Significant changes to our current health insurance have us considering changing, but we have over a dozen possible options. Finding it hard to compare when coverage is calculated different. For example, how does a $40 copay for an office visit compare to 5% coinsurance for the same visit? Or $150 + 10% for an ER trip vs 15%?
Flip a coin? (that’s basically what I did)
You just need to look at the relevant numbers. Coinsurance % isn’t actually the easiest one to evaluate because it requires you to know the $ amount of the charges you’ll likely face in the upcoming year–specifically the negotiated dollar amount for your prospective provider. Even if you have bills from a doctor there is no guarantee the rate will be the same for a new insurer, different insurers have different negotiated reimbursement rates with different providers.
Obamacare made some of this a lot simpler, ACA compliant plans have a few criteria that will be very important to you:
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Individuals have an out-of-pocket maximum of $6,600 per year. This is the most out of pocket you should ever have to spend per year for “Essential Health Benefits.”
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Essential Health Benefits include essentially everything other than your monthly health insurance premium itself–including things like co-pays, prescription drug purchases and etc.
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To understand the simplest view of your “total cost” of an insurance plan is to look at the out of pocket maximum + the annual cost of premiums. In theory that should be your max. Basically look at what your premium is vs your total possible out of pocket cost. Plans with total possible costs lower are usually better, because all plans are the same when you hit max OOP (insurance is required to cover everything, other than premiums which obviously you must continue to pay.)
Where it gets complicated is if you don’t want to base your decision on the “worst case” scenario of hitting maximum cost every year. In that scenario you’ll want to look at a nexus of premium vs deductible vs coinsurance %. For example a plan with a $1500 deductible and then a 80/20 coinsurance rate means your likelihood of having to pay a lot of “out of pocket costs” rapidly in a given year are lower. You’ll hit $1500, and then $0.80 of every dollar in medical care is covered by insurance. That can be good if you’re worried about coming up with enough money to get to your out of pocket maximum each year. But at the end of the day, if you know you’re going to have 3-4k+ out of pocket medical expenses every year then you should shop for the lowest TOTAL COST plan, that will largely always be your best bet financially. And total cost should be understood as the annual cost of premiums + out of pocket maximum. The different deductible and coinsurance levels aren’t unimportant, but they apply more to people that will have “middling or low” expenses. Those people (and you may be one of them) will need to break out a spreadsheet and calculate your expectations vs the costs of the various plans.
Also one caveat, the $6600 OOP limit ($13,200 for family plans) is based on people who are over 250% of the Federal Poverty Level. If you’re under that, then your OOP limit will be lower for ACA compliant plans.
Something you have to keep in mind is how often you go to the doctor. If you’re like most people and you only have a handful of office visits a year, you’re usually better off with a lower premium and a High Deductible plan.
The co-pay plans really don’t pay for themselves unless you’re seeing a doctor on a very regular basis. The premium (off the top of my head, I don’t have numbers in front of me), I think ends up being about double for co-pay plans. So, if you and your SO are going to spend, let’s say, $600 a month on a HDHC plan, and a copay plan is $1200 per month, would you save $7200/yr by paying $40/visit instead of the entire bill?
If you get a HDHC plan, you can also set up an HSA at your bank and funnel all your payments through that which makes them tax deductible.
Another thing, check the fine print, many (most? all?) just change what happens after you hit your deductible. I foot the entire bill (after the insurance discount) until I hit my deductible, then I pay some percentage or a co-pay or something, it’s not free after that. Used to be, isn’t now.
On preview, I see that I sort of said what Martin said…since you’re doing this on your own instead of through your an employer, you can try to evaluate your needs and then narrow down your options from there. If you see your GP once or twice a year for one reason or another (not counting a well visit) and that’s pretty much it, you can look for options that lower your premium since you don’t need the Cadillac of coverage. OTOH, if you get sinus infections 4 times a year and ulcers on a regular basis and you’re on some expensive meds, you may be better off looking for a higher end coverage with a higher end premium but letting them pay more of the bills.
Clear as mud, right?
