Re-evaluating Health Insurance Options

[vvvvvvv]

So... my health insurance goes up 45% on January 1 to cover the crap from Obamacare.

I'm in the process of evaluating my options.

This is what I've been looking at:

• Keep my current plan ($1K deductible)
• Switch to a $5K deductible with a small increase above my current premium
• Self insure

Yes, the last one sounds crazy, but the more I look at the numbers, the more it makes sense.

So please, I ask for input from supposedly-anonymous people that I trust.

 

[doctorjj]

If you are reasonably healthy and have a decent income to cover occasional minor issues that might come up, you could look into getting a catastrophic only type plan. Doesn't cover anything unless it's major but you likely won't need much health care anyway. It only protects you from being screwed if something, God forbid, horrible happened to you.

 

[vvvvvvv]

If you are reasonably healthy and have a decent income to cover occasional minor issues that might come up, you could look into getting a catastrophic only type plan. Doesn't cover anything unless it's major but you likely won't need much health care anyway. It only protects you from being screwed if something, God forbid, horrible happened to you.

Where do I find these? I'm an online shopper. You know, fill out the form once and get multiple quotes and policies sent to me, read them, narrow, read again, narrow, read again, and choose which one seems to work best.

The only things I can seem to find online anymore are high-deductible ones.

By the way, is the "God forbid" a sign of sarcasm? (j/k)

But yeah, I'm reasonably healthy. The only health problem is my asthma, but I know part of it is diet and exercise related, and I am willing and working to fix that. Even so, I spend under $300/yr between the meds and the dr. appt. for the prescription renewal.

I treat my allergies and any other ailments OTC if I can. In fact, I find that just taking something to help me go back to bed if I wake up feeling sick or overcome with allergies is good enough 99% of the time since I can just sleep it off. It takes a pretty bad sickness to get me to see a doctor.

But yeah, the only thing I'm worried about is that $50,000+ medical bill. I don't worry about the $200,000+ too much, because I'm likely terminally ill at that point and I can take an advance on my $500,000 term life insurance policy (well, at least until I am 44).

But even then, you can always work out a payment plan. And it's been the experience of some of my friends that offering a lump sum in cash can significantly reduce the bill.

 

[Jerryinokc]

The good Doctor has a valid suggestion. Without knowing your age or general health, I would offer up the following (please forgive me now for the length of this one):

"Self insure" has numerous levels of meaning to different people. For some, $5,000 would be enough to break them, while others would only consider a catastrophic policy to protect their assets over a certain level (say, $10,000 or $20,000). I for one take the largest deductible I can on my homeowners/auto/health insurance because I don't care about the broken window or small claim; I only care about the tornado, fire, or semi-truck that just wiped out my GMC.

Your health is a different matter, but I apply the same principle - buy inefficient and exorbitantly priced insurance for the MAJOR health issues, not the minor ones. Believe me, there is a reason insurance companies won't let you take TOO HIGH a deductible, because that's removing all their profit (I'm talking about individuals or very small employers here, not Walmart). Remember the scenario on my homeowners insurance? They typically only offer a few % points difference in premium credit between a $1,000 and $5,000 deductible. Why? Because the chance of a loss between 1,000 and 5,000 is small and they don't want to give that profit away.

So, let's look at that suggestion of "self-insure". I'll wager the premium for you and your family (let's assume you have one, but just cut in half the estimates of the money I'm about to discuss if you don't) runs around $900 to $1,200 per month for a decent policy with a $1,000 deductible. Let's call it $1,000 per month. That policy also provides a "coinsurance" clause that makes you take part of the risk, even after you pay the deductible, and we'll say that's 80/20 (they pay 80%, you pay 20%).

So, you find yourself going to the hospital for a couple of days and it costs a total of $10,000. In addition to your deductible of $1,000, you also have to pay 20% of the remainder, or $1,800. So your total out-of-pocket experience for the year is $14,800 ($1,000 per month for insurance, $1,000 deductible, and $1,800 copay).

Now, here's where your age and health condition come into play, not to mention your ability to sleep at night knowing you're "self-insured". If you were to take a $10,000 large deductible plan, and buy catastrophic coverage over that, it might provide as much as a 30-40% credit over that current $1,000 premium, making the monthly charge $600 per month, or a savings of $4,800 a year.

