This article is mainly for those of us lucky enough to be self insured, but I think anyone who has any ability to pick their healthcare plan could possibly benefit from it. I am going to tell you how the cheaper insurance policy could be a much smarter way to go. This topic makes me think of the old adage “You don’t truly appreciate the value of something until you pay for it yourself,” or something along those lines.
Selecting an insurance policy for yourself or your family can be a daunting decision. While everybody wants to get the best coverage possible – the reality is that health insurance is really expensive. Expensive enough to make one think that: welI, I am hardly ever sick. What is the harm in not having insurance for a few months/years? I won’t lie, when I was between full time jobs, and doing some freelance work on my own I let my insurance policy lapse for a few months before my common sense dictated that I set up my own policy in the interim. In this day in age where a minor surgery will cost you 10-20k out of pocket without insurance, and something major could run you into the 100’s of thousands of dollars – it just doesn’t make sense not to have some kind of financial protection from what would be a veritable mountain of debt. A debt that could possibly haunt them for the rest of their life.
So there are a few things to consider when shopping around for an insurance policy. The main ones to look at are
Monthly premiums – how much money you will be spending each month to maintain your policy.
Deductible – how much money you will have to spend on medical bills before your insurance policy kicks in (note: having insurance will get you lower rates at any doctors that are in network for your policy).
Max out of pocket – the maximum amount you will spend in any plan year of your policy on eligible medical expenses. This is an important one! Why, you ask? I will get to that in just a second.
What it actually covers – AKA the fine print. What exactly is considered an eligible medical expense? Does the policy cover things like eye care? Or infertility treatment? The important thing is to be aware of any possible things that you will likely use the insurance for and if they are covered or not.
The main thing to think about when selecting an insurance plan is to figure out it will cost you. This is not quite as simple as multiplying the monthly premium by 12 and calling it a day, although, that is an important piece of information. You also want to consider what the cost to you would be if you got really sick, and needed to be hospitalized. I.E. what is the deductible of each policy you are looking at and what is the max out of pocket. If you are hardly ever sick and almost never go to the doctor, it doesn’t make much sense for you to pay extra each month for a low deductible policy. A policy that would save you a few buck if you went to doctors just a few times a year, but would end up costing a lot more in premiums. You want to think of what will be your total health care costs on each insurance policy.
The deductible can be an important piece of data to consider when figuring how a policy will impact your total health care costs. Lower deductibles mean that the insurance benefit will kick in sooner. If I had a $100 deductible on my policy and I went into the doctor for $300 dollars of care I would pay 100% of the first $100 and that would satisfy my deductible. The next $200 would be processed at my coinsurance amount. For example, if I had a 80/20 coinsurance benefit on my policy, it would mean that out of that original $200, I would be responsible for just $40. Sounds pretty nice right? The lower the deductible the more you will pay each month. So again you have to consider how often you actually use medical treatment. If you are not someone who goes to doctors very often it is not very important to have a low deductible when it is costing you more money in premiums each month. As long as the money you save by not having a low deductible is more than the money you will save by having a low deductible than you are better off not having a low deductible, and vice versa.
One of the most important things to look at is the max out of pocket costs section on your policy. This little piece of info tells you how much you will have to pay if things really hit the fan. If my policy has an out of pocket max of 5k, and I get into accident and need some serious care, I know I will not have to pay more than $5k. For me, someone who doesn’t need much medical care, but wants to have insurance to protect myself from the potential life-changing amount of debt that an accident could give me, this is a very important. I save a lot of money each year by going with a higher out of pocket max. You should look at your total costs though, and a lower max out of pocket could make sense for you if you have kids, or need more medical care.
Also factor in any regular care that you need, and if it is covered or not. For example, I wear contacts and every year I need an eye exam and new contacts – about a $250 annual expense without insurance. I would then factor that in when looking at the total cost of the policy. If the policy covers that expense 100%, cool, I know that will save me $250 bucks a year. However, if this policy costs an extra $500 from a similar policy I am looking at and there are no other differences that matter to me (think long and hard about this) then I am basically losing $250 bucks a year by going with the additional coverage. You then take these numbers and see how they affect your total health care costs for the year.
You should take all these factors into consideration when selecting your insurance policy and go for what you think will end up costing you less money in health care expenses. As with many financial decisions, it is much more important to look at the long term costs and go with whatever makes the most sense. I went with a high deductible, moderate out of pocket max because I am not often sick or needing medical care. I figured that the amount of money I save each month on premiums to be well worth the cost of a few minor doctors’ visits, if I for some reason I needed the additional care. I can bank the addition costs and spend/save them for something else. If I was someone who went to the doctors on a regular basis, then it would be more important to have a lower deductible.
I hope I shed some light on the things to think about when shopping around for a health insurance policy and why a cheaper plan can save you money, and be the smart choice. If you have any questions about any of this don’t hesitate to ask! Happy healthcare shopping!
Cheers!
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