Great thought experiment (or actual experiment, in your case!). I am definitely not frugal by nature, and I'm always thinking about the value of my time when making decisions that will cost me either time or money. Personally, I would be very inclined to just pay for the EPO plan and do away with the decision making and price shopping that comes with every healthcare need, especially with young children. The additional stress is not worth the benefits the HSA offers. Plus, you're not getting the deduction or tax-deferred growth in SF!
> When I had the EPO, I wouldnât think twice about going to urgent care. With the HDHP, I mentally hesitated each and every time.
I had this same problem but in reverse: I spent most of my career as a contractor. So hesitation became my default. When you enumerated your visits this year, I was subconsciously projecting how I would pause for each: "Stitches? How bad is that lip, reeeeeeally? I bet I could slap some closuresâmaybe a little liquid skinâon there. Stitch removal? I think momma can handle that." Our family made those kinds of compromises for over a decade. Ironically, now that I have an EPO, I NEVER GO FOR CARE. As I sit here, I can list about 8 things wrong with me that I probably should get checked out. I just haven't built that habitâin ~5y in a FAANG, I've gone to the doctor zero times. Yet I deeply appreciate that I *could* go, and that when I do, it would allegedly be $10.
My young-adult children use my benefits quite often. One of them is probably in Urgent Care right now. I guess, in our particular case, I'm less concerned about the cost of the hassle and more motivated in the value of peace-of-mindâespecially for my family.
However, the FOMO of potentially swing trading a $25k HSA account with zero capital gains is enticing! Maybe once all of my children are 26+ I can switch to a HDHP and start gambling with my health in a whole new way (kidding . . . I think).
Loved your concept of Return on Hassle. There's just too much uncertainty with the HDHP/HSA plan. That one time I enrolled in one few years ago based on my own past health care expenses and projections was the same year I needed to undergo an ER visit followed by a procedure. That coupled with a few other urgent care, paediatrician visits, and prescriptions. I made my decision then that I'll always just stay with my Kaiser HMO plan that's predictable and less stressful.
I have a spreadsheet based on past experience and assumptions for next year, like how many times someone with pcp and specialist and urgent care, and what would be worst case as in extensive hospital stay.
When the employer already pays more than half of the deductible and the premium savings is mor than the the rest of the deductible, then this is almost a no trainer.
Watch out for restrictions in your Healthcare plan for specialty services like fertility (if that maybe be needed) and therapy/rehabilitation.
Some plans limit that and left struggling to pay out of pocket.
I like the flexibility of HSA as I can claim any out of pocket health expense (except premium) and there is no time restriction.
How have people handled it if it both you / your partner have access to HDHPs and there's extra money given by the employer for the HSA? My partner and I are at two different employers and if we opt for family coverage, we get more HSA dollars from our companies, but those family plans also have higher limits. Is it best to both opt for family and have each other's as secondary?
Very interesting! I created a similar model with a key difference â I live in nyc and nobody takes insurance. Think itâs important to note that your calculations donât factor in out of network deductibles & maximums. And please donât get me started on the cost when a provider doesnât accept insurance and the actual cost is higher than the plans allowed amount. Great job, very interesting and informative; Just want to call this out for anyone in a similar situation to me. PPO ended up being the best in my case⊠though donât ask me what my monthly spend on healthcare is đ. At least some of itâs tax deductible when I file
I went through the same experiment and went back to E/PPO. We have two kids, and our one son has ADHD and the cost of his medications ($25 vs $350) and weekly mental health visits pushed us to paying out the family maximum deductibles. Also I had the same delay in seeking medical attention because I knew the cost was going to be high. It was an easy choice to switch back.
I don't see it as a huge benefit since dividends are pretty small, and so saving federal taxes on dividends isn't much. Plus buying/selling isn't super valuable to me since:
1. You can't use the money if you sell before you're retired, and
2. I plan to hold the majority of my investments for a long time without selling anyways
But "it grows tax free" is always highlighted in a way that makes me think people view it as a big deal -- like it unlocks exponential growth in a unique way -- so curious if I'm missing something!
There is the tax drag that occurs on the dividends, but even more significant would be the capital gains when you ultimately sell to use the funds. This is the "growth" that is tax free.
You mention that for the HSA, "withdrawal would still be subject to ordinary income taxes."
So it seems that either you have to pay capital gains taxes when you sell the funds in your brokerage account, or you can use an HSA to "grow the funds tax free" but then need to pay taxes when you withdraw the funds.
So again it seems like it's not a huge tax savings win to me. What am I missing?
Great thought experiment (or actual experiment, in your case!). I am definitely not frugal by nature, and I'm always thinking about the value of my time when making decisions that will cost me either time or money. Personally, I would be very inclined to just pay for the EPO plan and do away with the decision making and price shopping that comes with every healthcare need, especially with young children. The additional stress is not worth the benefits the HSA offers. Plus, you're not getting the deduction or tax-deferred growth in SF!
