What Are The Benefits of High Deductible Health Plans

Wealth pales in comparison to Health. And since it’s open enrollment season, it’s time to prioritize our Healthcare while maximizing the value of our dollars

What is the Average American Healthcare Expense a year?

According to the most recent data available from KFF analysis of OECD and National Health Expenditure (NHE) data, the average American spent $10,966 on healthcare in 2019.

On average wealthy countries tend to spend more per person on health care and related expenses than lower-income countries. However, the US spends more per person on health than comparable countries.

The US is clocking in 42% higher than Switzerland. With the costs noted, the TNFG household cannot afford to ignore our open enrollment health care benefits review.

Critical Theory of Healthcare and Debt Inequality Persist

The 2020 report by the Brookings Institute broke down Healthcare expenses by class and racial inequities in the area of medical, dental, and vision. The report found that households with zero or negative net worth hold 80 percent of medical debt. The data also concluded that 27 percent of Black households have medical debt, outpacing 16 percent of non-Black households.

Unfortunately, 1 in 4 older Americans has less than $500 saved to cover medical expenses.

According to newly released estimates from the National Health Interview Survey (NHIS), the number of uninsured nonelderly Americans fell from 48 million in 2010 to 28 million in 2016.

However, that number has risen to almost 32 million in 2020, or 9.7 percent of the total US population.

In fact, medical debt has become the largest cause of bankruptcy in America, according to the National Consumer Law Center (NCLC). Nearly 1 in 5 Americans have medical debt in collections.

If that is you, here’s a link on how to negotiate your medical bills.

So what is included in Health Insurance, Anyways?

Health insurance is a plan that covers your medical expenses. This often includes preventative health screenings, illnesses and injuries, procedures, pharmacy prescriptions, and more. More often, your first interaction with medical health insurance will be through your employer. However, there is a myriad of health insurance plans available outside employment.

This is especially important as the gig economy develops and as more people pursue self-employment options.

Healthcare expenses were always confusing to me.

It’s not like a restaurant where there is just one price on the wall. Instead, it feels like you are rolling the price dice every time.  

Early in my career, I merely guessed my way to a health insurance provider. This was likely very expensive especially since I did not understand any of the terms. Start throwing words like deductibles, copays, in-network, or out-network; there will be blank stares in the audience.

Nonetheless, having health insurance coverage can help you avoid surprise medical expenses in case of emergencies or unexpected accidents. As a bonus, it can lower the cost of your prescriptions, surgeries, and routine doctor visits.

This entire process works in your favor since Medical debt now outweighs all other personal debt in the US. Researchers found that by June 2020, average medical debt was $429—$39 more than the combined average of all other non-medical debts such as credit cards, utilities, and phone bills.

Our Four Main Focus Points for Healthcare

Keeping our Health Savings Accounts (HSA) is a no-brainer. However, since my wife is looking into shifting her career opportunity, we are leveraging our options:

1. My wife has Type 1 diabetes and it’s costly. We have to consider the overall costs on a month-by-month basis, as well as the tax benefits. This can easily add over $10,000 to our annual costs if we pick the wrong plan.
2. We also have to consider how high the Health Plan Deductible and/or co-pays, and
3. How much it could cost or save us going forward? If you want to more about the triple tax advantage of the HSA, check out this TNFG article, the ultimate Millennial Millionaire Health Insurance Benefit.

Step 1. Choosing a High Deductible Health Plan (HDHP)

Turns out, Aetna is the only one compatible with our service areas. Depending on where you are, location-wise, there are likely more options. (see Table #1)

Table 1. Aetna HealthFund® HDHP with HSA

	Code	Biweekly Premium	Annual Premium
Self Only:	224	$135.59	$ 3,525.34
*Self +1 ie w/Dependent:	226	$298.12	$7,751.12
Self & Family:	225	$265.06	$ 6,891.56

Step 2: You get a Health Savings Account (HSA)

Your HDHP comes with an HSA. Aetna provides its services through PayFlex. Along with a debit card and app, over time you can choose how to help pay for your own healthcare. Being either out of pocket or with a debit card. That simple.