IF YOU'RE HEALTHY AND DON'T HAVE MAJOR PROBLEMS:

- Each year you will save $4,800 while protecting against that MAJOR problem (pray you don't have it within the first two years)

- Go those two years, and the savings are $9,600, three years would be $14,400. Sounds pretty good, huh! What's the problem?

99.9% of all people WILL NOT SAVE that money in an account for when something bad happens, meaning they will have to dig for the $10,000 somewhere! That's when they get into trouble and can't sleep (see my earlier comment about sleeping through the night).

Sometimes, just the worry of having to come up with $10,000 is enough to cause fits at night. Sometimes, it's worth paying that high premium to know you're covered. Again, if you're fairly young, in reasonable health, and have the discipline to put the savings away, there is really no decision - take the high deductible and bank the savings in preparation for that bad event down the road. It also gives you the confidence that you've got the funds to deal with any major issue, and trust me, healthcare providers LOVE CASH! In fact, it's not unreasonable to negotiate huge discounts if you pay cash for your "small" healthcare.

Sorry for the lengthy email, but you're facing a fairly serious decision. Make sure you consider the TOTAL cost of risk, not just the premium (factors such as health, your ability to bank the savings, whether the premium credit is really worth the increased deductible, etc.). People today have forgotten that SOMEBODY has to pay these bills. Relying on ever-decreasing "insurance" is just not a sound plan anymore.

I wish you the best of luck. Being a small business owner that provides health benefits to his employees, I know the struggles. The changes that are coming down the road will not make it any easier.

 

[Shadowrider]

Veggie I got mine through eHealthinsurance.com. They are only a broker, my plan is from Humana. I have a 5K deductible, 80/20 plan. It's also a HSA plan. I prefer to put the cost difference into my HSA account. In 4 years I've written 1 check out of it for $180. If you only spend $300 a year in prescriptions, you could do that easily, that money is tax free, and your account still grows. I really don't know why more people don't get their own plan and do an HSA. They are just like a Section 125 plan except if you don't spend it you keep it, still tax free.

My plan for just me is around $250 a month and a small part of that is a life insurance rider added on.

 

[vvvvvvv]

<snipped for length>

24 years old, self-employed, only insuring me. Spouse has insurance through employer. Current premium is $99/mo.

When I got the policy, I had just left my full-time job where Oklahoma taxpayers were footing my insurance bill, we were just getting our emergency funds built up, and I wasn't sure where business would be. So at the time, even though a $2000 deductible was feasible, a $1000 left more cushion, and a $500 had a >$500 difference in annual premium.

We are very disciplined when it comes to savings. We have a personal savings account that is automatically drafted from our bank account when my wife gets paid. This is the account that goes to pay quarterly, semi-annual, and annual bills (including taxes), and the amount we put in is a little higher than what we project we need. A lot of the time, though, we're able to pay some of those smaller bills without transferring back out from that savings account, but we don't lower what goes in there so it ends up building even more of a cushion.

Additionally, we have an "emergency savings" money market account with a checkbook for when we need to access money immediately (from the Dave Ramsey plan). Fortunately, it's never been tapped.

I fully understand the magnitude of this financial decision, which is why I asked for some additional input. I also have a pretty good idea of whose advice to consider here, and whose to table.

The plan I was considering for self-insuring was taking the premium (plus some) and placing it in a proven growth mutual fund. The "tax-free" part of the HSA plans don't apply because it comes out after paying self-employment taxes. Health insurance premiums are only deductible through 2010, and it doesn't look like they will extend that deduction. So to me, the capital gains tax looks like a tolerable trade-off.

I know from experience that even the payment terms of the deductible portion of a medical bill is negotiable, as in that $10K in your example would not necessarily need to come in at once. To me, that $10K could be found by strapping the belt really tight over the course of a year and only paying minimums on the debts that we have, especially considering that a $10K medical bill is eligible for a tax deduction.

That is what's making the self-insured option look so not-crazy in my opinion, and even more attractive if there is a bit of a safety net for those catastrophic events that don't leave me terminally ill.

I know the first couple of years will carry the highest risk impact if I go that route, but the way I look at it is that it will most likely pay off in the end.

I know I've said many times on this forum that I am a Dave Ramsey fan, and I know that Dave Ramsey would likely not advise this. But I also know that his teachings are geared toward the lowest common denominator of that 99.9% you mentioned, and I firmly believe that we have more discipline than that.

