Selecting health insurance, part 2
December 22, 2013
In case any of you were curious, we did finalize our health insurance selection for the company. The basic tradeoff is saving on monthly premiums (the cost of insurance, paid regardless of whether you use services) or saving on the costs of health care services when actually using them (known as coverage). Like anyone, we could choose lower-cost insurance, but be on the hook for more of the costs if something happens (think bronze level in the government's classification system), or we could pay more on a monthly basis and pay less if something happens (think platinum level).
As a team of relatively healthy individuals who rarely use health care services ourselves, we decided to go with lower monthly premiums. However, there was still the nagging question of what happens if a medical emergency should occur. To help mitigate against those unexpected costs, we calculated the difference between our monthly health premium and the premium of a higher-coverage plan that we were satisfied with. We plan on depositing that difference into a health savings account (HSA) on a monthly basis. Over time, we expect those savings to accumulate so that they would offset a significant part of the deductible used to pay for any major covered procedure. If no such event happens, then the savings should continue to accrue (and can be withdrawn at retirement). On a conceptual level, this helps capture some of the money that would be evaporating every month (used to pay for services that we don't actually use). The numbers work out such that if we consistently had to use health care services, it would make more financial sense to just get a more expensive plan with higher coverage (which would not be compatible with HSAs). For now, though, this combination is the one that seemed to make sense. We'll revisit the issue next year.