Health Insurance Guide For The Self-Employed

So many times, people get hung up on getting a lower deductible and having copays for something to be considered a “good” plan. However, most Americans miss the absolute most important thing in their health insurance documents: The Out-of-Pocket Maximum.

This is the most you would pay in one calendar year if everything went horribly wrong. If you have health insurance, this is the maximum of liability and it’s a number you need to be aware of!

For example:

I often have clients tell me they want the “best” plan and are willing to pay for it! They want a $250 deductible. In my state, the $250 deductible plan has a $7,900 out-of-pocket maximum and is often 30% higher than an HSA plan for monthly premiums.

However, if they enroll in an HSA they can often get a lower out of pocket maximum. My plan is a $4,500 deductible, but that is also the out-of-pocket maximum. At 30% less expensive per month, it’s an absolute bargain! But most people ignore this plan because all the see is the deductible.

Let’s look at an example:

Johnny needs a $60,000 heart surgery.

Plan 1: He’s paying $500 a month to get the lower deductible. That equates to $6,000 a year in insurance premiums. When he has his surgery, he will pay $7,900. So, in total he spent $13,900. Which beats the pants off $60,000 any day! But it’s not the best he could have done.

Plan 2: He is now enrolled in the HSA plan. He is paying $350 a month. That equates to $4,200 a year in insurance premiums. BUT when he has his surgery, he pays $4,500. That means he spent $8,700 less than on the “best” plan. But wait! He also got to put that $4,500 through an HSA account and gained the additional tax savings.