How to select from health insurance options

[PatSea32]

My wife and I are currently on my former employers COBRA group health plan which will expire on August 31. We are evaluating various options as to what type of health insurance policy to buy. We are 63 and 62 years old, both in good health. I know health insurance is a personal decision, and there is no "one size fits all", but I'm sure this group can provide good insight, suggestions, and ask the right questions.

The options we are currently considering boil down to these two:
1. A subsidized group health plan for retirees of my former employer. This is a "high end" plan. The cost for my wife and me is $825/mo.
2. Purchase a high deductible "catostrophic coverage" individual plan with $6000 medical deductible for $400/mo.

There are many other options out there. How do we go about evaluating these options to make the best decision for us? What features, etc. should we consider beyond just price? What are the risks, advantages/disadvantages associated with these and other options? What other good resources are available?
Thanks for your help.

 

[MichaelB]

Hi PatSea32 and welcome to the forum.

Those are pretty good rates compared with what others around here are paying.

Difference in policy coverage is pretty important. Preventive procedures – screenings, colonoscopies, etc can get pretty expensive if they count against the deductible.

The difference in cost between the two options ($425x12=$5100) is less than the deductible for the catastrophic coverage plan before tax. Is the high deductible plan HSA eligible? If not, after tax the “high end” plan might not be much more expensive – and possibly be a better option if you can afford it.

Is the high deductible plan group or individual coverage? Group plans are more tightly regulated so there is less likelihood for a problem (denial of service, cancellation, etc) to occur. Likewise, rates are less granular vs individual plans so there is less likelihood for a substantial rate increase due to age or other circumstances.

 

[PatSea32]

I'm not sure I understand the tax implications of buying health insurance. Can you explain?
Thanks.

 

[ksr]

I had to evaluate health insurance policies when I left megacorp a few years ago, so I'll just list some of the factors I considered when making my decision:

- Monthly premium
- Deductible
- Co-pays
- Exams: are they covered, subject to deductible, etc.
- Lifetime maximum
- Is the plan HSA-eligible?
- Drug coverage
- Changes to premium as I age (to do this, I used eHealthInsurance and changed my year of birth to simulate different ages)

I'm sure there are more but these are the big ones the come to mind. I also re-evaluate my decision periodically and am prepared to change policies in the future.

 

[TromboneAl]

Use a spreadsheet to evaluate your annual cost in different situations. For example, how much will it cost if I don't get sick at all? How much will it cost if I fill up my deductible? How likely am I to get sick? How many years of the last 10 did I have a significant cost?

I've uploaded a spreadsheet that I used in 2005. I was surprised to find that the high deductible was almost always cheapest.

 

[MichaelB]

I'm not sure I understand the tax implications of buying health insurance. Can you explain?
Thanks.

Medical expenses, including premiums, are deductible only after exceeding 7.5% of AGI.
An HSA eligible policy allows you to take an above the line income adjustment of $7150 (over age 55) this year. If your marginal tax rate is high and / or your deductions are low, the after tax cost could favor the high deduction (HSA) plan.