Health Insurance is one of the most difficult products to choose - Why?

  • Insurance plans vary widely in price, deductibles, copay, coinsurance and coverage for different health services. Many of the key differences are in the “fine print” of the plan disclosures. As individuals, it is very difficult to estimate and compare value based upon this information.
  • As individuals, we have no way to predict our potential costs for health care. In fact it has been shown that, generally, next year's health care expenditures cannot be predicted using the current year as a guide.
  • Costs charged for medical services are not published, and costs vary widely.
  • Funding health savings accounts adds to the complexity as it requires us to reserve funds for health expenditures with little to go on for guidance.

Health insurance companies have developed a wide range of plans for the purpose of addressing different customer priorities. Although it would be nice to be able to classify plans simply across a spectrum of “low premium/high risk sharing” to “high premium/low risk sharing” plans, it turns out that the relationship between plan cost and the resulting value delivered is not straightforward.

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In the left graph, the cost of a plan (premium) is compared to the “actuarial value”, which means the percent of actual expenses paid by the insurer vs. paid by the you. This amount paid by you defines the level of "cost sharing" in the plan. The cost sharing is sprinkled throughout the plan and shows up across the deductible, co-insurance and co-pay terms. Insurers make this complex by varying these parameters depending upon the type of service, location of service, and in drug reimbursement rates. Plans with greater actuarial value are less risky since you have less exposure to cost sharing, but one would expect that these kinds of plans would be more expensive up-front. In the left graph, we see that, remarkably, premiums can vary widely for plans with the same actuarial value, and it is not really possible to make the assumption that a higher priced plan will be all that better than a lower one.

The total value of a plan includes all costs associated with the plan - including premium. This fact is rarely discussed, and as we can see from the graph, premiums can vary so widely that the resulting value of a plan is hidden deeply in a complex relationship between the premium, deductible, copays and co-insurance rates in each plan design. Insurance companies have precise models that can predict how much the they can expect to pay out, but as an individual, there is no existing tool that provides the same type of estimate.

We provide a “consumer focused” method of revealing the cost/value tradeoff between plans. We estimate the total out-of-pocket expense, and exposure to cost-sharing risk based upon your specific health status. We have built in all of the complex aspects of the insurance plan coverage rules so that you can make an apples-to-apples comparison of the plans using your own health information as a basis, and finally be able to make real tradeoffs with usable information.


HealthDecisions.us is committed to providing the actionable information and resources needed by consumers to make wise choices on their health insurance purchases. Using financial analysis techniques well established in the financial investment community, we provide a unique view of health plan value. This, coupled with a comprehensive and accurate provider network search capability, will make health plan decisions easier and more suitable.