| RE: .5, et al
> Heaven forbid, but if one gets hospitalized to the the tune of say
> $20000.00, he would still be paying $3600 under either of the plans.
> If that is correct, then under what circumstances plan 2 is better suitable?
I know that this stuff is clear as mud, but...
Someone has MIS-INTERPRETED this pretty badly.
The most OUT OF POCKET expenses any ONE PERSON has to incur is
$1200.00/year, NOT $3600.00!! The $3600.00 MAX is for a FAMILY of
"n" members, where "n" >= 3! [This operates just like the
deductible at $150.00/person/year, up to a MAX of
$450.00/family/year.] Please refer to "DIGITAL MEDICAL PLANS", page
2, 2nd column for this info (we each got this packet in interoffice
mail).
Loosely translated, a single person would be paying $3.00/week =
$156.00/year to buy-back $1200.00 of coverage ONLY if hospitalized
(breakeven point is $6000.00 in hospitalization charges/year @80%
coverage = $1200.00 employee cost).
For a family paying $16.00/week (vs. $7.00/week for 80%
hospitalization coverage) = $832.00/year (vs. $364.00/year
@$7.00/week) or $468.00/year additional insurance premiums to
buy-back $1200.00 of hospitalization coverage (in the very unlikely
case where 3 DIFFERENT family members were hospitalized in the SAME
year, you would be buying back $3600.00 of coverage on 3 separate
$6000.00+ hospitalization bills!!). REMEMBER, the MAX "out of
pocket expenses" would be $1200.00/PERSON, regardless of how many
hospitalizations/year for that person!!
Since it is extremely unlikely (except for an accident/fire) for 3
different family members to be hospitalized, I wouldn't view this as
buying back $3600.00 of insurance coverage (your mileage may vary)!!
FYI: Last February I was hospitalized for an appendectomy, 5 days
in the hospital plus surgery and doctors/surgeons bills came to
~$7000.00, so yes the cost of hospitalization for even minor things
is very high, but the likelihood of multiple family member
hospitalizations in the same year is pretty small.
I STRONGLY suggest that everyone take an hour and attend a Personnel
Administration meeting on the new changes in the John
Hancock/Digital Health Plans.
I hope this Note helped clarify the real impact of these changes.
|
| Here are some comments and analysis of choosing among the two
Digital health plans that *might* help people decide. All
of the correspondence has been widely forwarded, and Mr. Pezzini
has agreed that it's OK to share it here.
Tom
From: GERBIL::BLINN "Dr. Tom @MKO, CMG S/W Mktg, DTN 264-4865 27-Feb-1989 1457" 27-FEB-1989 15:03
To: DR::BLINN !NM%STAR::PEZZINI,BLINN
Subj: Your "Plan I vs. Plan II" chart..
Your chart seems to be getting wide distribution, and it's relevant to a
recent topic in HUMAN::DIGITAL. May I post it in that conference?
Tom
DIGITAL co-moderator
From: DSSDEV::EPPES "I feel a song coming on 27-Feb-1989 1441" 27-FEB-1989 14:44
Subj: A way of figuring out cost of Plan I vs. Plan II
From: CLUSTA::SEVERIN "This page intentionally left almost blank." 27-FEB-1989 13:04:56.25
Subj: Plan I vs. Plan II
From: CLUSTA::CHURLEY "27-Feb-1989 0936" 27-FEB-1989 09:39:08.69
Subj: Info regarding how to choose Medical Plan I/II:
From: DDIF::MCEVOY "this is no social crisis" 24-FEB-1989 11:26:37.11
Subj: FWD: Interesting data to help choose Medical Plan I or Plan II ???
From: 2HOT::REGAL::FINNEGAN "Neal: ZK2-2/K29 381-0096 24-Feb-1989 1120"
Subj: Interesting data to help choose Medical Plan I or Plan II ???
From: STAR::PEZZINI "NH guns shoot snow 24-Feb-1989 1105" 24-FEB-1989
Subj: Medical Plan I or Plan II ???
Boy, these new DEC medical plans have had me going around
in circles trying to figure them out. It's an important
issue to all with insurance and medical costs rising. I
built this table in order to get some perspective on it.
The benefits people have seen it; there's no hard errors in
it in terms of math or how the plans work, but it slightly
favors Plan I.
