How To Compare Health Insurance Plans And Save Money

One of the downsides about early retirement is the expensive cost of healthcare in America. Without an employer subsidy, the average cost for a family healthcare insurance plan is about $21,000 in 2020. This post is about how to compare health insurance plans and save money.

The extreme cost of healthcare is one of the main reasons why many employees will work at a job for longer than they really want. If you retire early, unless you earn less than 400% the Federal Poverty Limit (FPL), you will have to pay the full cost of your healthcare premiums. But if you do earn less than 400% of FPL, do you really have enough to retire?

Even if you were eligible for healthcare insurance subsidies, it may feel weird taking advantage of the system. After all, we've all been taught it's always better to give than to receive.

The high cost of healthcare is why you sometimes see one spouse continue to work long after the other spouse has retired. It's kind of sad that due to expensive healthcare, many couples aren't able to live their retirement dreams together.

Because I still haven't been able to convince my wife to go back to work so we can get subsidized healthcare insurance, I've asked her to put together some helpful tips on how to compare health insurance plans. We just went through the process and it is quite mind-numbing without a guide.

Health Insurance Premiums Continue To Rise

I recently found out our existing PPO plan is being discontinued and morphing into a similar plan. Surprise, surprise the premiums are going up yet again. We're talking up to $2,500 a month or $30,000 a year for a family of four!

Unfortunately, many of you are probably going to face higher healthcare insurance costs as well. We really don't understand how $30,000 a year for a family of four can be considered “affordable” given the current real median household income is about $69,000.

Our existing health insurance plan is renewing at a 6% increase. My insurance rep said 6% is actually good considering the average increase he's seeing is 10%. Seems like empty words.

It actually feels like robbery that insurance carriers continue to raise rates significantly more than inflation. Take a look at the average cost of family and individual health insurance per year. Just like college tuition, even during a pandemic, the rates keep going up.

The Average Cost For Healthcare Soars

Alas, we don't plan on relocating to places like Canada or Australia to save on healthcare (I'm not sure if they'd welcome us anyway). Nor do we plan to torpedo our income in order to qualify for healthcare insurance subsidies. We're just going to bite the bullet and keep on paying these absurd rates.

In addition, we have a wonderful network of doctors that we've seen for years. That's not something we want to give up. Plus, with two young children, and Sam and I not getting any younger, it's a pricey expense we've built into our budget and financial planning.

How To Compare Health Insurance Plans

There are thousands of different healthcare plans to choose from. And even if your employer is only offering a small handful to choose from, the choices can still feel overwhelming.

If you're self-employed the options can be even more overwhelming along with the costs.

Without getting overly complex, try and figure out a rough calculation of what you're likely to spend on a few different plans.

The quick guideline below on how to compare health insurance plans can help you get started whether you are employed, self-employed, retired, or in between jobs.

Utilize the below list of features to help you draw up your numbers.

  • Network of Doctors
  • Monthly premium
  • Medical deductible, co-pay, co-insurance
  • Out-of-pocket max
  • Physician services
  • Prescription coverage
  • Hospital services
  • Emergency services

In Network vs Out Of Network

First of all, if you're set on keeping specific doctors, find out if they are in network or out of network.

Some health insurance plans don't offer any out of network coverage. Others do, but the costs can get very expensive. In addition, submitting out of network claims manually can be a royal pita.

Definitely be careful to check if the doctors you want are in network before selecting your plan. Otherwise the costs could be prohibitive.

Monthly Premium

Back in the good old days my former employer paid 100% of our monthly insurance premiums. It's pretty rare to find employers that do that anymore.

However much or little your employer is subsidizing, getting any portion paid for on their behalf is better than nothing. If you are self-employed or unemployed, so long as you earn less than 400% of the Federal Poverty Limit, you are eligible for subsidized health insurance from the government.

Simply take the total monthly premium amount that you'd be responsible for on each plan and multiply by 12 to get your baseline annual cost.

Deductibles, Co-Pays, and Co-Insurance

Next up when figuring out how to compare health insurance plans is to look at the deductibles, co-pays and co-insurance.

If you're young and very healthy, choosing a high deductible plan is a great way to save money if you don't anticipate using your insurance much.

Deductibles and co-pays usually don't apply for preventative care. So you can typically get flu shots and annual physicals without any out-of-pocket expense.

I've noticed a trend with co-pays going up in recent years for specialty care doctors on the plans I've compared. So if you regularly see an ENT, pulmonologist, cardiologist, etc. check with the carrier if their co-pays will be higher than your PCP.

Co-insurance is another important cost to take into consideration. When I was planning on getting pregnant, I made sure we had a health insurance plan that had good co-insurance rates for maternity care and delivery. It can get very expensive to have a baby these days!

