I'm comparing some health insurance plans with Humana, and trying to understand the relationship between the price tiers. For a single HDHP plan, they have these price options:

$1,500 Deductible - you pay $141.07/month (Tot- $3192.84)

$2,500 Deductible - you pay $100.30/month (Tot- $3703.604)

$3,500 Deductible - you pay $80.38/month (Tot- $4464.56)

$5,000 Deductible - you pay $61.48/month (Tot- $5737.76)

$5,950 Deductible - you pay $56.42/month (Tot- $6627.04)

Alright, so annually, the last option is more than double the price of the first, for the same plan.

I understand that everyone's finance situation is different, so some need a lower monthly payment - that makes perfect sense.

The irony is: How could you not afford the higher monthly payment, but you could afford the overall more than double annual cost?!?!

What am I missing?

  • It's yet another case where those who have some money don't need to spend as much of it. If you have $6k in the bank in case something expensive happens, you can pay less in months where nothing bad happens. – poolie May 9 '11 at 17:16

Your title question, Who could afford a higher premium who couldn't afford a higher monthly payment?, contrasts premium with monthly payment, but those are the same thing. In the body of your question, you list monthly payment and deductible, which is entirely different. The deductible is paid only if you need that much medical care in any one year. Most years a person in good health pays little because of the deductible. Thus, the higher deductible options offer catastrophic health insurance without giving much in the way of reimbursement for regular medical expenses.

Note - the original question has been edited since.

  • Thanks, I didn't realize the deductible was only payed when services are utilized. – user3560 May 8 '11 at 21:48

It's simple. Most people don't spend $6000 a year in medical care. As for myself, there's probably only $400 or less, mostly in annual checkups and the like.

If you are the type to require more medical care, then you will pay more per month. I know a person with asthma, kidney stones, and inflammatory issues. This person spends probably $1000 in co-pays per year, with considerable more if you were to include the hospital visits in the likes. But if you don't think you are one of these people, then don't get the higher cost plan.

  • 2
    Yep, I'm a 26 year old male and I spent a total of $0 out of my deductible last year. I only have health insurance in case I get into a car accident or get cancer or something. Plus with a high deductible plan I can have an HSA which is a good vehicle for tax-free retirement savings in the US. – Bryan Anderson May 8 '11 at 4:53
  • @BryanAnderson, car accident or cancer? You are positive. What about badly spraining your ankle(or broken? need an xray). What about an infection from the gym? I am not trying to give you trouble, but I know many 20 somethings that skip insurance because cancer and car wrecks are all they think about, and they assume they are health and drive well. Just important people carry health insurance. Good choice on your part to protect yourself. – Kortuk May 10 '11 at 4:20
  • @Kortuk Those were two examples that would most likely eat up my $3k deductible, infections and x-rays aren't likely to cost more than a few hundred. Anything up to my deductible I can pay out of pocket fairly easily so I used more catastrophic events for my examples. – Bryan Anderson May 10 '11 at 18:56
  • @Bryan, I was mostly trying to kid with you, but many people do not realize how expensive 2 x-rays can be. They cost us 2k. What if they needed 5? What if they need a cat scan? – Kortuk May 11 '11 at 4:39

I edited in the total annual out of pocket for each level to help illustrate what's going on. Your question makes sense, of course, but it's less a matter of afford vs an attempt to save. The way these plans work is to allow some choice based on your past experience. I can afford any option, but knowing the number of visits we have had in the past, the lowest cost option has the highest premium. A young couple who hardly sees a doctor may choose the highest deductible, risking the potential $3434 extra they may pay in a bad year for the savings of $1016.

Personally, I'd not be able to guess accurately enough to benefit from the middle choices, and can see the two extremes being picked most often.

  • The middle options make more sense if you have room for, say, $380 in your budget for health insurance. At that amount, you could put $300/mo ($3600/yr) into the HSA and $80/mo to the premium. This maximizes your savings at a particular budget level. (Similar case applies if you had a smaller monthly budget amount but money left in the HSA from a previous year.) Look at the max family deductible ($12k) -- takes a lot to afford that (you can't make HSA contributions that high, you'd need high balances left over from prior year(s)), the middle options make even more sense there. – bstpierre May 9 '11 at 12:24

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