Which plan is better for you? Which plan will have the lowest premium plus out of pocket expense?
Plan A is entirely deductible for its cost sharing. Plan B has a $500 deductible and a 30% coinsurance with no co-pays for everything up to $5,000 maximum out of pocket. Plan C has a $100 deductible, 30% coinsurance and a variety of service specific co-pays to a maximum out of pocket limit of $6,500. Let’s keep things simple and assume that Plans A, B, and C are offered by the same insurer on the same network as an EPO. Let’s assume that the premiums are in line with their relative actuarial value.
Which plan has the highest actuarial value? Which plan is best for you?
I’ll give you some time….
The answer is simple:
The three gold plans have nearly identical actuarial value of just slightly more than 80% actuarial value.
However, the pragmatic valuation of the insurance varies tremendously by expected health status and expected ability to absorb a financial hit. For someone who has low expected expenses and is able to take a big surprise shock, Plan B or C looks attractive. For someone who expects to have large medical bills, Plan A looks pretty good. Plan A also looks decent to people with modest ability to deal with a worse case scenario and thus need significant downside risk protection. All of these plans will be equal to each other if total utilization over the course of a year is roughly one sick PCP visit with one prescription for a generic penicillin pill. After that, it really depends.