Building a Better Health Insurance Comparison Tool
This describes how I created an online calculator for comparing out of pocket expenses for a variety of health insurance plans. You can find the calculator at http://www.hexonx.com.
While shopping for health insurance for my family in the wake of the Affordable Care Act, I found it very difficult to compare plans. While the New York state exchange (my local exchange) and Healthcare.gov made it easy for me to compare plans' deductibles, premiums, coinsurance, etc., they miss a key point in comparing plans; I want to know how much I might spend out of pocket for a variety of different medical expenses. What if I break my arm? Need back surgery? Dialysis? There is no easy way to tell how much I will spend out of pocket for these different medical bills just by looking at the numbers on the exchange, and no easy way for me to select the best plan for my family.
To get a better understanding I put together a tool that factored several insurance plans' features, then charts my out of pocket responsibility against a range of medical costs. Looking at several plans charted on top of each other, I could see some plans favored lower medical costs, but required more cash from me for more expensive procedures. Other plans offered a level cost to me, but in years I had few medical expenses I would end up paying just as much in years I had many. Now each plan had a 'profile' that allowed for easy comparison across different medical expenses.
The next step was to get an idea of how much I might pay. This was the biggest challenge; it has been documented (here for example) that the same procedure's cost varies widely by location. I wanted to import those costs into my chart and see what my out of pocket cost would be for the plans I had charted. Also, is there data out there to give me an idea of what my average cost would be? It turns out the Centers for Medicare and Medicade Services offered both.
CMS published the amounts 3,300 hospitals across the country charge Medicare for 100 inpatient and 30 outpatient procedures. You can read about the study results here (and see some extreme examples of price differences by hospital) and find the underlying data here.
While this data shows Medicare charges, it is likely not exactly what I would pay with my private insurance, it at least is a local estimate.
CMS.gov also provides average medical expenditures by age, gender, and state. Drawing from this data, I could plot what my estimated annual medical costs would be, and see what my responsibility would be under a variety of insurance plans. You can find the data here.
The study was conducted in 2004. To adjust the costs to 2014 dollars, I needed and estimate of how much healthcare expenses were changing annually. The CMS data goes back several years, so I was able to estimate 5.6% increase in the decade prior to 2004. We may be entering a period of declining costs, so if anything using 5.6% may be an overestimate. This article says Medicare cost increases between 2011-2012 was 0.7% versus 5.4% in 2006.
Now I was able to chart my costs in a variety of plans, overlay medical costs by age and gender as well as specific procedures in my county, and see which plans were most advantageous. The bulk of the work done, I focused on incorporating tax deductions to lower my cost. You can deduct medical costs (including insurance premiums) that are in excess of 10% of your income (7.5% if you are 65 or older, until 2016).
Also, some plans offer Health Savings Accounts (HSAs) that are tax advantaged in that they are pre-tax dollars. So in the 25% federal tax bracket, you save 25 cents for every dollar you put in your HSA.
One problem with the calculator was that I had to enter the plan characteristics (deductible, premium, etc.) into the inputs by hand. It turns out for the states covered by the federal healthcare exchange (all but 16) offers an easy interface to query plans by state, county, age, and plan type (family, individual, child, etc.). Now I could automatically pull plan information from the exchange. For states not covered by the federal exchange (like my New York), I still had to log into the state exchange, then type the details of the plans I wanted to compare.
There is still more data that could be incorporated. One problem is that HMO and PPO plans are not directly comparable. One criticism of HMO plans is that costs can be kept low by excluding certain doctors, who may offer superior care. So a higher PPO premium, that covers a wider range ov providers, may be well worth it if the specialist you want is not part of a cheaper HMO. An improvement to the tool would be the ability to chart plans accepted by certain physicians. Currently there is no easy way I know of to accomplish this.
In the end I signed my family up for a 'Bronze' level plan. The tool showed me that my relatively young and healthy family's low medical needs would be best served by a low premium, higher deductible plan. I found that many of the Silver level plans offered lower out of pocket costs for a band of possible expenses in the mid range ($3,000-8,000), but the premiums were almost $5,000 higher; so I would be better off keeping the $5K and betting on my good health. In the best case I save $5k; in the worst case I have to pay a few thousand more in my deductible. Signing up for the plan last month, I felt much more confident that I was aware of the likely costs having used this tool to compare my options.