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Dear Everyone!
The past two weeks has seen my phone ring with people who have been "downsized" and want to avoid expensive COBRA coverage.
They tell me they want the same kind of co-pay plan they had from their boss. When I tell them that they can't afford it, they ask why. I tell them the boss was probably paying around 80%. I told them to take the amount the boss took out of their check for coverage and multiply it by five and that the result would be close to what he or she was paying... and that while individual coverage would be less, it would still cost a lot... and besides... they probably didn't really need such comprehensive coverage in the first place.
I tell them about HDHP-HSA plans. Sometimes I have to tell them three times, but eventually they "get it." Below is what I tell them
-Al
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HDHP 101 (or how to afford good coverage)
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We all know that health insurance is important - without it, we're open to an unacceptable level of risk from unforeseeable, unavoidable health problems. But we know too that sometimes it can be tough to fit health insurance into our budgets.
Trust me, I know - long ago, my neighbor thought that they were spending a little too much money each month and thought it might be a good idea to save by cancelling the family health insurance policy. Well, after a while, they realized that perhaps this wasn't the best idea - my neighbor hasn't ever been the gambling sort, and she was worrying constantly about what might happen if one of her family got sick without coverage. So she sat down and decided that they'd just skip eating out a few times a month, maybe give up some of the premium channels in their cable package, and perhaps her youngest didn't really need to be taken to Toys R Us quite so often.
That was probably about fifteen or sixteen years ago. Since then, my neighbors' combined medical bills have totaled in the millions of dollars. A fourteen year battle with Ménière's Disease for the mother and a failed struggle with cancer for they father meant the bills rolled in fast and hard - and they didn't see the onset of either one coming.
Looking back now, I almost have to laugh. The amount they paid in premiums is negligible compared to what the cost of her streptomycin injections and brain surgery would have been out-of-pocket.
Paying for health insurance instead of HBO doesn't seem like such a sacrifice when they realized it bought the family an extra year with the father. The point is, I know it can be tough to find room in the monthly budget for health insurance coverage - but it can frequently be absolutely impossible to find room for those medical bills once they hit you.
There is a way to afford good health coverage.
I've used this example in another article, but it's a good one that bears repeating. What do you use your car insurance for: to cover your expenses in the event of a wreck, or to cover the expenses associated with oil changes, new windshield wipers, fresh air filters, and a wash and wax every weekend?
Of course, your car insurance is there to cover the big things - not the little tiny things like the ones we just listed. But if your car insurance did cover those little things, can you imagine how expensive your premiums would be?
Health insurance works the same way! If you want your health insurance to cover every bump and scrape, then your premiums are going to be higher. If, however, you are willing to take responsibility for some of the minor costs of your medical care, then your premiums are going to be much, much lower.
There's a way to do this, and it's called a High Deductible Health Plan or HDHP. Just as in the case of my neighbor the "real" bills don't come from check-ins with their pediatrician, or from a case of the sniffles. They come from surgeries, tests, and esoteric procedures - and those are the crucial risks you can't afford to not be protected from.
A High Deductible Health Plan, or HDHP, is defined as any health insurance plan with a single-person deductible of $1100 or more (or a family deductible of $2200 or more) and a maximum out-of-pocket limit of $5600 or more (or a family out-of-pocket maximum of $11200). Usually, however, a HDHP is set up with a straight deductible around $2500 to $5000. You are responsible for your medical costs up to that point - after that, you're covered at 100% of allowable charges.
What does this mean? Well, first off, it means your premiums are lower. Since you're assuming more responsibility for the little costs of your personal healthcare, the insurance company doesn't need to take as much money in the form of premiums to cover that risk.
Secondly, it means that your insurance is covering the things you truly need. If you have a cold, sure, you're going to have to pay for that visit to the doctor out of your own pocket. The average visit to a primary care physician costs about $60, not including any labs or diagnostics that might need to be done.
Think about it though, how many times in the past year have you gone to the doctor? Say you went three times, and each visit cost you that $60 - that's $180 in doctor's office charges for the year. So for the year, you've spent the same as $15 every month ($15 a month X 12 months = $180). But if you've saved $30 a month by switching to a high deductible health plan, then you're still ahead of the game! Not only that, but you've still got quality insurance to protect your assets in the event something happened.
Now, keep in mind, we're not talking about limited benefit plans. A high deductible health plan is not a plan that has a ton of limitations, riders, exclusions, and confusing clauses. The premiums for a HDHP aren't lower because the plan doesn't cover cancer, or won't pay on claims related to high blood pressure - if it's a covered expense under one of the $1000 a month policies, then it's a covered expense under a HDHP. The only difference is that you have to meet a higher deductible before your benefits kick in and, usually, that you won't have a copay for your smaller health care concerns.
There's one more thing about high deductible health plans that makes them an excellent solution for your health insurance needs: HDHP's are the only type of plan qualified for health savings accounts.
A health savings account is a tax-advantaged medical savings account. Any money you place into your health savings account is not subject to federal income tax (you deduct it like you do your IRA contribution) and can be used for qualified medical expenses at any time without federal tax liability.
In other words, if you put money into a health savings account and then pay for a qualified medical expense with funds from that health savings account, it is not a taxable event (like taking money out of an IRA is.)
You can put up to $3000 a year (for an individual policy, or $5950 a year for a family policy) into your health savings account, and those funds roll over year after year after year. So long as you have a HDHP, you can keep depositing money into your health savings account up to the annual contribution limit.
If you cancel your HDHP and move to a plan that doesn't qualify for a health savings account, you don't lose your money - you can keep taking it out until the account is depleted, but you can't put any more in. Furthermore, you can take the money in your health savings account at any time even for non-medical expenses, but the funds you withdraw become subject to income taxation and you incur a 10% penalty.
So basically, with a high deductible health plan, you get the same coverage, a lower premium, qualify for a tax-advantaged health savings account, and have more control over your health care dollars. Sound like a good deal?
It's a great deal and about 90% of the plans I sell are HSA-qualified plans (they almost always have "HSA" in the plan name... "Blue Shield 4000 HSA" or "Lumenos 1500 HSA."
There is no rule that you have to open a HSA plan at the bank. Hell, half of my clients never do... and bug them to death about it.
The whole concept of HDHP-HSA plans was for the government to give an incentive for people to buy health coverage by allowing a huge tax deduction for doing so. Do most people take advantage of it by opening an account at the bank? I wish!
If you have any questions about high deductible health plans or health savings accounts, please don't hesitate to contact me! As always, my email inbox is open and my phone is ready for your call. I'm more than happy to help you with any questions or concerns you may have!
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Well, that's a wrap for this issue. I hope you've found some of the info above useful and interesting. If you have questions about life or health coverage, safe-money annuities, or employer group benefits just give me a call or send email.
Sincerely,
Alan N Canton
InsuranceSolutions123 Agency
InsuranceSolutions123.com
916-962-9296
CA License # 0F31110
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Al Canton, Owner
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I'm Al Canton, owner of the Insurance Solutions Agency.
Everyone promises the best service, etc. So I won't bore you with that message.
Bottom line, I know health insurance, disability, Medicare, life, and annuities.
Most importantly, I'm honest. I will not put you in a product just for the money. I've lived in the Northern California area for 35 years and I've built my reputation on integrity and honor.
It's that simple.
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