The following is a staff writer post from MikeS. He is a married father of 2. So, with the cat, he ranks number 5 in the house. He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.
Once again, it’s Open Enrollment time for my employee benefits. As I discussed last year, there were some pretty big changes to my choices. This year will be no different, but I am happy about the changes. Naturally, there were calculations involved and of course I’ll share. The changes are only occurring with the health insurance options, so thankfully there was only one moving part to worry about.
This was the first year of being enrolled in a high-deductible health insurance plan (HDHP) with a corresponding health-care savings account (HSA). I personally did not feel like the deductible ($2,500) was all that high. I was rethinking that slightly after the first month, but things settled down for the most part. I also knew that we would hit the deductible without question given my son's condition. His annual check-up with his cardiologist is about $2,500. Still, the premium was a reasonable $184 a paycheck or $368 a month.
This year, the company is essentially moving everyone into a HDHP. We have 4 choices, 3 HDHP and one preferred-provider organization (PPO) option. The PPO was far and away the most expensive and one that I did not even consider.
The 3 HDHP’s all have different deductible options and different co-insurance provisions. For my family, we have the choice of a $3,000, $5,000 or $7,000 deductible with a 10% co-insurance for the $3,000 deductible or 20% for latter two. To throw one more variable into the mix, the company would contribute $800 towards your HSA for the $3,000 and the $5,000 deductible options, but nothing for the $7,000 option. Got all that?
The premiums for the 3 options ranged from $156 a month to $404 a month. So, which one is right for me?
Evaluating the Options
This is something that I love to do, figuring out which is the best choice for me because I love working with numbers. In the end, I will either be paying my medical costs in premiums or directly via claims. So, the first thing I did was to make sure my claims information is up-to-date. Yes, I keep track of my claims; that started with my son and trying to make sure all the bills had been paid. Now, I can use that information to actually keep track of my medical costs, so that in situations like this and know what numbers to use.
The gross medical costs for this year were about $12,000. If I just used that number, then the $3,000 deductible option (called the Value option) with the highest monthly premium was the appropriate choice. When I thought about it some more, I began to question whether I should use all of the claims we had this year. Specifically, my son had hernia surgery this year, and that represented about half of our total claims for the year.
Now, the choices look much different. The best option is between the $5,000 deductible (Standard) or the $7,000 (Basic). I also remembered that my daughter had some vision therapy in the first half of this year that would not be repeated next year. Removing those claims brought the total down again by about a $1,000. My anticipated expenses for a year were actually closer to $5,000.
This means the Basic option is actually the most cost effective choice. I will be paying for virtually all of my medical expenses with only major events triggering the insurance to kick in. My premiums are going to drop from $384 a month down to $156 a month while still fully funding the HSA.
Taking on More Risk
By selecting the Basic option, I am basically accepting more risk for lower premiums. This is a trade-off that I am more than willing to make. Since my financial position is more secure and stable, I can accept more risk. Should costs end up higher than anticipated; I have the money in the HSA and also my emergency fund should we approach the out-of-pocket maximum.
Do you have any changes for your benefit options this year?