Last week we discussed how to select a health insurance plan if we are regular users of health care services. This week we will address the rest of us who barely visit health care providers and who are trying to control our premium dollars without taking excessive risk. I hope you took my advice and charted your claims for the past year so that this exercise is more meaningful.
Many of us have options between high deductible plans and copay driven plans, but how do we choose? Using the high deductible plan without copays for an example:
- First determine the premium difference between the two options and be sure to factor in the tax advantage you may have if premiums are treated pre-tax or are in some way tax-deductible. For one group of our clients the premium difference for a single individual is $90 (greater for those with dependents.) Calculating a 25% tax saving (7.65% for FICA, 6% for Georgia State income tax and at least 12% federal income tax, rounded down) brings the premium savings to $67.50 per month.
- Looking back at the number of office visits we had for the prior year let’s assume there were no physician visits other than those for preventive care. Most wellness and preventive care is covered at 100% through the new federal health care legislation.
- Lab and x-ray expenses are often billed separately from the office visit copay and can run $150 each at the discounted rate. One of those as part of a preventive visit might need to be included in our calculation.
- If we are currently not on a prescription regimen we should have no costs here. If we need an antibiotic or inexpensive generic for a spontaneous condition there are plenty of resources where these are available at little to no cost.
So here is our formula of predictable expenses:
Premium difference: $67.50 times 12 months = $810 saved
Office visit costs: $0 per year
Lab & x-ray expenses: $150 per year
Prescription costs: $0
We will face a predictable claims cost of $150, but having “not spent” $810 in premium our net savings should be $660. In this case the patient appears to be best served by selecting the high deductible plan and many of these plans allow insureds to open a Health Savings Account.
If we establish an H.S.A. account we can set some money aside (perhaps the $67.50 per month we are not paying in premium) on a tax-deductible basis for unexpected expenses or for services that may not be part of our major medical plans like vision and dental costs. Dollars taken out of this account to cover approved charges are not taxed and the money we do not use by the end of the year rolls into the next calendar year without loss. We should certainly consider this option seriously so that we are prepared for any unpleasant surprises.
For assistance in finding the best path, contact us at Czajkowski Dumpel & Associates, Inc. – we are here to help!!