Veggie I got mine through eHealthinsurance.com. They are only a broker, my plan is from Humana. I have a 5K deductible, 80/20 plan. It's also a HSA plan. I prefer to put the cost difference into my HSA account. In 4 years I've written 1 check out of it for $180. If you only spend $300 a year in prescriptions, you could do that easily, that money is tax free, and your account still grows. I really don't know why more people don't get their own plan and do an HSA. They are just like a Section 125 plan except if you don't spend it you keep it, still tax free.

My plan for just me is around $250 a month and a small part of that is a life insurance rider added on.

I'm self-employed, so it isn't exactly tax-free for me. eHealthInsurance is where I found my current plan, and where I've been doing my shopping.

 

[Jerryinokc]

Sounds like you already know a lot and have a good plan put together. Well done.

 

[Jeff3C]

Sure if it was only $10,000 you might get away with self insuring. What if your in a major car accident and it's $500,000 (very possible with a back or neck injury) or a minor knee surgery and it's $35,000. You need to plan for the worse and at $99/month protecting your savings and assets seems like the smart thing to do.

Even if you do delevop some kind of disease it can be hard to collect early benefits from life insurance unless it is certain you are going to die, so I would not count on this as an option.

 

[Shadowrider]

24 years old, self-employed, only insuring me. Spouse has insurance through employer. Current premium is $99/mo.

The plan I was considering for self-insuring was taking the premium (plus some) and placing it in a proven growth mutual fund. The "tax-free" part of the HSA plans don't apply because it comes out after paying self-employment taxes. Health insurance premiums are only deductible through 2010, and it doesn't look like they will extend that deduction. So to me, the capital gains tax looks like a tolerable trade-off.

I know the first couple of years will carry the highest risk impact if I go that route, but the way I look at it is that it will most likely pay off in the end.

Yeah, I'm self employed too.

But if your current premiums are that low, the "plus some" that you add is going to have to be a considerable amount to get to where you "can sleep at night". One thing you might consider is running the HSA thing for like 3 years or so. Then go with your plan, leaving your HSA intact (just not making any further contributions because you wouldn't have a qualifying health plan) and invested conservatively in a dividend paying portfolio. Then open another account for your current contributions and self insurance purposes. Think of your HSA as a "bond" but you'd still be able to use it tax free for medical if needed.

I'm "up" well over 100% on my contributions to my HSA. With the right investments you could get there in less than 5 years and still not have to tighten your belt too much.

Regardless, you sound like your on the right track and have thought it out well.

 

[finnimus]

• Keep my current plan ($1K deductible)
• Switch to a $5K deductible with a small increase above my current premium
• Self insure

Here are my thoughts:

Self insure: I recommend against this. Yes there is the potential for savings if you put dollars into investments, etc. in a disciplined manner. However, there are a few things you should think about. First, if you need to see a physician, especially a specialist, many will not see non-insured patients. Secondly, if you require a procedure at a hospital, many are requiring large deposits to see uninsured patients for "elective procedures." You would be surprised what they consider "elective." Third, there prices for cash paying patients are often greater than what insurance companies pay. Yes, there is a self pay discount, but it's often not as good as what insurance companies get and there are paying terms attached (e.g. full amount in 90 days). Fourth, you said you are "healthy." People in your age group have 3 main (non-trauma related) things they go to the hospital for: sports injuries, child birth, and the onset of suprise chronic conditions (MS, ALS, etc.). These are expensive to treat and your options are limited being self pay.

$1k deductible vs. $5k deductible. I'm assuming both have the same exact coverage, just a change in deductible. Between the two, I suggest $5k. It allows you to be "insured," get treatment, and have a cushion incase something goes wrong. Definitely put the dollars aside.

Being self employed, I would not suggest a catastrophic plan. I consider "catastrophic" any plan with a deductible greater than $10k. Let's say you are under a catastrophic plan and something goes wrong. Chances are you will be out of work for a while. If you are out of work, how is that going to affect your ability to pay the deductible on top of the 20% out of pocket? You're now looking at paying $10k+ out of pocket. The average cost of an ICU day is $3k, a day in a hosiptal bed is about half that. The $10k dissapates quickly, but the 20% out of pocket will keep tallying up.