One of the most expensive propositions facing early retirees is the cost of health insurance until medicare kicks in at age 65.  For traditional health insurance companies the age band from 60 through 64 carries the highest premiums, even for those in good health, while those in poor health may be denied coverage and have to resort to state HIPAA plans where premiums could exceed $3,000 per month.  There is an alternative, however.   Certain indemnity insurance carriers offer guaranteed issue health insurance with fixed, reasonable premiums.

Indemnity insurance differs from traditional major medical in that the insurance company pays a defined dollar amount for each procedure, period.  For example, let's say for a doctor's office visit the defined amount is $100.  If the insurance comany offers a preferred provider network (PPO) a visit to a participating doctor may cost $80, where a non-participating doctor might charge $130.  In either case the insurance company pays $100---in the first scenario you receive $20 from them and in the second case they pay the doctor the $100 and you pay the doctor $30.  This approach will certainly encourage you to shop around.

Similarly, in the case of hospitalization you may receive a first day benefit (ie:  $3,000) and a daily benefit (ie: $1,500), which means that for the first day you would have $4,500 to spend---indemnity benefits can be additive.  There is usually a surgical schedule (ie:  100% of medicare allowed) and a seperate anesthesiology schedule. Again, making use of participating network providers would be most prudent in such cases.

A guaranteed issue indemnity insurance policy may not be for everybody but might well be suited for certain early retirees, especially those facing what could be daunting health care costs while they await their medicare eligibility.

With almost 40% of small businesses not offering employer sponsored group insurance, millions of working Americans are having to purchase individual and family health policies on their own.  Such was the case with the employees at a company I recently met with.  The business owner explained she had no budget to offer traditional group health coverage for her 15 employees, things were tight enough as it was, but wanted to know if I could somehow help save them money on their premiums which were averaging close to $500/month for each of them.  Not only were we able to save each employee between $1,500 and $2,000 per year, but we also reduced the employer's payroll taxes by about $6,000 which gave her more than enough to put an employer paid group dental plan in place and still come out ahead.   No, the employees didn't suffer a reduction in benefits and, yes, this is perfectly legal.  The employer installed a turnkey (read 'simple') Premium Only Plan (POP), an IRS sanctioned plan governed by the Internal Revenue Code Section 125, and gave the employees an option to pay their health insurance premiums through payroll deductions.  What this meant was, instead of the employees paying their premiums directly to the insurance company, the employer witheld the premium amounts from their paychecks and sent them in to the insurance company on each employee's behalf.   The employees no longer paid FICA, federal, state or local taxes on those witheld dollars, resulting in increases in their take home pay of $125 or more each month.   The $6,000 employer savings came from her reduced matching FICA contributions, money she was all too happy to pass along to her employees by means of providing them with dental insurance.

Any employer can sponsor a POP plan:  Regular corporations, partnerships, S corporations, LLCs, sole proprietors, professional corporations, even not-for-profits.   Even companies with a zero benefit budget can offer a valuable benefit program to their employees while at the same time reducing their own costs.  Truly, a win-win scenario.

The reason so many people villianize the health insurance industry is from the misguided notion that health care for those under 65 should be an entitlement.  It never has been that way in America and, despite the fact we have Obama in office and health care reform is actively on the table, it is unlikely to end up so.  Health insurance is a business, just like any other, and the players currently do a good job.  Yes, health insurance is expensive but insurance companies just pass along the costs and their profit levels are certainly in line with the rest of American industry.  The real driving force behind the cost of health insurance is the providers and pharmaceutical companies.  Have you ever examined a hospital bill?  If you have insurance, look at an 'explanation of benefits' to see how the insurance company manages to cut those charges down through negotiated rates (PPO) to the tune of 70% to 80%.  Have you looked at the retail cost of many brand name prescription drugs? Many are in excess of $200 for a month's supply.  Try to come up with a business model where the average customer costs $1,000/year and once every five years, on average, runs up an additional $100,000 in charges, and see where your premium numbers would come up.

The big problem currently is the system is unfair.  You can be denied coverage or given a wait for pre-exisitng conditions or charged more if you are not healthy.  The insurance industry is willing to do away with all of these things and treat everyone the same if everybody goes into the insurance pool---which means a mandate that all Americans have heath insurance coverage.  In this way risk can be actuarially calculated and fair rates can be arrived at for everybody.  From what I'm hearing there is a definite possibilty in the near future that if you don't have health insurance through your employer then you'll be required to pay for it on your own.

If you believe a government run plan would be less costly, consider the current government plan: Medicare.  If you are Medicare eligible you can elect to have a private insurance company provide you a better level of benefits than the government plan at no cost to you---this is called Medicare part C, or Medicare Advantage.  The government simply gives the insurance company the amount they have allocated for you to provide more benefits than they are able to.