The bonus is that the HDHP contributes money to your HSA each month (see table #2). You can use that money for qualified medical, dental, or vision expenses. You can also opt to contribute pre-tax dollars to the HSA to the limit of $3,600 for singles or $7,200 for families (for 2021).

When you reach age 55 and are eligible to have an HSA, you can contribute an additional $1,000 each year through age 65 or until you enroll in Medicare. HSA contribution limits will likely increase to $3,650 for singles or $7,300 for families.

However, the verdict is not yet official.

Additionally, the money remains in your HSA’s checking earning interest tax-free. Once you reach a threshold, you can even opt to move extra money into you your HSA’s investment account for more growth. The best part is that it is all your money, even if you leave the health insurance plan.

Table 2. How Does the AETNA HDHP add to your HSA?

	Monthly Contribution	Annual Contribution
Self Only:	$66.67	$800
Self Plus One or Family:	$133.34	$1,600

Step 3: You have a deductible

The annoying deductible is the amount you need to pay out of your pocket before the Health insurance plan starts to pay for covered services (see table #3). This is the moment when you come out of pocket in anger. In scenarios like this, you can use your HSA checking.

Make sure your recon your area so you can know which locations are considered in your network. I had an emergency operation once that transferred me to three hospitals. It cost me all three, no matter how long I stayed.

Lower your costs by using network providers.

Table 3. In and Out of Network Deductible

	In network	Out of network
Self Only:	$1,800	$2,600
Self Plus One or Family:	$3,600	$5,200

Step 4: Who is paying for these health expenses anyways? What’s in the Co-Pay?

Coinsurance or copay is how much the health insurance plan helps you pay for some of the health care expenses. The idea is that your copay is for the total cost. However, coinsurance doesn’t kick in until you’ve paid your deductible for the year. (see table #4)

The goal is to pay the least amount out of pocket by staying in your network.

With your Aetna HDHP insurance, you get preventive care at no additional cost to you. This includes wellness screenings and exams, dental cleanings, and routine eye exams. If you use in-network providers, nothing comes out of your pocket (or your HSA).

Table 4. Coinsurance Amount?

	Aetna Pays	You Pay
In network:	85%	15%
Out of network:	60%	40%

You also get Built-in pharmacy, dental and vision benefits, too!

Type of Coverage	What you get
Pharmacy	Copays after you meet your deductible. For a 30-day supply in-network, pay $10 (generic), 50% max of $200 (brand name), and 50% max of $300 (non-formulary drug).†*** Your plan requires the use of generic medication when a generic equivalent exists.**** Mail-order delivery or at a CVS Retail Pharmacy®††. For maintenance prescriptions (medicine you need for 90+ days), you get mail-order service for $20 for generics, 50% max of $400 for the brand name, and 50% max of $600 for nonformulary.
Dental	Cleanings and X-rays are covered 100% when you see network dentists.
Vision	Routine eye exams are covered at 100% when you visit network doctors. $100 allowance every 24 months to pay for prescription eyewear. Discounts on eyeglasses, contact lenses, and more.

Bonus: Up to $150 of free money in your HSA annually

Every year, you can earn an additional $75 for Self Only or $150 for Self Plus or Family (enrollee and spouse only) by completing the Health Risk Assessment (it’s FREE).

It’s all part of your comprehensive health and wellness program. The goal is to get your biometric screening and ensure that you are catching any issues early so that your overall costs stay as low as possible.

What’s our Bottom Line?

It’s going to cost us:

1. Base HDHP plan cost – $265.06 biweekly or $6,891.56 for 2022.
2. We have up to a $3,600 deductible to reach until the plan kicks in 85% per expense (generally).
3. The HDHP will kick back $1,600 to our HSA account (tax-free) and we will add $5,600 into our HSA to lower our taxes by about $1,500 or $57.70 biweekly.  
4. As a bonus, we will get the $150 and shift all that money to our investment side. So far, we were able to amass around $30,000. At even a 6% rate of return for 15 years, that’s a nice $240,000 minimum.   

In the grand scheme, it’s a simple yes for us.

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