Out-Of-Pocket Max

If you have accident prone kids, expect to have surgery, take specialty drugs, need ongoing medical treatments, or plan to give birth, finding a plan with a low out-of-pocket max can also save you a lot over the course of a year.

On the other hand, if you don't expect to need much medical care next year, then you can likely benefit from a plan with a low monthly premium and a high out-of-pocket max.

Physician Services

How To Compare Health Insurance Plans

Thanks to the global pandemic, telemedicine has increased in popularity substantially this year.

Most major insurance carriers now have rates specifically for telemedicine as well.

I've seen some plans offer fully covered virtual visits with deductibles waived.

Personally, I love having the option for fully covered or very cheap telemedicine. I hope telemedicine continues to become more accessible and affordable to all patients.

However, just like how students shouldn’t have to pay full freight for video classes, patients shouldn’t have to pay full cost for a teleconference with our doctors. Therefore, you may want to lower your plan level. A lot of people are logically waiting out seeing their doctors for non-life threatening illnesses until after the pandemic is over.

You'll also want to consider the costs of labwork, x-rays, and other imaging services when comparing health insurance plans. Often times you'll have to pay a deductible and co-insurance for these types of services.

Prescription Coverage

It's hard to imagine paying for prescription drugs in the US without health insurance. The prices are ridiculous.

I didn't realize until recently that some health insurance plans have deductibles specifically for prescriptions. As a result, you could wind up paying both a medical deductible and a prescription deductible each year.

If you or your dependents take any prescription medications, it's important to check the insurance carrier's prescription drug list each year. These lists are divided into separate tiers that determine how much the policy will cover.

If you take a Tier 2 or Tier 3 drug and select a health insurance plan with a prescription deductible, the costs per month can add up fast.

Utilize mail order prescriptions when you can as that can help save on costs. For example, some plans will ship a 3-month supply of medications for the cost of a 2.5 month supply.

Hospital & Emergency Services

If you've never gone to an Urgent Care before, I encourage you to find one in your area. They are a great resource to utilize if you have a medical issue that needs urgent attention that's not serious enough to require a trip to the ER.

Most of the time you can get treated faster and for a lot cheaper than in the ER. Definitely review urgent care coverage rates when comparing health insurance plans.

It's also important to look at the coverage options for in-patient and out-patient hospital services. ER and emergency transport coverage can vary as well.

Hopefully you won't need to use those services. But, if you anticipate needing any surgeries, treatments, having a baby, or have accident prone dependents, finding a plan with a good co-insurance coverage and a low-deductible may be the most cost effective for your needs.

Related: POS vs. PPO Plan – What's the Difference?

Compare Plan Tiers

There are a lot of insurance plan options out there. Way more than I can tackle in one post. However, to help you learn a bit more about how to compare health insurance plans I've put together a small sample set below.

Below you will find group plan examples of platinum and gold PPO plans from UnitedHealthcare with a large physician and hospital in-network list.

NOTE: The example costs listed below are for a 40-year-old employee named Bob. And the premium amounts you see below represent the total cost an employer would have to pay to cover this employee.

Typically, employers share the cost of premiums with their employees. Thus, a lot of employees have no idea how truly expensive their health insurance is because their employer is paying a sizable portion of it behind the scenes.

In other words, your employee benefits are worth a lot more than you may realize!

compare health insurance plans and premiums

Sample Platinum PPO Plan

Here are the main features of a sample platinum PPO plan.

  • Monthly premium: $777
  • Annual premium total: $9,324
  • Medical deductible: $250
  • Out-of-pocket max: $3,500
  • Office visits in-network: $0 co-pay
  • Speciality office visits: $75 co-pay (ded. waived)
  • Telemedicine: $5 (ded. waived)
  • Preventative care: $0 co-pay (ded. waived)
  • Lab/X-ray/Imaging: 20% co-insurance after ded.
  • Pharmacy deductible: $0
  • Tier 1/2/3 drugs: $5/$35/$70
  • Hospital services: 20% co-insurance after ded.

Sample Gold PPO Plan

Now, here are the main features of a sample gold PPO plan with the same network.

  • Monthly premium: $679
  • Annual premium total: $8,148
  • Medical deductible: $500
  • Out-of-pocket max: $6,500
  • Office visits in-network: $25 co-pay
  • Speciality office visits: $50 co-pay (ded. waived)
  • Telemedicine: $5 (ded. waived)
  • Preventative care: $0 co-pay (ded. waived)
  • Lab/X-ray: Non-Hosp. 20% co-insurance after ded., Hosp. 40% after ded.
  • Pharmacy deductible: $250
  • Tier 1/2/3 drugs: $15/$40/$80
  • Hospital services: $250/occurence + 20% co-insurance after ded.

