For years, I have offered health insurance to the employees of my company, Hen’s Teeth Network. December 2014 is the last month that HTN will provide health insurance. This blog post explains why and includes the spreadsheet that I used for my analysis. It is all about the numbers; this is not a political rant. Most of this blog post is plain English and you don’t have to be a math major to understand it. Read on.
Current Health Insurance Plan
Our current insurance plan is a good one. We use Anthem, one of only two companies in Missouri which will provide health insurance to small businesses which have employees in more than one state. Very briefly, here are the parameters of our current health insurance plan:
- Company pays 75% of premium. Employee pays 25%.
- $2,500 in-network deductible. $2,500 in-network out-of-pocket limit.
- $4,000 out-of-network deductible. $4,000 out-of-network out-of-pocket limit. This is separate and distinct from the in-network limit.
- Co-pays for doctor, specialist, urgent care, and emergency room visits.
- 0% co-pay / co-insurance for hospitalization, etc. (I.e., 100% covered by insurance after you meet the deductible.)
This is a more straightforward plan, with more predictable spending and a broader network of doctors and hospitals, than anything available through our insurance exchange (HealthCare.gov).
Rate Increases Outstrip Inflation and Income
Given that we had a good plan, why are we dropping it? We were quite simply priced out of the market. Here are our most recent rate increases:
- 28% August 2013
- 28% December 2013
- 16% December 2014
With increases like that, we simply could not raise our consulting rates fast enough to keep up. The cost of health insurance was eating HTN’s profitability.
I began my investigation of health insurance plans on HealthCare.gov angry and with a predisposition to intensely dislike my choices. I was wrong. I found a plan which
- includes my doctors,
- includes my preferred hospital network,
- will probably cost me less out-of-pocket, and
- will not cost me significantly more (in the worst case scenario).
When I first glanced at the plans on HealthCare.gov, I had been scared off by the 20% (or higher!) co-insurance. In case you are not aware, let me explain what “co-insurance” is. Co-insurance is the portion of the bill that your insurance does not pay. It is the portion which is not insured. If, for example, you go to the hospital and you have 20% co-insurance, the insurance company pays 80% and you pay 20%.
Out-of-Pocket Limit to the Rescue
But the out-of-pocket limit saves your bacon and my mistake was not understanding that correctly. As a first approximation, the most that you will pay per year for insurance is 12 × your monthly premium + your out-of-pocket limit.
Returning to the example that I gave before, if you go to the hospital and you run up a $100,000 bill and you have 20% co-insurance and you have a $5,000 out-of-pocket limit… the most you pay is $5,000. You can effectively ignore the “20% co-insurance.”
Health Insurance Numbers in Detail
Our legacy plan covers everything very well, once you meet the deductible. In formal language, the deductible and the out-of-pocket limit are the same. The premium, though, was going through the roof. Just as an example, I am a pretty healthy man in my mid-50s and my premium is $754 per month!
I checked HealthCare.gov and found that the Anthem plans include my doctors (both primary care and specialist) and my preferred hospital network. The bronze plan costs only $461 per month but includes 20% co-payments and has a $6,600 out-of-pocket limit.
I put together a spreadsheet comparing the plans in detail and calculating the maximum out-of-pocket and the minimum out-of-pocket. Surprise of surprises, the Anthem Bronze Pathway X may save me $3,000 next year and (at worst) will cost me $600 more than I would pay if I stayed with my current plan.
My spreadsheet contains three tabs:
- Plan Overviews gives the details on four health insurance plans. It includes two calculations: the maximum and minimum that I can expect to pay in calendar year 2015.
- Scenarios details the medical services that I expect to use in 2015 and totals the costs (assuming that I stay healthy). These numbers are presented as the minimum out-of-pocket on the Plan Overviews tab.
- Medications lists prices for the medications that I take. These costs are included in the Scenarios tab calculations.
There are three ways that you can see this spreadsheet.
- It appears little farther down this page and you can use the scroll bars to move around. This is a good way to preview it but you cannot see the whole thing all at once.
- Here is the insurance comparison spreadsheet as a web page. This is best for most people. You can easily read everything.
- Here is the insurance comparison spreadsheet as a Google Sheet. This is best for people who want to make a copy and plug in their own numbers.
What do you think of all this? Post your comments below (but please leave politics out of it).