High Deductible Health Plan? It Pays to Shop Around.

This is a guest article by Sara Stanich, a Certified Financial Planner (CFP®) practitioner and Certified Divorce Financial Analyst (CDFA™) based in New York City. Sara is one of four financial experts participating in Consumerism Commentary’s Naked With Cash series. She blogs about financial planning topics at Cultivating Wealth.

In this article, Sara addresses high deductible health plans (HDHPs). I have always had HMO or PPO health insurance, so this article covers new territory for me.

Do you have a new health insurance plan this year? Is it a high deductible plan with a health savings account?

If so, you are not alone. The HDHP market has been growing. According to the National Center for Health Statistics, 30.3% of group health care plan participants were enrolled in a high-deductible plan during the first quarter of 2013, up from 17.1% in 2008.

But not everyone understands how these plans work. So, let’s review the basics.

A high deductible health plan is a health insurance plan with lower premiums and a higher deductible than traditional plans. This means that while your monthly cost for the insurance (the premium) may be lower than with a traditional plan, you will probably spend more out of pocket (your deductible) before your insurance starts to partially cover the cost. Preventive care such as physicals and immunizations may be 100% covered.

At some point (the out of pocket limit), your insurance will cover 100% of your cost. You must check your own policy for the exact amounts that apply for your or your family.

A Health Savings Account (HSA) is a tax-advantaged account that’s paired with a high-deductible health plan (HDHP). This allows you to set aside money for healthcare expenses that are not covered by your plan. This is good news, because contributions are made with pre-tax dollars, so spending on health care may be done with pre-tax dollars, and contributions reduce your taxable income, which may in turn reduce your taxes. (The contribution limit for 2014 is $3,300 for individual and $6,550 for family coverage).

What I think is more interesting than the basic rules, is how this structure may be affecting our decisions surrounding healthcare. The high deductible puts more financial responsibility on the consumer. What is the result?

My story

Recently, I had some pretty bad neck pain. This happens to me from time to time and is probably related to stress or lifting something heavy (like a squirmy kid). After trying ice, a heating pad, and lots of ibuprofen, I decided to break down and call a chiropractor. Actually, I called two.

So I called a chiropractor I had been to before to make an appointment. I know I have a High Deductible Health Plan, and I was pretty sure I would need to pay 100% of the cost out of pocket.

So I asked, “How much will it cost?”

They said I should give them my insurance information, and that they would call the insurance company and let me know. Well, OK.

She called back. I was right; the insurance company will not pay any of the cost.

• My quote for a consultation and a chiropractic adjustment: $848.00.
• As a former patient, they could offer me a 50% courtesy discount, so $424.00.

Although I actually have the money in my HSA, this number gave me pause. Maybe my neck wasn’t so bad after all?

I thanked her for looking into it, but said I would try something else. On the way home, I got a 15 minute massage from one of those storefront places for $20, and my neck did feel better.

Fast forward one week. Between long car rides over the holidays and crouching over a laptop on the couch, my neck is worse and the pain is radiating to my shoulder.

I decided to call another chiropractor from my “past.”

They said, “Come on over!”

I said, “Can you tell me roughly what this will cost? I know my insurance has a high deductible and I will be paying out of pocket.”

The answer was evasive as always. “We have a sliding scale. Just come in and we’ll figure it out with the insurance company.”

I didn’t like that answer, but frankly I was so sick of this pain I was ready to just hand over my wallet. So I went, and my back made lots of loud popping noises from many angles. Aaahhhhh… much better.

The price? $75.

I was certainly happy with that number, but what the heck? I had been quoted over ten times as much for essentially the same service. In the same city. On the same street!

I also wondered if they gave me a bargain price because “poor me” had cheapo health insurance. (I can pay; I just don’t want to overpay.) I wasn’t about to argue, and I feel $75 is probably a pretty fair price for 20 minutes of someone’s time.

Lessons learned. Use these tips if you have a new health plan!

• Understand how your health insurance works. If I hadn’t known and the first chiropractor hadn’t provided an estimate, I could have been presented with a surprise bill of $824.00.
• Ask questions. Judging by the surprised reaction to my questions, not many of us ask how much it will cost. That makes sense; if I had a $20 copay for everything, would I have even asked about the cost?
• Shop around. Prices may vary considerably. If you can (and it isn’t a medical emergency), check with two or three options. I went from $848 to $75 for similar service. You may be surprised at what you find.

I am curious about how the expansion of these plans will change the industry. Will pricing become more transparent and competitive? In the meantime, it pays to shop around!

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Sara Stanich and not necessarily those of RJFS or Raymond James. You should discuss any tax matters with the appropriate professional.

Photo: Flickr/planetc1