In this example, our 40-year old employee Bob is fairly healthy and doesn't anticipate having any surgeries in the coming year. However, he takes 2 medications that are in the Tier 3 category.

Here's a very simple example of how he compared two plans. He is anticipating minimal usage with only preventative care doctor visits in his best case scenario. His employer pays for 50% of the premiums and Bob is responsible for the rest.

Bob's expected costs on the platinum plan are:

  • Annual premiums = $4,662
  • 1 year supply for two Tier 3 prescriptions = $1,680

Total estimated platinum plan expenses = $6,342

Bob's expected costs on the gold plan are:

  • Annual premiums = $4,074
  • 1 year supply for two Tier 3 prescriptions = $2,170

Total estimated gold plan expenses = $6,244

So, you can see it's pretty interesting how he could wind up paying $588 less in premiums a year on the gold plan, but pay $490 more for his prescriptions. Since he could save $98/year overall by selecting the gold plan Bob decides to go gold.

However, if he wasn't so sure of his health and factored in an unexpected trip to the hospital or a round of visits to a specialist and some imaging expenses, he could better off on the platinum plan.

If Bob was on a platinum plan, and wants to downgrade to a gold plan to save money, he should consider pre-ordering as much of his medication as possible. Often, you can preorder a three-month’s supply worth of drugs. Further, Bob should see any specialty doctors before switching.

Comparing Two Health Insurance Plans

Here is a graphical example of two health insurance plans. One is a Select Plus Platinum plan and the other is a Select Plus Gold plan for a family of four. Notice the significantly higher out-of-pocket max for the Gold plan.

Neither seem particularly affordable, unless your family is making ~$300,000 a year.

How to compare health insurance plans and save money

Of course, you could elect to get a High Deductible Health Plan (HDHP) to lower your monthly premiums. A HDHP would also make you eligible for a Health Savings Account with tremendous tax benefits to pay for your healthcare bills. However, it simply may not be worth it.

Select A Health Insurance Plan For Your Individual Needs

Just like how personal finance is personal, so is health insurance. We all have different health issues and needs. So it's important to run an analysis of your own expected costs. Further, factor in some different scenarios as well.

A certain health insurance plan may look best at quick glance, but may not wind up being the most cost effective for your needs once you run the numbers.

As for us, we don’t think paying $2500 a month for a platinum plan for a family of four is worth it. We realized all of our doctor’s visits have been covered under preventative care. Further, we plan to minimize doctors visits during COVID-19. Therefore, we are most likely going to downgrade to a gold plan for “only” $2,230 a month.

As of 2024, we have a Select Plus PPO Gold Plan for $2,300 a month. It's expensive with a $5,000 deductible. Sure, it will save us from paying a huge medical expense. But it still stinks to have to pay $27,600 a year in premiums + $5,000 before getting any coverage!

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Readers, are you facing higher premiums for the upcoming year? How much of an increase are you seeing? What are the most important factors you consider when you are comparing health insurance plans?

15 thoughts on “How To Compare Health Insurance Plans And Save Money”

  1. Megan Alder

    Recently I moved on my own and I’m looking for advice to be able to choose the right health insurance plan at the right cost. You made a great point when you said it’s best to compare all plans with different providers, and see which one offers more for less, and replace it. Thank you for writing this article, I will definitely take it into consideration.

  2. Thank you for this well thought out article. It explains a lot of confusing healthcare insurance concepts. I appreciate your guidance and the time you spent writing this.

    I’m retired and pay full fare for my health insurance. I don’t qualify for a subsidy. For comparison’s sake, I’m in my mid 50s and pay $1065/mo for a Blue Shield Bronze plan in California. It is very expensive for a relatively healthy person who rarely uses it. It’s too risky to go without coverage these days so I’m continuing with the premiums. I’m grateful for the Affordable Care Act. Because of it, insurance companies can’t discriminate against folks with pre-existing conditions.

  3. Naveen Kumar

    I am a physician and in this article, it would be important to comment on direct pay primary care as an adjunct to high deductible Insurance plan.

  4. I’m curious about your thoughts on medicare for all. I think I know what you’ll say, but I’m really hoping it’s more thoughtful than “government healthcare is bad!”

    On a philosophical level, I don’t believe insurance companies should exist the way they are now. The incentive structure doesn’t make sense. Insurance companies make money when they deny coverage. I just can’t get behind that.

    I’m 35 and hope to retire by the time I’m 45. I sincerely hope that in the next 10 years, this country can figure out a better insurance system than what we have now. So far I’m behind medicare for all, but if someone can propose something better, I’m all for it.

    1. Sounds good to me. Who doesn’t want free or highly subsidized healthcare. You can get covered, and if you want to pay for speciality healthcare, you can pay more out of pocket.