MEDICAL INSURANCE PLAN I VERSUS PLAN II
| You 468/yr in savings acc|
| 1st yr | 2nd yr | 3rd yr |
| Plan I | Plan I | Plan I |
| PLAN I | | 9/wk | 9/wk | 9/wk |
| You Pay 20% | PLAN II | Credit | Credit | Credit |
Hosp Bill | Fam | INDIV| Ins Cost | Union | Union | Union |
================================================================|
18,000 and | | | | 8%=37 | 8%=80 | 8%=112 |
greater | 3600 | 1200 | 468 | | | |
| | | | 468 | 936 | 1404 |
12,000 | 2400 | 1200 | 468 | + 37 | + 80 | + 112 |
| | | | --- | --- | ---- |
10,000 | 2000 | 1200 | 468 | 505 | 1016 | 1516 |
| | | | | | |
8,000 | 1600 | 1200 | 468 | | | |
| | | | | | |
------------|------|------|----------|--------|--------|--------|
6,000 | 1200 | 1200 | 468 | | | |
5,000 | 1000 | 468 | <--1016 | |
4,000 | 800 | 468 | | | |
* 3,000 | 600 | 468 | | | |
----> 2,340 | 468 | 468 <--505 | | |
2,000 | 400 | 468 | | | |
1,000 | 200 | 468 | | | |
500 | 100 | 468 | | | |
| | | | | |
-----------------------------------------------------------------
* (Recoop line) Need 2340 Hosp bill to recoop Plan II cost
PLAN I - 7/wk or 364/yr
PLAN II - 16/wk or 832/yr
PLAN II insurance cost = 468/yr or 9/wk
To recoop Plan II insurance cost over Plan I, you have to get hit
with medical expenses greater than 2340 dollars.
If you go with PLAN I and deposit 9/wk in your savings account
matching what you would spend for PLAN II insurance, that money
would reach a value close to 1516 in 3 years. If you averaged
2000 total medical bills per year, you still saved or ahead by
316 dollars ( 3yrs x 400 = 1200, 1516 - 1200 = 316).
However, PLAN II might be a better choice for families greater
than 3 persons with a higher than average inclination of medical
occurrences.
...Bob
From: STAR::PEZZINI "NH guns shoot snow" 27-FEB-1989 16:26
To: GERBIL::BLINN
Subj: RE: Your "Plan I vs. Plan II" chart..
Sure. It shouldn't be considered the final answer, but tool for each
one of us to begin our decision process.
...Bob
From: DSSDEV::EPPES "I feel a song coming on 27-Feb-1989 1701" 27-FEB-1989 17:04
Subj: Slight correction to the Plan I vs. Plan II table
From: DDIF::GOUN "A courageous effort to restore unrest in the face of rapidly escalating calm 27-Feb-1989 1632" 27-FEB-1989 16:55:35.15
To: STAR::PEZZINI
CC: DSSDEV::EPPES
Subj: RE: Medical Plan I or Plan II ???
Thanks for taking the time to prepare your chart showing the relative cost of
the Digital Medical Plan options. One factor you left out of your calculations
is the effect of the pre-tax medical expense deduction that Digital is
implementing with the plan changes.
I calculated that this feature reduces the actual cost of Plan II by $5.68 a
week, from its nominal cost of $16, for a family in the 28% incremental tax
bracket plus 7.51% FICA tax. (The example Digital used in its recently mailed
benefit package assumed a 15% tax bracket plus FICA.) The actual cost of Plan
I is similarly reduced, but by only $2.48 a week from its $7 nominal cost.
Therefore the actual cost difference between Plan I and Plan II is not
$9.00/week, but $5.80/week ((16-5.68)-(7-2.48)). The cost difference is even
lower for those unlucky enough to live in a state with an income tax. :-) The
effect of all this is to significantly reduce the break-even point for hospital
bills under Plan II, though I haven't redone your table to find out what the
new break-even point is.
To really be thorough, you would also have to take into account the Federal and
state income taxes you would owe on the interest you earn on the money you'd
save by choosing Plan I, which further reduces the break-even point.
-- Roger Goun
From: DSSDEV::EPPES "I feel a song coming on 28-Feb-1989 1117" 28-FEB-1989 11:21
Subj: Still more on Plan I vs. Plan II
From: DDIF::GOUN "A courageous effort to restore unrest in the face of rapidly escalating calm 28-Feb-1989 1113" 28-FEB-1989 11:12:09.25
Subj: Still more on Plan I vs. Plan II. Forwarded with permission.
From: STAR::PEZZINI "NH guns shoot snow" 28-FEB-1989 10:51:19.92
Subj: RE: Medical Plan I or Plan II ???
Roger, Yup. Good. NH 15% bracket people save 105/yr over Plan I.
NH 28% bracket people save 165/yr over Plan I.
This drives the cost down from 468 to 363 and 303 respectively.
Therefore: the recoop line moves down in the table from 2340
to 1815 for 15% people and 1500 for 28% people.
If you live in Massachusetts with 4.3% income tax, you save
another 20 dollars driving the recoop line down another 100.
The highest income bracket (33%) comes close to the 285 people
["28%" -- R.]
in that these fortunate people might have individual salaries
higher than 48000 (the cap on FICA). So for these reducing
their income by 468 does not affect them with the 7.51% with-.
holding stopping somewhere during the year.
