Cheap Medical Insurance – Is Cheap the same as Affordable?

Medical insurance is one of the most sought after benefits that companies can offer employees these days, and often times, medical insurance can run higher numbers than what the companies can support. Knowing this, companies will be looking at a barrage of insurance policies to help give their employees choice in the matter of benefits; employers often give “buy up” options to their employees to give them both inexpensive plan options and more expensive, comprehensive plans. Being the insurance member, either the employee or the employer, there are some very important aspects of your plans besides the monthly premium, and there is a chance that the “cheap” insurance policy is actually less affordable than the more comprehensive one.

Why Inexpensive Insurance can be considered “Cheap”

Back when I was attending college I had a professor who always disciplined students who used the words “inexpensive” and “cheap” interchangeably. My professor drew a line saying that inexpensive products were low in price but competitive in value and benefits, while cheap products were low in price while also being low in quality and benefits. An example of his definitions of these two words; a stapler that costs $1 and breaks the first month is cheap, while a stapler that is $1 and works still you move offices and unfortunately lose it, is inexpensive. The prime difference is that one brings value to the table while having a small cost, while the other is a piece of junk.

Bringing my story back to the point; some insurance policies that have low premiums may be lacking in value and benefits making them “cheap” plans instead of inexpensive ones. Here is an example of that:

Let’s say I purchase a plan that has a low monthly premium (for sake of example, it is 15% lower in premiums than the next plan up). During the year, I am enjoying the fact that I am both covered medically with insurance, and that I am paying a relatively small amount in premiums per month. As a triathlete, I enjoy road biking near the coast, and six months into obtaining health insurance I take a pretty bad fall and break a leg. I call a friend, and he drives me to the hospital. I find out that my deductible, that I now need to pay before my insurance kicks in, is $4000. While staring down at my deductible I also see that I have a 30% coinsurance for the medical services needed to fix my leg. My “inexpensive” plan just became very expensive.

If I look back in retrospect, I remember that the more expensive plan I was offered had a $1500 deductible with 20% coinsurance for the services I needed, and in those 6 months, I would have only paid 15% more on premiums. I could have saved a lot of money moving to the more expensive plan in this example (assuming my premiums weren’t extremely ridiculous). The point to take away from this example is that a lot of employees who are first introduced to insurance look at the premiums more often than the deductible, and judge their insurance accordingly. Making this mistake can cost them much more down the road, and because we don’t know when we will have to use our insurance (such as breaking a leg in my example), we should pay more attention to the deductible and actual benefits (value) the policies offer. Low income employees cannot afford a $4000 deductible.

Hindsight and Health Insurance

Health Insurance is a risk management system for your finances and your health, and the biggest problem with choosing plans is that you never know if you will actually use your deductible or not. My take away advice would be to always look at both your premium and deductible, judge accordingly, then look at the rest of the benefits in your policies. If you end up finding out that your policy is cheap and provides little value to you, look at the next policy.

Thank you for reading, and having a great day!

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