Posted by Elisabeth Leamy, Mon Oct 26 2009, 11:28pm

It's that time of year

It's that time of year. Open enrollment. The one time when you can make changes to your healthcare plan at work. I encourage you to buckle down and really think about your choices because it could be an opportunity to SAVE BIG. Last week, I told you that I've just written a book by that name. SAVE BIG. The premise of the book is to look for savings of at least $1,000 in the most expensive parts of our lives --like healthcare-- rather than wasting time on all the Small Stuff Savings that people always preach, like skipping your daily latte or going to your own bank's ATM.

I've started sharing some of my BIG SAVINGS ideas in hopes of A) helping people out in this economy and getting a national dialogue going about how to pinch thousand dollar bills instead of pennies. One reader accused me of trying to sell books, but there aren't any to sell yet! The book doesn't come out until January. I do have one ulterior motive though, and that is to get YOUR ideas for how to SAVE BIG and share them with others. Please write and tell me how you have saved more than a thousand dollars in a single year, by clicking here. (Alice, please link to my "ask Eli" mailform that leads to my Google account.)

Anyway, as I was saying, time to select your health plan, if you are one of the lucky majority with employer-based coverage. My husband and I just sat down and thought it through and made our selections the other night. We are going to save $1,690 by going with a plan where we pay lower premiums up front but pay a higher percentage of our care when we actually receive it. Most Americans choose Preferred Provider Organization (PPO) health plans. So did we. But instead of going with the most popular one in which we pay for 20 percent of our doctor visits, lab bills and so on, we chose the one in which we pay 30 percent.

Why on earth would we want to pay more to the doctor? Because by doing so, we can pay less --way less-- to the insurance company. And in our family we don't go to the doctor that often. This "pay as you go" concept is what I want to share with you. If you are physically and financially healthy, it makes much more financial sense to pay as you go.

Here's a stunning statistic that helps explain it. In 1970, Americans paid 40 percent of their own medical costs out of pocket. Today, we pay just 15 percent, according to the Kaiser Family Foundation. We pay a lot more in insurance premiums but a lot less of our own actual medical costs. That's a money mistake because it's always more expensive to run costs through a middleman, in this case an insurance company.

Here's another way of doing the math for my own plan at ABC. The plan where I pay just 20 percent of my medical bills would cost $4,784 a year in premiums. For that high premium to pay for itself, I would have to have $8,000 worth of PPO medical expenses during the year. By contrast, the 30 percent plan that I chose costs just $2,184 a year in premiums. I pay far less up front, but I pay a bigger percentage of my actual costs as I go. Since my family's costs have historically been low, this pays off for us.

Here's a nice easy way of doing the analysis with your own plan options. Look at the cost of the plan premium and compare that to how much you rack up in medical bills each year. Say the premium is $5,000. Do you have $5,000 in medical bills each year? If not, it's probably not worth it. Why spend money on medical care you won't be using? Of course, the other function of insurance is to serve as a hedge against possible calamities like a car accident or major disease diagnosis. If you gamble on a lower-priced plan where you pay more as you go, you are only stuck for the current plan year. If disaster strikes, you can switch to another employer-offered plan a year from now. There is no penalty or restriction.

You notice I haven't even mentioned the healthcare debate raging across the country? That's because no matter what Congress does --or doesn't do-- the advice to pay more as you go brings a BIG SAVINGS for health people. Period.