RichDayHealthPlans Blog

Current Economic Conditions Are Affecting Health Insurance Choices:
Most of us are struggling financially, since our economy has changed for the worse recently. People have lost their jobs, or they are worried that they might lose their job. There is no doubt that families and individuals have cut back their spending to more sustainable levels. In short, people are looking for bargains in just about everything they buy - including health insurance plans.

What is happening in the health care business?
In 2009, approximately sixty-two percent of the plans being sold by agents in North Carolina, are health savings account plans (HSA plans).  Blue Cross and Blue Shield of North Carolina has a plan called Blue Options HSA. The Blue Options HSA plan costs so much less than the traditional copay plan that it is being chosen more frequently. This was not true in previous years.

Why are people choosing health savings account type plans?

Lower Premiums:
The monthly premiums on HSA type plans are considerably less than the premiums you have to pay for the copay type plans. This is not obvious when people make quick comparisons. Most people make a mistake when they compare premiums on HSA type plans with copay plans.

They make the mistake of comparing deductible amounts between the plans in question. They make the deductibles approximately equal thinking that they are making a fair comparison — they are not.

Do The Comparison Properly:
To make a proper comparison, you have to consider the maximum out-of-pocket risk. What does that mean? Let’s take an example: If you have to be hospitalized to have your gall bladder removed, you will have to pay your deductible. Most people will understand that. However, there is another factor that most people don’t know about, or have forgotten about. It is called coinsurance.

You Must Consider Coinsurance
Coinsurance is the amount that you have to pay, in addition to your deductible. So, to illustrate, consider the gall bladder operation example. You must pay your deductible AND your coinsurance.

Assume that you have a $2500 deductible plan with a 70/30 coinsurance. The 70/30 describes the coinsurance. It means that you will have to pay 30%, and the insurance company will have to pay 70% of the first $10,000 of expenses. In actual numbers, this means that the patient will be out-of-pocket $2,500 plus ($10,000 X .30 = $3,000) or a total of $5,500.

I know that I have lost some people with the previous paragraph, but suffice it to say that with the copay plan, you will be out-of-pocket $5,500 - not $2,500.   After the deductible and the coinsurance portions are paid, the insurance company will pay one-hundred percent of the balance of the covered expenses.

A Valid Comparison:
Now getting back to the comparison. If you compare a $2,500 70/30 copay plan to an HSA type plan, you need to compare it to the $5,000 deductible 100% HSA plan. Don’t compare it to the $2,700 100% deductible plan HSA type plan — the risks are not approximately equal there.

Remember, we are trying to make the out-of-pocket risks similar. If you do the comparison properly, you will see that the premium savings are in the range of 50%.  The HSA type plan is always the winner.

Catastrophic Coverage:
Most HSA plans are pretty simple. You pay for the day-to-day medical expenses like doctor visits, and medications, (at a discounted, negotiated price),  but if you have to be hospitalized, or have out-patient surgery, you have to pay your deductible and any coinsurance.  Then your financial obligations are complete.

Tax savings:
Once you have the HSA type plan, you can go to your local bank and open up the health savings account. This is a savings account that you can use for any qualified medical expense. Examples of qualified medical expenses: over the counter cough medicine, doctor visits, prescription medications, chiropractors, accupuncture treatments, dental expenses, and vision expenses. This is an incomplete list…generally, any medically related expense is qualified. Here is a list of Qualified Medical Expenses for HSA plans. Since your contributions to this savings account are pre-tax, you will save money when you do your taxes. As a rule of thumb, consider that you are paying your medical expenses at half price.

What Else Does The Catastrophic (HSA) Plan Have To Offer?

• Annual physical
• Access to medical providers
• Lower monthly premiums
• Savings on taxes

Summary:
You must work with a helpful, knowledgeable health insurance agent. Ask him to help you make the comparisons. You will immediately know if he knows his insurance principles if he compares plans with equal or approximately equal out-of-product risks.

It doesn’t matter which insurance company you choose, they will all have an HSA type plan — sometimes also called a high deductible health plan.

Once you have really understood the concept, you will be ready to purchase the least expensive, affordable type of health insurance plan available — the Health Savings Account (HSA) type plan.