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Author: Jan Fernandez    Posted: June 5, 2015

The other day I was selling my dog crate on Craigslist.  The gentleman who came to buy my crate was showing me a large dent in his front fender and complaining that he had $1,000 deductible and that was just way too much to pay when he had insurance.  I replied very politely “well, why did you choose $1,000 deductible?  I’m sure that you could have purchased a policy with a much lower out of pocket”.  He explained that he didn’t want to spend that much on a premium when he thought that he would never need to use the insurance.  We chatted a little longer and I told him that I was a healthcare finance consultant and what he did was actually retain risk without banking the savings.  He could have just given the insurance company the extra money in premium and walked away, transferring his risk.  And had he never been in an accident, he would have just given the money to the insurance company as extra profit.  What he did was take on the risk of the additional amount that the lower deductible would have covered and assumed it himself to keep his premiums lower. The difference was about $40 a month. He could have saved a portion or all of the money and, if he ever needed it (like now), he would have had some or all of the deductible sitting there waiting to pay the bill. I went on to explain that this is how health insurance works too.  His response was – “Where were you two years ago when I bought the policy?!

We as consumers, often times buy more insurance than we actually need and just give it to the insurance carrier.   We probably will not have claims in any given year that exceed $2,000, but we give the insurance company double that in premium “just in case”.  I say, keep the insurance company profits for yourself!

I’m looking at a quote for an employer right now with a 45 year old male on a $250 deductible plan for $499 per month. The same person can purchase a $2,000 deductible HSA-qualified plan for $322 per month.  That’s a difference of $177 per month, or $2,124 a year – more than the entire deductible! Some plans, like the HSA plan in my reference, even allow you to put that money away tax free.  Then, if you do have a need, the money is sitting there waiting. And if you don’t, then you keep it for yourself!

I see this all the time with employer’s plans.  Employers assume higher premiums than necessary.  You can pair a fully-insured health plan with a higher deductible (transferring less risk) with a health reimbursement arrangement (retained risk), just in case your employee needs it.  The savings in employer contributions is often double digits and their employees are kept whole.

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