Maximum Thinking

Jonathan Clements

WHEN I PICK HEALTH insurance each year, my focus is twofold: What’s the monthly premium—and what’s the out-of-pocket maximum?

Sure, I want to stay with my primary care physician. But my doctor just announced that she’s leaving Philadelphia to return to her native Massachusetts, so that became a non-issue for 2023.

Meanwhile, I’ve long wanted a high-deductible health plan so I could fund a health savings account (HSA). But since 2014, when I started working for myself and had to buy individual coverage, either such plans weren’t on offer where I lived or they struck me as overpriced. I’ve come to suspect that some insurance companies, aware of the nifty tax benefits that come with funding an HSA, have concluded that they could overcharge for these plans.

The good news: When I went to pick a health plan for 2023, the pricing on one high-deductible policy looked compelling. That meant that, after eliminating plans with steep monthly premiums but often high out-of-pocket maximums, I found myself weighing two choices.

One option was my current plan, which wanted to charge me $590 a month in 2023 to cover my soon-to-be-60-year-old body. For that premium, I’d get a policy with an $8,500 deductible and a $9,100 out-of-pocket maximum. There were also relatively modest copays for various medical services, plus—as with all health insurance—I’d benefit from the price discounts that the insurance company had negotiated with medical providers.

But the reality is, if anything went seriously wrong, I’d be looking at forking over the $9,100 maximum. Combine that with the $590 monthly premium, and my possible health-care expenses in 2023 would be $16,180. That’s the number I focus on when picking health insurance, and it’s another reason to set aside some emergency money.

To be sure, a $9,100 out-of-pocket maximum is steep, but it wouldn’t be a catastrophe—and it’s far better than the bad old pre-2014 days, when out-of-pocket costs were often unlimited and medical expenses sometimes forced families into bankruptcy. (Note that there’s still no out-of-pocket maximum for those covered by traditional Medicare, which is a reason for the 65-plus crowd to buy Medigap insurance.)

But in the end, I didn’t renew my current coverage—and instead opted for the high-deductible policy I’d found. Why? I was pleasantly surprised to discover that this high-deductible policy had a lower deductible and lower out-of-pocket maximum than my current plan, plus the premium would be just $3 more per month. My new plan’s deductible and out-of-pocket maximum are both $5,800. Add the premium, and I’m looking at $12,916 in potential health care costs in 2023.

Admittedly, with the high-deductible policy, I may pay more for each doctor’s visit and prescription than I do under my current plan. But I also know that my total cost for 2023 will be lower in a worst-case scenario. The cherry on top: I get to fund a health savings account to the tune of $4,850 in 2023, which includes the $1,000 catchup contribution for those age 55 and older. That contribution will be tax-deductible, the money will grow tax-deferred and withdrawals will be tax-free if used for medical expenses.

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