Martin, that’s a phenomenal analysis. As a relatively young healthy couple, I am mostly worried about routine care, urgent care, and emergency room. That said, my wife had an injury this year and has been in PT. Both her PT and orthopedist are $20 a visit. That would change to $40, or under the plan we are considering, 5 to 15%.
And Joey, this is through an employer, but switching from one to the other.
See, that’s the option that is confusing me. (I’m not the OP, just struggling to figure out the same thing.)
I’ve got a choice of 5:
$1500 deductible, $469.67 premium, $10 co-pay, 80% co-insurance, $3500 OPX
$2000 deductible, $470.32 premium, no co-pay, 100% co-insurance, $2000 OPX
$3250 dedictible, $454.39 premium, $30 co-pay, 100% co-insurance, $3250 OPX
$6000 deductible, $307.63 premium, no co-pay, 100% co-insurance, $6000 OPX
$0 deductible, $398.09 premium, $25 co-pay, 100% co-insurance, $1500 OPX <—this is the only one that’s an HMO, not a PPO.
(For some reason, the comparison tables use *their *portion of the co-insurance, while the Summary of Benefits and Coverage pages use mine. This is giving me a headache.)
So…I almost never go to the doctor. Not even once a year. I’ve been once in the last 5 years to “my doctor” and twice to a walk-in clinic, because it was over the weekend and I didn’t want to wait, I just paid out of pocket. But I’m about to turn 41, so…y’know, things might start popping up.
Assuming I go once or twice a year, that $6000 deductible scares the hell out of me. I’d have to pay for those visits and labs entirely out of pocket, because they won’t meet my deductible, right? It seems like a high deductible only works in my favor if I go to the doctor a lot, more than $6000 worth a year. Otherwise, I’m paying all my own health care costs AND a premium for insurance I never use. So I’m leaning towards the last one, HMO be damned, because I like the not-having a deductible, and therefore having more predictable monthly costs for healthcare total. I have no savings. Even a $200 office visit would really screw up my monthly budget.
This is basically a test of risk aversion, isn’t it? It’s whether I’m more scared of getting really, really sick and needing a hospital, or if I’m scared of spending $91 more each month and not being quite sick enough to benefit from that. Gods, I hate gambling. This sucks. I don’t wanna be a grownup no more. 
But according to the numbers you posted, that policy with the $6,000 deductible will cost you $162.04 less each month than the one with the $1,500 deductible. That’s more than $1,900 each year – way more than enough to pay for a couple of $200 office visits over the course of the year.
Now, I know a lot of people aren’t prepared to run up a $6,000 medical bill all at once, just to meet a deductible (although one trip to the emergency room will put a big dent in that number.) But are you willing to spend $1,900 more each year for the $4,500 difference in deductible cost when you’ve rarely needed a doctor at all?
**kunilou **nailed it. HDHP is the way to go for people who don’t use chronic medical care now AND expect to go another 12 months the same way AND can come up with the total high deductible amount early in the year if this is the year their luck runs out.
In exchange they save, using WhyNot’s numbers, $2000 per year. Less whatever medical care they actually buy, e.g. one trip to doc-in-the-box.
Plus with the HDHP you can to place $3350/person (6750/couple) of pre-tax money in an HSA vice just $1200/per person in an FSA under a PPO. At a 25% marginal rate that’s an extra $500 in tax savings.
Looking at Whynot’s other PPOs, the most expensive one costs $2500 / year more after tax and saves, at most (e.g. if you get cancer), $2500 in OPX.
In other words, by getting the fanciest insurance, you’re break even if you get cancer, but $2500 behind if you stay totally healthy & never see a doc that year.
And said the other way, by getting the HDHP insurance you’re starting out $2500 ahead versus the fancy plan and as you get progressively sicker you eat into that. But no matter how sick you get, you’ll never be worse off than if you’d bought the fanciest plan.
The financial decision is clear. The only remaining issues are whether you’re somebody who needs monthly payments because they’ll blow any excess earnings every week.
