6 Steps to Finding the Right Health Plan for You
Selecting the best health plan is no longer about picking the lowest copays and deductible. Sure that is the hope, but those added benefits come with a cost. Depending on your utilization, buying up to a richer plan may give some added peace of mind and cash-flow stability, but ultimately cost more than a plan with a higher deductible, lower premium, and more out-of-pocket expense.
When it comes to selecting the best health plan for you and your family, meaning the plan that provides the greatest personal value at the lowest cost and risk, it helps to first quantify your liabilities. Here are six steps to help you assess you and your family's health expense liability and make an informed decision when selecting health coverage.
Step 1: What is your predictable health-utilization baseline?
Building a health-utlization baseline entails reflecting on historic usage, identifying constant ongoing expenses, and quantifying your total annual spend (without insurance copays) on healthcare. Specific items to consider would be:
- the cost of regular prescription medications
- will there be a pregnancy or birth in the plan year?
- are there any planned surgeries or procedures falling in the plan year, and in what months of the plan year will they occur
- What is your average number of visits to your Primary Care Physician (PCP)?
- What is your average number of ER visits?
- What is your average number of urgent care visits?
Once you determine your baseline utilization, you need to translate that into your health-spend.
Step 2: Apply a dollar value to your baseline.
For regular medications, you can enter actual fees and arrive at a fairly predictable annual-Rx spend. For visits to the ER, procedures, specialty treatments, pregnancy-related costs, etc. you may need to explore the average costs at local providers, or use average-cost statistics to estimate costs.
Some national statistics on average medical expenses without insurance are:
|Provider visit type||Average Visit Cost w/o insurance|
|Primary Care Provider||$200|
|Urgent Care Visit||$155|
|Emergency Room (not overnight)||$1,233|
Total your expenses for your baseline utilization and that is your annual health-spend baseline. Breaking this baseline down by month would help you track the timing of different expenses. This will come in handy when comparing deductibles and predicting when copays would start for different plans.
Step 3: Build a cost analysis for best and worst case scenarios.
Now that you have a baseline, consider best and worst case scenarios that may impact your annual health-spend.
Of note, it’s easy to immediately go to extremes when thinking worst-case scenarios. We’ve provided some guidance in how to develop a predictable health-spend for best, medium, and worst case scenarios.
- Best Case: Is it possible to beat your baseline? If you average two annual visits to urgent care, your best-case scenario might include zero additional urgent care or ER visits. Assuming Rx spend is constant, this would probably remain as part of your best-case scenario cost plan. Evaluate all possibilities of beating your baseline health-spend, and that is your best-case scenario.
- Medium Case: This is having a slightly higher utilization than your baseline, specifically factoring in some scenarios that have a higher likelihood of occurrence based on personal medical history. Here, you are looking at one or two additional provider visits, perhaps some additional Rx costs, and considering any historic ailments that have a chance of return. For example, if you have epilepsy and have had seizures in the past that have forced an ER visit, though it may no longer be a regular occurrence, how might such a visit impact your annual health spend?
- Worst Case: We’re getting into catastrophic circumstances now, but not quite to the point of a radical health change, like a cancer or diabetes diagnosis. Rather, consider a car accident requiring an extended hospital stay, ongoing physical therapy, and an ambulance ride. When it comes time to selecting plans, your worst case scenario analysis will help you compare deductibles, inpatient hospital copays, and maximum out-of-pocket limits.
Step 4: Consider the likelihood of each case scenario.
Your case scenarios do not have an equal likelihood of occurrence. Factors liker age, gender, and personal health circumstances may impact how you assign a percentage likelihood to each. For example, the younger and healthier single population, generally speaking, will have a higher possibility of reaching their best-case scenario than a senior population.
This is an arbitrary value, but it will come into play when comparing how plans perform in each case. For example, you may have a low-premium high-deductible plan that is a relatively poor performer in your worst-case scenario, but if you presume a 10% likelihood of reaching your worst-case, the savings may be worth the risk.
Step 5: Consider your “cry-uncle” point for annual health expenses.
Your “Cry uncle” point (yes a technical term) is your personal tolerance limit for annual out-of-pocket expenses. This means looking at your overall family budget and seeing how much you your budget can handle. You'll want to factor your premium contribution into this number.
For example, if you set your annual limit at $3,000, and your baseline health-spend is $3,500, you’re going to be looking for a plan that has a lower deductible so your co-pays can kick-in faster. If you’re annual baseline is $1,500, and you have a high likelihood of achieving your best-case scenario, you may be more comfortable with a high-deductible plan that has a lower premium co-pay.
Step 6: Apply individual plans to each of your case-scenarios.
At this point, you are ready to bring actual plan descriptions into the equation. It may help to build a spreadsheet or workbook that allows you to assess the side-by-side comparison of how each of your plan options would perform under each scenario. Keep in mind when you expect to cover your deductible under each plan, and how expenses above that of your baseline would be handled before and after reaching your deductible.