Part 4: Health
By Keith Bunn Jr.
September 2, 2012
It seems like healthcare has been a major topic in the news for some time now. And with medical bills being the number one reason for bankrupts in this country, along with Obamacare looming around the corner, it is more important than ever to know what your options are.
In my opinion, more and more people are going to have to provide for their own and their family’s healthcare. So this means that you are going to have to figure out what plans are good for you and your family, Figure out what you can do in each plan to make the plans affordable, for the most coverage needed, and finally, get your financial life in order so you can afford the plans that are out there.
Biggest Bang for our Buck
So what can we do to get the most out of every dollar we spend on healthcare?
1. Increase your deductibles and/or your co-pay amounts. Most people today have an 80/20 insurance plan, which means if you need to use the insurance, your insurance company pays 80% of the bill and you pay 20%. Well if you were to increase your deductible and went to a 70/30 plan, you assume more responsibility and a greater risk than before and that will cause your premiums to go down.
2. Increase your Stop-Loss without decreasing your Maximum Pay. Stop-Loss is the maximum amount of out of pocket cost you’ll have to pay. Let’s say that you had a $10,000 Stop-Loss, you would pay your deductible, plus your 20% (if you had an 80/20 plan) up to $10,000. Everything above that, your insurance company would pay 100%. If you had a good 3 to 6 months saved in your emergency fund, you would be able to afford a $15,000 to $20,000 Stop Loss. Maximum Pay is the total amount your insurance company will pay. If you have a half a million dollar Max Pay and the total cost is above that, whatever the remainder is, you’re on your own. I would keep your Maximum Pay to be a minimum of $1 million.
3. Another way to keep your family’s healthcare down is by using a Health Savings Account (HSA). An HSA is a tax-sheltered account with a high deductible. A typical HSA account has around a $5,000 deductible but has lower premiums than your typical PPO insurance plans. One of the good things about an HSA is that after you have reached your deductible, the insurance company pays 100% of the medical cost. So an HSA makes sense if you and your family fall into two different categories. If they are really, really sick or really, really healthy.
If you or your family member is seriously sick and you would burn through that $5,000 deductible easily each year, the HSA would be a good plan because all you would have to pay each year is the $5,000 deductible, plus your monthly premiums. That’s it! Your insurance company pays 100% after all that.
Now if your family is really health, meaning, you hardly ever go to the doctor at all. You can build up each year a tax deferred savings account by saving your deductible each year. This account can then only be used for medical reasons of any kind no matter what your income is. In a sense, this account, over time, will turn into another big hairy ‘medical’ emergency fund on top of your 3 to 6 months fund.
The only way an HSA doesn’t make sense is if you go to the doctor often enough to where you don’t reach your deductible limit but use enough of the savings to where you hardly have anything left.
· Are there any of these things we just went over something you can implement today or the next time you can choose or change your benefits through your employer?
· If your employer dropped their healthcare benefits package, would you be able to afford healthcare out in the open market?
· If you’re married and both working someplace that has healthcare as part of your benefits package, have you compared the two plans to see which one is better?
· Have you checked the open market to even see if there is a better deal out there than what your employer offers?