How To Compare Health Insurance Plans And Save Money

One of the downsides about early retirement is the expensive cost of healthcare in America. Without an employer subsidy, the average cost for a family healthcare insurance plan is about $21,000 in 2020. This post is about how to compare health insurance plans and save money.

The extreme cost of healthcare is one of the main reasons why many employees will work at a job for longer than they really want. If you retire early, unless you earn less than 400% the Federal Poverty Limit (FPL), you will have to pay the full cost of your healthcare premiums. But if you do earn less than 400% of FPL, do you really have enough to retire?

Even if you were eligible for healthcare insurance subsidies, it may feel weird taking advantage of the system. After all, we’ve all been taught it’s always better to give than to receive.

The high cost of healthcare is why you sometimes see one spouse continue to work long after the other spouse has retired. It’s kind of sad that due to expensive healthcare, many couples aren’t able to live their retirement dreams together.

Because I still haven’t been able to convince my wife to go back to work so we can get subsidized healthcare insurance, I’ve asked her to put together some helpful tips on how to compare health insurance plans. We just went through the process and it is quite mind-numbing without a guide.

Health Insurance Premiums Continue To Rise

I recently found out our existing PPO plan is being discontinued and morphing into a similar plan. Surprise, surprise the premiums are going up yet again. We’re talking up to $2,500 a month or $30,000 a year for a family of four!

Unfortunately, many of you are probably going to face higher healthcare insurance costs as well. We really don’t understand how $30,000 a year for a family of four can be considered “affordable” given the current real median household income is about $69,000.

Our existing health insurance plan is renewing at a 6% increase. My insurance rep said 6% is actually good considering the average increase he’s seeing is 10%. Seems like empty words.

It actually feels like robbery that insurance carriers continue to raise rates significantly more than inflation. Take a look at the average cost of family and individual health insurance per year. Just like college tuition, even during a pandemic, the rates keep going up.

The Average Cost For Healthcare Soars

Alas, we don’t plan on relocating to places like Canada or Australia to save on healthcare (I’m not sure if they’d welcome us anyway). Nor do we plan to torpedo our income in order to qualify for healthcare insurance subsidies. We’re just going to bite the bullet and keep on paying these absurd rates.

In addition, we have a wonderful network of doctors that we’ve seen for years. That’s not something we want to give up. Plus, with two young children, and Sam and I not getting any younger, it’s a pricey expense we’ve built into our budget and financial planning.

How To Compare Health Insurance Plans

There are thousands of different healthcare plans to choose from. And even if your employer is only offering a small handful to choose from, the choices can still feel overwhelming.

If you’re self-employed the options can be even more overwhelming along with the costs.

Without getting overly complex, try and figure out a rough calculation of what you’re likely to spend on a few different plans.

The quick guideline below on how to compare health insurance plans can help you get started whether you are employed, self-employed, retired, or in between jobs.

Utilize the below list of features to help you draw up your numbers.

  • Network of Doctors
  • Monthly premium
  • Medical deductible, co-pay, co-insurance
  • Out-of-pocket max
  • Physician services
  • Prescription coverage
  • Hospital services
  • Emergency services

In Network vs Out Of Network

First of all, if you’re set on keeping specific doctors, find out if they are in network or out of network.

Some health insurance plans don’t offer any out of network coverage. Others do, but the costs can get very expensive. In addition, submitting out of network claims manually can be a royal pita.

Definitely be careful to check if the doctors you want are in network before selecting your plan. Otherwise the costs could be prohibitive.

Monthly Premium

Back in the good old days my former employer paid 100% of our monthly insurance premiums. It’s pretty rare to find employers that do that anymore.

However much or little your employer is subsidizing, getting any portion paid for on their behalf is better than nothing.

Simply take the total monthly premium amount that you’d be responsible for on each plan and multiply by 12 to get your baseline annual cost.

Deductibles, Co-Pays, and Co-Insurance

Next up when figuring out how to compare health insurance plans is to look at the deductibles, co-pays and co-insurance.

If you’re young and very healthy, choosing a high deductible plan is a great way to save money if you don’t anticipate using your insurance much.

Deductibles and co-pays usually don’t apply for preventative care. So you can typically get flu shots and annual physicals without any out-of-pocket expense.

I’ve noticed a trend with co-pays going up in recent years for specialty care doctors on the plans I’ve compared. So if you regularly see an ENT, pulmonologist, cardiologist, etc. check with the carrier if their co-pays will be higher than your PCP.

Co-insurance is another important cost to take into consideration. When I was planning on getting pregnant, I made sure we had a health insurance plan that had good co-insurance rates for maternity care and delivery. It can get very expensive to have a baby these days!

Out-Of-Pocket Max

If you have accident prone kids, expect to have surgery, take specialty drugs, need ongoing medical treatments, or plan to give birth, finding a plan with a low out-of-pocket max can also save you a lot over the course of a year.

On the other hand, if you don’t expect to need much medical care next year, then you can likely benefit from a plan with a low monthly premium and a high out-of-pocket max.

Physician Services

How To Compare Health Insurance Plans

Thanks to the global pandemic, telemedicine has increased in popularity substantially this year.

Most major insurance carriers now have rates specifically for telemedicine as well.

I’ve seen some plans offer fully covered virtual visits with deductibles waived.

Personally, I love having the option for fully covered or very cheap telemedicine. I hope telemedicine continues to become more accessible and affordable to all patients.

However, just like how students shouldn’t have to pay full freight for video classes, patients shouldn’t have to pay full cost for a teleconference with our doctors. Therefore, you may want to lower your plan level. A lot of people are logically waiting out seeing their doctors for non-life threatening illnesses until after the pandemic is over.

