When HSA Math Really Works

Several years ago, we added an HSA compatible option to our health plan.  Both owners enrolled, and what struck me at the time was the math.  I’m an owner at a limited liability company, so I essentially pay 100% of my family’s health insurance.  At the time, I saved about $6000/year in premium to move from a more traditional plan to the HSA option.  I exposed my family to a $4000 deductible, and we had the potential to save even more with tax deductions if we funded the HSA account.

We picked up a new client for April 1 for whom the math once again made a lot of sense.  Their situation is similar to ours.  The company is an S corporation with 2 owners, both enrolled as families.  The renewal rate for their “no deductible” plan was about $1600/month.  The family rate for the HSA compatible plan was about $950.  Here’s how the math worked out for each owner:

  • Annual premium saved to switch to HSA compatible plan:  $7800
  • Rough tax savings at 25% if they contribute $6700 to the HSA account:  $1675
  • Total savings with account contribution:  $9475
  • Family deductible:  $4000
  • Family out of pocket maximum:  $13,100

The owners and their families were healthy with no planned large medical expenses coming up during the year.  The out of pocket maximum is definitely higher than the tax and premium savings, but members rarely get close to that number.  As such, the $9475 saved compared to the $4000 deductible seemed like a very viable option for the owners.  They and their employees were offered a non-HSA option as well, but the math for the HSA plan just made sense for them.

If you have questions about this or other topics related to employee benefits, feel free to call us at (866) 724-0008 or click the button below.

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