Think Your Way to Wealth

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Health care and health insurance premium costs have been going up rapidly for many years. While it’s certainly not the biggest problem with health care in this country, one problem is the fact that, for many people, they use their health insurance infrequently, and feel like they are paying into a system (skyrocketing premium costs) without taking any of the benefits. After seeing how much my health insurance premiums were going to be going up this past December, I decided to go with a High Deductible Medical Insurance Plan this year, combined with a Health Savings Account (HSA). A HSA account is part of a “Consumer Driven Health Plan”, which supposedly allows the consumer to make more choices regarding their medical treatment and more control over how their medical dollars are being spent.

 Here’s how they work, and what I think will be the benefits of using this plan.

A health savings account is only available if you are in a High Deductible Health Plan. To qualify as a High Deductible Plan, the minimum deductible for a single person is $1,100, and $2,200 for a family in 2008. You are allowed (by law) to put up to $5,800 for a family plan, $2,900 if single. For me, this means I can put more than my max. out of pocket ($4000) in per year. Premiums for an HSA plan are normally lower than other types of plans. Contributions can be made pre-tax, if your employer has the option available, or post-tax and then deducted from your tax return. In general, you are responsible for all out-of-pocket expenses until you meet the deductible, and then there usually is a co-insurance portion. For me, the first $2500 comes straight out of my pocket. (i.e., no co-pays, I pay the entire bill) Between $2500 and $4000 worth of expenses, I pay 10%, the plan pays 90%. So for me to reach the max out of pocket, my total expenses have to exceed $2500 + $15000= $17500. After I hit $4000, the plan pays 100%.

Beneficial Features of an HSA Plan
• You can have the money to fund your HSA put into a bank account, which you can draw from to pay medical bills. Normally, your employer will set this up so the money comes out pre-tax.
• I can keep any money left in the HSA account, it rolls over to the next year, and I can take it with me if I leave my employer. (I can then still use what is left, but cannot contribute to it unless I get into another high deductible medical plan.)
• The HSA account available to me pays 4% interest per year. (This will vary based on your plan and the bank they use)  After reaching a certain limit, $2500 I believe, I can invest in a variety of mutual funds.  You will need to have a cushion, though, because should you need the money you have to sell your investments. But, using my situation as an example, after I have amassed my max yearly out of pocket, I could begin investing that money.
• If I do leave my employer, I can use any money in the HSA plan to pay Cobra premiums, if necessary. You may use your HSA to pay for COBRA premiums and Medicare premiums.
• Similar to an IRA, if you use the funds for non-medical expenses, you pay a 10% penalty plus income tax. However, once you reach 65, the penalty portion disappears, and you basically have a tax-deferred account you can use for medical or non-medical expenses.
• Similar to a flexible spending account (FSA), you can use the money for vision, dental, or over-the-counter medical expenses.

Criticisms of HSA plans
• Several health related groups feel HSA’s only benefit the healthy, and this will cause an increase in less healthy people’s insurance premiums. Although it can limit maximum expenses as well, so I am not sure if this is valid. Because prescriptions count towards the max. out of pocket, people who take a lot of expensive medications may end up paying less than they normally would.
• Many people also believe that because people have more choice, they may choose not to seek medical attention because they may have to pay out of pocket, and this may have a negative effect on their health.

Why did I do it?
Because after looking at the plan details and crunching the numbers, I have decided if I come out $1.00 ahead at the end of the year, it is a moral victory. I am hoping to do better, of course. The savings in premiums for me ($2400) is basically equal to my deductible under the previous HMO plan I was in, so I am “even” up to that point. Since I normally put about $1000 in my flexible spending account, I am now up to $3500, only $500 less than the total max out of pocket for the year. 

Now, if I were a healthy, single person, in my early 20’s I think this would be a no-brainer, at least for me.  But I am in my mid-thirties, and married with two small children. Have I made the right choice? I think I have, but only time will tell. So far this year, things have gone pretty well. I will keep you updated.

HSA Resources:
US Treasury 
Council for Affordable Health Insurance

Filed under: Health by RC - 2 Comments →

The April 2008 Edition of Smart Money Magazine contains an article entitled “Under the Knife: Cutting Medical Bills”, by Angie C. Marek. The article describes how “haggling” for better deals on medical costs is on the rise, and similar to finding the best price for airlines and hotels, those who search out the best deals will get better rates than those that do not.  The article describes 6 ways to get better deals and lower your medical costs.

