Which of the following is my best health insurance option?

Question

Have HDHP (obtained 8/01/07). Single, no dependents. Contributed $1187.50 to HSA for 2007.

Eligible for employer plan (non-HDHP) starting March 1.

Am considering:

a. Decline employer coverage. Keep HDHP. Premium $61/month. Contribute max to HSA for 2008.

Advantages: tax savings offset premium.

Disadvantages: Insurer tries to cancel coverage of anyone to tries to claim big benefits.

b. Same as (a), except make additional $1662.50 HSA contribution for 2007 (as well as 2008 contributions).

Advantages: same as (a), plus larger tax advantage.

Disadvantages: same as (a), plus, if I move to a state without non-group HDHP's (e.g., NY) in 2008, I owe the IRS a penalty related to the 2007 contributions.

c) Employer HMO.

Advantages: Free to me.

Disadvantages: Minimal out of network coverage. None if HMO doc refuses referral.

d) Employer PPO.

Advantages: Most likely to actually pay claims.

Disadvantages: $25 biweekly premium without HSA deduction to offset the cost.

Answer 1

Any premiums you pay should be pre-taxed just like your HSA plan...therefore, I'd stick with your employer group health plan as it has many more benefits than you probably will need, but changes do happen and it's better to be safe then sorry.  Good luck with your choice.  And, $25.00 biweekly is not bad for an employee to pay...no different than paying $61.00 for that other plan.  Trust me, employer groups are better than that other plan.

Answer 2

Actually, they can't usually cancel you for claims, but they might question big expenses that "should have been disclosed", which, effectively, might be the same thing.  

In any case, if the insurer tries to cancel you for "big claims", then it really isn't insurance and you are wasting at least some of your money.  

I'm a huge HSA fan so I get that you want to keep that option and continue saving with an easy to use cash plan.  

However, free is free on an employer plan. Take the coverage. If you are not filing claims then the referral hassle issue is no big deal, although it is annoying if you do need care.

In the event of a big claim, such as a broken leg, the HMO plan will cost thousands less, and, again it is free to you. It won't be cancelled, nor will the rates be increased every 6 months.

I saved about $4k after I shattered my leg while covered under the HMO plan at work. As soon as I was better, I enrolled in the new HSA plan that was offered, however.    

If possible, encourage your employer to offer a HSA option. Employers need to offer coverage choices.  

Not quite understanding how you can owe a penalty for 2007 contributions just by moving states in 2008.  It may not be to important to explain here. The question is long already.  

In general, you are better funding your HSA monthly, rather than all at once, if there is uncertainty that you may have to drop the HSA plan at some point.