Is my companies health insurance plan worth it?

[StashinIt]

So the health insurance situation is changing drastically in 2013 for the StashinIt family.

For two reasons

• We had our first child in October
• My wife will be quitting her job soon to be a stay at home mom
• Company I work for was acquired bringing a new health plan

In 2012 my health insurance was fully covered by my employer (they never covered dependents). My wife has insurance through her work and has our child as a dependent. Our out of pocket expense cumulatively is currently $260 monthly.

In 2013 I can either choose to purchase the insurance my employer provides or find my own policy. The cost to me will be $715 a month for the family plan. A $455 monthly increase from last year! I contacted an insurance broker and the broker was able get us approved for a high deductible policy for my family for $548 monthly. Since the insurances are very different in what/how much they cover it's not an apples to apples comparison. So I wanted to ask the Mustachians if my employers plan is worth the extra $167 a month?

For brevity and accurate comparison I'll try to summaries the key differences in the plans. They don't exactly match up perfectly but I'll do my best to create an equal comparison. These are both PPO plans so I'm going to assume we always use In-Network services.

Employer's Plan:
Deductible: $1,500 individual; $3,000 family
Out of pocket maximum: $4,000 individual, $8,000 family
Prescription Drugs: $10/$35/$60 copays (generic/brand/non-preferred brand)
Office visits: $30 PCP/$50 specialist copay. Then covered 100%
Well Care Adult/Child + Maternity Services: covered 100%
Medical/Surgical Services: 20% co-insurance
Inpatient/Outpatient hospital services: 20% co-insurance
ER visit: $150 copay

Private plan:
Deductible: $2,500 per member = $7,500
Out of pocket maximum: $5,500 per member = $16,500
Prescription Drugs: $250 deductible per member = $750 plus $15/$30 or 30% contracted rate copay (generic/brand/non-preferred brand)
Office visits: $45 (first three visits) then 35% co-insurance
Well Care Adult/Child + Maternity Services: 35% co-insurance (unless it's a preventative health service covered by federal/California law)
Medical/Surgical Services: $100 to $500 copay (depending on the service) plus 35% co-insurance
Inpatient/Outpatient hospital services: $1,000 copay per admission plus 35% co-insurance
ER visit: $100 per visit plus 35% co-insurance

So obviously my employers plan covers much more (as it should since they are paying 60% of the total cost). Am I a fool to decline this insurance? With the old company, they would pay the benefit amount for the employee only policy if I declined health insurance from them so I could buy elsewhere. This is no longer the case. Also of note, my employer deducts the health benefit pre-tax. I could put $2,500 in a HSA to pay for the private policy.

Hopefully that's enough information for an informed discussion. Feel free to ask for any relevant details I have missed.

[tooqk4u22]

You should start with an apples to apples comparison then work from there - i.e. have your broker check what a private plan would cost that is comparable to your company plan.

I assume the rate went up to $455/month (from zero if I read right) because of you now have to contribute for you but you also are adding your wife and child, so now it will be family plan - is that right. If yes, then again do apples to apples not oranges.

In most cases I would think it would be hard to beat a company subsidized plan with a private plan and would lead me to believe that the apparent savings in the HDHP would not be worth the additional self insurance risk - potential savings of $2000 a year but much bigger downside.

Just some things to consider.

[madage]

Out of pocket maximum: $5,500 per member = $16,500

I believe an out of pocket maximum for $16,500 makes this plan ineligible for an HSA, per the IRS. The limit for 2012 was $12,100 for a family plan. IRS publication 969 has not yet been updated with the 2013 limit, but I'm pretty confident it's not going to increase by $4,400. The increase from 2011 to 2012 was $200.

[StashinIt]

You should start with an apples to apples comparison then work from there - i.e. have your broker check what a private plan would cost that is comparable to your company plan.

Actually I already did! :-) For comparable coverage it would be $1,364 monthly but there would be no reason for me to choose this option. But yes, it does show that it's ~650 better than I could do on my own for the same coverage.

But what I want to compare is the plan I would be willing to buy for myself  to my employers option. If I were to buy for myself I would get a high deductible because an extra $10k out of pocket isn't going to break me. If my employer offered a plan with comparable coverage, it would be much cheaper, and I would therefore choose it.

