The tension between price and value is familiar. We want the $14k Ford Fiesta price but the Tesla Model S product. We usually get what we pay for.

Employers promote generous healthcare benefits, ones with little advertised friction (e.g., low deductibles). Generosity is vague. Is a $1,500 deductible good or bad? Our only guide is usually our past experience, which is not the purest of benchmarks. There are also premium contributions we make through payroll.

The biggest expense in a given year for most is not paid with card swipes. The median out-of-pocket expenses for employer-providers insurance is around $500. The largest cost is via payroll deductions. For single employees, this averages $1,500 per year or 75% of typical direct employee costs1.

Low price (direct premiums) and high value (low deductibles) are elusive. Benevolence in both is rare. For large firms 2, only 10% are in the top quartile in both low deductible and payroll contributions. See the green dots below.

 

To be in the green zone, you have to find a top-tier firm3. As an employee, this is the sweet spot of both price and value.

 

Disclosures: my personal healthcare coverage is a $5,000 deductible cost-sharing plan (non-ACA compliant). Healthcare investments: long CI, HQY; short (via long puts): TDOC. I have a Lively HSA and have invested most of the balance in 5 stocks via a self-directed TD Ameritrade account. Photo by Dylan Calluy on Unsplash

  1. Yes, 10% or so will blow through and hit the maximum out of pocket
  2. more than 1,000 employees, N=462, PPO coverage
  3. or negotiate your way to higher pay to close the gap