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high-deductible versus low-deductible health care plans
This is somewhat related to the last post.
I thought I had previously posted about the new high-deductible (HD) health care plan I switched to last year, but I had actually only written a comment on someone else's post. So I'm posting it to my journal now.
The HD plan includes a Health Savings Account (HSA) as mentioned in the prior post. The low-deductible (LD) plan instead includes a Healthcare Flexible Spending Account (FSA). HSAs should not be confused with FSAs, as they are different in several regards. HSA's are much better - unused funds roll over each year, earn tax-free interest, and can be used tax-free for qualified medical expenses in retirement. FSAs do not allow unused funds to roll over each year.
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I was surprised last year when I calculated the costs of going with the new HD plan versus the LD plan of my employer's health insurance.
Both plans have a deductible and a yearly out-of-pocket maximum amount, as well as biweekly premiums you have to pay. The amounts differ per plan. The benefits are pretty much the same.
I thought that the HD plan would make more sense for someone who had fewer medical bills, and that the LD plan would make sense for someone who had higher bills. However, that wasn't exactly true.
Supposing I didn't have any health care costs during the whole year, the HD plan would cost me less, as its premiums are much smaller. The HD plan would cost me only $260 while the LD plan would cost $2184.
Supposing I had just enough costs to meet the high deductible ($2500)... then I'd end up paying about $200 more for that year compared to the low deductible ($400) plan. The LD plan's biweekly premiums are so much higher ($84 versus $10), that by the end of the year, you pay nearly as much in premiums as the higher deductible amount would have been.
Supposing I had high enough bills to reach the yearly out of pocket maximum, the total amount I'd have to pay on the HD plan would actually be $500 less than the total amount that I'd pay to reach it on the LD plan.
Based on all that, it seemed that whether or not I were to have a lot of medical bills, the HD plan was likely to cost me less.
The LD plan seems like it would only possibly be the better option for people who don't have enough savings at the beginning of the year to cover the higher deductible.
Not all HD and LD plans are the same. The deductibles, premiums, and benefits can be very different than my own situation. Anyone who is considering them needs to do their own comparisons. One shouldn't assume however, that one is better than the other without researching them first.
Another good thing with last year's changes to my company's health care plans was that the contributions were made variable based on salary bands. Employees with higher salaries pay higher premiums now than employees with lower salaries.
I thought I had previously posted about the new high-deductible (HD) health care plan I switched to last year, but I had actually only written a comment on someone else's post. So I'm posting it to my journal now.
The HD plan includes a Health Savings Account (HSA) as mentioned in the prior post. The low-deductible (LD) plan instead includes a Healthcare Flexible Spending Account (FSA). HSAs should not be confused with FSAs, as they are different in several regards. HSA's are much better - unused funds roll over each year, earn tax-free interest, and can be used tax-free for qualified medical expenses in retirement. FSAs do not allow unused funds to roll over each year.
.
I was surprised last year when I calculated the costs of going with the new HD plan versus the LD plan of my employer's health insurance.
Both plans have a deductible and a yearly out-of-pocket maximum amount, as well as biweekly premiums you have to pay. The amounts differ per plan. The benefits are pretty much the same.
I thought that the HD plan would make more sense for someone who had fewer medical bills, and that the LD plan would make sense for someone who had higher bills. However, that wasn't exactly true.
Supposing I didn't have any health care costs during the whole year, the HD plan would cost me less, as its premiums are much smaller. The HD plan would cost me only $260 while the LD plan would cost $2184.
Supposing I had just enough costs to meet the high deductible ($2500)... then I'd end up paying about $200 more for that year compared to the low deductible ($400) plan. The LD plan's biweekly premiums are so much higher ($84 versus $10), that by the end of the year, you pay nearly as much in premiums as the higher deductible amount would have been.
Supposing I had high enough bills to reach the yearly out of pocket maximum, the total amount I'd have to pay on the HD plan would actually be $500 less than the total amount that I'd pay to reach it on the LD plan.
Based on all that, it seemed that whether or not I were to have a lot of medical bills, the HD plan was likely to cost me less.
The LD plan seems like it would only possibly be the better option for people who don't have enough savings at the beginning of the year to cover the higher deductible.
Not all HD and LD plans are the same. The deductibles, premiums, and benefits can be very different than my own situation. Anyone who is considering them needs to do their own comparisons. One shouldn't assume however, that one is better than the other without researching them first.
Another good thing with last year's changes to my company's health care plans was that the contributions were made variable based on salary bands. Employees with higher salaries pay higher premiums now than employees with lower salaries.