This one is a health insurance deductible story problem.
To use nice round numbers: suppose my health insurance has an annual deductible of $5,000. Let us further suppose that, here in mid-June, nearly halfway through the year, I have spent $1,200 so far this year in healthcare expenses.
Also suppose that I have to refill a medicine which is relatively expensive: it costs $1,000 for a three month supply. If I need to refill it today, I'd need to refill it again in mid-September; and then again in mid-December. That means that, after mid-December's refill, assuming no other major medical expenses, I would have spent about $4,200 of my $5,000 deductible. Of course, if an unexpected health problem occurs (the very purpose of being insured), my expenses could easily have surpassed my deductible by then.
Now ... further suppose that, if I refill that expensive medication using Good Rx (a website which offers medications at a discount), my refill cost is $750 rather than $1,000. That's a savings of $250 per refill, which is substantial. However, if I use Good Rx, my insurance doesn't get charged, so the expenditure doesn't count toward my deductible. Over the course of the next three refills, I would save $750, but I'd still be only $1,200 or so toward my $5,000 deductible.
Is it better (a) to pay less out of pocket by using Good Rx, even though it makes it unlikely I'd reach my deductible? Or is it better (b) to reach the deductible as quickly as possible?
FYI, this is a real-life story problem, with the amounts slightly changed. I talked it over with my wife, and we're opting for (a). What do you think: am I thinking about this the right way?
Yikes, Jim. A $5000 deductible is awfully high. When I was working my company insurance was $300 deductible. Now with Medicare and supplemental it is (I think) $190. Our company insurance actually had two plans to choose from. One had a high deductible with a medical savings account. The other was the more traditional plan that we elected. It was predictable the way it played out. The higher paid employees chose to go with the high deductible. There were a lot of young single guys who went that way too. The people with young kids, women of childbearing age, and the lower paid production workers chose the traditional plan, because they didn't havebenough of a cushion to deal with a large expense. We did, too, because very many years when you met the high deductible would play havoc with your retirement savings.
ReplyDeleteAbout your dilemma, if you are both in good health, you are probably safe in choosing the lower priced meds, is especially if you have a medical savings account or enough cash to cover an unexpectedly bad year.
Right, that deductible (which is not entirely accurate, but not that far off from the actual one) is for the entire family, not just me as an individual. Three of our kids are still "on the payroll" when it comes to health care benefits. They're all healthier than I am; because of these meds I take, I'm the biggest spender of the five of us.
DeleteFWIW, I read an article a few years ago that, on the whole, persons who choose the low-deductible plans end up paying more out of pocket over the course of a year, because their premiums are higher than those with high-deductible plans. Unfortunately, the trends have continued in which employee premium contributions continue to rise every year.
These plans are difficult for consumers to navigate. This is true for most consumer financial products. They are complex and opaque. My wife and I both are MBAs. If we struggle to do the financial analysis, I can only guess how it goes for people with less training.
The calculation that people sometimes use in choosing a high or low deductible plan is that it is easier to deal with a higher, but predictable, monthly premium than to take a chance with a disastrous expense.
DeleteYes it is nice to be able to keep your young adult kids on your insurance. That hadn't kicked in yet when our kids were that age. We bought a short term policy for them, fortunately they didn't need to use it, and were able to find jobs with insurance.