Last week at work we had a meeting with Human Resources. The purpose of the meeting? To tell employees that our organization (a large non-profit) can no longer keep our current health insurance plan because of the cap the feds put on the amount of money non-profits can spend on fringe benefits (don’t get me started on this one, I’ll address that “issue” at another time).
This of course caused a great deal of anxiety and frustration within the organization. Most people (myself included) didn’t know exactly what a high-deductible health plan was, or how it was any different from our current plan.
Here’s my current insurance situation:
Currently my organization has standard health insurance. Basic services like preventative care (yearly physical exam, yearly gynecological exam, children’s wellness visits and vaccinations) are all covered in full and have no co-pay. If you visit a specialist or need to see your regular PCP for an emergency office visit (flu, ear infection etc.) you pay a $25 co-pay ($40 for the specialist). If you go to the ER you pay $100 co-pay. The rest of the bill is paid in-full by the insurance company directly to the provider. My company currently pays part of the cost of the plan and I pay the rest directly out of my bi-weekly paycheck (right now, about $120 per month).
Here’s what my insurance will look like (high-deductible) on July 1st:
Basic preventative care (yearly physical exam etc.) will be covered in full by the insurance company. Any other service including emergency visits to my PCP’s office, emergency room care, and non-routine care i.e. I get sick and need to go to the doctor, will be paid for by me in full out of pocket. Once I meet my deductible, $1,250, my health insurance will “kick in” and begin paying for anything above that amount. Let’s say for example I end up in the emergency room on July 2nd. The bill is $10,000. The hospital sends the bill directly to me. I pay $1,250 out of pocket to the hospital and the remainder of the bill, $8,750, is paid by the insurance company.
What’s the difference between “regular” health insurance and my new high-deductible plan?
Well a couple of things. Instead of the regular $120 that comes directly out of my pay each month, I’ll now only be paying about $30 per month. Sounds like a good deal right? More money in my paycheck is never a bad thing. In addition, my employer will be depositing money $16 per paycheck into a Health Savings Account (HSA) on my behalf. Over the course of a year they will give me about $430. That $430 I can use to pay for any eligible health care expenses. Curious what qualifies? The IRS has a 35 page pdf explaining that here.
The Good, the bad and the ugly…Who this plan hurts!
- The good: For young, relatively healthy folks like myself (knock on wood). I usually only attend my regular preventative visits. Once in a while I have an emergency visit to the MD’s office for the flu etc. but those visits shouldn’t total more than the $430 my company will be contributing to the HSA over the course of the year for me. Additionally, I can (and will) automatically contribute the $120 per month I used to pay towards my old plan directly to my HSA. I’m not used to having that money in my check, so I won’t miss it. If I don’t use the money in put in the HSA this year, it will roll to next year. It will also travel with me if I move to another company.
- The bad: I can imagine myself (and many other people) not going to the MD when I’m sick because I don’t want to spend the money out of pocket. With my old plan, if I got sick it would cost me a $20 co-pay and possibly $10 co-pay for the medications I’d need. Now if I get sick I’m going to get billed for an office visit (I suspect at least $100) plus I’ll have to pay for the medication at full-price-no co-pay. If, god forbid, I get hit by a bus on July 2nd, I’ll have to foot the bill for the ER visit to the tune of $1,250. Not great, but I have the money in my emergency fund (and soon my HSA) so it’s not the end of the world.
- The ugly: High deductible plans hurt low-income earners! Take the bus scenario I listed above and imagine you don’t have $1,250 just lying around in your emergency fund. Imagine you live paycheck to paycheck and end up needing emergency surgery. 2 weeks later you get the bill in your mailbox. You don’t have the money to pay the bill so you ignore it. A few months later, the bill goes to collections and ruins your credit.Yes I understand it’s “only” $1,250, but many people don’t have that kind of money saved for emergencies, especially low-income earners. If you’re struggling to keep food on the table and pay your light bill, saving in your HSA probably falls pretty low on your immediate priority list.
Are you happy with your health insurance? Do you avoid going to the MD because it’s cost prohibitive?