Right, I’m not even looking at the others. Just the $6000 deductible and the $0 deductible, both in reality and for the sake of argument.
Here’s what’s really going on here, I realize this morning: This is one of those examples of the high cost of being poor, and/or the ways that being poor messes with your head. All I can see is deductibles I could not pay in an emergency. Just couldn’t. Even the smaller ones are more than I could handle. We live, quite literally, paycheck to paycheck. A significant medical cost would see us homeless again.
The difference in monthly premiums means little to me, because they won’t be enough to pay the deductible should I need to. But at the same time, yes, of course saving money each month is appealing. But it seems like every time I make a decision based on short term saving, I end up deeper in the hole.
Are you the employer or buying on the private market? Or are you an employee choosing among employee plan offerings? If the latter, the employer’s broker almost certainly has people who will be happy to explain how the different plans are likely to affect you.
For example, my employer offers a conventional PPO (pay a lot for coverage, pay a small copay each time you use it) and an HSA/HDHP (pay very little for coverage, pay everything up to a certain amount when you use it, get a tax-deferred savings account for medical expenses).
The HDHP makes sense if you are young and healthy. The employee pays every expense except annual checkups up to $4000 and the out-of-pocket maximum is $6000. So you are basically self-insured up to $5K, give or take. But the employer gives us $1000 a year so we only pay for anything over $1000 and under $5000. In most years, my healthcare costs are like $200, so I “make” $800 per year and keep that banked for the future.
The downside is that I could be paying for $4000 in medical care myself if something bad happens, but that’s really not bad at all. If we look at the PPO, we see that hospital stays are only covered at 80%, so if I spend a night in the hospital I am going to be out $3000 anyway. Here’s the thing, though: there is no out-of-pocket maximum under the PPO. So if I spend two nights in hospital, I am out $6000 under the PPO (despite its supposedly better coverage and greater expense) but still only $4K under the HDHP.
Basically, the PPO only makes sense if something slightly bad happens to you every year. Like, you needed minor outpatient surgery once a year that cost $2500. If nothing happens, or something terrible happens, you are much better off under the HDHP.
Obviously, your plan choices may differ (will differ, in fact). But that’s how you want to analyze them: see how much you’ll be out of pocket in a good year, and see how much you’ll be out in a really bad year. Then add those numbers to the initial cost of coverage. Then eliminate the plans where you can’t afford the out-of-pocket costs for a really bad year. Then pick the one that benefits you the most in a good year.
I should also add that if your employer is offering HDHPs for the first time, now is the time to get into them. Because of the above calculus, the youngest, healthiest employees will gravitate to them which will drive up the cost of the conventional offerings over time (since only the oldest and sickest will be in them). The employer is likely to reduce its HSA contribution over time, so getting in early means getting the biggest wad of free money possible.
I will throw out what I am looking at, because it sounds like maybe since we are both public employees we have it a lot better off and I can’t gauge what is good.
First, the current plan that is changing after 2015 (biweekly premiums for an indiv. and minifamily):
$34/$114 biweekly; no deductible; 250/500 OPX; $20 copays for most visit; 10% coinsurance for most services
We went to the ER on this plan and owed $146 for the ER, drugs, and imaging, and $13 for the doctor.
This plan is changing to:
$38/$126 biweekly; 250/500 deductible; 2000/4000 OPX; $20-40 copays for visits which are subject to the deductible; now charging $75-100 for imaging and tests; the ER bill would have been 100 more copay.
If we switched to the plans offered by my employer:
$52/$111 biweekly; 350/600 deductible; 6000/7500 OPX; $15-35 visits; 15% coinsurance
$54/$116 biweekly; 1500/3000 deductible; 6000/12000 OPX; 5% coinsurance; 25% for Rx
HMO: $55/$120 biweekly; 1500/3000 deductible; 5000/6850 OPX; 20% coinsurance
Now, I don’t want to have too much insurance considering we are both late 20s, but my wife did have an accident this year. It seems like their really isn’t much savings to be had here, so really trying to get the most bang for my buck in this range. It’s really impossible for me to gauge how these compare, especially without knowing the “adjusted” charge from one insurer to the next. I can’t even adult.
