In an earlier post, Evaluating Health Insurance Options: The Basics, we talked about different places you can find coverage that you may be eligible for, an alternative to health insurance and the basic types of plans offered.
As I covered in that first post, Steve and I have recently shopped for health insurance as his new employer coverage was quite expensive both in the premiums we would pay and the out of pocket costs to us via the deductibles.
So, we decided to get creative and really vet all of our options.
Please understand: I am not a health insurance professional. I have shopped for it personally, as well as for companies in my positions as Controller and CFO. These are my opinions based on my own experience.
Pay Attention to the Variables – They Affect Your Costs
The various options are likely to make your head spin; it is no wonder people stress over choosing health coverage. But you need to pay attention to the variables in your plan options, because that is what drives the cost of the premiums. At the most basic level, you save money on premiums when you take on more risk and you pay more for premiums when the insurance company takes on more risk. Here are some things to consider:
- Is there an approved network? If there is, check to make sure your preferred doctor(s) are in that network. Going outside the network means less coverage and more costs for you. All things being equal, premiums for plans with approved networks are usually less than those without an approved network. If you can live with the approved network, then you may be able to save on premiums.
- Do you need a referral to see a specialist? While there is some logic in requiring referrals, it usually takes longer to navigate the system, more fees (one to the doctor to make the referral, one to see the referral) and more red tape (your insurance company has to be able to follow the trail). Premiums for plans with referral requirements are usually less than those without required referrals.
- What are the co-pays? What are the deductibles? High deductible plans can range from just over $3,000 to up to $12,000 for families. That is a big range, so understand what you are responsible to pay.
- What is the insurance rate once the deductible is met? For some plans, it is 100%, meaning the insurance company will pay 100% of your bills once you pay your deductible (and assuming the bills are for covered services). For others, even after meeting your deductible, you are required to pay a percentage (for example, 20%) of costs up to a second deductible amount. Again, understand what you are responsible to pay.
- What is covered? Check to see if the services you are likely to need are covered. Some services that tend to go either way include mental health, chiropractor and bariatric surgery (like gastric bypass). Cosmetic surgery is usually not covered, so be pay attention to what is considered plastic surgery. You may think you need a nose job to fix a health issue, but your insurance company may consider it cosmetic and deny coverage.
- Lifetime maximum coverages. These have greatly improved in recent years, but be sure you understand what the total amount your insurance will cover is. Long-term illnesses like cancer or events like having an extremely premature baby cost hundreds of thousands of dollars, if not more. I know of a set of premature twins whose medical bills were nearly $3 million dollars just for the first several months.
- Are pre-exisiting conditions a factor? A lot of the coverage does not take pre-exisiting conditions or health factors into account (per the new laws), but you can get a better rate for coverage that is based on your health, assuming you and everyone you are covering is healthy. If you are all healthy, look for plans that give you custom rates based on your application.
- If any other differences stand out, be sure to track those as well.
How Do I Choose The Plan Type?
This will be different for each person, and likely even different during various points in your life. Are you likely to have a baby in the coming years? Are you aging? Do you have a chronic condition? A child with a special medical need? Understanding exactly how you will likely utilize your insurance is the key to picking a plan that works for you. You need to examine your tolerance for risk and your ability to save enough to cover the costs, should the unexpected happen.
The best way to do a comparison is to compare like with like. For example. compare traditional plans with similar co-pays and out-of-pocket deductibles with each other and high deductible plans with similar deductions with each other. Otherwise, it can get very tough to really compare the plans to each other as it is tough to put a value to every little variable. When you keep things similar, you can see which plans really cost more for the same (or similar value).
If you are not sure which type of plan you want, consider doing two (or more, if you need to) health insurance comparisons, one for each type of plan.
To compare our plans, I made a simple spreadsheet in Excel (which you can download here). Here is an example of how our spreadsheet looked:
Using the Health Insurance Comparison Spreadsheet, we were able to decide which option provided the best value for our family, considering our tolerance for risk and how we wanted our healthcare dollars to work for us. I am not sure if I will ever be excited about spending my monthly amount on healthcare, but by evaluating the plans and making an educated decision, I know we have made the best choice for our family given our options.