Wesabe is a young company, so I’ve been using COBRA from my last employer to keep myself in health insurance. That’s often the most expensive possible option, though — with dental and vision, my PPO plan was $465 a month — so I decided to look through what other options I could find.
After asking around a bunch, I decided to go with Blue Cross, where I’ve had insurance before. They haven’t been great, but they’ve been better than Aetna, by previous provider. The options were interesting. I’ve always heard the personal finance mantra of, “Go with a high deductible, you’ll save yourself money!” I didn’t realize just how much money I’d save by following that advice. I eventually decided to go with a $1,500 deductible, which, compared to the $250 deductible I had before, will in all likelihood save me between $200 and $1,000 over the next year. If the worst happens and I max out the amount I could possibly spend on health costs with this insurance plan, it’s still only about $100 more than I would spend with a low deductible plan.
I put together a spreadsheet comparing the four PPO plans from Blue Cross California, which vary primarily in the amount of the deductible ($500, $1,000, $1,500, or $2,500). I’ve posted my spreadsheet on Google Spreadsheets, so you can see the different plans and how they compare to each other. The big unknown, of course, is how much I’ll have to spend on health costs over the next year. So, I listed three scenarios to see how much I would spend under each of the four plans:
- The good life: how much would each plan cost me if I had no health expenses?
- A moderately bad year: how about if I had $2,500 in expenses?
- Hit by a bus: finally, what if I had a big disaster, and had $25,000 in expenses?
I chose these because they are good inflection points — if something happens that incurs more than $25,000 in expenses, under these plans, my costs wouldn’t change (at least until I hit the maximum insurance amount). At the bottom of the chart, you can see how each plan compares to the others for each of these three scenarios.
How does my $1,500-deductible plan compare to the $500-deductible plan? In “the good life” scenario, by taking the higher deductible, I’ll save $888 over the next year. If I have a “moderately bad year,” I’ll still save $118 over the year. Things only work out worse for me if I get “hit by a bus” — but even in that case, I only lose $112.
I could save even more in the first two scenarios by taking the even higher $2,500 deductible, which I’ll probably do next year if I have a little more saved up. And with the savings I get by taking a higher deductible now, that will be a lot easier.
I was feeling pretty good about this math, and having run the numbers to my benefit, but the insurance company had the last laugh: because I’m allergic to cats, they tacked on 25% more for my premium. No, your eyes don’t deceive you — I carry an inhaler I use once or twice a year, and I got stuck with a 25% price increase as a result. They must have a “figured out the high deductible trick” strike team that looks for ways to get back at you for getting around their price structure. Bah! Still, if they applied the same surcharge on the low-deductible plan, I’m still saving over $1,000 a year in the best case.
Health insurance is pretty nasty to figure out in the U.S. If you’re looking for insurance, I’d strongly suggest you take a look at my spreadsheet and run the numbers for your own options. (You can copy my spreadsheet using Google Spreadsheet’s “File -> Copy” command, and then modify it for the plans and prices relevant to you.)