Along with all the new rules and regulations comes a host of new health insurance plans from every insurance company in Ohio. Among these plans you will find significantly higher deductibles and out-of-pocket maximums.
In order to help you sleep better at night, I thought we should go in depth on the why and how higher deductibles might make more sense for you
Don't Buy the Hype
If I have ever had the privilege to talk with you about your health insurance or handle your renewal, this might sound familiar, but for everyone else, this is the magic pill that will have you welcoming a higher deductible with open arms.
It has become common place with "modern" health insurance to want a low deductible, as if that displayed what a smart and safe choice you had made.
I'll tell you what, if you're paying the full load for your health insurance premium, buying the lowest deductible you can is the biggest blockhead move you can make.
By doing so you ship excessive, obscene amounts of guaranteed money to the insurance company each month "just in case."
It's this fear and ignorance that can be debilitating and paralyze you from making a smart choice with your health insurance.
I'm going to show you how to reanimate your "smart health insurance making" ability with this ridiculously simple formula.
One Important Question
One very important question you will want to ask yourself before we get started is "have you ever hit your deductible?"
If the answer is no, you should be off to the races.
If the answer is yes, ask yourself "how many times in the last five years?"
If that answer is more than two, you might need some more serious math to figure out your situation.
Math Never Lies
If you are trying to calm your nerves about selecting a higher deductible with your health insurance. This is the only formula you need to follow to tell you if you're making a smart choice.
Take your current monthly premium or payment and multiply it by 12, that's going to give you your total annual cost for that health insurance policy. That number might be a little depressing at first, but once you get over it you can start to see things very clearly.
Now, take the cost of the higher deductible policy that you are considering and multiply that by 12. Now you have the total annual cost of your desired plan.
Subtract the two to get the difference. This is the amount of money you are saving by going with the higher deductible.
Finally, take the savings and subtract it from the amount of the new deductible you are considering. This will tell you how much of your money "is on the table" or at risk with this new deductible.
Take The Money and Run
If that number is under $500 or even $1,000 take the higher deductible all day long. I would much rather put that extra money in your pocket instead of guaranteeing it to the insurance company.
If you are unable to cut the distance between the new deductibles in half, then you might be better off where you're at. However that will come down to your personal preference.
Let's Get Real Fancy
If we want to get a little extra credit for this math assignment and you are still feeling a little uneasy about this. Take your total savings number and multiply it by five. That number will tell you how much money you will save over a five year period.
If you had only satisfied your deductible once in the past five years you will have a pretty good idea of how long it will take you to accumulate enough money to break even or be ahead of the "deductible game."
A Real Life Example
I ran a quote for my family (of four) in Ohio and looked at Medical Mutual's Health Savings Account Plans.
Now I would have gladly quoted new "Obamacare" plans, however due to the "technical difficulties" it's currently experiencing, I am unable to.
Here's how the number's break down.
A SuperMed One Wellness HSA with a $2,500/$5,000 deductible costs $480.54 a month.
$480.54 x 12 = $5,766.48
$5,766.48 is the total annual cost for that plan.
A SuperMed One Wellness HSA with a $5,000/$10,000 deductible costs $307.79 a month.
$307.79 x 12 = $3,693.48
$3,693.48 is the total annual cost for the higher deductible.
$5,766.48 - $3,693.48 = $2,073
Our total annual savings would be $2,073
$5,000 - $2,073 = $2,927
We would be adding $5,000 to our deductible so our total added risk would be $2,927 (what's on the table)
$2,073 x 5 = $10,365
We would save enough money over five years to cover the new deductible if needed at $10,365
The Bottom Line
If you don't want to take the risk of paying an extra $2,927 a month and saving $10,365 over a five year period, Medical Mutual will gladly take your money.
I would just examine your past medical usage closely before making that choice.
Unless you go way over your deductible every year, the house wins. It doesn't matter if you paid $5 or $4,999 for your 5k deductible. Unless you're receiving annual medical treatment of more than $7,000 your tossing a lot of extra money away.
If you don't like doing math and/or your numbers are a little messy I would be happy to help run them for your specific situation.
You Tell Me
Show of hands, who wants a higher deductible now?