Cheap Health Insurance?

 Is buying cheap health insurance worth the cost just because it’s cheap?  There are several health insurance options available in the marketplace.  There are alot of added confusion with the onset of the Health Care reform.

Let me explain….  I get calls daily from customers looking for health insurance. 

It’s completely understandable that cost is a factor in purchasing health insurance.  When I am looking at purchasing anything I do alot of research before I purchase that item. 

It’s through those eyes that I assist my customers in finding the balance between their insurance and financial needs.

What is may cost you:

Cheap insurance may end up costing you alot more in the end than just premium.  When purchasing health insurance it’s important to look at several factors such as;

  • Deductible
  • Out of pocket maximums
  • Monthly premiums
  • Your own medical history and claims utlization

The health insurance deductible for example directly affects the cost of the monthly premium on health insurance.  The lower the deductible the higher the monthly premium and vice versa.

Lets take the below example:

Jo Smith has a PPO plan with a $1,000 deductible and 80/20% co-insurance with an out-of-pocket maximum of $3,000.  The actual out-of-pocket she will be out-of-pocket is $4,ooo which is the deductible plus the co-insurance out-of-maximum.  On this plan her premium is $450/monthly which is $5,400 annually. 

Jo is a pretty unlucky lady and ends up in the hospital twice in the year.  In the first visit she met her out-of-pocket of $4,000 so the second time she ended up in the hospital it was covered at 100%.  In this example, her true expenses for annually premium and out-of-pocket maximum totals $9,400.

Jo decided she would like to lower her monthly premium and the way to do this is by increasing the deductible.  She decided to increase her deductible to $5,000 with an 80/20% co-insurance and out pocket maximum of $4,000. 

Her monthly premium drops to $260 equalling $3,120 annually.  Based on the above scenario of her claims, she would be out-of-pocket $9,000 for deductible and co-insurance and $3,120 for the premium thereby making her true out-of-pocket  $12,120

Although her monthly premium was lower on the second example, her out-of-pocket is an additional $2,720 by switching to a lower monthly premium plan.

Cheap isn’t always the better way to go.  The old adage “You get what you pay for” is as true today as back then. 

However, on the flip side… if Jo was a healthy person and didn’t go the hospital and only utilized office visits/prescriptions, then she actually would be ahead via paying less in premium by $2,280 annually ($5400-3120). 

I will definitely say, if I had a choice between a cheap monthly premium or having no insurance at all, I would go with a cheaper monthly premium every time.  Something is way better than nothing it all depends on what you prefer and can pay out of pocket.

Keep in mind that copays do not accumlate towards your deductible or out of pocket maximum and will always have those even after paying deductible and coinsurance maximums. 

Have a question or comment?  Please let us now.  Thanks for reading.

 

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