In the past three years, our family has had four different health insurance plans — some good, some bad. I feel a bit traumatized from the switch-overs and the surprises we got each time. Yet, here we are again, looking at our new health insurance options with Mr. Stapler’s new job. The process always throws me for a loop and I get pretty frustrated. Give me a complicated financial dilemma or a multi-step legal question and I’m all over it. Give me a health insurance plan, and I just want to hide and make it all go away!

So, if you skip this entire post, I understand and I forgive you.

We currently have a high deductible plan, which doesn’t pay for any labs or — as Mr. Stapler discovered after starting an allergy shot regimen — allergy shots. What they do is require that you meet a $1,000 per year deductible per person, up to a family maximum of $2,000. Mr. Stapler’s new employer is offering three plans — a high deductible plan and two PPO’s. The new employer will cover Mr. Stapler’s insurance 100% and the family portion 50%, which means that we have to balance the cost of the premiums against the cost of the services we will need under each plan.

Each time I have a new plan to evaluate, I have to get back to basics and make sure I understand what all the terms mean.

Health Insurance Terms You Need to Know When Figuring Out The Best Plan For You:

• Premium: The amount the consumer or her employer pays for health insurance coverage. It is typically paid out of each paycheck or, if not offered by the employer, on a schedule selected by the consumer.
• Deductible: Covered services subject to a deductible require that the consumer pay for the service out of pocket — up to a certain amount — before the insurer will kick in any money to pay for it. For example, each plan year Mr. Stapler has to pay $1,000 to his allergist, after which point insurance will cover his visits and Mr. Stapler only has to pay a co-pay.
• Co-Payment: This is the fixed amount the insurance company determines the consumer must pay for each covered service. Some services won’t require a co-payment, but others will. Co-pays typically do not count towards meeting the annual deductible.
• Co-Insurance: The percentage that the insurance company pays after the consumer has met her deductible. For example, if the explanation of benefits states that your cost is “20% co-insurance,” that means the consumer must pay 100% of the cost until she meets her deductible, then 20% of the cost after the deductible is met — up to a certain amount (“Out-Of-Pocket Limit”), after which the insurer will pay the cost.
• Out-of-Pocket Limit: This is the most a consumer would pay during the plan year for covered services. Premiums and services not covered do not count towards this limit. Pay attention to when the plan year begins and ends.
• Health Savings Account (“HSA”): I could spend an entire blog post writing about the ins and outs of HSAs, whether a health plan qualifies, and how much a consumer can contribute each year. But I won’t, because the IRS publication on HSAs does a surprisingly good job of explaining it all. Suffice to say that an HSA allows consumers to save money tax-free to cover the cost of qualified medical expenses if the consumer has a high deductible health insurance plan. This money rolls over each year (there is no “use it or lose it” provision, as with a Flex Spending Account), the consumer can invest the HSA funds, and withdrawals are tax-free as long as the consumer still qualifies for an HSA.

Evaluating Plans for Specific Circumstances:

Just like with budgeting for annual expenses, there are certain medical expenses we can count on incurring over the next year. Keep your anticipated expenses in mind when you’re evaluating a plan. The obvious elephant in the room is that I’m pregnant and expect to deliver before the end of the plan year. Another issue that may arise are Mr. Stapler’s allergy shots, which can be considered a specialty or may not be covered at all. For those on regular prescriptions, it’s important to know whether the prescription is a generic drug or a brand name.

I whipped up a Health Insurance Comparison spreadsheet in Google Drive that helped to lay out the different metrics that are important to us. Those specialty services that we already use are easier to assess because we can refer to our past bills to see how much we will have to cover for each visit.

Because I’m pregnant, the high deductible plan is off the table. It may be a good idea down the road, when we don’t anticipate any hospital stays or specialty services like allergy shots. But a $2,500 per individual and $5,000 per family annual deductible it’s not for us right now — even though we would be able to pay the deductible out of an HSA. The monthly premium savings doesn’t come close to making this the lowest-cost option for us.

That leaves us with one of two options: A 20% co-insurance plan or a 25% co-insurance plan.

One piece of the puzzle that’s difficult is assessing how much you anticipate paying with co-insurance when you don’t already know the cost (like having a baby). But if you’re just comparing the difference between two co-insurance plans, just compare the additional cost of the higher co-insurance amount. For example, the cost difference in our options is 5% co-insurance. We’ll pay co-insurance either way, it’s just a question of whether the 5% anticipated extra is less than the discount in premiums, deductibles, and copays we would have with the 25% co-insurance plan. Did I lose you there?

It boils down to whether, for us, the 5% increase in co-insurance will be more or less than the $134 per month in premiums we would pay for the small c0-insurance amount. With 5 months left in the plan year, the premium difference is $670. So, the only way the higher co-insurance plan costs more is if we rack up over $13,000 in medical bills that qualify for co-insurance.

We anticipate a hospital stay of two to five days, so although it’s possible that we will rack up $13,000 in medical bills, each plan has a $650 per day out of pocket limit for hospital stays due to delivery.  I’m sure my hospital stay will meet the minimum co-insurance price ($3,250 for the 20% plan, $2,600 for the 25% plan).

We decided to go with the 25% co-insurance plan. In addition to the anticipated cost savings between the premiums, the 20% co-insurance plan has a $150 deductible for prescriptions, which I anticipate we wouldn’t meet in any plan year — whereas the 25% co-insurance plan has a $10 co-pay for generic drugs.

It’s all laid out in our Health Insurance Comparison spreadsheet, which you’re welcome to copy and adapt to your situation. A little bit of knowledge about Excel formulas will go a long way towards tailoring it to your needs, unless you’re pregnant and have no anticipated prescriptions or specialty services to plug in to the calculation. In which case, you can use the spreadsheet as-is and just plug in the numbers specific to your options.

I would write “Enjoy!” but really, who enjoys this kind of stuff? Not me!

Image by Vichaya Kiatying-Angsulee via FreeDigitalPhotos.net