First Job Problems: Which Health Insurance Plan Should I Choose?

Similar to two weeks ago when we discussed whether to enroll Kyle in his 401(k), we have a choice to make regarding Kyle’s benefits at his new job, or rather whether I should use one of his benefits. Unlike with the 401(k), we have no idea which option is best and we’re running out of time to decide!

 

stethescope and moneyI found out a couple weeks ago that even though I’m going to be a student through the fall semester, my health insurance won’t be paid for by my department as it has been for the last six years.  Apparently the policy in my department is that starting in the seventh year, if a student is being paid through the non-compensatory payroll system, the department does not pay her health insurance.  For seventh years and above who are on the compensatory payroll system, they do pay for health insurance.  This is an unforeseen consequence of being switched last year from being paid by a grant to being paid from my advisor’s discretionary spending.

 

Therefore, for the first time in my life, I have options for my health insurance plan!  And I have to pay premiums.  🙁  Up to this point I’ve either been covered by my parents’ insurance or my insurance was paid for by my employer but there were no choices, just take or leave the fellow/student plan. Now I have three-ish options and I really don’t know which one to take.  Each one seems like the best value from a different point of view.  I need to make a decision before the end of this month and I would love to hear your opinions.

 

Option #1: Pay the premium for my student insurance.

 

I can still get the same insurance I’ve had for the last several years – I just have to pay the premium. The plan apparently received a “platinum” rating under the ACA system. I would pay $2,100 for the year, all up front. I can get out of it and be refunded the balance for the remainder of the year on December 31, 2014, but no earlier or later until July 31, 2015. This option offers the highest amount of insurance coverage. In network, I would have a $0 deductible and a $2,500 coinsurance maximum. Out of network, I would have a $250 deductible and a $3,000 coinsurance maximum.  In Durham, it would be no problem to stay in network, but if I keep this insurance after we move everything would be out-of-network I assume.

 

Option #2: Add me to Kyle’s plan as his spouse.

 

Kyle is signing up for the “basic” plan for his health insurance – it’s an HMO and the cheapest option.  His premium is $29/month and the additional premium for me is $191/month. For our family, the annual deductible would be $1,500 ($500 for just Kyle) and the coinsurance maximum would be $6,000 ($2,000 for just Kyle). However, as usual the COBRA premium is just insane – $805 for the two of us. I had rather hoped that we would be able to take a short break between Kyle’s two postdocs, but that premium would make that quite burdensome.

 

Option #3: Buy a catastrophic insurance plan through healthcare.gov.

 

The last option is for me to purchase an independent insurance plan.  If I go this route I would choose a catastrophic only plan, since the spousal plan would be subsidized for a medium amount of coverage. The cheapest plan available to me has a monthly premium of $108 and an annual deductible/coinsurance maximum of $6,350. The copay to see your primary care physician is $20.

 

What Do I Actually Need?

 

I’m generally pretty healthy. On average, I interact with the healthcare system twice per year – my yearly physical plus maybe one appointment if I have some kind of ailment. Therefore, I’m not really anticipating needing to see a physician during the time I have this insurance (probably through December or so).  Of course something unexpected could occur, which is why even if I weren’t required to I would buy at least catastrophic coverage.  If I were to become really ill, we have a bunch of cash on hand and we could definitely cover the $6,350 deductible on the catastrophic plan.

 

Assuming I don’t have any medical stuff come up, we’re looking at paying, for five months of coverage, $875 for option 1 (most insurance), $955 for option 2 (medium insurance), and $540 for option 3 (least insurance). If I have like one appointment with a primary care physician, it would be $0 for option 1, $25 for option 2, and $20 for option 3. I think with any plan I can continue going to student health since they are all affiliated with my university.

 

The Next Transition

 

The main thing I’m considering is which plan would be best to transition me to whatever is next. Eventually I’m hoping to have a full-time job that provides health insurance, or if it looks like I won’t have that long-term I’ll get on the plan at Kyle’s next job.

 

The advantage to going on Kyle’s plan is that we’d be together so if we had to buy COBRA or just go straight to being covered by his next job it would be very simple and we only have to keep track of the one insurance plan instead of juggling one for each of us. The disadvantage is that COBRA is darn expensive.

