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How much should be in an emergency fund?
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I built one.
1) Start with a scenario of your usage - how much you will use, how much it will cost after plan discount.
2) model the deductible and co-insurance to figure out how much the usage would cost you. E.g., $2,000 deductible and then you pay 20% above that.
3) replicate for specific kinds of usage. E.g. if one kind of doctor is only covered 50% instead of 80%, break that out separately.
4) now add in the premium
5) sum all your costs and see which in total is the least expensive.
6) modify based on risk and confidence in your usage and cost forecasts.
See, isn’t the American “health” system great?!
Rising Star
See my last comment :)
I estimated using prior history as a guide and forecasted what I thought was a reasonable guess. Like, kids would get sick or have an ear infection or whatever 2x per year, I’d have some minor injury 1x per year, etc. that gets you the quantity.
The cost is the harder part. You can get a sense of it by looking at EOB documents from prior visits. They will break everything down such as gross charge by the provider, $1,000; plan discount $750, net equals $250. Also insurance websites have cost estimators. Honestly, they’re probably garbage, but it’s all we have.
As I said, step back snd look at this exchange and you quickly realize how completely fucked our system is. Where else in the world would you ever agree to some procedure without having any idea what it will cost you, and where the same procedure at two different facilities a mile apart could be 10x different in price for no reason?
I know that’s not what you asked so I’ll get off my soapbox, but this is exactly how I became an ardent supporter of radical reform to our system. And I haven’t even talked about the god-forsaken reason why the shit-show we just described is ^tied to your job^. It would be hard to design a more masochistic and inefficient system if you tried.
I interpreted that as if you had multiple spouses and was going to pick the spouse based on health insurance
Definitely take the spouse with the 100% covered $0 deductible PPO. Consider nothing else!
The triple tax advantage (tax free compound growth, on pretax contributions, and tax free withdrawals) in an HSA outweighs the near-term out of pocket difference.
https://www.nerdwallet.com/blog/what-is-an-hsa/
I have a HealthEquity HSA and can invest any amount over $1000 cash.
I choose to pay out of pocket in the near term since when I am retired, in my 60s, I will be happy that the HSA account, the *only* triple tax advantaged account that exists, will have had tax free compound growth for years. If I never filled up the HSA bucket, these funds (which are pretax as well) would just be in a regular taxable brokerage acct and subject to cap gains tax.
Think of it this way: 1) A Traditional 401k gets a current year tax deduction but then you pay tax on everything once you withdraw. 2) A Roth IRA/401k is taxed now but then the growth is all tax free and withdrawals have zero taxes due. 3) An HSA gets the tax benefits of both pretax deduction ($7300 max for family) as well as tax free growth and no taxes due at withdrawal (for qualified medical expenses)
I made the mistake of reimbursing myself from my HSA in 2011 & 2012 - since I was using it as more an FSA account at the time. Instead, imagine the tax free growth on the funds I had withdrawn then!