I assume the rate went up to $455/month (from zero if I read right) because of you now have to contribute for you but you also are adding your wife and child, so now it will be family plan - is that right. If yes, then again do apples to apples not oranges.

Yes. It's a family plan now. What we are paying now really is irrelevant, but maybe I included as a desperate plea for compassion since I'm going to be paying so much more now :-(

In most cases I would think it would be hard to beat a company subsidized plan with a private plan and would lead me to believe that the apparent savings in the HDHP would not be worth the additional self insurance risk - potential savings of $2000 a year but much bigger downside.

Right, that's exactly it. If I were to buy insurance for my family at market prices this is how much I would get, and this is how much I would pay. I'm all for increasing my savings rate, but I am very tempted to take the subsidized insurance at a slightly higher cost for the additional coverage. Even though I would not buy this level of coverage at market price. I'm interested in what the community thinks about this and help with my analysis.

I believe an out of pocket maximum for $16,500 makes this plan ineligible for an HSA, per the IRS. The limit for 2012 was $12,100 for a family plan. IRS publication 969 has not yet been updated with the 2013 limit, but I'm pretty confident it's not going to increase by $4,400. The increase from 2011 to 2012 was $200.

Thank you! This is exactly why I post here. I'll keep an eye on the updated publication.

[chucklesmcgee]

I would look at ehealthinsurance.com. By law, brokers can't give you any additional discount, so it's probably best to look at ehealthinsurance (which probably has about 80-90% of the major plans offered by big carriers)

The new limit for HSA compatible HDHP's is $12,500 out of pocket family maximum so that wouldn't be compatible.

Some important questions:
1. Could you afford to pay the maximum out of pocket on the cheaper plan without having to make substantial sacrifices to your lifestyle or endangering your finances?
2. Will you spend an additional $2000 on health care next year because of the second plan? Because it costs an additional $2000 to stay on your employers plan.

If your employer is actually paying 60% of your premiums and your premium is being paid pre-tax, I have to imagine that the numbers are almost certainly going to work out in your favor to stay on the employer plan, not even looking at the numbers, unless the employer plan is such a Cadillac plan it covers things you wouldn't even get if you had regular insurance (free massage, aromatherapy, idk).

I would take a look at ehealthinsurance.com and see about an HSA compatible plan. The tax benefits of those are enormous if you're able to contribute the max, especially if you wait years to reimburse yourself. It's almost like an ultra-IRA.  It might possibly tip the scales in your favor, but idk. My HDHP runs  $40/month and generates an immediate $1000 in tax savings a year. But those are the sorts of premiums you get being single and 25.

[bogart]

Do you anticipate needing, or typically use, anything other than "well person" care  (checkups, screenings, vaccinations), in the coming year?

[StashinIt]

Do you anticipate needing, or typically use, anything other than "well person" care  (checkups, screenings, vaccinations), in the coming year?

No, our family is healthy. Of course with a baby we're not exactly sure what to expect in the next year.

[StashinIt]

Some important questions:
1. Could you afford to pay the maximum out of pocket on the cheaper plan without having to make substantial sacrifices to your lifestyle or endangering your finances?
2. Will you spend an additional $2000 on health care next year because of the second plan? Because it costs an additional $2000 to stay on your employers plan.

1. Yes
2. It's certainly possible, but we do not expect to do so.

[bogart]

So I'd probably go with the less expensive plan, with the cautionary note that those "out of pocket maximums" often actually exclude a lot of stuff (e.g. the cost of prescription drugs, copays).  But while it's entirely likely that a basically healthy baby (and by the way, congratulations!) will have, say, 1 stomach something-or-other and 2 ear infections, or whatever, you're unlikely to run up big costs there, regardless.  Obviously this being a good idea is contingent on you all staying in good health, so, touch wood and all that.  But it seems like you could switch back to your employer's plan in a year if you need/want to, so barring some horrific and sudden crisis, you'll probably save a bit, you might not, and it's unlikely to be a horrible disaster either way.

[trammatic]

The majority of major health problems for newborns show up in the first 10 days or so after birth.  That's why Gerber offers child life insurance policies for "children 14 days to 14 years old"...  Even the more rare issues (liver problems, etc.) show up as a problem within 1-2 months of birth.  Have you gotten nothing but good news from your pediatrician so far?  If so, I'd say just go with the HDHP.