 Ask for it early- Ask for a price break before the procedure, not after the bill comes in. Surgeons may offer a discount on the surgery fee, or a “two-fer” if you are getting more than one procedure done, such as with  plastic/cosmetic surgery. The author was also successful in getting 8 out of 10 mental-health professionals to offer some sort of discount on therapy sessions by approaching them and asking for a break on the price.

Pay in cash up front- Not surprisingly, paying in cash was the number one incentive to offer a discount, according to doctors questioned.  Ask the doctor or medical care provider up front for a discount for paying cash in advance, you certainly have nothing to lose.  Another good reason not to use a credit card, I would think!

Do your homework- The article describes how it can be difficult to bargain when you are not sure of the real cost of something.  One web resource listed was www.nahdo.org, where you can search for medical care cost data by state.  Another technique I have used is to use my health insurance provider’s member website, which can offer prices for drugs and other services as well. Also, I have found a simple Google search can often turn up information.

Butter up the billing staff-It is the people in the back office, running the business side of things,  not the doctors’ themselves, who often hold the power to reducing your medical bills.  Just by speaking with the office coordinator and fretting over the bill, the author was able to get a 66% price break on a skin tag (small growth) removal procedure.

Go at an off-peak time- Go to a plastic surgeon after the summer bathing suit season, and you may be able to score an “off-season” deal.  Also, offer to fill in for a cancellation at the last minute, or schedule an appointment at lunch time and they may cut you a break as well.

Hire an advocate- Hiring a professional to review your bill and negotiate a better deal for you may save you money, even after paying their fee.  A “Health Care Advocate” may have experience in health care billing which may result in savings for you. Do your homework before hiring one though, checking references and with the Better Business Bureau.

In these times of soaring medical costs, it certainly never hurts to ask for a discount, especially if you are underinsured or do not have health insurance, and the more informed you are about any medical costs you may incur, the better off you will be. This past January I changed my family’s health plan to a high deductible plan with an HSA (which I will discuss in the near future) where I pay a the first $2500 in costs out of pocket up front, so over the past few months I have been trying to educate myself on medical and prescription drug costs.  I will certainly be trying out some of these tactics when the situation arises in the near future.

Filed under: Health, Saving Money by RC - 6 Comments →

With health-care costs rising even faster than the rate of inflation over the last few years, its no wonder that one of the key issues of the presidential campaign season is health-care reform. Many people are worried about whether they will continue to be able to afford health-care premiums, prescriptions, or other medical needs in the coming years. Similar to investing for your retirement as early as possible, by taking care of yourself and your body as early in your life as possible, you can potentially avoid health problems later in life. Here are some ways to start living healthier now.

Get regular medical checkups-While you may have to pay a co-pay for an office visit, it makes no sense to spend hundreds of dollars a month on your health-care premiums only to skimp because you don’t want to pay a co-pay for a visit.  A lot of people, myself included, don’t really like going to the doctor, especially when we don’t feel ill, but getting a checkup ever year or two, even if you are young and healthy, (or more often if you are older) can alert you to potential problems such as high cholesterol, high blood pressure, or other conditions which can develop into lifelong chronic illnesses if you don’t take preventative measures early enough.

Get enough sleep-The amount of sleep an adult needs every night is debatable and varies from person to person (many experts recommend between 7 to 8 hours a night), but you generally know when you are not getting enough. 

Get your teeth cleaned regularly-This is another area where people like to put off regular visits.  But putting off regular cleanings and exams can turn small problems, such as a small cavity, into larger ones such as a crown or other dental work.  Again, if you have any sort of dental insurance, use it. You should also brush twice a day and floss your teeth.

Take Vitamins- The argument against taking vitamins, which some people even consider a waste of money, is that you can get all you need from a well-balanced diet.  If you are lucky enough to eat a well balanced diet every day, then maybe you don’t need to take them.  But I would guess that a lot of people don’t eat as healthy as they would like, and taking a generic multivitamin everyday is pretty cheap insurance that you are getting at least the RDA of important vitamins and minerals.

Get regular exercise- Simply adding 15 to 30 minutes a day of something as simple as walking can improve your overall health, and exercise is a great stress reliever as well.

Drop your Bad Habits- Smoking, excessive alcohol consumption, and unhealthy eating habits all work against you living a healthier life and lifestyle.  By giving up your bad habits, or at least cutting back, you will feel better, become healthier, and potentially live longer.

Filed under: Health, Saving Money by RC - No Comments →