FEHB Plan Catastrophic Limits

The most important reason for buying health insurance is to protect you against financial catastrophe. You may, therefore, wish to approach plan selection by comparing plans based on potential financial risk, rather than average cost. To facilitate this, our cost comparisons include a “Limit to you” column. Our “Limit” calculation includes both the annual premium and the claimed guarantee provided by each plan for hospital, medical, and prescription drug expenses. We combine these two types of expenses because you are sure to incur premium costs and there is little point in picking a plan with $1,000 less in claimed limit if its premium is $2,000 higher. However, no plan includes dental expenses in its guarantee. The “Limits” column, therefore, cannot include these costs. Our figures use a 33 percent premium reduction for tax savings for employees under Premium Conversion (but not for retirees or those paying full premiums, who are ineligible). We also take account of the ability of enrollees in High Deductible plans to reduce costs by using their HSA or HRA accounts. We have not, however, included estimates for additional tax savings from funding high expenses through additional contributions to HSA accounts FEHB Tax Savings for Federal Employees). Therefore, these are conservative estimates for High Deductible plans.

Because some plans present catastrophic limits in confusing ways, we attempt to make our limit calculations comparable among plans. For example, we consider deductibles if these are not included in the claimed limit. A few plans put prescription drug payments under separate limits and we adjust for this difference. Plans calculate limits differently and the dollar numbers published in a plan's "Summary of Benefits" do not reflect the loopholes and exclusions listed under “Your cost for covered services”). The adjustments we make are necessary to make comparisons that are not inaccurate “apples to oranges.” For plans that do not include certain hospital, doctor, or drug copayments in the limit we have assumed three hospital stays and 50 (single) or 100 (family) prescriptions or doctor visits and presented the limit on this basis.

Although we included dental costs in most columns, we had to leave dental costs out of the "Limits" column because no plan includes dental costs in its guarantee. Most HMOs have a limit and cover nearly all hospital, medical, and prescription drug expenses.

The cost tables can be used to find those plans with the lowest limits. From this group, you can select plans with lower average costs. Or you might wish to select one of the plans with the very best catastrophic coverage and accept somewhat higher out-of-pocket costs as the price of that guarantee. Importantly, because we include premiums in the calculation of the most you can pay, we help you avoid the mistake of paying many thousands in higher premiums for a saving of fewer thousands in catastrophic limits.