Dave Clark* works for Local Tool and Die* in Akron, Ohio which for years had always paid half of Dave’s health insurance premium for him and his family.  When the 2011 renewal rates came in at $1,200/month for family coverage the company said it could only continue to pay $500 towards it and gave Dave the option of paying the additional $700/month himself or be reimbursed up to $500/month through the company’s Defined Contribution Plan if he chose to buy a plan on his own.  Dave quickly investigated that option.

Dave is 44, his wife is 41 and they have two children, a 10 year old boy and an 8 year old girl.  They did not need maternity coverage.  Dave found he could buy an otherwise comparable, $1,000 deductible copay plan to what they had with the same insurance carrier for $760/month, which meant that his portion of the premium would be only $260/month.  He also learned that he could get an HSA qualified , $5,000 family deductible plan for only $390/month and that he could then add a family dental plan for $70/month  and a supplemental accident plan  for $30/month, all paid for by his company with no premium requirement from him.

While Dave and his wife had been very pleased with the $1,000 deductible plan in the past, the lower premium of the HSA plan and the potential of adding a dental plan intrigued them enough to look closer.  Under their current plan their out of pocket expenses were capped at two deductibles ($2,000 total), one person would have no more than $3,000 coinsurance (80/20 until this amount is met, then the insurance company pays 100%) and the maximum coinsurance a family would have to pay would be $6,000.  Under the HSA there was a single deductible for the family of $5,000 but that was also the maximum out of pocket they would be subject to since the insurance company paid 100% after that was met.  In the case of a major accident or illness, the lower cost HSA plan would actually cost them less out of pocket too.

Under the copay plan they only had to pay $30 for a doctor visit and either a $15 or $30 copay for prescription drugs, the same as with the group plan, but under the HSA they would have to pay these expenses out of pocket and have them accumulate towards their deductible.  However, the $260/month he would not be paying in premium would be more than enough to cover any out of pocket expenses.  Dave had never realized before that the copays he made in the past had never accumulated towards his deductible.  Plus, since both of these new plans covered preventive care with no out of pocket expense, a provision of the new Health Reform  rules, there would be no cost for routine checkups and preventive screening either way.  Dave and his wife decided to go with the HSA qualified plan.

It was an even bigger bonus to Dave when he learned that the new plan enabled him to set up a Health Savings Account.  If he took the money he was used to spending on health insurance premiums, which last year was almost $500/month taken out of his paycheck, and deposited it into a special account that money would be 100% tax deductible.  It could be drawn out it out to spend on out of pocket expenses tax free, but the most exciting part was that the IRS allows these accounts to grow and earn interest year after year and at age 65 this money can be treated as retirement income, much like an IRA.  The money Dave had been spending in the past on his portion of family health insurance premiums through his employer was now being accumulated towards his retirement.

*the names are ficticious but the numbers used in this example are real for Akron, Ohio effective May 2011.


Contact Ronald Haines at ronald@hcibenefits.com