 

The disadvantage of doing the student health insurance is that I have to pay for the whole year up front (large-ish outlay of cash) and can only cancel the policy on January 1, 2015 and August 1, 2015. If we move before the end of December, we’ll be out the remaining money until that midpoint date.  If we move in January or later, I’ll face the same set of decisions again at that time.

 

The main thing that makes me nervous about the catastrophic plan is that I’ve never had so little insurance and I rather like to carry a lot of insurance.  The main upside is the low cost.  I think it’s also HSA eligible – does anyone know how/where to open an HSA? It’s kind of a dumb question, though, since we won’t even max out our Roth IRAs while I need this insurance.  The other negative is that I can only have this particular plan in NC, so if I’m not going on Kyle’s insurance when we move I’ll have to buy a new plan in the new state.

 

Even after writing this whole post I still don’t know what to do!  Cheapest: Option 3. Best value: Option 1. Easiest/most flexible: Option 2.  Financially, we can go any which way.  Ugh, being an adult is so hard!

 

Which option would you go for in my position and why? Have you ever had an HSA?  Am I missing anything in considering this decision?

 

photo from Free Digital Photos

 

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32 Responses to "First Job Problems: Which Health Insurance Plan Should I Choose?"

  1. That is tough! At least you have the cash to cover any of the costs – but still, you never know what could happen!
    Retired by 40 recently posted..Yakezie Challenge Update 7/14/14 – I broke 100,000!

    1. Emily says:

      It’s nice to have the option of choosing a higher-deductible plan. We definitely wouldn’t have been able to cover that kind of deductible even two years ago. Of course, the money is earmarked for other things, but those are not as important if there is a true health crisis.

  2. Kelly says:

    I love my HSA! Kyle should be able to open one at the start of his postdoc. I believe any leftover funds can now be rolled over to next year (double check that). For me it’s a win – win – a tax break for money I would spend on health care anyway, plus the entire balance is available at the start even though it’s split up and comes out of your paycheck on a monthly basis. With Kyle ‘ s basic plan, I believe the university contributes to the HSA as well, right? Though their portion is taxable as benefits. It’s been really easy for me and I love it! No more targeted savings for medical expenses.

    1. Emily says:

      Kyle was excited about his employer’s tax-advantaged savings options when he saw them, but I’m pretty sure it is an FSA not HSA. I’m very wary of putting any money into an FSA at this job because he’ll only be there a few months (we hope) and you do lose it at the end of the year. You have to have a high-deductible plan to qualify for an HSA, and Kyle’s plan doesn’t meet the minimum deductible. The only plan I’m considering that meets it is the catastrophic-only plan. If we open an HSA I think we’ll do the trick I’ve been reading about in the PF blogosphere of late – contribute money, invest for the long-term, and use cash flow to pay for medical expenses. That way the money you have built up in your HSA (contributions and earnings) can be used in retirement and it has never and will never be taxed (IRS source). But that plan is dumb, like I said in the post, because we’re unlikely to earn enough this year to even max out our IRAs.

  3. I’m not in the US, so I really don’t have any insight into this decision. Personally if you’re relatively healthy, I would play the odds… get the catastrophic insurance coverage and hope for the best. If you do need a small visit here and there, will it go over $200/month (up to $2400 per year, or $800 for the Fall semester)? I have no concept of this because I’ve never paid out of pocket for a visit… maybe $800 doesn’t even touch the cost of it.
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    1. Emily says:

      For the catastrophic-only plan, to see a primary care physician (the only type of appointment I’ve ever even had as an adult) I would just pay the $20 copay for up to 3 visits per year. So that part is totally fine. If I had an emergency or had to see a specialist, I’m just assuming we would end up paying the whole deductible. Like you, I actually have no idea how much it costs to see physicians if the care isn’t subsidized. It’s pretty unlikely that I would need to see anyone other than a primary care physician, but I don’t know exactly what the odds are!

  4. Finding the right health insurance can be a challenging task. It is important that you become familiar with your options so that you can make the best decision for your situation.
    Alicia @ Monster Piggy Bank recently posted..Trying to stay under $100 per day

    1. Emily says:

      There are a few other points of information we need to gather to complete our familiarity with the plans, and then we just need to make a decision! The clock is ticking!

