Say It Ain’t So, Joe. Please.
Recently I searched YouTube for “health insurance,” and this video popped up near the top of the list. Meet Joe Simonds (rhymes with diamonds): author, digital marketing maverick, and guru of the Retirement Think Tank.
Now I’m sure Joe knows a thing or two about how to save for the golden years, but early on in his presentation he proves that he doesn’t know much about health insurance – after just 4 seconds he says he’s talking “about healthcare, or Obamacare, or whatever you want to call it.” It’s health insurance, Joe. You’re talking about health insurance.
Anyway, the message Joe wants to send his viewers concerns this December 2013 article from the AP, which discusses how people are putting themselves at risk by buying the cheapest health insurance plans. You know, the ones that have high deductibles.
In Joe’s opinion,buying one of these policies is “The BIGGEST Mistake You Can Make When Choosing a Health Insurance Plan.” Yet when he implores his viewers to take into account the total cost of each plan, and not just the premium, Joe gets it right – but for the wrong reasons, since he only factors in the deductibles from the different metal levels.
And that my friends, is a big mistake.
Because, as I’ve pointed out before deductibles (D) are superseded by the Out-of-pocket maximum (O), and in the vast majority of plans the O is higher – much higher – than the D. So instead of the deductible being a realistic stopping point for potential health care expenses, it’s really just a marketing tool that insurers use to scare consumers into overinsuring themselves. Say it ain’t so, Joe.
To illustrate, I went to ehealthinsurance.com and looked for policies that matched the original AP story examples as close as possible. I pretended that I am a 30 year old male (born 12/01/1984), and that I live in Chicagoland’s 60610 ZIP Code. I didn’t check the tobacco use or college student boxes, and I didn’t try to qualify for a subsidy. When I entered my data, here’s what I got:
See what I mean? Isn’t it interesting how a Platinum plan with no deductible can still potentially leave you $4,500 in the red? And yet, this is the plan that Joe would tell you is the best. But is it?
Let’s use Dr. Wacasey’s Equation to find out:
To me, it looks like the high deductible, lower cost Bronze plan makes the most sense in this scenario. And if you use Dr. Wacasey’s Equation to compare other health insurance plans, you’ll see that this is often the case – the more you spend, the less you get. Go ahead. try it.
So I pose the question to everyone, and especially to Joe: still think that buying a cheap health insurance policy, with a high deductible, is really the biggest mistake you could possibly make?
Nope. It turns out that the BIGGEST mistake you can make when choosing a health insurance plan is to not use Dr. Wacasey’s Equation to help you choose wisely.