Keep It Simple - Health Plans Edition

Why Most People OverPay for Health Insurance

During the annual open enrollment period , people tend to blindly select the same plan from the previous year or choose a plan that does not fit their situation. Navigating the unfamiliar policy language with terms like specialty tiers, actuarial value and coinsurance cause most people to make the incorrect assumption that the more expensive policy will be better. To avoid this mistake (and help your staff avoid this error as well), here are two simple steps:

1) Avoid the inertia and pick a plan. Rather than spending 30 seconds opting into the “same as last year”, spend 10 minutes reviewing the options and evaluating your personal health.

2) Acknowledge the fact that for most people, the best choice is a HDHP (high-deductible health plan paired with a HSA (health savings account). If you and your family are relatively healthy with no chronic or diagnosed conditions and don’t anticipate any large surgeries like a joint replacement, you likely will not need the low co-pays and low deductibles that come with higher premium plans. Don’t let the larger deductible scare you! Here is the math to prove it:

Assumptions - 2023 average family plans with 20% tax savings on $7,500 HSA contribution

As you can see, the premium savings alone can often make up for the increase in the deductible that you may not even hit. Add the triple tax advantages of the HSA and the ability to roll the HSA over into future years as a retirement planning tool and the simple plan becomes a win-win.

This can all get thrown out the window if you do have a cancer diagnosis with high treatment fees or plan on having other high fee treatments done. If that is the case, you may want to find your own policy and then still cover your family (via your spouse) with an HDHP/HSA combo.

Practice Perspective

As a practice owner, you can help control your health benefits costs by ensuring that you offer an HDHP and potentially even encouraging that option with an employer HSA contribution.

Like all things in tax and life, each situation is specific to individual and practice needs so feel free to contact us if you have questions about what plan might work best for you.