Saturday, November 10, 2018

Our ACA Compliant Options for 2019 (and the benefits of an HSA illustrated!)

Although it is unlikely we will purchase insurance through the ACA exchange this year (www.healthcare.gov), we still like to understand the options available there. Over the next few posts we’ll explain each of our options for 2019, a cost comparison of those options, then ultimately the choice we are making and why. 

A key criteria for any option is that it provides coverage for our primary providers. Thus, the plans from Oscar Health (www.oscarhealth.com) and the Cleveland Clinic are the best ACA options for us. Without the subsidy our cheapest available plan is as follows:


To provide perspective, our mortgage, plus property taxes, was about $768/month. Of course, that’s not a luxury home but health insurance that is roughly the cost of two mortgages is not an appealing option. Our cheapest option, however, did not include a Health Savings Account (HSA) so we next looked for the cheapest option that would also include an HSA:


So for an extra $90 a month you get a lower deductible and the option to contribute to an HSA plan. It is highly frustrating that more high deductible plans do not have the HSA option. We can pay $1,316 a month for health insurance and still not have access to save in an HSA! This is a problem.

In 2019, HSAs allow you to contribute up to $7,000 for a family (up $100 from 2018) or $3,500 for an individual (up $50 from 2018). You are permitted to make these contributions “before taxes” meaning the $7,000 a family might contribute won’t be taxed. This means $7,000 less of your income will be taxed. To illustrate the point let’s compare the cost of these two options:

Option
Monthly Cost
Yearly Cash 
Cost
HSA 
Contribution
 Tax 
Savings
Actual Yearly 
Cost
Oscar with no HSA
 $1,316
 $15,792
 $-  
$4,127
 $11,665
Oscar with HSA
 $1,406
 $16,872
 $7,000
$6,238
 $10,634

Wait, if I contribute the max to an HSA I can actually get a plan with a much lower deductible for a lower yearly cost? Yes, because of the tax savings. To understand the tax savings you’ll need to understand two deductions:

Self-employment insurance premium deductible – Since my wife and I are self-employed we are permitted to deduct the cost of our yearly premiums from our income. This makes up the majority of the deduction.

Health Savings Account (HSA) – As mentioned, we would also be able to deduct the full $7,000 HSA from our income.

If you have greater deductions then you have less income to report…and if you have less income to report you will pay less tax! So, although we likely won’t be purchasing one of these plans, hopefully this lesson in the benefits of an HSA was valuable!


Please note the Tax Savings column was calculated based on our specific tax situation (i.e. self-employed, certain income tax rate based on income, etc.). Your tax rate and situation will be different than ours and the tax savings may not be high enough to justify the higher premium! Please consult a tax professional if you have uncertainty.

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