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Wednesday, February 23, 2011

Guest Post: "An Accountant Runs the Numbers on the High-Deductible Health Plan" by Darlene Mangrum

I have been enrolled in the HDP insurance plan through Thomas Nelson for two years. The HDP insurance plan is based on the principle of the insured having a deductible and no co pays. Once the deductible is met, the insurance pays 80% of medical costs and the insured pays the remaining 20%.

In the HDP plan offered by Thomas Nelson, the deductible for our current year is $2,400 for employee + 1 and family coverage. What that means is that you will pay $2,400 out of your pocket before the insurance pays anything. I know that seems like a big pill to swallow, but consider the cost/benefit of the HDP over the PPO. When thinking about deductibles, there are differences between the PPO and HDP. With the PPO, you pay higher premiums, you pay a $35 co pay each time you visit the doctor, and you pay a co pay of $10, $30, or $50 for each prescription at the pharmacy. In the PPO none of these payments are credited to your deductible. With the HDP, everything counts toward the deductible. So once you reach out of pocket expenses of $2,400, you then only pay 20% of any future medical expenses for that calendar year. Deductibles are always calculated on a calendar year.

Premiums for PPOs are higher than premiums for HDPs. Since insurance premiums are deducted from your paycheck, it’s easy to forget how much you are actually paying for insurance. For example, the PPO annual premium for Employee + 1 is currently $2,410. The HDP annual premium for employee + 1 is $638. That’s a difference of $1,772.00. By choosing the HDP option, you could use some or all of the difference in premiums to fund an HSA bank account that can then be used to pay for actual medical expenses.

Nelson offers payroll deductions to fund your HSA account. You can use a debit card or checks to pay medical expenses from the account.

Here are a few tips to keep in mind when considering the HDP:

• Annual premiums are lower.
• Your charges from physicians and pharmacies are at a discounted rate.
• You pay for medical services as you use them instead of paying high premiums for services you may not need.
• All medical expenses you pay are counted towards your deductible.
• Only people with an HDP can set up an HSA bank account.
• HSA accounts are owned by you.
• HSA accounts are not a “use it or lose it” account. The funds roll over and accumulate year to year if not spent.
• HSA money is portable and can be moved with you when changing jobs.
• HSA accounts can be used as an investment vehicle-after the age of 64, you can withdraw your money from the account for any reason.

Darlene is a Senior Accountant working primarily with both Women of Faith and corporate Payroll reconciliations and journal entries. She has been with the company 9 1/2 years.


Misty Bourne said...

Jim, all this info about the different types of health insurance is really helpful. But it begs the question... If I usually only do the routine physical, dental, and eye check-ups every year, how much are those office visits and examinations going to cost me if I go with an HDP?

Jim Thomason said...

Great question. Being only able to estimate what your doctor charges for an annual physical or well-woman visit, I'll try to give you a rough comparison.

First of all your dental and vision coverage is separate from your medical, so those services aren't changed if you move to an HDP or stay with a PPO.

Let's say that your doctor is thorough and your annual visit costs $200. Under Health Insurance Reform both plans will pay 100% of those expenses.

Now let's say that of that $200 there was a $100 test that Blue Cross considered outside the scope of an annual visit. You would pay that and it would apply toward your $2,400 deductible (assuming you are taking EE + 1 coverage).

The PPO plan will cost you $127.64 per pay period (again assuming EE + 1) or $3,318.64/yr. The HDP will cost you $27.38 per pay period, or $711.88/yr. You save $2,606.76/yr that you put into a Health Savings Account, pay the extra $100 test from that, and put away $2500 pre-tax for future medical, dental, or vision bills as HSA money is yours and rolls forward from year-to-year unlike the FSA that is paired with the PPO plan.

How does that sound?