Heath Insurance Book, Chapter 1, Section 2
Before launching into the process of getting a good deal, you should briefly review the factors that constitute a good deal. Each of the following points in Figure 1.1 is an important factor in defining a good deal on health insurance.
What Makes a Good Deal?
1. Value: Getting the most for your money.
2. Necessity: Paying for only what you need and not pricey extras that do not help you or that you don’t use.
3. No Gaps: Making sure that you are getting the coverage that you need without any costly gaps, especially if you are unaware of them.
4. Long Term: Ensuring that short-term savings don’t mean long-term (future) higher expenses and financial hardship.
5. As Promised: Ensuring that you actually get that which you are paying for, and don’t get the run-around when trying to use the benefits.
6. Easy to Use: Minimizing the amount of work and hassle involved in the purchase, maintenance, and use of the plan.
Figure 1.1: What Makes a Good Deal?
Let’s explore getting the most for your money in more detail.
Getting the most for your money means getting the best value for you. This may not be the same value as your sister, your best friend, or your neighbor. For example, two different people drive cars – one sees the best value in getting the most miles to a gallon of gas. Another sees getting the most enjoyment from a gallon of gas. While the first may be trying to save money, the second may be trying to enjoy the act of driving, placing that at a higher priority than the additional cost of fuel. Both are trying to get the most for their money, but they are after different goals. This is true of health insurance, where different coverages and approaches will be better for different people – not a one-size-fits-all approach. Some people are more attracted to having a lower monthly payment, others are more attracted to having a lower deductible.
Each and every feature that is included in a health insurance plan has a cost. Many plans are combinations of features that are offered together as an attractive package. Few allow à la carte choice in features, allowing you to configure your own coverage. Having additional features may be nice, but if you never use them, then you are paying money for nothing.
You can look at this like the way different automotive manufacturers sell cars. The first manufacturer offers many different options that you could add on separately if you desired. It takes a lot more time to go through all the options you could add on, but this process also ensures that you buy only what you need, assuming you do not get tempted by all the cool accessories. Another manufacturer’s purchasing process offers a few packages that group many options together. This process is a lot simpler and less time-consuming for a buyer. However, you end up paying for an option that is part of a group whether you need it or not. It can be the same with health insurance policies that group features together. For health insurance, however, you may end up paying for an unnecessary feature over and over every month and every year that you have the unused feature, which, as you might imagine, can be extremely costly.
3. No Gaps
|“I review insurance coverages with everybody.”
-Lauren Gadkowski Lindsay, CFP®, NAPFA Registered Financial Advisor, Personal Financial Advisors
Gaps are health insurance needs that are not paid by your plan. For example, having a limited number of days in the hospital for an illness may mean that the plan stops paying after you’ve been in the hospital for a maximum number of days, for example, Medicare’s 150 day hospital maximum. It is also possible that your insurance will only pay up to a certain amount, the daily maximum, and you pay the rest. An example of this is a health insurance policy with a hospital room and board maximum of $300 in an area where hospital charges always exceed this amount.
It is hard to know where the gaps are in any insurance plan. They all have some gaps, some are small and some are large. Reading the sales material before applying for health insurance doesn’t answer many questions about gaps. Even reading the material that comes with any purchase may not clearly answer what is and is not covered because these decisions are made and revised over time, sometimes getting broader in what is covered, sometimes narrower. Your best bet to avoid encountering price gaps is to choose a plan offered by an insurer who is concerned about quality. You will see how to refine your search for health insurance for factors like quality in Chapter 7, and to avoid rip-offs in Chapter 10.
4. Long Term
A cheaper monthly payment may be attractive now, but if it means that in the future you will have big expenses because of what is and is not covered, then it is not a good deal. There are plans out there that cover what you need now for prevention and don’t run out when you need them most in the future if something bad happens. Examples of plans that may lead to future hardships include a plan that offers a low annual maximum of $100,000 that would not likely pay enough in a year to cover an extremely serious medical problem. Or a low lifetime maximum ($500,000 to $1 Million) that might stop paying twenty years down the road after you’ve had a serious ongoing medical condition for many years and inflation has more than quadrupled the current costs of treatment.
5. As Promised
You are buying a plan that is supposed to pay for what it says, but sometimes you don’t get what you pay for. It’s important to choose a plan from a company that values quality and pays claims promptly and fully. You can ensure this by buying from a company of quality and checking out the complaints against any particular insurer with your state. Chapter 7 covers evaluating the quality of the insurance companies and the complaints against the companies.
6. Easy to Use
A good deal means that you don’t have to continually file paperwork, deal with claim rejections and inquiries, and pay for medical expenses with little hope that you’ll get reimbursed – often getting paid late if at all.
All of the factors involved in a good deal must be considered – both what you get as well as how much it costs. Remember, it’s the best deal for you, not someone else.