BUSI 687 Week 3 DB Forum 2 Example

Discussion Board Forum 2: Thread and Replies

BUSI 687 Insurance & Risk Management, Discussion Board Forum 2 (thread and two replies)

Thread by [Student Name]

The forum topic, the family's plan options and the classmates are composites standing in for the course's own; the premium and deductible averages come from KFF's 2025 employer survey, and the textbook and research cited are real; the requirements follow Liberty's public course guide for BUSI 687.

Thread

The topic asks us to advise a composite family of four whose employer offers two plans. KFF's 2025 survey of employers gives the context: the average annual premium for family coverage reached $26,993 and the average deductible for single coverage was $1,886 (KFF, 2025). Rising costs explain why employers increasingly offer high-deductible plans, which Dalton et al. (2018) describe as shifting more of the cost of routine care to the insured in exchange for lower premiums, often paired with a tax-advantaged health savings account.

The family's choices look like this:

In a light year, with $1,500 of care, the traditional plan costs about $8,900 ($7,800 premium, the full $1,000 deductible and roughly $100 of coinsurance on the rest), while the high-deductible plan costs about $5,100 ($4,600 plus $1,500 of care, less the $1,000 employer deposit). In a heavy year that hits both out-of-pocket maximums, the traditional plan costs $13,800 and the high-deductible plan $11,600. On paper, the high-deductible plan wins in both years, largely because of the lower premium and the employer's deposit. The gap is widest in a light year, which is the kind of year a family with young, healthy children usually has, and narrowest in a heavy one. The main risk in the high-deductible plan is not the total for the year but its timing, since a large bill in February arrives before the account has had time to grow.

The arithmetic leaves out behavior. When one large employer abruptly ended free coverage and put every worker on a high-deductible plan, Brot-Goldberg et al. (2017) watched what happened next: people reacted to the price they faced at the moment of care, reducing spending by 42 percent while under the deductible. The reductions came from using less care, including care that appeared valuable, not from shopping for cheaper providers. A deductible saves money partly by making people skip care they need. I recognized myself in that finding: two years ago I put off a recommended test for three months because I had not met my deductible, and the problem it found would have been easier to treat earlier.

My recommendation is the high-deductible plan, with two conditions. The family should deposit the $3,200 premium savings into the health savings account each year, so the deductible is funded before care is needed. And they should treat preventive care, which qualifying plans may pay for before the deductible is met, as free, and avoid deferring recommended tests because of cost.

Reply to Andrea

Andrea, your comparison of the two plans for your own household was clear and well organized, and I agree with your conclusion that the high-deductible plan saves money for a healthy family. I would strengthen your case with the account's tax treatment, which your thread did not mention. Dalton et al. (2018) explain that health savings account contributions are made before tax, grow tax-free and can be withdrawn tax-free for qualified medical expenses, a triple advantage no other account offers. If your family contributes the $3,000 you calculated as premium savings and sits in the 22 percent federal bracket, the deduction alone is worth about $660 a year before any state tax savings or investment growth. Over ten years, an account funded this way and used only for large expenses could build a meaningful reserve for later medical costs. The one risk I see is the one Brot-Goldberg et al. (2017) identified: under a deductible, people cut back on care, including care that matters. Your thread mentioned that your husband manages a chronic condition with regular lab work. I would check whether the plan treats those tests as preventive or applies them to the deductible, because skipping them to save money would be the wrong kind of saving. If they count toward the deductible, funding the account early in the year matters even more, and a monthly payroll contribution may need to be supplemented with a deposit in January, so the cost never becomes a reason to wait. Have you checked how your plan classifies his lab work, which could change the math for your family considerably, and whether your employer contributes in one lump sum or spreads it through the year?

Reply to Tyler

Tyler, you recommended the traditional plan because a high deductible would expose your family to large costs in a bad year. That caution makes sense, and your thread was honest about your family's limited savings, but the numbers you presented suggest the risk may be smaller than it seems. Your plan's high-deductible option has an out-of-pocket maximum only $2,000 higher than the traditional plan, while its premium is $2,800 lower, so even in the worst year your family would come out ahead unless the employer contributes nothing to the health savings account. Dalton et al. (2018) note that comparing plans requires looking at total cost under different scenarios, and your heavy-use scenario appears to have left out the premium difference. Where your caution is right is cash flow. A family without savings could face a $3,400 deductible in January before the account has been funded, which is a real hardship. KFF's 2025 survey found the average single-coverage deductible was already $1,886 (KFF, 2025), so high deductibles are now common even in traditional plans, and the question is less whether to accept one than how to prepare for it. One solution is to keep the traditional plan for one year while building the account balance with what would have been premium savings in a separate savings account, then switch. Another is to ask whether the employer front-loads its deposit at the start of the plan year. Either way, the comparison should include the premium difference in every scenario, since it is money the family keeps whether or not anyone gets sick. Would either approach address your concern about a bad year arriving early?

References

Brot-Goldberg, Z. C., Chandra, A., Handel, B. R., & Kolstad, J. T. (2017). What does a deductible do? The impact of cost-sharing on health care prices, quantities, and spending dynamics. The Quarterly Journal of Economics, 132(3), 1261-1318. https://doi.org/10.1093/qje/qjx013

Dalton, M. A., Dalton, J. F., & Langdon, T. P. (2018). Insurance planning. Money Education.

KFF. (2025). 2025 employer health benefits survey. https://www.kff.org/health-costs/report/2025-employer-health-benefits-survey/