As I mentioned recently, I made a big change in my family’s health plan selection during during open enrollment this year. After years of selecting the higher premium, lower deductible option, I finally bit the bullet and chose a higher deductible plan with a lower premium.
In running the numbers, I determined that we would have paid about $1,000 less if we had chosen the higher deductible plan this past year. (Ditto for the year before, for that matter). Given that I expect the coming year to be similar in terms of our overall healthcare use, that higher deductible health plan certainly looked to be the rational choice for the coming year. But, I had been here before, with the higher deductible plan making sense on paper, while my risk-averse self was convinced that next year might be the year we get hit with big expenses.
What really changed my thinking this year was taking a longer planning horizon. Sure, this might be the year we have a significant health event and hit our (higher) deductible or even out-of-pocket maximum, but if I have four or five years that look like the last few, I will be saving at least $1,000 per year, which should help more than offset that one bad year…if it ever even comes to pass.
For those who have the option of a high-deductible health plan — especially one coupled with a health savings account (HSA)– here’s a great way of thinking about this and minimizing the downside risk: Take those potential premium savings (the money you save by having a lower-premium plan) and put that money (tax free) into the HSA, to be used to cover expenses in that possible (hypothetical) “bad year”. Of course, it is always important to make sure that the worst-case cost scenario is
one that you can still afford. If you can’t, it may not be worth taking the risk.
For now, I’m looking forward to paying a lower premium every month next year, and will be keeping tabs on things to see how my decision plays out…over the longer term.