Choosing between two health plans
November 16, 2011 7:08 PM   Subscribe

I am trying to choose between two different health plans offered by my large employer - a POS80 and POS90 plan. The choice seems so clear to me (the lower-cost plan seems better) that I wonder if I'm overlooking something in making the decision. The difference in monthly premiums seems to be more significant than the difference in the deductible & out-of-pocket maximums.

For individual coverage, Plan A (POS80) would cost me $48/month ($576/year), deducted pretax from my paycheck. Plan B (POS90) would be $127/month ($1524/year). So for one year, premiums for Plan A would yield a savings of $948.

Both plans are with the same insurer, have the same provider network, have the same rules about precertification and what kinds of services are covered, have no lifetime limit on benefits, and offer both in and out-of-network benefits.

The out-of-network benefits & deductible are 100% identical for both plans.

For in-network services, both plans have free preventive visits and a $30 copay for sickness/injury office visits (deductible doesn't apply for visits with a copay). For in-network medical services beyond office visits:
Plan A pays 80% of covered services and I would pay 20%. There is a deductible of $400 and an out-of-pocket maximum of $2000.
Plan B covers 90% and I would pay 10%. There is also a deductible of $200 and an out-of-pocket maximum of $1500.

So, let's say something comes up and I end up having to meet the deductible. With Plan A, I need to pay $200 more, but I have saved $948 in premiums. And even though I will be required to pay a higher percentage of my care, the most I will have to pay before the plan starts covering everything is $2000. This is $500 more than the out-of-pocket maximum for Plan B -- but I have saved $948 in premiums.

Granted, the higher premiums for Plan B come out of pretax money, and the higher out-of-pocket costs for Plan A come out of posttax money. But I will make up some or all of this difference by using my employer's FSA to get tax savings on my out-of-pocket costs.

Plan A seems clearly the better option for me, but am I missing something? For instance, even if I use an in-network provider (with which the insurer negotiates costs), is there a chance that some of the services I might receive would not count against the out-of-pocket maximum, and I would go on having to pay for more services than I anticipate at 20% rather than 10%? I am totally stumped on this. I want to save money, but I don't want to do something stupid, especially because I do anticipate needing to use medical services of various kinds this coming year. (Including possibly having a baby.) (But I also would have the option of switching plans when the hypothetical baby is born as a "qualified life event.")

I do have enough savings to shell out for the deductible up front -- is having no ready cash the only reason why someone would opt for the more expensive plan?

Thank you for any thoughts on this!
posted by Fran C. to Work & Money (7 answers total) 1 user marked this as a favorite
Are there any prescription benefits in either plan? Those monthly pharmacy co-pay can really add up over the course of a year.
posted by 26.2 at 7:13 PM on November 16, 2011 [1 favorite]

Check to see if copays count against your out-of-pocket max (or rather, check to make sure that the list of stuff that applies is the same for both plans - copays is one of the increasingly rare ones that's still out there for the nicer plans.) Also check to be sure that both plans are the same when it comes to traveling, and that the network doctor lists are the same. My employer switched from one vision plan to another offered by the same company, and a ton of doctors don't take the cheaper plan (they had to send a letter to everyone because of the confusion this created.) You have to be absolutely sure on the doctor list thing - there was a one-word difference between the two plan names, and most doctor's offices didn't know they didn't take the cheaper plan until people were trying to check in for appointments. Oh, the phone calls we in HR got that month were just delightful.

It's also worth knowing what the COBRA costs would be for each one, if there is any chance (any at all) that you might not have this job at some point. For me, I visit doctors enough that having the copays count against the out-of-pocket max is enough to tip me from one side to the other. I've only hit my deductible once in the last three years, and I hit my out-of-pocket max every single year, usually in August. It's also possible that these are single rates and the rates for families are different enough to push people to the more expensive plan.
posted by SMPA at 8:13 PM on November 16, 2011

I'm going through a similar process right now too.

I think the biggest question you should be asking is "How often do I go to the doctor?"

For me, I hardly ever go and barring anything major happening (the chances of which are pretty dang slim) I don't use even 1/3 of all of the benefits. As a result, I've decided to switch from our fancy-pants coverage to the HMO plan--saving me quite a bundle in monthly premiums and deductibles.

If however, you are the type of person that goes to the doctor a lot, you may want to consider the higher premium-lower deductible plan. Perhaps try to find an online calculator that might help you decide cost-wise the better option?
posted by Zoyashka at 8:15 PM on November 16, 2011

Best answer: Here's a spreadsheet comparing the cost to you of various amounts of claims for the year. There is a sweet spot where you will save money using Plan B—if you have $8,500 worth of claims in the year. But if you make $8,000 or less, or $9,000 or more, you will save money with Plan A (forgetting about the tax implications and the time value of money).
posted by grouse at 9:04 PM on November 16, 2011 [2 favorites]

I should add you will save a whopping $22 by using Plan B under those conditions, but under other conditions Plan A will save you as much as $768 if you have no claims, or $448 if you have more than $14,000 worth of claims.
posted by grouse at 9:07 PM on November 16, 2011 [1 favorite]

If it makes you feel better about gong with Plan A, it's worth noting that there are two things that drive premium costs: (1) the generosity/richness of the benefits, and (2) the risk profile of the people signing up.

It's not unheard of--or hell, even really even uncommon--for companies that offer multiple insurance options to their employees to end up with a premium for the "cheaper" (less generous) plan lower than can be explained by benefits alone. What is going on is that all the young, healthy, junior staff making less money sign up for the cheaper plan--after all, they're young and don't have chronic illness that would make the extra premiums definitely worth it--and the older, higher-paid folks or those with expensive chronic conditions sign up for the premium plan. The difference in risk profiles drives the lower-cost plan premiums lower, and the higher-cost plan premiums higher, in a compounding fashion until you have new hires saying "well why in the hell would I ever choose the premium plan??" You're not crazy!

It's really a failure on the part of your employer's HR department to allow this sort of risk selection by offering such similar plans with a slight difference in premiums (which will inevitably snowball until they finally probably drop the higher-cost plan) but there's no reason for you to not take advantage. Go forth and sign up for Plan A!
posted by iminurmefi at 6:57 AM on November 17, 2011 [1 favorite]

Response by poster: Thanks for the very helpful comments so far. Grouse, I am going to study your spreadsheet so I can learn to make one like that myself. I need to brave the world of formulas (don't use them for my job).

A couple of points of clarification:
--both plans have identical prescription benefits.
--for both plans, the $30 copays aren't included in the out-of-pocket maximum, but deductibles are.
posted by Fran C. at 6:57 AM on November 17, 2011

« Older Love the bag, hate the stained pants.   |   Adjust/Renegotiate mortgage on property that is... Newer »
This thread is closed to new comments.