Where does the coinsurance kick in on each? Right away?
I assume after the deductible, but in some cases it isn’t clear. Some say 15% after deductible, others just say 15% (this one for example: http://www.aetnafeds.com/pdf/sbc/2016/2016SBC_AetnaDirect.pdf)
It can be quite complicated to compare plans. At one of my old jobs they tried to make it easier. The benefits provider had set up a web site where you could enter a bunch of relevant information and it would crunch the numbers and tell you how much each plan would cost you. That was very helpful. But even then it required some guesswork about the future, such as the number of times you expected to visit the doctor.
It’s easy. Step one, get into your time machine…
Maybe flipping a coin is not such a bad alternative. 
You just don’t know which plan will be the better deal until after the year is over and you see what expenses you had. People with predictable needs - chronic ailments, a planned pregnancy, well child visit - may have more luck in guesstimating their needs.
One thing to think about: for plans with high deductibles, many hospitals still have options to reduce your bill based on your financial situation. When I had a ton of emergency room related expenses, the total bill was first reduced by the amount the insurance company would approve (even though the company didn’t pay a cent), then it was reduced by another 50% by the hospital. Ironically, this put me out of pocket about $4200 on a $5000 deductible… sigh. But it would have been over $10,000 at the very beginning of the process.
Evil insurance plan:
Step 1. Offer “health insurance” that both costs a lot and doesn’t cover anything.
Step 2.???
Step 3. PROFIT.
Hell, you aren’t even able to compare the back half of the plan, and that matters a lot if you pick a high deductible plan.
IE,
How much does plan A) vs B) pay for a doctors visit ?
In my personal experience I’ve paid all these prices for a regular GP visit at the same place:
- $55 - Medicaid
- $75 - Individual insurance, small insurance company through a negotiating group in common with other insurance companies
- $105 - ACA insurance through Healthcare.gov
- $110 - And that was the rack rate, IE what the doctor actually billed so potentially they could have charged a few $$ more - ACA insurance through Healthcare.gov
If you pay a $6000 deductible, plan 2 vs plan 4 would save you $35 every doctor visit, but you have basically no way of knowing that without committing for a year.
It sounds like what I will have to switch plans, then break my wife’s other arm to give us another ER visit to compare…lol.
Grace Gee and Eugene Wang, two math undergraduates at Harvard, became interested in the amount of data available for insurance plans on the exchange, but found shopping the plans difficult.
They detailed the insurance plan information (and wrote their paper for class!), then added some health stats, sorted all the information into a user-friendly format and created a start-up. I helped my brother shop for insurance the other day on the site and was very impressed.
The site asks you how many people you will want insurance for, ages, smoking status and income. Next, it takes you to 3 general pricing options. From there, you can tinker around with the different options.
One option is “If you spend as much as a (typical person with your stats).” Under that is a breakdown of what that person typically spends on things like prescriptions and office visits, etc. There is also a slider so you can customize they ‘typically spent’ amount higher or lower.
Anyway, I just found this site to be very user friendly and informative. It’s annual enrollment time so those shopping for insurance right now might find this site helpful.
Gee and Wang’s website: https://honeyinsured.com/
Article about the students: What Are the Best Plans on Healthcare.gov?<!-- --> - The Atlantic
You won’t be homeless. I’ve never met a single medical place that won’t work with you, allowing you to make payments. I know we paid like $75 a month on a $9000 bill at my current doctor’s office. And if they don’t negotiate low enough, there’s always loans if you have the credit (or know a family member who can help) or even bankruptcy, which has a way of forcing creditors to take what they can get lest you do actually go homeless with Chapter 7 and they get nothing.
Now, I’m not saying I agree that the highest deductible is necessarily the best. Sure, on paper you save the most, but the things you may have to do to cover the deductible may not be worth it to you. In my mind, insurance is about planning for the worst, not really about saving money.
But I see no reason to fear having a deductible at all, thinking that having one will make you homeless.