My first year with my current employer, I chose an HMO plan. It had the highest monthly premiums, but there were fixed co-pays for everything and no percentage coinsurance. Since I had no idea how much things would cost in cash, this seemed like a reasonable option.
I also have access to a PPO plan, which I very quickly ruled to not be worth it since the monthly premiums were negligible in cost difference, but all of the coinsurance amounts were crazy.
My third option is a CDHP (Consumer Directed Health Plan), where my employer pays for the first half of my $1,000 deductible and the monthly premiums are about half of those of the HMO or PPO plans. After the deductible, I pay 10% in coinsurance until I reach the out-of-pocket maximum, which is $1,000. My maximum out-of-pocket cost for the year is $1,500 after the premiums.
After my first plan year, I re-did the math and the HMO plan actually cost me about $412 more over the course of the year than the CDHP would have! ($1,220 for the HMO versus $808 for the CDHP, assuming the same usage.)
I threw a lot of ridiculous situations (me ending up in emergency, getting pregnant and having a complicated pregnancy, plus taking regular brand-name medications) at the math and the CDHP came out ahead no matter what. This is mostly because the monthly premiums on the CDHP are significantly lower (about 35% of the HMO monthly premiums) and there is actually a maximum out-of-pocket cost, which the HMO doesn’t have.
I clearly ended up switching to the CDHP and it has saved me almost $500 so far this year and I’m projecting that it will save me over $600 versus equivalent expenses with the HMO plan.
Throughout the course of that second plan year, I kept a spreadsheet (of course – who do you think I am at this point?) to validate my decision to go with the CDHP over the HMO with the following columns:
- Date of service
- Reason for service
- HMO co-pay
- Actual cost of service
- (calculated) Portion of the cost covered by my employer’s half of the deductible
- (calculated) Portion of the cost I pay towards my half of the deductible
- (calculated) Portion of the cost I pay 10% of in coinsurance
I’ve definitely validated my decision to go with the CDHP at this point, but I’m keeping the spreadsheet around. It’s great to be able to forecast my health expenses for the year. So far, my health expenses have been higher than projected each year, but it’s still useful to know how much I expect to spend at a base level.
I’m curious to see if we’ll have a HDHP next year as an option. But then I would have to re-do my spreadsheet to compare that with the CDHP I’m currently on!
Readers, what kind of health insurance plan do you have? How did you choose it?