  5. I HATE how complicated healthcare has become and you never feel as though you are making the right choice personally and financially. That being said, with my younger clients who are in good health and have no pre-existing conditions. I would say to choose the cheapest option and save extra (up to or more than the expensive option) in an HSA as a “hedge” against any health care issues. This way you start building a health care savings account that can be use now or years from now but also don’t overpay for health insurance you don’t need.
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    1. Emily says:

      I’m sooooo tempted to open that HSA if I get the catastrophic only plan! And I really don’t believe I’ll need the additional coverage. However, since we are in the 15% tax bracket I think we’ll still prioritize maxing out our Roth IRAs before contributing to an HSA.

  6. Leigh says:

    I would actually avoid COBRA if you can get an ACA plan for $108/month. Losing employment/other health insurance is a qualifying life event to allow you to apply for an ACA plan.

    You should double check if the ACA plan is HSA eligible. Not all of them are. I’m wondering if the one you found might not be since it has a co-pay? Double check on that. You can open HSAs many places. My credit union has one. Alliant Credit Union (online) has one, as does HSA Bank. You can check out HSAs at Bogleheads. But if you’re not maxing out your Roth IRAs, I would not contribute to an HSA either.

    What I would probably do if I were you is to go with Option 1 and cancel in December (so you’re not out the money for the whole year). If you don’t like Kyle’s new job’s plan, you can always go with an ACA plan after. The ACA plan is only $335 cheaper for 5 months, which is honestly only one or two medical events happening.
    Leigh recently posted..Reflections on Home Ownership: 2 Years In

    1. Emily says:

      You make some very good points. It wouldn’t take much of an event to overwhelm the savings in this short time period. But if the near future looks like the near past… I don’t think I’ve seen a physician for anything other than an annual physical in two years.

      My qualm about going from Kyle’s plan to an ACA plan (if there is enough of a gap between jobs to necessitate that) is that I don’t know what state we would buy it in if we are traveling for a little while, having already given up our lease in NC and not yet having one started in the new state. Talking with an ACA rep on the phone about leaving the state kind of freaked me out but I can look into it more.

      Is there anything more to the HSA eligibility than the deductibles? That’s all I saw when I looked at Publication 969. It also says “An HDHP may provide preventive care benefits without a deductible or with a deductible less than the minimum annual deductible” and then lists annual physicals and such as an example of preventative care, so I think I’m okay on the $20 copay bit.

  7. Liz S says:

    You probably would not need COBRA coverage between jobs. You can apply for a cheap ACA plan as a result of losing coverage due to job loss (even if it’s a voluntary separation) to bridge the gap.

    Many plans do not terminate on the exact day you leave your job and instead extend coverage through the end of the month. If you leave your job on the 3rd of the month, for example, you’d have paid coverage for the next 4 weeks. There are also many short-term catastrophic insurance providers that specialize in this type of gap coverage – for example, my undergraduate university sponsors a plan for alums that I have used in the past between jobs.

    1. Emily says:

      Kyle called his insurance company after I saw your comment and they actually continue coverage through the month after the month you leave the job! So that’s probably enough that we wouldn’t need COBRA or gap ACA coverage. Thanks for pointing out these options!

  8. If you are thinking about opening an HSA, check out this website: http://www.hsaforamerica.com/. It’s a great source of information and is the place I started several years ago when we purchased our HSA policy. It really is challenging knowing what to do for health care in today’s environment.
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    1. Emily says:

      Thanks for the resource! It it telling me that we would have up to next April 15 to contribute for this year. That is sweet! I might even have a FT job by then and if so we can plow more into savings for 2014, both our Roth IRAs and the HSA if we open it.

  9. Sara says:

    In that situation I would choose option 1 for simplicity and peace of mind. It’s a plan you and Kyle are familiar with and have a routine in place for. You guys are in the midst of lots of transitions and I would appreciate conserving the mental space for other things by staying with what I know.

    The downside of the cheapest option, for me, would be that if something extreme did happen Kyle would be dealing with the complexities of an insurance plan he wasn’t familiar with on top of everything else going on. That, and not to mention that I think the worst place to find yourself in was needing to pay a high deductible under that plan for something that would have been routinely covered under the school’s plan.

