Math question -- estimating health care costs

Factual Questions
1

So my husband may decide to take early retirement, which means we’d have to go on COBRA for a while and then he would have to go on an individual policy for a few months. (Assuming he retires mid-summer, the 18 month COBRA period would take me to age 65, when Medicare would kick in; he would have to wait about 6 months for Medicare eligibility.)

COBRA is of course somewhat pricy, so we also want to know if we could save some money by just going on individual insurance from the get-go.

I know that counting on the ACA to be there is not the best assumption to make, but for right now I just want a handle of how to cost out the different plans. As a starting point we’d like to compare costs for 2 different plans – both from the same insurer (BCBS). I got this info from healthcare.gov, and premiums are after the tax credit.

Plan A has estimated monthly premium of about $600 for the two of us. Max out-of-pocket is $14,300. Deductible is $7,000 per person. (Family deductible is $14,300 – I assume that since there are only 2 of us that our total deductible would be $14,000. Am I right?) Obviously there are copays and coinsurance amounts.

Plan B has estimate monthly premium of about $1,150. Max out-of-pocket is again $14,300. Individual deductible is $3,000, and again I’m assuming that this means $6,000 for the 2 of us, since the family deductible is $9,000. The copay and coinsurance amounts for this plan are naturally different from those of Plan A.

On the one end, suppose we use no health care whatsoever over the year. Our total costs then are the premiums. Plan A is the clear winner – it would cost us about $7,200 for the year, while Plan B would cost us about $13,800.

On the other end, suppose we have a catastrophic year healthwise and end up with expenses in excess of the max out-of-pocket. Again Plan A is the clear winner – total costs would be $21,500, while Plan B would cost $28,100.

There’s a lot of room in the middle though. is there some way of coming up with a quick-and-dirty estimate of what the crossover point might be, given different copays and coinsurance amounts? Or do I have to set up some hypothetical scenarios? If so, is there some app that could help me do this?

Also, I’ve been assuming that since both plans are from the same insurer they would have the same negotiated rate for medical services. Is this a good assumption?

2

I don’t thing there is a GQ “right” answer to this.

The best choice depends on your particular circumstances. Are you both relatively healthy or do either of you have chronic health problems? What risk are you willing to assume? What is your income?

This is a question only you and your spouse can answer.

I would recommend making a spreadsheet and start plugging in numbers. You can then decide which coverage is best for you and yeah…you are balancing the risk of a healthy year vs an unhealthy year. Sucks to have to make that choice cuz even if healthy shit happens.

3

Thanks, Whack-a-Mole.

I took another simple try at this. I looked at 2 scenarios, making some pretty gross assumptions.

Scenario 1 – Total covered out-of-pocket costs = $6,000 - the family deductible for the plan with the lower premium. Assuming neither plan pays anything until the deductible is met, the costs for Plan A would be $7,200 (total premiums for the year) plus $6,000 in out-of-pocket expenses or $13,200. Total cost for Plan B would be $13,800 (premiums) plus again $6,000, or $19,800. Plan A is cheaper.

Scenario 2 – Total covered out-of-pocket costs = $14,300, the max out-of-pocket for either plan. Both plans have coinsurance amounts of 40%. (This is admittedly a very broad assumption.) Plan A would cost $7,200 (premiums) + $14,000 (deductible) + $120 (40% of total expenses minus deductible) for a total of $21,320. Plan B would cost $13,800 (premiums) + $6,000 + $3,320 (40% of total expenses minus deductible) for a total of $23,120. Plan A is still cheaper.

If my math is correct, Plan B is cheaper in Scenario 2 only if the copay/coinsurance amount is under 20%. That seems to me to be an unrealistically low percentage.

What am I doing wrong?

4

When I was looking at this I found it helpful to plot in Excel My costs versus the total cost used. It would start out at $0 used and whatever your premiums are on the vertical axis. It would then go up $1 used for every $1 I paid until it reached your deductible. Then it would climb at a slower rate based on your coinsurance till you reached your out of pocket max. Then it would be a horizontal line assuming the insurance is paying for everything. This helped me to visualize what my cost would be for each level of potential costs. Some plans were never better under any amount of spending and could be discounted right away.