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Meet "Edward"

Edward is single, age 31 and exercises regularly and watches his weight. Edward always uses in-network providers. He is an existing VMware employee who switched from the Traditional PPO plan to the HSA PPO in 2018. The following describes how the HSA PPO plan would work in 2018 for Edward.

  Premium (per paycheck) $0
  Coverage Employee Only
  HSA Contribution by VMware $750
  Employee-only deductible $1,500
  Coinsurance 10% for in-network medical services after deductible; 10%/15%/20% (generic/brand/non-formulary) for prescription drugs, after deductible
30% for out-of-network services, after deductible
  Out-of-pocket Maximum $2,500 for in-network services
$6,000 for out-of-network services

2018 was a relatively healthy year for Edward. He scheduled and completed an annual physical exam, filled four generic prescriptions to manage his cholesterol level, and had one unexpected doctor visit and prescription for an ear infection.

The following shows how the plan covered the costs for these services.

Services Used in 2018 Total Costs Amount paid from Edward's HSA Amount paid by the plan Amount paid by Edward Amount applied toward the $1,500 individual deductible Amount applied toward the individual OOP maximum
Annual physical, lab tests (in-network) $185 $0 $185 (100% covered preventive care) $0 $0 $0
Doctor visit for ear infection (in-network) $375 $375 $0 $0 $375 $375
One (1) generic prescription medication for ear infection, filled at a network pharmacy $22 $22 $0 $0 $22 $22
Four (4) generic medication prescriptions for a chronic condition, filled at a network pharmacy $185 $185 $0 $0 $185 $185
Totals $767 $582 $185 $0 $582 $582
Edward's HSA balance at year end   $168        

Summary

  • By the end of 2018, Edward incurred a total of $767 in medical and prescription drug expenses
  • The plan paid 100% of his $185 for preventive care
  • Edward used VMware’s HSA contribution to pay his prescription and office visit of $582
  • Edward paid nothing out of his own pocket towards these expenses and saved $168 pretax in his HSA account and did not incur any other expenses for the year

Edward's total cost for the year with the HSA PPO was $0. Moreover, he gets to keep the remaining HSA contribution balance of $168 for future medical expenses. If he remained in the Traditional PPO he would have spent much more in paycheck contributions and coinsurance.

How would this experience have differed under the Traditional PPO Plan?

If Edward had the Traditional PPO plan, here's how his year would have looked:

Services Used Total Costs Amount paid by the plan Amount paid by Edward Amount applied toward the $500 individual deductible Amount applied toward the individual OOP maximum
Annual physical, lab tests (in-network) $185 $185
(100% covered preventive care)
$0 $0 $0
Doctor visit for ear infection (in-network) $375 $355 $20 copay Deductible waived $20
One (1) generic prescription medication for ear infection, filled at a network pharmacy $22 $0 $22 $22 $22
Four (4) generic medication prescriptions for a chronic condition, filled at a network pharmacy $185 $0 $185 $185 $185
Totals $767 $540 $227 $207 $227

Edward’s total cost for the year would have been $2,371.40 under the Traditional PPO plan, which includes the total annual premium total of $2,144.40 ($89.35 per paycheck) plus his total out-of-pocket cost of $227. Under the HSA PPO plan, his total cost for the same services is $0.00, or a difference of $2,371.40!

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