Is there any financial decision that we dread more than the annual chore of choosing a health insurance plan? It’s got everything we hate: choice and information overload, time pressure, ambiguity and confusion, consequences worth thousands, uncomfortable scenarios involving disease and injury, inscrutable jargon coming at a time of the year full of other business, family and personal obligations.
I have written before about how there’s no rational way for people without serious financial programming experience to choose the best health plan under these conditions. The experience is especially bad on the New York Marketplace where the self- and unemployed go to pick from dozens of plans without an HR benefits professional to help. I tried calling the marketplace and found their operators were limited in the advice they could provide.
So what do we do? Like any hard decision, we try to replace it with an easier one. Instead of optimizing — trying to find the best plan — we’ll just try to avoid picking one that’s worse than what we’ve got right now. We’ll stick with the status quo or go with the default or “do nothing” option. Or perhaps we’ll ask some friends who may not be any more qualified than we are. The trouble with these short-cuts is that they could leave several thousand dollars on the table.
What we really need is a tool that projects our total healthcare spending — including insurance premiums — under every available plan, so we could simply pick the lowest total cost plan. We might also consider a worse-case scenario to get a sense of how risky each plan is. Indeed, the lowest cost bronze plans have the highest deductibles: in some scenarios, they could have a higher total cost than silver plans.
Because I can’t bear to pay insurance companies more than is absolutely necessary, I built an Excel model that calculates my family’s total out of pocket spending plus premiums for many of the plans on the marketplace, in a base case and in a worst case. Here’s how the results came in for my family this year:
Here are some observations:
- The cost of making a mistake remains around $9,000 per year (the total cost difference between the average plan and the lowest cost one, at least for us)
- Our total costs are up about 4% since last year
- The doctor networks of some nonprofit plans like Fidelis Care seem have expanded, at least in New York
- You still can’t rely on insurers or the state’s database to tell which doctors accept a given plan: you’ve got to call the doctors’ offices
- Many gold and platinum plans seem to have negative value in most realistic scenarios, i.e., we’d be better off uninsured than to pick one of these
State marketplaces, unions and companies really should offer tools like ours so people can make rational decisions. We know that financial stress is epidemic in the US and that many people delay needed healthcare to avoid copays. Until we fundamentally reform healthcare, a decision tool is a relatively easy and low-cost way to mitigate these consequences.
In the meantime, what can non-Excel nerds do? Here’s an algorithm that might work better than simply sticking with the default (your mileage may vary; this is intended to provide some ideas and may not work for everyone):
When you think about the situations that bankrupt people, it really is about total bills exceeding [their] ability to pay.
— Matt Wallaert, Chief Behavioral Officer at Clover Health
In sum, we pay a lot for health insurance and health care in general. Under current conditions, we can’t hope to pick the very best plan, but we may be able to do better than just sticking with the default. Try the six steps above; they may save you thousands.
This article originally appeared on December 12, 2018 on Forbes.com.