...Bob
From: DSSDEV::EPPES "I feel a song coming on 02-Mar-1989 1253" 2-MAR-1989 13:00
Subj: "Fear makes insurance buildings taller" - more medical plan factors
From: EVETPU::GOUN "A courageous effort to restore unrest in the face of rapidly escalating calm 02-Mar-1989 1254" 2-MAR-1989 12:52:20.83
Subj: FWD: More Medical factors to consider
From: STAR::PEZZINI "NH guns shoot snow" 2-MAR-1989 12:25:43.15
Subj: More Medical factors to consider
This message relates to the Medical Plan I versus Plan II table
I sent recently.
A Positive Factor for Plan II to consider.
------------------------------------------
The pre-tax aspect that reduces your income by the amount you spend
on DEC's medical plan. Your federal, state, and FICA taxes affect
med-plan costs in your favor. Thanks Scott McGregor and Roger Goun.
- NH 15% tax-bracket people save 105/yr over Plan I.
- NH 28% tax-bracket people save 165/yr over Plan I.
This drives the cost down from 468 to 363 and 303, respectively.
(i.e, 468 x .28 = 130 and 468 x .0751 = 35 for 165 total)
Therefore: the recoop line moves down in the table from 2340
to 1815 for 15% people and 1500 for the 28% people.
If you live in Massachusetts with 4.3% income tax, you save
another 20 dollars driving the recoop line down another 100.
The highest income bracket (33%) people come close to the 28% people
in that these fortunate people might have individual salaries
higher than 48000 (the cap on FICA). So for these, reducing
their income by 468 does not affect them with the 7.51% FICA
witholding stopping somewhere during their year.
***
A Negative Factor for Plan II to consider.
------------------------------------------
The effects of the deductables on costs of medical occurrences was
not reflected in the first table I sent. My initial thought was that
since the same deductable amounts are applied to both plans, no
comparison is needed. This is not true, the deduct-effects are dif.
Plan II has a deductable cost applied to every medical hit. Whereas,
Plan I has the same deductable cost applied to each hit until the
"out-of-pocket-cost" exceeds 20% of the med bill. The transition
point from the deductable-effects to where 20% of the total bill starts
affecting the cost, occurs at the 750 hosp bill point and above.
Refer to the second table (3/02/89), Plan I, individual cost for
500 hosp bill and the 1000 bill. A 500 hosp bill for an individual
is 150. This 150 is the deductable amount for the plan. A 1000 hosp
bill is 200 dollars derived by multiplying 20% times total bill. Here,
the deductable is over-rided by the 20% out-of-pocket-cost being
larger. -I checked with Personel, that's the way it's computed.
So for Plan I, individual hospital bills larger than 750, the 20%
out-of-pocket factor takes over in determining what you pay. This
factor drives the cost of Plan II up by 150.
***
A revised table incorporating both these factors will be sent following
this message [below -- R.]. This will be table #2.
Anymore factors/comments? Confused? -just scan the new table and use
your gut instincts.
...Bob
From: STAR::PEZZINI "NH guns shoot snow" 2-MAR-1989 12:26:39.06
To: DDIF::GOUN,TOKNOW::METCALFE
Subj: Med Plan I versus Plan II, Table #2
Boy, these new DEC medical plans have had me going around
in circles trying to figure them out. It's an important
issue to all with insurance and medical costs rising. I
built this table in order to get some perspective on it.
The benefits people have seen it; there's no hard errors in
it in terms of math or how the plans work.
This is the second table and revises the first I sent 2/24.
This revision includes the pre-tax saving factor that favors
Plan II and the deductables; how they affect or favor PLAN I.
Note: This table is not officially endorsed by the DEC Benefits
people. It's based on an employee's view and feedback
received. Comments/corrections are welcome.