    If you do go with option 1, I would also take advantage of the insurance while you have it. Get all of your wellness visits in now in case you do go on very basic insurance for a period of time.

    1. Emily says:

      I think it would be simple for me with either option 1 or 2… Option 1 because like you said it’s continuing what I currently have, or option 2 because Kyle has to figure it out anyway (if we ever use it). You are right that the downside of Option 3 is both the outlay of cash and wrestling with an unfamiliar company. My customer service with our university’s current company (providing both options 1 and 2) has actually been quite good.

      The timing of this unemployment period is such that I don’t need any routine care (I get my annual physical in Jan/Feb), though if I keep my student insurance I might get some bloodwork or something done just to check.

  10. I’ll just add that if you have a physician you particularly like going to, make sure to find out if they’re covered by each of your three options. Though if, as you mentioned, you won’t need to visit the Dr. during this timeframe, it might be a moot point.

    Similarly, do you have any prescriptions? If so, check on the Rx co-pay for each plan. I recently joined my husband’s plan after my insurance through my employer suddenly increased all office visit and Rx co-pays.

    Personally I’d probably go with option 1 or 2 to be on the safe side. You’re wise to carefully examine each plan–health insurance is not user-friendly!
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    1. Emily says:

      I always go to student health so I don’t see any one particular physician. I can keep going there as long as I’m a student no matter the insurance provider, so that thankfully doesn’t have to weigh into this decision.

      My only prescription is a generic BCP, so I think that will be covered with no co-pay under any of the plans (I double-checked and since the catastrophic plan is sold through healthcare.gov I believe the new birth control rules apply and my particular BCP version is on their list of covered drugs).

  11. I usually put for the university system whenever I have the option. It may not be the most cost effective but I feel more comfortable with what the university recommends. I also typically don’t have tons of time to research the best choices. You could go for the convenient choice this time zone and then do some more through research this year and make a docent choice next time around.

    1. Emily says:

      Good point. I really need to be focusing on my dissertation right now instead of worrying over this! Either option 1 or option 2 (both through our university) would be easy.

  12. ervinshiznit says:

    Bogleheads has a nice overview of HDHPs: http://www.bogleheads.org/wiki/High_deductible_health_plan

    I think the HDHP is statistically better for you – you’re young and in good health. You’d be covered for catastrophes, less the deductible (and if I recall, Kyle is pretty risk adverse so you guys have a sizeable emergency fund)

    But I certainly wouldn’t consider the HSA in your decision, unless you’re confident you can max out both of your Roth’s first. The HSA fund offerings that I have seen on Bogleheads forums are not so great.

    But for future reference, HSA contributions are pre-FICA tax! Even more tax savings =)

    1. Emily says:

      Our EF proper is pretty small (not $6k!) but we just have like a lot of other cash that’s been earmarked for various things but could definitely be repurposed to pay for a medical event. When I’m unemployed I think we’re just going to lump all our short-term targeted savings accounts together anyway since we might have to draw on them for basic living expenses and that will be a legit EF.

      That’s good to know about the pre-FICA contributions to the HSA. Ugh, this makes me want to open one even more even though we don’t have the money. Thanks for the reference to the Bogleheads forum. Do you happen to know or can find easily if the HSA contributions come out before just the employee’s side of FICA or both the employee and employer? If both maybe I can work it so that I contribute from my SE income and don’t have to pay that 15%??

      1. ervinshiznit says:

        I hand’t thought about that before for self employment income! Unfortunately it doesn’t seem so. I didn’t search too hard though. This site apparently has more details http://www.irs.gov/irb/2005-04_IRB/ar13.html

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  14. I would probably go for the cheapest option. You’re young, healthy, and — this is the most important part — this is basically “gap coverage” which you only need for a short time before one of you gets a real job with better and hopefully cheaper insurance. If you were talking about a period of five years, I might go with something more expensive. (I know, obviously you could be hit by a bus in a month just as easily as you might in a five year period, but….)

    However, I spent about half my 20s without any kind of health insurance whatsoever, and my early 30s on a really terrible, covering-nothing student plan, so I guess my stupidity level is relatively high.
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    1. Emily says:

      I agree – for the long-term, I want decent coverage, but for the short-term it would be fine to go catastrophic. I don’t think that’s stupid – it’s just the odds!

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