How Do I Compare HSA Eligible Plans and Other High Deductible Marketplace Plans?
So I am in NYC and I am looking through all of these plans and there are only a few random Bronze and Silver plans that say “HSA” in the title. But the premiums are very high compared to the “Catastrophic Care Plans.” If it doesn’t say “HSA eligible” does that really mean that or is it possible that the marketplace is labeling these things incorrectly? Because otherwise, I would need to get a Bronze or Silver plan with premiums over $400 a month which seems dumb..
It takes more than a high deductible for an insurance policy to be considered a High Deductible Health Insurance. The insurance also must not cover any benefit except for preventative care before the deductible is met. That means that if the insurance offers cost-sharing (copays) or coverage for prescriptions, additional primary care visits, or other benefits before the deductible is is not HSA eligible. While HSA eligibility does have a lot of tax advantages, insurers tend to raise the prices on whatever is popular. So while HSA eligible plans are often the best option, shopping around and comparing plans is important. There are exceptions to the rule and companies adapt and change. Some things that will help you decide which of those available to you is going to work best for you.
Things to look at carefully when comparing the costs of health insurance plans:
- The total cost of the premiums for a full year (monthly premium X 12).
- The out-of-pocket maximum. If you add the total annual premiums to the out-of-pocket maximum for the plans and compare, then you can get an idea of those plans' cost in the worse case scenario.
- Do the same to compare the cost of needing just enough care to hit the deductible for each plan. Add the total annual premium to the deductible for each plan. This will give you an idea of what is might cost if you had a moderate amount of health needs during the year. However, it is difficult to make an estimate unless you know exactly what your health needs might be with anything but a stable chronic illness. However, you should look at what kind of cost sharing each plan has once the deductible is met, especially if the plans you are comparing have remarkably different deductible levels. Some catastrophic plans the Out-of-Pocket Max and Deductible are the same, that means they cover 100% costs after the deductible is met. If the Out-of-Pocket is higher, than it likely has cost sharing after deductible, but before Out-of-Pocket Max.
- Look at whether the HSA eligibility will offer enough tax benefits to offset the difference the in premiums. HSA contributions (up to an annual limit) are tax deductible, and they lower your AGI which could drop you into a lower tax bracket if you are close to the threshold. They also lower your MAGI which is used for calculating cost assistance on the marketplace; you could qualify for more Premium Tax Credits on your year tax return. You can even use those adjusted numbers to project your income for the year when you enroll at the beginning of the year, but you'll want to make sure that you follow through and place money in the HSA during the year, or you could end up owing money back.Figure out your projected MAGI for the year without any contributions to an HSA. Then consider how much you would place in an HSA even if you had no significant health costs during the year. Does this number bring your income below any of the important tax and cost assistance eligibility thresholds for the ACA (400%, 250%, 200%, 150%)? Then look at the moderate health scenario and worse case scenario mentioned above (Deductible vs. Out-of-pocket Max) by subtracting those from your MAGI (up to the maximum tax-deductible HSA contributions for the year). Do those numbers drop you below any of the eligibility thresholds for Cost-Sharing Reduction subsidies (150%, 200%, 250%)? If any of the totals are below 400% the Federal Poverty Level, you can plug them into the Marketplace to see what they estimate your Premium Tax Credits and what CSR (lowers copays and deductibles for plans) you are eligible for with and without HSA contributions.
Other important things to consider when purchasing health insurance is: Silver plans are unique, they are the only plan that is eligible for Cost-Sharing Reductions subsidies (CSR) and you can re-enroll if your eligibility changes during the year. As long as you choose the same insurer and the same plan, you will even be able to count all medical costs you had already paid during the year towards your new lower deductible. Having that flexibility with CSR might be worth the cost for some people.
Another interesting note, Republican health care reform plans have often emphasize HSA use; the requirements for having an HDHP may be loosened or eliminated in the future.