Sunday, August 31, 2014

Family of 4 Health Insurance Options

I've found that a lot of people do not actually know about the various ways to afford healthcare that are available today and meet the law requirements.  I will start out with the obvious ones that most people know about and then share with you some others that are available to Christians.  I'm just going to talk about the ones that I'm personally familiar with - if you know another option that is better, leave a comment!

  1. Traditional Health Insurance - this is your basic health insurance that has a premium, deductible and then copays or coinsurance.   These plans are usually the highest of all the ones I'm going to talk about today.  They are also usually NOT the best choice as your total yearly costs are the most expensive.  You can purchase these online, through the exchange (what a joke) or they are normally offered from your husband's employer and given at a reduced rate and you can pay your premiums with pre-tax dollars in a payroll deduction.
  2. Health Savings Account High Deductible Health Insurance (HSA) - these health insurance plans require an HSA (Health Savings Account) and are generally the best option when you look at total yearly costs.  The plan itself can have a high deductible ($3K or above) and then you pay a certain percentage up until your out-of-pocket limit.  You can set aside money to pay your medical bills through the HSA and it is pre-tax and stays tax-free if you pay only approved items with your HSA (medical, dental, etc.) and your premium is also pre-tax through your payroll deduction.  Most of the time employers offer this option along with the first one and this one is the least expensive as premiums are way lower and when compared to the yearly costs of the first plan, this one wins. 
  3. Christian Sharing Medical plans - these are plans only offered to Christians and are very affordable.  You pay a set amount each month depending upon age and/or family size, then you either only pay up to a certain amount of your bills a month and anything over is paid for by others OR you set your deductible and premium and once the deductible is met, you pay nothing.  These plans would be good for those who don't get a discounted plan from their employer or for those that don't foresee any medical needs of substantial amounts in the upcoming year.  The downside is that you pay your monthly premiums with after-tax dollars.

Let's look at a typical employer-given health plan:

  1. Traditional - $6,000 annual premium; $1,000 deductible then plan pays 80%; $12,000 out-of-pocket limit
  2. HSA plan - $3,500 annual premium; $3,000 deductible then plan pays 90%; $6,000 out-of-pocket limit

Now let's compare those rates with Christian sharing medical plans:

Family of 4 monthly premium -  $405
Yearly premium amount - $4,860
Responsible for bills up to $300 a month then plan pays 100%

OR

Family of 4 monthly premium of $10,000 deductible plan - $184
Yearly premium amount - $2,208
Plan pays 100% after $10K deductible

OR

Family of 4 monthly premium of $2,500 deductible plan - $500
Yearly premium amount - $6,000
Plan pays 100% after $2,500 deductible


Taking these plan scenarios, let's see what a medical crisis looks like within a year of these plans:

Worst Case Scenario - $55,000 medical bills

What you pay max for this year:
Traditional -  $19,000
HSA plan - $9,500 (can all be pre-tax dollars)
Christian sharing #1 - $8,460 (if bills are over $300 each month)
                                    $5,160 (if bills happened in one month)
Christian sharing #2 - $12,208
Christian sharing #3 - $8,500

You can see that the Christian sharing #1 is the cheapest option for a $55K scenario with the traditional plan costing the most.  However, most large employers give a portion to your HSA, so if they gave $1,000 towards your yearly costs, that would make the HSA plan comparable to the cheapest Christian sharing plan at $8,500.  You should also factor in the cost of using after-tax dollars to pay the Christian sharing plans and how the other plans will decrease your taxable income.  This can make a difference at tax time by putting you in a different tax bracket and you could factor in those numbers depending upon your personal situation to get a true cost.

When you choose a plan for your family, you can either plan for the worst case scenario or take the risk with a high-deductible plan and save on costs.  Let's say you want to take the risk, everyone is healthy and you don't foresee any medical bills (besides office visits) for the upcoming year:

No Medical Bills Scenario

What you pay max this year:
Traditional - $6,000 + office visits you pay
HSA - $3,500 + office visits you pay
Christian Sharing #1 - $4,860 + office visits you pay
Christian Sharing #2 - $2,208 + office visits you pay
Christian Sharing #3 - $6,000 + office visits you pay

The cheapest option would be the Christian Sharing #2 that has a very low monthly/yearly cost and a very high deductible, but this is risky business, you don't know if you will get in a car accident or someone will get very ill or need to be in the hospital.  If you take this risk, make sure you have the money in an emergency fund just in case!

In my opinion, the HSA high-deductible plan through your employer is the best option as it is the least riskiest but still gives you a great deal and you can pay all of your medical bills and your premium with pre-tax dollars and that also brings down your taxable income!

Notes - I didn't include Flexible Spending Account (FSA) plans because I have no experience with them and because you lose the money at the end of year if you didn't spend it.  The HSA is by far the better choice if your employer offers it as the funds roll-over from year to year.

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