March 25, 2014
What You Need to Know BEFORE Buying Health Insurance [Part III]:
HealthCare Planning
HealthCare Education Series written by Net Advisor™
This is Part III (“HealthCare Planning”) of our eight-part series on information to help you understand about health insurance costs, choosing the right plan for you, and how the industry works.
[8] HealthCare Planning.
If you’re still not sure what kind of health insurance to get after we’ve covered the basics and the type of plans out there, here are some more things to consider.
I Have Large Savings Dedicated For Healthcare Emergencies
If you have large cash reserves (anticipate for the size of your family, maybe $50,000 to $100,000 or more set aside for healthcare emergencies) then a higher deductible with no more than 20% (or preferably zero percent) of co-insurance would be my preference.
You may not need that much money set aside, but as a risk manager, better safe than sorry, right? On the low end, if you can try to start saving no less than 200% of the annual deductible is a good start. Remember your premiums are not usually the most expensive part of insurance costs, it’s the co-insurance, followed by the annual deductible that can add up to more than your premiums in a higher healthcare situation.
I Don’t Have Much Savings Dedicated For Healthcare Emergencies
If you don’t have large reserves of cash to cover any of the out-of-pocket co-insurance costs, then you want a plan with zero co-insurance.
At this point the size of the annual deductible depends on your current health, health history and family health history. If you have ongoing healthcare needs, probably a low annual deductible might be best. This plan with no co-insurance will be the premium plans with highest monthly premium costs, but then all you have to think about in terms of cost is whether the monthly premium still affordable for you.
I am in Excellent Health
If you are in excellent health, young or relatively young with no health issues or related history, and don’t want to come up with an unknown amount for co-insurance should you need real medical care, maybe a higher deductible with no co-insurance could save you money. Just know the higher deductible means you have to spend that much each year before your insurance really kicks in and starts paying.
I Want More Control Over My HealthCare Decisions
If you want more control of what doctor you can see or have more serious health issues and not a lot of cash reserves, a PPO plan with no co-insurance and lower annual deductible (that you can afford) might be the best way to go. This will be one of the premium plans, but think about how much you may be spending for healthcare having to meet annual deductibles and co-insurance.
My preference is to try and get zero co-insurance. The last thing most people want is to pay the full annual deductible, then get whacked with another 30% (on a 70/30 plan) for the rest of the bill related to co-insurance.
[9] Start a Savings Plan For HealthCare Now to Reduce Future Risk
Another way to help control premium costs and offset future health costs is to set up a savings plan just for healthcare. Money set aside should be placed in a health savings account or very conservatively invested. A one percent savings account when inflation is running two percent or more will erode your buying power over-time. You might also consider opening up a separate IRA or preferably a Roth IRA conservatively managed for medical savings.
Some advisers may not consider the greater tax deferred savings (IRA) or better – get tax free savings (Roth IRA) by using a dedicated retirement account to help pay for healthcare, especially if exhausted a health savings account, but this could be an interesting strategy.
There are rules for withdrawals for medical reasons in retirement accounts and these rules can change. This would mostly likely be used for major medical where the medical costs exceed currently 7 1/2% of your adjusted gross income. Consult with a CPA or tax law expert before considering this step.
If for some reason you don’t end up using the money set aside for healthcare, you just created another retirement account! If you become deceased, you created a way to help provide for your spouse or beneficiaries.
If income is currently limited, you could also get a lower annual deductible say $3,000 with ten percent co-insurance and start putting let’s say $100 a month (or whatever you can afford – try to hit $50 minimum) in a health savings account, or create your own reserve account for health emergencies.
Once that reserve is built up to the deductible, then you can change your plan to a higher deductible and reduce your monthly premium because you have cash to cover the deductible now. Remember to keep the savings going and repeat this process. Worst case scenario here you have built up a savings account!
[10] What are Medical Write-offs?
