It’s that special time of year: open enrollment season. Over the next few weeks, employees will be choosing between plans through their employers. And many other self-employed people will purchase insurance through health care exchanges.
A year ago, my wife was pregnant with our second child, so I knew we would face hefty medical bills. But the insurance premium to service my low deductible plan was growing rapidly,
So, I had a decision to make: Do I make the leap to high deductible or stay at the low deductible plan.
On a flight back from Europe, I had an idea. What if I ran through every possible scenario of billing and compared the plans at each stage. Would there be a clear winner?
There was, and I saved around $5,000 in the process. I ended up going with a high deductible plan, socking money away in my HSA for the upcoming birth of my daughter, which saved me further on taxes.
I took the money I saved on my biweekly insurance premium and socked it back into my HSA. We “paid off” my daughter (her birth, at least) a few weeks before she was born, so we had no fear or concern about surprise bills after the fact.
Today, I was filling out my spreadsheet again for myself, and it occurred to me this may be helpful to other people who are evaluating competing plans and may want to make a change.
Note: The numbers reflected are just sample numbers that you will need to replace with your own situation.
The calculator itself is quite simple. It lets you compare up to three plans at a time, with the idea being that two would be low deductible plans and one would be high deductible, enabling you to take advantage of the awesome HSA tax breaks. You have the option to specify exactly what your tax situation will be and what the implications are, including employer contributions to your HSA (as applicable).
The next part of the calculator shows you the various billing scenarios you would encounter based on the plan you choose in a given year, with most favorable coded green and least favorable coded red. On the far-right-hand column, you can see your savings by going with the “lowest cost” plan compared to the “most expensive” plan in your analysis.
As you can see below, with the inputs I’ve specified the “Basic” plan becomes the most expensive option at $9500 of medical bills in a given year. Being able to visually see such jumps was quite helpful to me when considering my options.
Nothing in my spreadsheet is locked or that complicated, so you can do additional calculations as needed if you so desire.
One final note: When comparing insurance plans, savings alone is not sufficient (or shouldn’t be) to make you choose a plan. You have to be able to withstand the difference in deductibles. The savings should justify making that bigger-than-desired sacrifice of paying higher deductibles. In exchange for this, you get lower premiums all year long and, thus, more cash in your pocket.
One more final note: I’m a dude with a spreadsheet–not a financial professional. Get one if you have questions or need expert advice.
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