This was helpful, thanks!
> When I had the EPO, I wouldnât think twice about going to urgent care. With the HDHP, I mentally hesitated each and every time.
I had this same problem but in reverse: I spent most of my career as a contractor. So hesitation became my default. When you enumerated your visits this year, I was subconsciously projecting how I would pause for each: "Stitches? How bad is that lip, reeeeeeally? I bet I could slap some closuresâmaybe a little liquid skinâon there. Stitch removal? I think momma can handle that." Our family made those kinds of compromises for over a decade. Ironically, now that I have an EPO, I NEVER GO FOR CARE. As I sit here, I can list about 8 things wrong with me that I probably should get checked out. I just haven't built that habitâin ~5y in a FAANG, I've gone to the doctor zero times. Yet I deeply appreciate that I *could* go, and that when I do, it would allegedly be $10.
My young-adult children use my benefits quite often. One of them is probably in Urgent Care right now. I guess, in our particular case, I'm less concerned about the cost of the hassle and more motivated in the value of peace-of-mindâespecially for my family.
However, the FOMO of potentially swing trading a $25k HSA account with zero capital gains is enticing! Maybe once all of my children are 26+ I can switch to a HDHP and start gambling with my health in a whole new way (kidding . . . I think).
Loved your concept of Return on Hassle. There's just too much uncertainty with the HDHP/HSA plan. That one time I enrolled in one few years ago based on my own past health care expenses and projections was the same year I needed to undergo an ER visit followed by a procedure. That coupled with a few other urgent care, paediatrician visits, and prescriptions. I made my decision then that I'll always just stay with my Kaiser HMO plan that's predictable and less stressful.
Such a great topic Andre! I am going through this decision right now.
I thought it would be timely! Those open enrollment mailers should start arriving soon.
More helpful would be how you calculate costs.
I have a spreadsheet based on past experience and assumptions for next year, like how many times someone with pcp and specialist and urgent care, and what would be worst case as in extensive hospital stay.
When the employer already pays more than half of the deductible and the premium savings is mor than the the rest of the deductible, then this is almost a no trainer.
Watch out for restrictions in your Healthcare plan for specialty services like fertility (if that maybe be needed) and therapy/rehabilitation.
Some plans limit that and left struggling to pay out of pocket.
I like the flexibility of HSA as I can claim any out of pocket health expense (except premium) and there is no time restriction.
How have people handled it if it both you / your partner have access to HDHPs and there's extra money given by the employer for the HSA? My partner and I are at two different employers and if we opt for family coverage, we get more HSA dollars from our companies, but those family plans also have higher limits. Is it best to both opt for family and have each other's as secondary?
Just remember that the $8,300 family limit. So if you both have a plan, be sure to stay under $4,150 each including any employer matches.
(Note: 2025 limits are slightly higher at $8,550)
I would just run the numbers and see which option gives you the most free $$ and tax savings potential. It depends on the specifics of each plan.
Very interesting! I created a similar model with a key difference â I live in nyc and nobody takes insurance. Think itâs important to note that your calculations donât factor in out of network deductibles & maximums. And please donât get me started on the cost when a provider doesnât accept insurance and the actual cost is higher than the plans allowed amount. Great job, very interesting and informative; Just want to call this out for anyone in a similar situation to me. PPO ended up being the best in my case⊠though donât ask me what my monthly spend on healthcare is đ. At least some of itâs tax deductible when I file
I went through the same experiment and went back to E/PPO. We have two kids, and our one son has ADHD and the cost of his medications ($25 vs $350) and weekly mental health visits pushed us to paying out the family maximum deductibles. Also I had the same delay in seeking medical attention because I knew the cost was going to be high. It was an easy choice to switch back.
I've always been a bit confused by the "It grows tax-free" benefit.
Don't investments in your regular brokerage account grow tax free as well, so long as you're not frequently buying and selling?
No taxes on the dividends or even when you buy and sell. Similar to other retirement accounts.
Unfortunately in CA you would still pay State taxes though.
How much do you value that at?
I don't see it as a huge benefit since dividends are pretty small, and so saving federal taxes on dividends isn't much. Plus buying/selling isn't super valuable to me since:
1. You can't use the money if you sell before you're retired, and
2. I plan to hold the majority of my investments for a long time without selling anyways
But "it grows tax free" is always highlighted in a way that makes me think people view it as a big deal -- like it unlocks exponential growth in a unique way -- so curious if I'm missing something!
There is the tax drag that occurs on the dividends, but even more significant would be the capital gains when you ultimately sell to use the funds. This is the "growth" that is tax free.
You mention that for the HSA, "withdrawal would still be subject to ordinary income taxes."
So it seems that either you have to pay capital gains taxes when you sell the funds in your brokerage account, or you can use an HSA to "grow the funds tax free" but then need to pay taxes when you withdraw the funds.
So again it seems like it's not a huge tax savings win to me. What am I missing?