Like most of you, every December we are faced with a dilemma that employers affectionately refer to as Open Enrollment. In our case, this is a chance for an insurance company to have an employer-sanctioned way to sell us all kinds of insurance policies we don't need. This year's list of “designed to be sold, not bought” insurance we don't need and had to decline included:
- Short-term disability
- Accidental death
- Vision insurance (totally misnamed, should be called “glasses and eye exam insurance”)
- Critical illness insurance
- Group life insurance
But there were also two types of insurance that we do need on the list and one that we want:
- Health insurance
- Long-term disability insurance
- Dental insurance
Let's do the easy stuff first. I've written before about why we have both individual and group long term disability insurance. Although we're getting very close to feeling comfortable canceling both of those policies, we've decided to keep them for at least another year or two.
Dental insurance isn't insurance that we need. In fact, it really isn't insurance at all given the low maximum benefit ($1500 per person.) The reason we pay for it is that it allows us to pay for dental care with pre-tax dollars without having to burn HSA money on it. We figure cleaning, x-rays, and exam is about $200 once or twice a year for each of the six of us paying cash. So that's $1200. Dental insurance covers that and costs about $100 a month, or $1200. But I can pay for dental insurance with pre-tax dollars, so I do. There's a little bit of extra benefit including up to $1500 per person worth of non-preventive dental care for cavities and such, but it only pays like 80% for minor stuff and 50% for major stuff. We also get the benefit of the insurance negotiated rates. We were purchasing dental insurance on the open market the last few years, but this year our “open market” plan increased premiums and our partnership plan offered a cheaper option, so we actually had our premiums go down about $50 a month (a 33% decrease) for not much less benefit. That doesn't happen very often, but we'll take it!
The Health Insurance Dilemma
Now on to the elephant in the room, health insurance. It's one of those insurances that everybody needs because becoming seriously ill or injured can wreck even the best financial plans. We've also been buying this one on the open market for years because we could get a plan that was cheaper than what my physician partnership was offering. However, this year our open market plan premiums went up 16% and the plan was significantly worse.–higher deductibles, a crummier prescription benefit etc. Then I got an email from the partnership saying the premiums were staying the same as last year. Hmmm…maybe time to go back to the partnership plan I haven't been on since I made partner and had to start paying the premiums myself.
Open Market Plan
It qualifies as an ACA bronze plan, but we just buy it through a health insurance broker instead of through an ACA exchange since it doesn't cost us anymore and we don't qualify for a subsidy anyway.
- Premium: $1192.75
- Deductible $6,650/$13,300
- Max out of pocket: $6,650/$13,300
- Benefits: 100% after deductible
Also an HSA plan, just like the open market plan, which is best for us since we're pretty healthy and haven't hit our deductible in years.
- Premium: $1224.11
- Deductible: $3,000/$6,000
- Max out of pocket: $4,000/$8,000
- Benefits: 20% co-pay after deductible met until max out of pocket met
So it's not quite apples to apples, but it's pretty obvious that one plan is way better than the other and the price is essentially the same.
Health Insurance Vs Health Sharing Plan
The other thing I always look at each year is whether we'd be better off with one of the Christian Health Sharing organizations such as Liberty Healthshare, Medi-share, Christian Health Ministry, and Samaritan Ministries. Although comparing these plans to health insurance is again an apples to oranges comparison, the “shares” (premiums) are dramatically lower than health insurance premiums. This year, I compared to Christian Health Ministry. Our family would be “three units,” one each for me and my spouse, and one for all the kids combined. It costs $150 per month per unit, or $450 for the “gold plan” where you're only responsible for the first $500 of each incident. However, it has such a low maximum benefit that it would only make sense to buy the “Brother's Keeper” addition, which would be another ~$75 a month plus $40 a year.
Total cost: $6,340
That is dramatically less than the cost of my health insurance ($14,688,) especially given the lower deductible. Again, it isn't an apples to oranges comparison though. The CHM “deductible” is “per incident,” not total. It doesn't cover any preventive care. It doesn't cover chronic care or prescriptions for stuff like hypothyroidism. No psychiatric care or substance abuse care.
Overall, I don't like what it covers and doesn't cover, but could deal with that in exchange for paying less than half as much. But then I run the numbers….
Running the Numbers
In reality, while my premiums seem quite high at first glance, that's not really the price I pay. You see, health sharing premiums (i.e. “shares”) are not tax-deductible to me. But the health insurance premiums are. They're an above the line deduction for the self-employed. In addition, using a High Deductible Health Plan (HDHP) allows me to use a Health Savings Account (HSA). We can contribute $6,900 to that in 2018. That's also a tax deduction. All told, going with a Health Sharing Plan instead of an HDHP/HSA would cost us a $21,588 tax deduction.
At our 46% marginal tax rate (no, I have no idea what my rate will be in 2018, but that's what it was in 2016 and probably is in 2017), that's worth $9,930. Subtract that from $14,688 and all of a sudden that health insurance only costs us $4,758, about $1,600 a year LESS than the health sharing plan.
Then I told my wife what we'd have to do if we went with a health sharing plan. We would have to send our “shares” to a different person every month manually instead of just automatically having our health insurance premium paid out of our checking account. We would also have to negotiate every medical bill we got during the year, rather than getting the price the big health insurance company negotiated. When I told her that she gave me an “Are you kidding me?” look, which combined with the lower price, made the decision pretty easy. But next year, we'll probably run the numbers again.
What do you think? What are you doing for health insurance in 2018? Are you doing health sharing? What has it been like? Comment below!