(Photo Detail: Shake Shack, maybe not the healthiest decision)
I’ve been reading a lot of complaints about how the individual policies on the new health insurance exchanges are terrible because the deductibles are so high. I’ve had a high deductible plan ever since I retired, since no one else is footing the bill anymore, so I don’t really understand the problem. If you don’t like the plan with the high deductible, you just can buy a policy with a lower deductible. But then you’ll have to pay more in premiums. Take this example from an article I read today in the Wall Street Journal:
Ms. Brunstein, a semiretired 64-year-old lawyer, saw her Emblem Health plan canceled her $407-a-month plan in December because it didn't comply with the law. By New Year's Day, she had chosen and paid for a new health-law plan offered by the same insurer. The new policy costs less, $333 a month, and she's eligible for a $94-a-month subsidy, further lowering the costs.
She's still frustrated by the new plan, which has a $3,000 deductible, higher, she says, than her prior coverage. "I don't even think I have $500 a year in medical bills," Ms. Brunstein said. "That's a mighty tall mountain to climb."
So here’s the deal. She, like many people I’ve read about and watched on TV recently, is frustrated because now she has a $3,000 deductible—higher than her previous coverage. However, her new policy is almost $900 cheaper per year than her old policy. And that’s before her $94-a-month subsidy. In all, that’s $2,000 she’s going to save each year over the cost of her old premiums.
She’s complaining that her deductible is so high, when she doesn’t even reach $500 a year in medical bills. Maybe she had a really low deductible on her old policy—let’s just, for argument’s sake, assume she had no deductible at all before. That means, she will pay $500 more each year in medical expenses, but save $2,000 in premiums. She’s going to come out $1,500 ahead, but for some reason she is still frustrated.
I don’t totally get it, but I presume she feels like she’s taking a risk, a risk that she might have to pay $3,000 in any particular year. So would she rather have locked in the extra $1,500 expense of her old plan, every single year, to protect against the possibility that she might have $3,000 of expenses one year in the future?
Which is exactly why we chose a policy with a $9,000 family deductible. The same plan with no deductible would run us $4,700 more in premiums each year. In the six years that I have had insurance on the individual market we’ve never come close to that in expenses working toward our deductible. We’re a lot like Ms. Brunstein, maybe spending about $1,000 each year. Although most of the things we used to pay for are now paid for as preventive care, so it will probably be closer to zero going forward.
So why would I lock in an additional expense of $4,700 each and every year to protect against the possibility that in one year we reach $9,000 of expenses? With the savings we’ve pocketed over the years so far, we’ve banked enough to get us through three really unlucky health years, where we both get sick enough to reach our deductible. And if that doesn't happen for a few more years yet, I’ll just keep pocketing the difference until then.
Sure, if we develop some ongoing health issues, it might make sense to upgrade to a different policy in future years. But for now, I’m going to use that savings to fund my tax-deductible Health Savings Account.
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