Back in late 2011, I described how I made a change to our traditional health plan selection and tried a higher deductible plan.
At the time, I wasn’t sure whether it was a wise move, but I had hit on this idea that the premium savings associated with choosing a higher deductible plan over a longer time horizon (say 5-10 years) might put us ahead in the long-run, even if we did have a bad year or two where we hit our deductible or even our out-of-pocket maximum. I fretted a bit that 2012 was sure to be the year when we would have bad luck and higher health expenses, but I decided to give it a shot, especially since I had considered the worst case scenario and decided it was one that we could afford.
Here’s what happened.
True to form, after having had a relatively injury-free year in 2011, 2012 brought several ER visits for stitches and pneumonia (that’s what happens when you have two young boys – at least at our house!). I was sure that when I looked back at the end of the year, I would find that we should have chosen the lower deductible health plan.
I was surprised when I did the numbers in choosing our plan for this year – especially in asking the question of what plan would be best for 2013 if we were to have the same health-care use experience as in 2012. It turned out that the higher deductible plan still made sense for us. Our health plan benefits happen to be such that they consist primarily of copays for things like doctor visits and ER visits, which are what we seem to use most – and copays don’t typically count toward the deductible. So, while our copays were a little higher under the higher deductible plan, the difference wasn’t enough to cancel out the $1,000 annual premium savings we achieved by going with the higher deductible plan. For us at least, the way the plan benefits were structured was actually a pretty good fit for how we use health care in our household.
The rough analysis I was able to do is is an example of the type of feedback loop that is needed in the health insurance world. Because I was able to go back and look at my 2012 experience and test out how my 2013 plan options would stack up if I had the same experience next year, I felt like I had some feedback and was able to make a better-informed choice for 2013. I could make a prediction of whether I thought this year (2013) would be similar to, better than or worse than last year. I decided that if 2013 turned out like last year (or, hopefully, better), we would be in pretty good shape sticking with the same higher deductible health plan. This year I felt more confident in my decision than I did last year. Having this ability to assess at the end of the year how well our decisions play out helps us become better planners and make better decisions over time.
Now let’s hope that I was right about my predictions – who knows what my boys have in store for me this year!