I’ve had it hammered home to me over the last year, particularly in October, that not everybody made it out of their childhood with a stick up their ass about making optimized decisions and squeezing the bleeding life out of every last penny. This is strange to me, but since many of the people who caused the hammering seemed just as confused about how I do it as how I do, because I’m in a state of chronic abject boredom, and because I just solved a nasty little problem that illustrates this perfectly, I’m going to ramble on the subject.
For reasons we will not get into now because it involves inordinate amounts of cussing and threats of physical violence, my ex-employer yanked my COBRA health insurance coverage six months early, and waited until last week to tell me. That’d be far enough after having done it that I have no way of going back and making it unhappen. So I’ve had to condense the process of finding new health insurance that I was going to begin in February so as to have it ready in June into a single week. Fortunately, when you call people and say, “My jackass ex-employer has screwed me, I need insurance,” they jump rather quickly. So here I am, a week later, with a choice of a bajillion different plans, most of them from my current insurance as an individual policy, plus four shiny new ones I’m eligible for because I’m a Realtor. I need to pick one today so I can get the application in with plenty of time for processing by Feb 1, or I don’t get coverage until March. This, this is a nightmare.
Optimized problem solving to the rescue!
The first, most important step is to define what you need, from biggest picture down to smallest. Mostly, I need something that will keep me from going bankrupt if I get hit by a car, an airport scanner induces cancer, or I encounter my preferred method of dying and have a heart attack. (Mmm, fatty food). This criteria narrows things significantly, because all of the plans that only cover 80% of a hospitalization are right out. I’m budgeting the next three years for around 30k each. 20% of one sufficiently nasty hospital trip could blow my annual budget right out of the water without blinking, so this is not okay. I will, in fact, go so far as to say that any plan that could put me on the hook for more than 10k is out of the running.
The next constraint is that I want to keep my monthly expenses as low as possible, because once the current contract is up, I’m going to be on a straight commission income in an industry that’s experiencing a rather violent correction. The lower my monthly expenses, the more time I have to make that work before going back to the miserably dull, over-paid, recession-proof industry I’m qualified for. So any plan requiring a monthly expense of more than $250 gets tossed. (All of the plans remaining after the first purge include free preventative care visits, or that would need to be part of the consideration here). $250 is the mark that made sense to me based on my projected budgets and the price ranges of the plans, your comfort zone may be different.
This left me with four plans to consider, two from my current insurer and two through my broker. Each has a different set of things they cover, as well as different premiums and deductibles. This morning I was leaning towards just taking the cheapest with my current people – I like them a lot and prior to them have had a long track record of interactions with stupid doctors – but I decided to break out the spreadsheet anyway. It’s important to note that I don’t lose my chance to switch back to the current guys if I go with the broker’s insurance, the rates I’m looking at now are valid through the end of the year. I might have skipped the spreadsheet stage of the decision tree otherwise.
I’m bad at keeping numbers straight and my spatial reasoning abilities don’t exist, so I adore spreadsheets for organizing data. Plenty of people could have built a chart in their heads and seen the obvious answer right away. I hate those people, and did my organizing manually.
The first thing I did was break out each individual benefit that was relevant to me from each plan. Then I made a chart for each plan on the first worksheet. Title of the plan went at the top of a chart, with the heading for each benefit under it, as well as a column for the monthly premium and the deductible. Benefits where the priced changed based on whether or not I’d hit the deductible got two columns, one for before and one for after. Picking which columns matter to me was an exercise in data suppression that’s always useful. For example, my current insurance people cover 100% of maternity and pre-natal stuff, as well as a significant portion of infertility treatments up to a point. If I had any interest at all in having children ever, this might be relevant to me. However, they kindly gave me a (free, because they’re awesome) IUD that’s pretty much guaranteed I’ll be into naturally infertile territory before accidental babies happen, and it would take a serious personality shift for deliberate babies to be an issue (in which case their mental health coverage might come into play, but I digress). In short, it’s a nice benefit, but of no value to me. Dental, on the other hand, is hugely important, since I have TMJ and should probably have done something about that, oh, two years ago.
At this point, the decision making almost ground to a halt. The current insurance plans cover TMJ stuff, but whether or not regular dental things are covered isn’t explicit, and their benefits person is gone for the day so I can’t find out until Monday. The broker insurance grid doesn’t say anything about whether diagnostic labs and radiology are covered, and their benefits person is gone too. I don’t have all the data I need. Crap.
Except that, really, I do. The deductibles from my current insurance plans are extremely, extremely high, and the dental coverage that is explicitly listed has a benefit cap lower than the difference in deductibles. In fact, when I run a simple version of the calculated comparisons, i.e. just premiums*12 next to premiums*12 + deductibles, this decision becomes pretty easy. Here’s what that chart roughly looks like.
Current1 Current 2 Broker1 Broker 2
Min $2,340 $2748 $2388 $1588
Max $7590 $5248 $2886 $3088
The current insurance plan covers some dental and all diagnostic radiology and lab, but no prescriptions. The broker plans covers no dental, all but a copay on prescriptions, and I don’t know about the the labs and radiology. Let’s give Current 2 the benefit of the doubt and say that all dental is included, a value of about $400/year, and that I need surgery for the TMJ (I almost certainly don’t) so it gets credit for the $1,500 it’ll fork over to that. The gap between it and the Broker 2 plan is still so big, that I’d need to use about $260 in labs and radiology for them to break even. And that’s the most favorable comparison I can make for the Current 2 plan. Am I likely to use $260 in labs and radiology? Uhm, no, not based on my history. And I doubt they aren’t covered at all by the broker plans, much like I doubt basic dental is included in the Current plans.
And so we see that my gut is good at picking what I know has been good for me before, but it’s not so financially savvy. I need to switch carriers. I’ll be taking the Broker 2 plan. If I hit the ceiling, I lose about $200, but if I don’t, I save $500. As long as the doctors in their network are not morons, this is the right choice, and now I know that, and have a handy spreadsheet for re-reunning the numbers as I get more data or circumstances and plans change.
As a reference, my original plan had been for my spreadsheet to be much more complicated, including costts of no preventative visits and how many of those it would take for various copays to balance against deductibles, but that just wasn’t necessary. The prescription drug coverage in the broker plans almost certainly balances the more generous price point for specialist visits and whatnot in the current plans, and the comparison is academic either way since I don’t actually use either benefit and have no way of knowing which I’m more likely to need.
Yeah, that’s pretty much how I make all of my money decisions. If anybody wants a copy of my spreadsheet, let me know and I’ll send it to you, though you probably will need to make your own from scratch to capture the data that’s relevant to you.