Most of the times when people are shopping for NC health insurance they are looking to reduce their premiums. Whether these premiums are for COBRA, a portion of their group, or individual coverage that they already have. Sometimes I am able to help them find a better solution and sometimes I cannot. However, if you are on COBRA then most likely we will find you a better alternative.
What I call the "No Brainer" solution to changing your policy is when your annual premium savings with the new plan will cover your out of pocket exposure of the new plan. Let me explain through an example of a recent client.
The Jones' (not really their name!) came to me looking to save money on their current COBRA premiums. In disussing their current plan they told me they were paying $1,500/month for COBRA...holy cow that is more than most peoples mortgage! Well the plan has a $0 deductible, 80/20 coinsurance (max individual exposure of $4K and family exposure of $8K). Having a $0 deductible (almost unheard of anymore) is great but you are paying for this in premium. After a discussion of everyones health status and determining the appropriate carrier we moved forward wiht the application.
After a several days the underwriting process was complete and final rates were determined. After explaining to them the benefits of having a high deductible health plan (HDHP) paired with a North Carolina health savings account and the premium savings they were convinced this made the most financial sense. Well how much was it? For a $10,000 family deductible the monthly premium was roughly $500/month. $10,000 deductible you say! Who in their right mind would want that? Let's look at the math.
Current premium savings of $1,000 per month equals $12,000 annually which is $2,000 more than they would have to spend on claims with the new plan. Therefore they cannot lose money...they will either save $12K annually or worst case they will save $2K. It is a win-win situation and why I call this a No Brainer.
Let's look at some examples:
| COBRA | New Plan | |
|---|---|---|
| Annual Premium | $18,000 | $6,000 |
| Annual Individual Claim | $10,000 | $10,000 |
| Amount of Claim Owed | $2,000 | $10,000 |
| Total Annual Cost | $20,000 | $16,000 |
| Annual Savings | $4,000 |
In this example you can see that in this type of scenario they still saved $4,000. Not only that but now the ENTIRE family is covered for the rest of the calander year because they have met their family deductilbe. Still not convinced. Let's look at one more Scenario.
| COBRA | New Plan | |
|---|---|---|
| Annual Premium | $18,000 | $6,000 |
| Claim 1 - Husband | $40,000 | $40,000 |
| Claim 2 - Wife | $20,000 | $20,000 |
| Claim 3 - Child | $8,000 | $8,000 |
| Amount Owed Claim 1 | $4,000 | $10,000 |
| Amouth Owed Claim 2 | $4,000 | $0 |
| Amount Owed Claim 3 | $0 | $0 |
| Total Annual Costs (including premiums) | $26,000 | $16,000 |
| Annual Savings | $10,000 |
As you can see in this situation they CANNOT lose money. We looked at two examples...the first being more common scenario and the second a more extreme but very real scenario.
Granted not everyone is paying this much in COBRA premiums but they usually are quite high. This situation was a great example of why someone shopping for NC health insurance needs to work with a broker so that they can insure they are getting the best plan for their money.
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