Total Healthcare Cost Calculator
First Post of Healthcare week! Today we’re just going to introduce a couple things. One, the hypothetical family we’re going to follow along as they try to select a healthcare plan for 2017. And two, a basic calculator for assessing their total costs that they’re going to be utilizing as they go.
Our Test Family
Our test family is a typical group of mid-westerners: a husband, wife, and one young daughter (surprise! they sound a bit like the Grizzlies). Their adjusted gross income is sitting around $50k (a lot lower than us right now, but closer to what we’ll be showing in early retirement). And they currently live in Johnson Co, KS. They’re shopping on the healthcare exchanges for the first time and are a bit bewildered by all of the options, subsidies, caps, deductibles, metal plans, etc. Up till now, they’ve always been covered under an employer plan which made this entire process a whole lot easier. They’re a bit scared, a lot confused, and frustrated with the entire process. We’re going to attempt to demystify it for them over the next few days.
The first thing to discuss is how we’re going to approach this decision. Building on our previous discussion about how you shouldn’t treat your investments as separate chunks, we’re going to advocate a similar approach here. Essentially, don’t get too bogged down in the weeds of deductible amounts, coinsurance %, max out of pocket, premium subsidies, etc. Those are all distractions and really only serve to confuse the crap out of everyone.
Instead, we’re going to focus on the total amount you and your family are going to pay for healthcare next year. That’s it. That total amount is going to vary based on two things – the plan you select and the amount of healthcare you end up needing. Number two is is not in your control, but number one certainly is. As a result, we’re going to look at ranges of possible outcomes for our family based on the plans available to them.
Total Cost Calculator
In order to facilitate this, I’ve pulled together a basic calculator over in our tools and research section that takes in family, marketplace and plan details. The output is the total annual cost including all factors – deductibles, coinsurance, out of pocket max, and HSA contributions. The below is the sample for the actual costs of a bronze, silver and gold plan for our hypothetical family living in Kansas.
The shape of the curves is fairly typical of the cost structures of the plans. Bronze plans start out much cheaper but increase in costs quickly as healthcare costs increase. Silver plans have mid-range total costs at low use but ramp up to be the most expensive at high healthcare costs. Gold plans start out expensive and only increase moderately over the range and end up being the cheapest for high health care costs. We’ll dive into all of this in much more detail in the next several posts!