Whenever you're about to make a major purchase, financial
experts will suggest a cost-benefit analysis _ a fancy term for
figuring out whether what you're buying is worth the amount you
have to pay.
Nowhere is a cost-benefit analysis more advisable than when
you're choosing among health care plans.
"A lot of people will spend hours figuring out whether they
should buy a car or dishwasher, but they don't do anything when
they're faced with a health care choice," said Colleen Murphy,
associate at William M. Mercer Inc. in Los Angeles. "Over time,
health care is going to cost you a lot more than a dishwasher."
How do you do the cost-benefit analysis?
First consider your health care history. Pull out all of your
medical bills. How much did you spend on doctors last year? Did
you have hospital visits, prescription drugs, drug or alcohol
dependency treatments? Is your health care utilization likely to
be similar next year?
The second step involves introspection. What do you want and
need a health care provider to provide? Do you have children who
require frequent checkups? Do you have any existing health care
condition? Are there congenital ailments in your family? Are you
at high risk for a serious communicable disease, such as AIDS or
What are your plans? Do you want to have children in the near
future? Are there medical procedures that you need that you've
put off, such as a tonsillectomy or having moles removed? How
important are your current doctors and hospitals? Is there a
particular doctor, specialist or pediatrician that you can't
imagine giving up?
Finally, plot out your health care options. Chances are you'll
be given at least two or three. A good way to do this is set up a
grid with horizontal columns for each option, such as indemnity
plan, health maintenance organizations, preferred provider
organization, point of service plans or whatever you've been
Under each plan name, list the main cost provisions. For
instance, in the indemnity column you might have: $300
deductible, 20 percent co-payment, 20 percent co-pay for
Under your HMO option, you could list: $0 deductible, $5
doctor's visit, $20 hospital stay, $5 per prescription. No
reimbursement for non-plan doctors.
The preferred provider organization column might say: $100
deductible, 10 percent co-pay for plan doctors, 40 percent co-pay
for non-plan doctors, $10 per prescription. …