(Table #2)
MEDICAL INSURANCE PLAN I VERSUS PLAN II
| You 468/yr in savings acc|
(28% tax brkt)| 1st yr | 2nd yr | 3rd yr |
(w/ 7.5% FICA)| Plan I | Plan I | Plan I |
| PLAN I | PLAN II | 9/wk | 9/wk | 9/wk |
| You Pay 20% | Ins Cost | Credit | Credit | Credit |
Hosp Bill | Fam | INDIV| Fam | INDIV| Union | Union | Union |
===================================================================|
18,000 and | | | +468 | +468 | 8%=37 | 8%=80 | 8%=112 |
greater | 3600 | 1200 | +450 | +150 | | | |
| | | ---- | ---- | 468 | 936 | 1404 |
12,000 | 2400 | 1200 | 918 | 618 | + 37 | + 80 | + 112 |
| | | -165 | -165 | --- | --- | ---- |
10,000 | 2000 | 1200 | ---- | ---- | 505 | 1016 | 1516 |
| | | 753 | 453 | | | |
8,000 | 1600 | 1200 | | | | | |
------------|------|------| | |--------|--------|--------|
6,000 | 1200 | 1200 | 753 | 453 | | | |
5,000 | 1000 | 1000 | 753 | 453 | <--1016 | |
4,000 | 800 | 800 | 753 | 453 | | | |
* 3,000 | 600 | 600 | 753 | 453 | | | |
.15--> 2,565 | 513 | 513 | 753 | 453 <--505 | | |
.28--> 2,265 | 453 | 453 | 753 | 453 | | | |
2,000 | 450 | 400 | 753 | 453 | | | |
1,800 | 450 | 360 | 753 | 453 | | | |
1,500 | 450 | 300 | 753 | 453 | | | |
1,000 | 450 | 200 | 753 | 453 | | | |
-------------------------------| | | | | |
deduct 750 | 450 | 150 | 753 | 453 | | | |
region 500 | 450 | 150 | 753 | 453 | | | |
| ----------|------|------|------| | | | |
| 300 | 300 | 150 | 603 | 453 | | | |
v 200 | 200 | 150 | 503 | 453 | | | |
150 | 150 | 150 | 453 | 453 | | | |
----------|------|------|------|------| | | |
100 | 100 | 100 | 403 | 403 | | | |
--------------------------------------------------------------------
* (Recoop line) When you are in the 28% income tax bracket,
you need 2265 Hosp bill to recoop Plan II cost.
15% people need 2565 bills to recoop II cost.
PLAN I - 7/wk or 364/yr
PLAN II - 16/wk or 832/yr
Therefore:
PLAN II insurance cost = 468/yr or 9/wk
(Plan II adjusted cost = 468 + 150 deduct - 165 tax factor
for a total of 453 or 8.7/wk)
To recoop Plan II insurance cost over Plan I, you have to get hit
with medical expenses greater than 2265 dollars.
If you go with PLAN I and deposit 9/wk in your savings account
matching what you would spend for PLAN II insurance, that money
would reach a value close to 1516 in 3 years. If you averaged
2000 total medical bills per year, you still saved or ahead by
316 dollars ( 3yrs x 400 = 1200, 1516 - 1200 = 316).
However, PLAN II might be a better choice for families greater
than 3 persons with a higher than average inclination of medical
occurrences. (approx. average = 2265 hosp costs)
More Exact Information / Adjust table to your specification
-------------------------------------------------------------------
468 in PLAN II column is the insurance cost.
450 in PLAN II column is the Family deductable/yr.
150 in PLAN II column is the Individual deductable/yr.
165 in PLAN II column is the 28% bracket pre-tax saving factor
when you reduce your income by 468/yr (includes 7.5% FICA w/h).
(i.e., 165 = 468 x (.28 + .0751) where FICA is 7.51%)
If you live in Massachusetts subtract 20 dollars from the
PLAN II column costs (move the recoop line down 100).
(i.e., 20 = 4.3% MA tax times 468)
If you are in the 15% income bracket add 50 to the
PLAN II column costs (recoop=2565).
If you are in the 28% bracket and your income is over 48K,
subtract 35 from the PLAN II column costs to remove the 7.5%.
FICA witholding factor is already included in this column.
(The maximum total wage that FICA is witheld from- is 48K.)
If you are in the 33% bracket and over 48K, add 11 to the
PLAN II column costs.
(i.e., 154 = 468 x .33) No FICA factor; 48K FICA max)
(Then: 468 - 154 + 150deduct = 464 adjusted cost)
Add all If-factors that apply to find your exact or adjusted
cost in the Plan II column. Divide the adjusted cost
by 20% to get your recoop (hosp bill) magic number.
If you do not want to do any number crunching, just use table. It
will probably be within 10%.
In general Plan II adusted cost is 450 to 500 dollars that requires
medical occurrences of 2200 to 2500 dollars to recoop this cost.
Yes, what if this year is a bad year with high med expenses. But
over 3 years, more thoughts of what probably won't happen begin to
rest fear. Make a probability stab at each of your family members
and yourself. How many times will I be hospitalized in the next
3 years? -Your spouse and child? What were the medical hits like
the last couple of years? Project over 3 years and find your family
average per year and compare against the insurance cost. Of course,
you won't bother with this thought process if there's more than one
family member with high med inclinations, each greater than 2000 per
year, a pregnancy, or other warnings that will invoke Plan II. We
have the edge, we can change plans once a year. Remember, fear
makes insurance buildings taller.
...Bob
If I receive further messages on this, I'll post them here if no
one else beats me to it. Obviously, it's not trivially easy to
choose one plan over other, and many factors can enter in.
Tom
|