You’ll also want to consider the costs of labwork, x-rays, and other imaging services when comparing health insurance plans. Often times you’ll have to pay a deductible and co-insurance for these types of services.

Prescription Coverage

It’s hard to imagine paying for prescription drugs in the US without health insurance. The prices are ridiculous.

I didn’t realize until recently that some health insurance plans have deductibles specifically for prescriptions. As a result, you could wind up paying both a medical deductible and a prescription deductible each year.

If you or your dependents take any prescription medications, it’s important to check the insurance carrier’s prescription drug list each year. These lists are divided into separate tiers that determine how much the policy will cover.

If you take a Tier 2 or Tier 3 drug and select a health insurance plan with a prescription deductible, the costs per month can add up fast.

Utilize mail order prescriptions when you can as that can help save on costs. For example, some plans will ship a 3-month supply of medications for the cost of a 2.5 month supply.

Hospital & Emergency Services

If you’ve never gone to an Urgent Care before, I encourage you to find one in your area. They are a great resource to utilize if you have a medical issue that needs urgent attention that’s not serious enough to require a trip to the ER.

Most of the time you can get treated faster and for a lot cheaper than in the ER. Definitely review urgent care coverage rates when comparing health insurance plans.

It’s also important to look at the coverage options for in-patient and out-patient hospital services. ER and emergency transport coverage can vary as well.

Hopefully you won’t need to use those services. But, if you anticipate needing any surgeries, treatments, having a baby, or have accident prone dependents, finding a plan with a good co-insurance coverage and a low-deductible may be the most cost effective for your needs.

Compare Plan Tiers

There are a lot of insurance plan options out there. Way more than I can tackle in one post. However, to help you learn a bit more about how to compare health insurance plans I’ve put together a small sample set below.

Below you will find group plan examples of platinum and gold PPO plans from UnitedHealthcare with a large physician and hospital in-network list.

NOTE: The example costs listed below are for a 40-year-old employee named Bob. And the premium amounts you see below represent the total cost an employer would have to pay to cover this employee.

Typically, employers share the cost of premiums with their employees. Thus, a lot of employees have no idea how truly expensive their health insurance is because their employer is paying a sizable portion of it behind the scenes.

In other words, your employee benefits are worth a lot more than you may realize!

compare health insurance plans and premiums

Sample Platinum PPO Plan

Here are the main features of a sample platinum PPO plan.

  • Monthly premium: $777
  • Annual premium total: $9,324
  • Medical deductible: $250
  • Out-of-pocket max: $3,500
  • Office visits in-network: $0 co-pay
  • Speciality office visits: $75 co-pay (ded. waived)
  • Telemedicine: $5 (ded. waived)
  • Preventative care: $0 co-pay (ded. waived)
  • Lab/X-ray/Imaging: 20% co-insurance after ded.
  • Pharmacy deductible: $0
  • Tier 1/2/3 drugs: $5/$35/$70
  • Hospital services: 20% co-insurance after ded.

Sample Gold PPO Plan

Now, here are the main features of a sample gold PPO plan with the same network.

  • Monthly premium: $679
  • Annual premium total: $8,148
  • Medical deductible: $500
  • Out-of-pocket max: $6,500
  • Office visits in-network: $25 co-pay
  • Speciality office visits: $50 co-pay (ded. waived)
  • Telemedicine: $5 (ded. waived)
  • Preventative care: $0 co-pay (ded. waived)
  • Lab/X-ray: Non-Hosp. 20% co-insurance after ded., Hosp. 40% after ded.
  • Pharmacy deductible: $250
  • Tier 1/2/3 drugs: $15/$40/$80
  • Hospital services: $250/occurence + 20% co-insurance after ded.

In this example, our 40-year old employee Bob is fairly healthy and doesn’t anticipate having any surgeries in the coming year. However, he takes 2 medications that are in the Tier 3 category.

Here’s a very simple example of how he compared two plans. He is anticipating minimal usage with only preventative care doctor visits in his best case scenario. His employer pays for 50% of the premiums and Bob is responsible for the rest.

Bob’s expected costs on the platinum plan are:

  • Annual premiums = $4,662
  • 1 year supply for two Tier 3 prescriptions = $1,680

Total estimated platinum plan expenses = $6,342

Bob’s expected costs on the gold plan are:

  • Annual premiums = $4,074
  • 1 year supply for two Tier 3 prescriptions = $2,170

Total estimated gold plan expenses = $6,244

So, you can see it’s pretty interesting how he could wind up paying $588 less in premiums a year on the gold plan, but pay $490 more for his prescriptions. Since he could save $98/year overall by selecting the gold plan Bob decides to go gold.

However, if he wasn’t so sure of his health and factored in an unexpected trip to the hospital or a round of visits to a specialist and some imaging expenses, he could better off on the platinum plan.

If Bob was on a platinum plan, and wants to downgrade to a gold plan to save money, he should consider pre-ordering as much of his medication as possible. Often, you can preorder a three-month’s supply worth of drugs. Further, Bob should see any specialty doctors before switching.

Select A Health Insurance Plan For Your Individual Needs

Just like how personal finance is personal, so is health insurance. We all have different health issues and needs. So it’s important to run an analysis of your own expected costs. Further, factor in some different scenarios as well.

A certain health insurance plan may look best at quick glance, but may not wind up being the most cost effective for your needs once you run the numbers.

As for us, we don’t think paying $2500 a month for a platinum plan for a family of four is worth it. We realized all of our doctor’s visits have been covered under preventative care. Therefore, we are most likely going to downgrade to a gold plan for “only” $2,230 a month.

Related: How To Qualify For Healthcare Subsidies Even As a Multi-Millionaire

Readers, are you facing higher premiums for the upcoming year? How much of an increase are you seeing? What are the most important factors you consider when you are comparing health insurance plans?

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