It is open enrollment and your employer offers a couple of health plan options. You appreciate that they are giving you options, but how do you choose???
Realize, insurance is often referred to “legalized gambling.” You are betting you might need it…the insurance company is betting you won’t. While there are several factors to consider, this is a simplified tool that may prove helpful.
Add up the annual cost of both plans.
Estimate what you expect to spend under each plan. (This is the gambling part…you may want to add up everything you spent last year as a starting point.) The post on Deductible vs. Out-of-Pocket may also be helpful.
Add the annual premium to the expected cost for each. Choose the plan with the lowest total cost.
It is also a good idea to know the “worst case scenario.” Add up the deductible and out-of-pocket maximum of both plans (gives you the total exposure for both). Is the cost worth the risk?
Other helpful tips:
Copayments (or copays)- usually a fixed dollar amount, copays typically do not count toward your deductible or out-of-pocket max. They are “per occurrence” charges.
Remember- you pay premiums every month, you only pay deductibles and copays when you use the plan.
If both spouses work- your calculation just became more complicated. You need to do the same calculations based upon each spouse having single coverage on their respective employer’s plan as well as both covered together (employee+spouse coverage) on either plan. The “rule of thumb” is it is typically least expensive for him to be covered under his employer and her under hers.
Then if you have children, you get to calculate which is the best place for them.