We need the insurance companies, we need them to be profitable so they stay in business and we need several of them in the marketplace to insure competitiveness.  Without them the cost to your for your health care, whether it be through premiums such as for Medicare parts B and D or through increased taxation, will undoubtedly end up higher.

As a health insurance broker specializing in small businesses I vividly witness the need for health care reform on a daily basis and I fully support addressing that need, even at the risk to my own livelihood.  There is much anticipation for reform in the marketplace I serve, especially the sole proprietors and husband/wife businesses, but much of that anticipation is based on an unsound premise that needs to be rapidly defused.  Before announcing the specifics of a health care reform plan, whatever it might be, the American people at large sorely need to be educated about health care and responsibility.  There are many Americans under age 65 who, probably due to rich employer provided benefits in the past, seriously believe that health insurance is an entitlement.  Compounding that with the fact that the Democratic Party is now at the helm of government and billions of dollars have been spent on other programs, I hear on a daily basis the growing expectation of free health insurance in the near future.  I’ve listened carefully to President Obama and, while I’m quite confident this is not going to be the case, I believe it is incumbent upon the President to lay some precise groundwork for the upcoming reform before the American people right away.  The message should be, in a nutshell: 

(1) Health care for those under 65 has never been an entitlement in America and it is not going to be so in the foreseeable future. 

(2)  It is the responsibility of government to ensure that the health insurance industry treats everyone fairly and without discrimination due to health conditions. 

(3)  It is the responsibility of every American to purchase health insurance for himself and his family. 

(4)  For those who might suffer economic hardship from purchasing a policy, the government will provide subsidy. 

This message had better be sent now, before the growing expectation I mentioned above becomes so commonplace that even the best reform bill will be regarded negatively by the American public.

HSAs, or health savings accounts, are one of the best ways to save on health insurance premium dollars and also control out of pocket expenses.   According to the IRS, maximum contribution levels into health savings accounts for 2010 will increase from $3,000 to $3,050 for individuals and from $5,950 to $6,150 for families (two or more).  100% of the money going into these versatile accounts is tax deductible, they are immediately accessable to use to pay for a variety of medical and dental expenses tax free and, unlike flexible spending accounts (FSAs), there is no "use it or lose it" provision.  Unused balances roll over year after year earning tax free interest and, after age 65, they can be used for retirement income just like an IRA.  The majority of my under-65 clients have HSAs; why doesn't everyone have them?

In order to qualify for an HSA you must first have a high deductible health insurance policy.  "High deductible" is defined for 2010 as a minimum of $1,200 for individuals and $2,400 for families, but many select higher in order to pay a lower premium.  In the simplest form (there are variations), all your medical and prescription expenses accumulate towards your deductible and it you meet it then the insurance company pays the remainder your claims for the rest of the year.   The premiums are often considerably lower for a high deductible health plan than for the more familiar copay plans and the idea is that you take the difference and deposit it into your HSA to create a pool of money to draw on until your deductible is met.   If you had a year with very few expenses then you've kept the money you would have spent on premiums.   Since the maximum out of pocket is also capped on these plans, even in a year with a lot of medical expenses your total costs would still probably be much lower than under the "traditional" plans.

Saving money on health care is just one of the benefits of the HSA, however.  It creates a pool of money that can be used for a whole variety of qualified expenses---see IRS publication 502 (www.irs.gov).  Since the money that goes into your HSA is tax deductible, you're seeing a 30% to 40% discount (depending upon your tax bracket) on anything you buy with that money, from braces to eyeglasses to premiums for long term care insurance.  

How might this work?  Let's use a real example of a family of 4 paying for a health insurance plan with $25 office visits, prescription drug copayments and a $500 deductible.  Their monthly premium is $1,140.  Now, let's move them into a $5,000 family deductible plan for $378/month.  That's an annual premium difference of $9,144, of which we put the maximum of $6,150 (for 2010) into their HSA.  What we have acomplished is (1) given them a health insurance plan which covers everthing 100% (allocate $5,000 of the HSA money for the deductible, just in case) with no out-of-pocket expenses, (2) given them $1,150 (the difference in the HSA) to pay for out of pocket dental expenses, and (3) on top of this, a real annual savings of almost $3,000.  Plus, unused HSA dollars roll over year after year.

There may be changes in health insurance coming in the future as a result of health care reform, but a health savings account is a way for you to save substantial dollars right now. 

With the media attention to dental health over the past couple of years linking the buildup of plaque to heart disease it surprises me that the average American only goes to the dentist 0.6 times per year; especially since its standard knowledge that everyone should have their teeth cleaned and checked every six months.  So, why don't people go to the dentist?

