Such a beloved topic...health insurance premiums. Just the thought can raise blood pressure faster than the actual rates seem to go up. Let's take a closer look and find out why an expensive plan might not necessarily be the right plan.
It is a pretty straight forward contract...as long as you pay the premiums...the insurance carrier will cover you, but what exactly are we paying for? Before we take a look at big bills and small bills...etc...you need to understand a fundamental truth about health insurance.
If you are getting great benefits for the smaller bills...believe me...you are PAYING FOR IT. It's the equivalent to buying a car warranty that also covers a weekly car-wash, oil change every 3,000 miles, and a new set of tires every two years....sounds great but the cost would be so high...no one could afford it!! Health insurance is very similar...
A simple example (real life) will help explain this.
Let's say you have a PPO High-deductible at $47/month that mainly covers the big bills...any small stuff will be your responsibility. Compare that to a 30% PPO plan for $167/month that will cover right away...leaving you to pay 30%. That means your doctor visit is going to be pretty cheap. Remember, it will handle the big bills pretty much the same.
Now the first reaction to our $47 plan is..."You mean I HAVE to pay for the doctor visits and anything else up to $2,250??? That doesn't sound too good!!"
But let's look at it more closely...The difference in premium is $120/month. That's $1,440 a year. That's a lot of small bills you better be having in order to get any value out of the more expensive plan. So you're paying a definite $1,440 to cover a potential $2,250 expense. That's not smart insurance. You want to pay pennies on the dollar...i.e. protect with $47/month from a potential $20,000+ surgery bill.
Some other interesting facts on premiums:
Rate increases tend to hit the most expensive plans hardest. Why?? We are now in a period of extreme medical inflation. As mentioned in the previous section, managed care (HMO's and PPO's) did a pretty good job of keeping costs down but there is only so much they can do and the results have shown over the last three years. So with this rate increase, the plans that are paying the majority of the bills will feel it the most. Typically it has been the HMO's and No-deductible PPO's.
Sometimes, a person can save money by splitting up policies. For example: a family rate is based on the average...father, mother, 2 children. If you have 1 child and a significant difference in age between father and mother...it may be better to have older spouse alone and other younger spouse and child together. Try the different options or tell us your situation and we will find out the best option.
Next...the real reason you buy health insurance...The big what-if. It sounds ominous but a car accident can quickly add up to $80-100,000 of medical expenses. Let's look at how the plans handle this big what-if...
Next Page - Section 3 - The Big Bills