A long time ago, before 163 hours of graduate level coursework and two advanced degrees, I worked in a surgeon’s office and some of my primary responsibilities were billing insurance companies for services rendered. So, my knowledge about health insurance is a little dated, but it gave me some perspective on the things I need to look at when choosing between health insurance plans. This post is simply a walk-through of how I evaluate my options with respect to health insurance. I’m not going to use this post to indulge in any of my many rants about the stupid features in the healthcare payment system here in the States. I may come back with additional posts in the future about some our system’s flaws, but that won’t help anyone solve the current problem of sorting among a bunch of less than optimal choices for a health insurance plan or whether they should bite the bullet and pay the tax penalty for being uninsured.
The guiding principle for my health insurance selection process is this: if my family has a supremely bad year, where not only I but every member of my family is diagnosed with cancer and has to have chemotherapy, which policy is going to maximize our chances of getting through recovery without having to declare bankruptcy? Fortunately, one of the good things the Affordable Care Act has given us is that lifetime limits are a thing of the past, so that is one less data point to juggle when comparing policies.
I’ve developed a worksheet for myself to perform the comparison because I find the required disclosures from the insurance companies still require me to take a couple extra steps to fully understand how a policy would work with my finances. I’ve provided an example below using my fairly healthy family of three, and if you think you want to try it for yourself, at the end of the post is a form where you can submit your email address for a blank worksheet to be emailed to you.
[[editor’s note on the table: there are 14 entries, so if you use the drop-down box and select 25 entries, you’ll be able to see the entire worksheet at once.]
|Option 1: Big Insurance Co. Green Policy||Option 2: Bigger Insurance Co. Purple Policy||Option 3: Biggest Insurance Co. Yellow Policy|
|A. Monthly Premium||1245.92||1048.68||828.38|
|B. Annual Premium (A X 12)||14,951.04||12,584.16||9,940.56|
|C. In Network Deductible (use individual if 1 insured; use family if 3 insured; consult plan document on whether 2 insured means individual deductible x 2 or family)||3,000.00||3,750.00||1,000.00|
|D. In Network Out-of-Pocket Maximum (see note on C)||9,900.00||10,500.00||11,000.00|
|E. Sub-total 1 (B+C+D)||27,851.04||26,834.16||21,940.56|
|F. Out-of-Network Deductible||3,000.00||3,750.00||1,000.00|
|G. Out-of-Network Out-of-Pocket Maximum||11,400.00||13,000.00||11,000.00|
|H. Sub-total 2 (F+G)||14,400.00||16,750.00||12,000.00|
|I. Monthly co-pay amount for known prescriptions||100,00||100.00||100.00|
|J. Annual co-pay amounts for known prescriptions (I X 12)||1200.00||1200.00||1200.00|
|K. Almost Worst Case Scenario (E+H+J)||43,451.04||44,784.16||35,140.56
|Do Co-pay amounts count towards the Out of Pocket Maximum? What are co-pay amounts?||No. $25/$50||No. $30/$60||n/a. 50%|
|Are there pre-deductible (aka “first dollar”) benefits? If so, how much?||No||No||Yes, $500|
|What is my best prediction of actual cost if no catastrophe? (B+J+ individual deductible and 10 specialist copays or 50% oop max)||17,651.04||15,634.16||14640.56|
After working through the numbers, even though option 3 is kind of scary with its deductible and 50% coinsurance until the out of pocket maximum is reached, it looks like it is ultimately the most affordable of the options. If we have a year of great health, we may pay no more that premiums and prescription copays, and if we have a year of poor health the insurance company’s obligation to pay at 100% kicks in earlier.