With health insurance premiums headed through the roof, many people are having to make some difficult choices. The least desirable of which is giving up their health insurance. Going without health insurance is never a viable option and can lead to personal bankruptcy or worse in the event of a catastrophic illness or accident. The path of least resistance these days seems to be a High Deductible Health Insurance plan.
How does one work?
Essentially a high deductible plan is a traditional individual health insurance plan with a high deductible and no bells and whistles such as co-pays for doctor visits and prescriptions.
When you "run the numbers" it makes quite a bit of sense and apparently for a great many people. This plan makes most sense for older adults who are in good health and don't go to the doctor's office frequently. But even some young families are taking a second look. The premiums are just so much lower. When you weigh that against the fact that most adults don't go to the doctor's office that frequently or come close to meeting their deductible, the numbers are just too hard to ignore.
Let's consider an example
Our subject is a 45 year old male in good health, a non-smoker, and 6'0" weighing 175 pounds. Let's say he lives in the Orlando area.The first plan has a $30 doctor visit copay and a separate $500 deductible for brand prescriptions. It has a $5,000 out-of-pocket maximum ($2,500 deductible and then $2,500 coinsurance).
The second plan (our High Deductible Health Insurance Plan) has a $7,500 deductible and then it pays 100% of claims with a separate $1,000 deductible for prescriptions. It also covers an annual physical (pap smears for women and mammograms) without any deductible.
There is a difference of $2,500 in maximum out-of-pocket costs between the two choices.
The Cost and the Savings:
The first plan costs $235/month in Orlando. The second plan costs $82/month here in Orlando. That's a saving of $153/month and that's just for a single person. Thats' an annual savings of $1,838. The savings are compounded if there's more then one person or a family. In little more then a year and half the high deductible plan will have saved the applicant enough money to offset the added exposure of having a higher out-of-pocket maximum ($2,500).
The key point here is that people very rarely come anywhere close to hitting their deductible which big means savings for the policy holder. An additional consideration is the PPO discounts and negotiated rates one receives for staying in network. Even though the high deductible plan has no co-pays, It turns out that the discounted rates for doctor visits are not too different from what some co-pays plans look like.