      The question is, who pays? When you retire, are you willing to pay $3,000/month for healthcare for your family for 10 years to help others first and then get subsidized healthcare?

      Right now, we’re paying a lot to help subsidize others. We understand this is our responsibility as Americans who also pay six figure in income taxes.

      I’d love to have a system that REWARDS people for eating better and exercising more. Preventative care.

      We all want free. But somebody has to pay for it.

  5. Healthcare costs are one of the biggest things troubling my plans for early retirement.

    It is so hard to predict just how much it will cost because they do increase so much each year. Like college tuition it seems these increases are unsustainable but they have proven me wrong so far.

    I know some individuals have turned to health ministries as an alternative to expensive insurance plans. I just am not sure how reliable that option is. Plus a lot of them have faith requirements that would exclude me.

    I also know of some people who turn to catastrophic plan type coverage. They self insure the routine stuff and then have a plan that only covers the catastrophic things that could have costs run out of control like a cancer diagnosis or transplant surgery.

    As a physician I have been spoiled as I get quick access to care and imaging (I am a radiologist). A lot of colleagues give me courtesy visits and don’t charge even. But those perks will go once I retire

    One option is to transition to part time to extend the employer Healthcare coverage.

  6. Excellent and comprehensive article, Sydney. One side note I have is on telemedicine. I think it is excellent for straightforward issues but as a spine/pain specialist it has been very difficult to diagnose patients via telemedicine without a physical exam. Telemedicine can also lead to increased frequency of imaging and lab tests because it can be unclear what is going on with the patient without seeing them.

    Telemedicine is definitely here to stay, but I hope carriers, physicians and patients learn to utilize them properly to prevent additional healthcare utilization waste.

  7. Shari Lehrer

    Would you do a similar comparison for long term care? My financial planner is recommending it (age 54) and I would appreciate insight and advice.

  8. Average annual cost per person in the USA is about $10k. Granted, we have the obesity epidemic and the notion that hospitals will make up lost revenue from those who can’t pay from the insured. If you’re doing better than than the average Swiss ($8k), I’d say you’re doing ok.

    This data counts for costs only and doesn’t considers how much tax revenue is lost in the bureaucratic process.

  9. The coat of health insurance and prescription medication in the US is outrageous. At least we have good doctors and hospitals for the most part. But man I can’t imagine needing surgery or medical treatments and not having insurance.

    Thanks for the easy to understand suggestions on comparing health plans. I’ve never heard of prescription deductibles before either. I’m glad to hear that more plans are covering free or low cost telemedicine at least. Speaking of health insurance and preventative care I need to go get my free flu shot. My local clinic was already sold out when I checked last week. I bet more people are getting them this year because of the fear of a bad flu season with covid out there.

    Hope we all stay healthier. Maybe with more people being much more cautious about hygiene and social distancing the flu season won’t be as bad though. I’m very curious to see how things pan out!

    1. I’d argue it’s “included” not free. Some mental health services will go to 0 deductible/copay for remote therapy sessions… But only on gold plans.

      There are so many gotcha. I had a broker say that for the average person they tend to cost about the same every year, by design. So if you can get an advantage out of one go all the way with it.

  10. Was reading something the other day that had to do with insurance companies paying 3x what Medicare does for the same services.

    Combine that with it being no secret we spend more in public dollars per person on healthcare, and agree to pay for it all over again out of pocket.

    It’s disgusting that we’ve accepted this for so long. I’m a young healthy male and I pay more than my car payment for health insurance.

    I don’t know how serious I am, with things in life right now would take me years to wind down current things, but in the back of my mind at least I keep looking at other countries. I don’t mind paying taxes, but I’m getting sick and tired of the lack of return I get for them in the US.

    1. ** pay more in public dollars per person than many of those socialized countries.

      *** I get filled with rage every time I see my insurance bill and also see what I pay in fees, taxes, etc.

    2. Medicare often reimburses the hospital or provider less than the cost of performing the procedure.
      I’ve worked in two health systems; the UK and the US and the difference is astonishing. Both countries are using the same equipment and therefore the difference in cost often comes down to salaries.
      In the UK an attending equivalent will be paid roughly $100k a year. In the US you are looking at about $400k per year. I also paid 50% effective tax rate in the UK on a salary of $40k and up.
      For what it’s worth most of the groups in the US advocating for government run healthcare are the healthcare unions, and I can’t see them accepting lower pay for their members.
      The best way to decrease costs in healthcare is to remove barriers to entry and reduce the administrative burden imposed by government. I’d also propose moving the tax deduction for healthcare to the individual, thus enabling us to be consumers and stop penalising self-employed.

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