Picking Plans

Mike Zaccardi

HAVING LEFT the nine-to-five world, I face a decision: What to do about health insurance? I’m a single, generally healthy millennial. Historically, I’ve not run up major medical bills. But as with the financial markets, past performance doesn’t guarantee future outcomes. Here are the five options I’ve been considering:

1. Continue COBRA. When I left my job, I kept my old employer’s health plan, but I have to pay the full cost of coverage. That’s a steep bill each month, but the coverage is decent. If I continue with it, there would be an added bonus: I could keep contributing to a health savings account.

2. Buy through the health exchange. An Affordable Care Act policy would offer a slightly lower premium, but the benefits are unimpressive.

3. Purchase short-term coverage. Premiums are almost too good to be true, meaning the insurance isn’t all that great. Considering that I have ample savings and I’m healthy, maybe it’s worth taking the risk. Famous last words, perhaps.

4. Join a health sharing ministry. These programs allow members of a religious group to share risk by pooling health care costs. Premiums are attractive, but coverage can be sketchy. While there are plenty of positive comments about these programs, there are some horror stories, too.

5. Self-insure. This seems too risky to me. Sure, I have way overfunded my emergency reserve, plus I have other means of raising cash. But I’d be living in fear that a broken finger or a bug bite could mean a huge financial hit. Remember, if you self-insure, you aren’t protected by the out-of-pocket maximum and the negotiated medical discounts offered by an insurance policy.

Which will I choose? Option No. 3 strikes me as the way to go. I don’t plan on sitting out of the workforce for long. That’s the purpose of short-term coverage—insuring the transition period between fulltime jobs. It would be a different story if I chose self-employment indefinitely.

Today, I better appreciate the adage, “When you’re young, you think you’re invincible.” In my 20s, health risk wasn’t something I thought much about, but now I do. As risk managers know, unfortunate and costly events can domino and cluster. Carefully considering risk and reward is paramount in our investment decisions—and in our insurance decisions, too.

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