Most insurance companies have health plan options that allow you to choose from among health insurance policies that have lower monthly premiums if you consent to pay more out-of-pocket expenses, such as a yearly deductable, copayments, and coinsurance for services and prescription medications. If you are healthy and do not anticipate any (or a small amount of) medical spending in the coming year, choosing a plan with larger out-of-pocket expenses may make sense for you.
Your copayment is a flat fee that you pay each time you have a health-related service. For example, you may have to pay $15 for each doctor's visit or $25 each time you have a prescription filled.
Your coinsurance is a percentage of the cost of covered health-related services after you have met your deductible. Usually, coinsurance is 20% to 30% of what your health plan approves. Your health plan will pay the remaining 70% to 80%.
Your deductible is the amount you must pay each year for health-related expenses before your insurance policy, or health plan begins paying.
Your out-of-pocket expenses are a combination of your deductible,copayments, and coinsurance. In general, higher out-of-pocket expenses mean lower monthly premiums and lower out-of-pocket expenses means higher monthly premiums.
Run the Numbers
There are numerous health plan options available and they differ considerably depending on where you live. In an online search for a health insurance policy to start in January 2010 for a healthy couple in their mid 30s, a PPO with a $20 copayment for doctor visits offered a wide range of monthly premiums based on the annual deductible. For example, with no deductible, the monthly premium for the couple is $804. With a deductible of $5000, the monthly premium is $355.
Predicting their health care needs for 2010 and doing the math should help this couple decide which policy to choose. The plan with no deductible will cost them $9648 for the year, but all their health care costs would be covered. The high deductable health plan will cost them $4260 for the year, but they would be responsible for all their health expenses up to $5000. Since they are healthy and only anticipate 4-5 doctor visits in 2010 (which would cost them about $500 to $1000 out of pocket), it makes sense for them to select the high deductible option.
Even if you anticipate ongoing health expenses, modifying your plan may help to lower your costs. For example:
- Judy S. is a 55-year-old woman with multiple chronic health conditions. She visits her physician five to six times per year and takes six prescription medications. She works for a small company and does not have health insurance. She buys a plan from her state Blue Cross Blue Shield company, which has been costing her $750 per month. She was recently notified that her premium would be increasing to $925 per month. Judy reviewed other plans offered by Blue Cross and found one that would keep her premium at $754. In return, her copayments for all services and medications almost doubled. However, paying more for out-of-pocket expenses was less expensive than buying the plan with the higher premium.