It’s open enrollment season, which means it’s time for my wife and I to select our health insurance for next year.
As complicated as health insurance is - dealing with deductibles, out-pocket-maximums, in-network-vs-out-of-network doctors, and so on - the way I compare plans is simple. I add the out-of-pocket max (OOP) to the total premiums for the year. I then choose the cheapest option.
For instance, next year we have three options: a $350-deductible plan with a $4,000 OOP and a $510.45 premium, an $850-deductible plan with a $4,800 OOP and a $387.61 premium, and a $2,500-deductible plan with a $214.26 premium.
Now, the plan paperwork never explicitly stated it, but the premiums are per-check. The OOP are annual. Since there’s 26 checks a year, I need to multiply each premium by 26 before I get my comparison value.
|deductible||OOP||premium||premium × 26||OOP + premium|
The clear winner here is the $2,500-deductible option. As an added bonus, it’s the only one that’s HSA eligible.
I know there’s a few flaws with my comparison. The premium affects my tax rate. The deductible affects how fast - and potentially how much - I will spend out-of-pocket. But it works for what my wife and I need.