Compare Health Plans

What is the first thing that the vast majority of people do when they compare health plans? They take a look at the monthly premium payments.

Obviously, the lower monthly premiums may look more attractive to the average consumer. Taken on face value, what that means is that you will be paying less money to your health insurance provider every month.

Sounds more affordable doesn't it?

But let's take a closer look at what this really means.

When you compare health plans, you may read that the health insurance provider will only provide coverage after you have met your deductible, or your coinsurance payments.

So if your annual deductible is $3,000, for example, the health insurance company is telling you that you are liable to pay the first $3,000 of your medical expenses "out-of-pocket", before they start covering for your insurance.

Reality check here: Whether you pay $3,000 directly to your medical providers, or whether you pay a few hundred dollars a month to your insurance company every month, all of that money is still "coming out of the same pocket"!!! YOURS!!!

Ok, so you have gone through your due diligence to compare health plans and have opted for the lower monthly premium plan with a higher deductible.

Are you really saving money? Now, pay attention, because this is not a trick question.

If your monthly premiums are $300 per month, that's $3,600 per year you must pay "out of pocket" to your health insurance provider.

Now let's say that your annual deductible is $3,000 per year. Let's say hypothetically that you use it all up.

That means your total cost for health care during this calendar year was $6,600.

(This is an oversimplification, as office copays and prescription copays are not taken into consideration in this example.)

Now, let's say, that on the other hand, your annual deductible is only $500 per year and you were to use it up, but that your monthly premiums are $600 per month.

$500 per month x 12 months = $6,000 per year

So your total out of pocket expenses for the year are $6,000 + $500 = $6,500.

It looks like the plan with the higher monthly premiums actually saved you some money.

If you rarely ever get sick, if you are single and have no dependents, then it makes sense to opt for the low premium, high deductible option. Why?

Because your monthly payments will be low and you may not actually use up all of your deductible.

So, if your monthly premiums are $150 per month, and your annual deductible is $5,000, but you only go to the doctor twice and pay $150 per visit, then your total out-of-pocket expenses for the year is $2,100.

But if you have a family or you have dependents, or you are going to need maternity coverage, or you have a need to take prescription drugs on a regular basis, then it may actually make more sense to go with the higher monthly premium, lower deductible option.

Why? Because when you know you are going to be incurring a significant amount of medical expenses, having a higher premium helps you budget your monthly expenses more easily. You pay a higher, flat monthly fee to your insurance provider, and less money in variable deductible expenses. This is one very important point to keep in mind as you compare health plans.

If your monthly medical expenses are fixed every month, then it might make more sense to opt for the higher monthly premium. You pay a flat fee to your medical insurance company in exchange for broader benefits. You don't have to worry about budgeting for each individual medical expense, the way you would have to if you were responsible for paying more of your money toward the deductible. So keep all this in mind when you compare health plans.

COBRA is basically a way to bridge the gap in your health insurance coverage when you have left an employer. This is all well and good if you have another job that offers medical insurance benefits lined up.

But if you are either going into business on your own, or you have not yet been able to find a job, then it is a good idea to compare health plans and find cheaper alternatives to COBRA.

Don't wait until COBRA expires, for you to shop around for your own private health insurance! You could wind up saving a ton of money!