Frequently, when receiving medical care, or even just a doctor visit for the common cold, or annual physical, you’ll get several bills for the same service, and then the amount will adjust lower on the final bill.
The insurance company will generally pay the Contract Rate – the pre-negotiated agreement between the doctor and the insurance company, and then you pay another part of that bill.
For example:
If you have received a health bill for say $525.00. It will eventually be updated where part of the final bill was “written-off,” we’ll say it was $125.00 in this hypothetical example:
Medical Bill: $525.00
Insurance Paid: -$279.00
Write-Off: -$125.00
You Pay: $121.00 (This amount is also applied toward the annual deductible for that calendar year.)
Once you meet the annual deductible, your insurance pays up to the co-insurance rate. If you have zero co-insurance, your insurance pays 100% for that calendar year. Then you have to meet the deductible again the next calendar year and so on.
The part of the bill which is written-off is the part that neither the insurance company, nor the patient pays. This write-off is the doctor’s rate if you didn’t have a negotiated contract (healthcare plan) with the insurance company.
If you have any questions about what part of the bill to pay, contact the insurance company. Some doctors might send you bills as an implied “courtesy notice,” but this just means they are waiting for the insurance company to pay first. The doctor hopes you just pay this bill, when in fact you may not be obligated to pay all of it. Some or all of that bill could be covered by insurance, and some of that bill may be written off according to the Contract Agreement. It’s kind of like you are getting a discount for having insurance.
I would wait until the insurance company pays the doctor before you pay. If you get late notices from the doctor, call the insurance company to see what the status of the claim is. Then call the doctor’s office to inform them of who you spoke with and about what. If the claim is processed by the insurance company, then it’s your turn to pay.
[11] Why It’s Important to Keep Good Records
Keep all your health records and payments. Also keep records on the bills of dates, times, persons you spoke with on the phone and what was said. Repeat the conversation at the end of the call to confirm everyone is on the same page. Also get copies of all imagery work (X-rays, MRIs, CTScan, etc). Some facilities put this on CD’s now. Remember to ask for copies of everything you sign your name to.
Write your check number, date and amount paid and date mailed on your copy of the medical bill in case you need to refer to it later. If paying by card (not recommended, because they have you credit info), ask for the confirmation number of the charge and amount paid. Remember to write down who you spoke to, date and time.
Keep in mind you are dealing with a business and often times low-level employees who sit in front of a computer fielding calls all day. In my experience these people are not altruistic (including government) who are just waiting for your call so they can pay your medical bills.
You may be talking to a call center that may route your calls outside the USA. Many times the call centers could care less about your situation, and all they know is what was input on your file from someone else which may or may not be accurate.
They all keep files and records on you – mostly to protect themselves in case of a dispute or lawsuit. So you need to protect yourself too by keeping detailed records on conversations, date of calls, time you called, what number did you call, who you spoke with (rep’s first and last name) and note everything that transpired.
If you have a difficult problem, ask for their employee number too. Be nice though, they are not all bad. Just know they are representing their interests, not yours.
Article Series Index:
Part I: Health Insurance Basics
Part II: Choosing a Provider
Part III: HealthCare Planning
Part IV: Risks of Under-Insuring
Part V: The Truth About Health Insurance
Part VI: Navigators (Coming soon)
Part VII: How Your Health Insurance Rates Can Increase (Coming soon)
Part VIII: How to Profit from Your Insurance Company (Coming soon)
original article content, Copyright © 2014 NetAdvisor.org® All Rights Reserved.
Disclaimer: Post intended to be commentary from an insider’s view and based on actual experience working in and out of the industry. Poster’s licenses are currently inactive by personal choice. The information provided herein should not be deemed as specific investment, tax, insurance or legal advice. Rules and laws can change and thus opinions can change without further notice. Individual experiences and situations will vary. All of the data was accurate to the date of this post. Please contact your state or licensed appropriate person for specific advice for your specific needs.
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