I also second ehealthinsurance.com  It's a great resource, and plopping in 2 29year olds with a 3month old in San Diego, I got a couple quotes for 304 and 370/month.

It's kind of like your employer paying for 60% of a new Mercedes to get the out of pocket cost to you down to 25k, which is a great deal, except for the fact that you could still get a new Civic for 18k...

[tooqk4u22]

I have a high deductible plan now through work and its fine and so far works for us as we are relatively healthy...if I was going private I would also go this direction.

But if my company plan didn't offer a high deductible plan I don't think I would do it privately. 

Best case scenario is you will save $2000 and as somebody else pointed out on an after-tax basis that may only be $1500. For a family of three it is not hard for a good chunk of that to be hit - especially when you factor in prescriptions. 

I am all for savings but I just can't imagine this would be a good trade off. 

[unpolloloco]

If the employer-sponsored health insurance is pre-tax and the private is post-tax, there's no contest.  The $167 difference would get entirely eaten if you're in a tax bracket >23% and nearly eaten if you're in any lower bracket.  If it's not, run through a few likely scenarios with medical costs and figure out when each scenario would be cheaper.  Also, if you're planning to have any more kids, the employer coverage wins hands-down due to the maternity benefits.

[StashinIt]

After scavenging through ehealthinsurance.com I applied for a plan for $405 monthly. I applied for the Shield Spectrum PPO Plan 5000 with a 10k deductible and 30% co-insurance. The Family out of pocket maximum is $14,000 (including deductible) so this is still not HSA compatible? Hopefully it doesn't take too long to hear back. My open enrollment ends in a week.

[StashinIt]

It's kind of like your employer paying for 60% of a new Mercedes to get the out of pocket cost to you down to 25k, which is a great deal, except for the fact that you could still get a new Civic for 18k...

Yep, I'd rather have my employer subsidize the Civic.

[chucklesmcgee]

The Family out of pocket maximum is $14,000 (including deductible) so this is still not HSA compatible?

Sounds like it. You can search for HSA-only plans.

[tooqk4u22]

It's kind of like your employer paying for 60% of a new Mercedes to get the out of pocket cost to you down to 25k, which is a great deal, except for the fact that you could still get a new Civic for 18k...

Yep, I'd rather have my employer subsidize the Civic.

Well I would still take the mercedes because it is still the better value even if you are paying more - your in it for $25k even after 50% depreciation you are still ahead. 

Choosing a HDP vs. traditional plan is not just about saving on the monthly premium, its about risk management - the insurance companies don't care which you choose because for them each one will be based on actuarial data so while you may win or lose individually over a larger population the two plans will be neutral to the insurance company as relates to costs/profit.  Think about that - the employer subsidized plan is the better value, if they offered a HDP then I would say go that way but to do it privately no way. 

I hope it works out for you but from risk/return perspective you are making illogical choice.

[twinge]

I would go for the employer plan--kids need regular well visits, and many get sick fairly often even with a healthy lifestyle--especially once they start being mobile and crawling and touching everything and are more out and about in the world.  It adds up quick as doctor's usually err on the side of caution with the young ones if they get any kind of infection-- checking them out, doing a range of tests, and then confirming they are okay.  While my husband and I never approached using up anything near the added cost of health insurance, our children have.

[DoubleDown]

Adding to the chorus to go with the employer-provided plan. There are too many unknowns with a newborn, both for the infant and for your wife. You should not even be considering a high deductible plan in your situation.

Given the ridiculous cost of health care in the U.S., any complication (even minor) could easily blow your deductible and then some. I'll bet a C-section would easily cost $25,000- $50,000. Though it's "routine", it's still invasive surgery with a hospital stay, anesthesiologist, etc. And as an example, my firstborn was delivered premature. Total cost for two weeks in the Neonatal Intensive Care Unit was $135,000 (my cost through my employer's health plan was a $10 copay). That's about $10,000/day. And that was years ago, it could only be even more expensive now.

[StashinIt]

Just to follow up on this thread. I ended up going with my employers sponsored plan. Even though I chose this option I'm glad I did my due diligence to see what was available. Thanks everyone for the help!