Acme Health has three plans it offers to mid-size employers.
This basic one costs $4,000 for the employee this year, plus $2,500 for the spouse, and $2,500 for any number of children. It also has a family deductible amount of $2,000 before benefits (80% paid; 20% co-insurance) kick in.
The second plan costs $5,000 for the employee and $3,000 for a spouse and an additional amount of $3,000 to any number of children. It has a $1,000 family deductible and after that, insurance of 85%, 15% co-insurance.
The third plan costs $7,000 for the employee and $3,500 for the spouse and $3,500 for children. It has a $250 deductible for the total family each year. After that, insurance pays 95%, with 5% co-insurance.
As an employee of the company, which option would you take? Explain your answer.
Consider the probability of using the health services, the total expected cost of the co-payments, and the tax status of all of the expenses.
HINT: The premiums ($9,000, $11,000, or $14,000) can be paid with pretax dollars, as an income tax avoidance method. In all three cases, the employer pays nothing.