conditions and in good health. Although I would love to have an HSA for tax purposes, as I could roll my IRA money to establish the account, I still don't believe it would justify the increased premium costs over my existing high deductable plan. Any commentsare welcome.

Posted: 05 Mar 2009 05:32 Post Subject: Same find here

I've found the same thing. Comparison of plans with those having the HSA option were plans are virtually identical having a CONSISTENTLY HIGHER PREMIUM.

There are many factors that could be influencing this. It could be that people with HSA option plans are more likely to use that insurance. I spoke with an agent a while back and was told that higher income earners are opting for HSA plans knowing they will max their accounts with health expenses.

I'm also wondering if insurers have been tasked with additional compliance requirements on HSA option plans by Uncle Sam. Do not know but that could push up admin costs.

Then there is this weird industry thing where various insurers use pricing to gain market share - and that gets very complicated.

While it seem OBVIOUS the plans should not be more right now (at least in Texas) they are... one more of the world's unsolvable mysteries.

Posted: 11 Apr 2009 09:35 Post Subject: HSA accounts deposits are tax deductible

The main difference I've encountered is that I can deduct the money I put into the HSA savings account on my taxes, whereas prior to signing up for an HSA my healthcare costs for the year never exceeded the percentage required (I think something like 7%) so I couldn't deduct them. I also get to pay for dental through my HSA even though I don't have dental insurance. All of my healthcare costs, besides premiums are paid with my money pretax, so it goes a bit further.

Posted: 14 Apr 2009 01:49 Post Subject:

Put properly, it should be an HDHP coupled with an HSA. You absolutely can have an HDHP without an accompanying HSA. The HSA is, as previously explained, nothing more than a tax-advantaged savings account that can only be used for specific purposes and can be withdrawn 100% tax-free for qualified medical expenses. The deductible and amount of contributions for HSAs is limited by federal law. For 2009:

* The minimum deductible is $1150 for individuals and $2300 for families.

* The maximum contribution limit is $3000 for individuals and $5950 for families plus a $1000 "catch-up" additional contribution for age 55 and older. If both spouses are 55+, the catch-up may be used twice for a second HSA.

* The maximum out-of-pocket is $5600 for individuals and $11,200 for families

The HSA can be rolled from year to year, and can be withdrawn for any reason after age 59 1/2 without penalty; just pay the taxes. Prior to 59 1/2 disallowed withdrawals are taxed + a 10% penalty. So, if you haven't used your HSA funds when you retire, you can use them in a manner similar to other qualified retirement accounts.

I, too, have compared premiums with traditional plans vs. HDHP/HSA combos. The only advantage that I can see would be the pre-tax savings and tax-deferred growth afforded throught the HSA. Traditional higher-deductible and/or co-pay plan premiums are comparable, and commonly even less costly than HDHPs associated with HSAs.

Remember, the whole idea of HDHPs was to SAVE YOU MONEY. :?: :?:

InsTeacher 8)

Posted: 22 Apr 2009 09:04 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: 23 Apr 2009 09:15 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: 23 Apr 2009 10:07 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: 23 Apr 2009 12:59 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: 23 Apr 2009 03:20 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: 28 Feb 2011 09:32 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: 05 Mar 2011 02:05 Post Subject:

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

Posted: 14 Mar 2011 09:28 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: 12 May 2011 06:12 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: 16 May 2011 12:44 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.

Posted: 31 Aug 2011 04:53 Post Subject:

Here is a more cynical explanayion for which I have no proof. The insurance companies know that the consumer wants to use HSA eligible policies in order to save money - the consumer can shift medical expenses from a non-tax deductible to a tax deductible status.

Therefore, insurance companies can "take a cut" of the consumer's savings by charging higher premiums for the same coverage. Sadly, this is exactly how corporate usa works.

Posted: 31 Aug 2011 04:37 Post Subject:

insurance companies can "take a cut" of the consumer's savings by charging higher premiums for the same coverage. Sadly, this is exactly how corporate usa works.


Written by someone with no understanding of (a) business in America and (b) the insurance sector specifically.

"Corporate USA" does not "take a cut" of anyone's savings. They operate in a manner that results, in most years, with a net profit. There is no other way to remain in business over the long term. This is the essence of capitalism. In the USA, "consumers" are free to do business with any company of their choice -- no one is forced to do business with anyone, EXCEPT BUSINESSES that are forced to do business with local, state, and federal government bureaucracies and CONSUMERS with "public utilities".

Insurance companies, like all others, are in business to earn a profit -- for their investors or their policyholders. They manage to do this in most years by charging appropriate premiums, paying appropriate claims, and investing their capital resources in (a) an actuarially-sound manner (as required by law) and (b) a prudent manner with regard to their unregulated reserves.

If insurance companies, like any other company, including the Big Oil companies, simply charged whatever they wanted to charge consumers, they would soon find themselves with relatively few customers, little profits, and eventually no longer be in business. That, too, is how capitalism works. It is a "for profit" system, but it is not only about profits. Competition helps to restrain prices. Kellogg's does not charge $10 for a 15-ounce box of cereal because its two main competitors, Post and General Mills, still charge only $3.50 for a similar product.

the consumer can shift medical expenses from a non-tax deductible to a tax deductible status.


This, too, shows a complete lack of knowledge of the US (federal) tax system. Insurance companies did not create HSAs . . . Congress did. Congress also tells us, "You cannot deduct medical expenses unless they exceed 7.5% of your Adjusted Gross Income (AGI)" -- a standard that all but some non-working or retired folks can meet.

So then Congress said, "If you want an HSA (the ability to use pre-tax dollars) to pay for medical expenses, you will also have to purchase a HDHP." And the insurance companies responded with products to meet the need.

Those products are not one-size-fits-all, one-price-for-all. Consumers have a wide choice of plans, and competition restricts wild pricing. But, in insurance, there is also a state-based system of regulation that also prohibits wild pricing.

When Obamacare ultimately forces all consumers to do business with a single-payer system (that necessarily eliminates the state-based regulatory system and replaces it with another sprawling, inefficient, unmanageable federal bureaucracy), the discussion of pricing and competition will be moot. The new discussion will turn to the lack of providers, the long wait for service, and the fact that, "What I need, the government says I don't need, so if I want it, I have to pay for it myself. I sure wish I still had health insurance."

That discussion will be coming sometime after 2014, unless a new Congress and a new President of the US make some changes sooner rather than later . . . because the incumbents have no desire to change the discussion today. All they (the party of the president) want to talk about today is more ways to "raise revenue" to feed their addiction to spending.

That "taking", alcesalces, is what will cause your savings to evaporate. Not insurance premiums.

Less government = more savings. Less government = more profits. Less government = LOWER prices. Less = more.

Demand less from your government, not more.

Add new comment

Restricted HTML

  • Allowed HTML tags: <a href hreflang> <em> <strong> <cite> <blockquote cite> <code> <ul type> <ol start type> <li> <dl> <dt> <dd> <h2 id> <h3 id> <h4 id> <h5 id> <h6 id>
  • Lines and paragraphs break automatically.
  • Web page addresses and email addresses turn into links automatically.