Some will honestly answer that they are scared of dentists or don't like pain but, considering the potential consequences of having to undergo dental surgery due to neglect, these are the folks who should be the most eager to endure a relatively painless oral exam twice a year.   Certainly, the pain of a root canal should balance out the slight discomfort of a prophylaxis.  Plus, many dentist also perform screens for oral cancer and take blood pressure as part of their twice a year screening service, certainly painless procedures that could be of great benefit.

Many will answer that they can't afford it.  Yes, if you don't have dental insurance that routine, six-month checkup with x rays could cost in excess of $150 per person and with the current economic situation one might well argue that that money is necessarily spent on a trip to the grocery store.  Quite true, so how about budgeting, say, fifteen to twenty dollars a month into a special account for dental?  At least you could cover one visit per year.   Even better, why not buy dental insurance on your own?   Many health insurance companies now offer individual/family dental insurance that rival group dental plans with prices in that $15 to $20 range (family coverage in the $60 to $70 range).   Plus, not only do these plans provide that visit every six months at no charge, they also cover other services such as fillings and even that root canal.  If you do the math you'll pay less in premium for a dental insurance plan than you would on your own for just two preventive visits.  

Hold it, you should be saying right now.   That makes no economic sense for the insurance company---aren't they losing money on a deal like that?  Go back to my earlier statement about the average American going less than once per year.   That study was done on people who have insurance.  My advice is, if you plan to look after your teeth dental insurance should be a no-brainer; you can beat the system and get more value back than you paid for.

I do have a word of caution for when you go shopping for a dental plan.  Make sure you are buying dental insurance and not a discount plan.   There are many discount programs available that give you access to a network at reduced rates but if you buy that type of program you will still have to pay something for each visit.  With the cost of a true dental plan being so affordable it's well worth it to go in every six months and pay nothing for that visit.

I saw a commercial on television the other day announcing that a third of the people taking antidepressants were receiving no benefit from them.  My knee-jerk reaction was they were either on the wrong medication or that those prescriptions were not the solution to their problem but, "not so," according to the announcer.   Just take yet another medicine on top of what you are already taking (which doesn't work) and you may find relief.  HUH? 

Americans as a group are some of the most effective consumers in the world: comparison shopping to pay the lowest price and making copious use of sales and coupons in order to stretch their budgets.  My father and sister compare notes almost daily about who found the best price on ice cream or milk, for example.   Why is it, then, that these American consumers appear to forget these well honed skills when it comes to medicine?

Setting aside all of the potential side effects that are rapidly listed at the end of the ads, let's look at this from an economic perspective.  How much do prescriptions cost?   Aha, therein lays the problem!   So many Americans are covered under prescription copay plans that $10 or even $20 may be considered minor for a month's supply of "something" that "might" be of benefit.   After all, it was on television so it must be good.

I'm not picking on antidepressants, but prescriptions in general.   I wonder how many people realize the actual cost for many of those medicines, especially those with brand names, is in excess of $200 for a 30-day supply.  Each!

"Who cares," seems to be a pervasive attitude.  "After all, my insurance company pays for it."

Is that so?  If you are an employee of a company with generous benefits you certainly might be shielded but those of you who are responsible for your own insurance premiums and have seen them more than double since 2000 know that those costs are just passed along.   Insurance, after all, is just like any other business and, contrary to popular opinion, insurance companies work hard to earn a relatively small profit margin.  Costs must be passed along.  Costs which are being driven up by thoughtless prescription drug usage.

Let's put those excellent American shopping habits to work and take control of health insurance costs.  I'm not suggesting that you stop taking worthwhile drugs that you really need.  What I am saying is to take a look at all the prescriptions you take, check them out online and make a list of questions to ask your doctor about them.  Do you need them all?  Are you taking any to offset the side effects of another, where a different drug or a change in habit may be equally as effective?   Why are you not on a generic version?

Americans, put consumerism in health care and let's help hold down costs!

In my business I talk to a lot of small business owners, almost half of whom do not currently have health insurance.  The majority of these uninsured people tell me they're looking forward to the upcoming healthcare reform, exuberant about the fact that everyone will be guaranteed health coverage.  Whe I point out that guaranteed health insurance is something they already have available to them the quick retort is invariably a variation of a standard "yeabut."  Yeah, but that costs too much.

How much is too much?  These are people who life in nice houses, make close to $100,000 per year, ...<< MORE >>

I'm Ronald and I advocate individual responsibility for our own health care, be it choice of insurance or personal habits.  Governmental regulation of the health industry is fine, even necessary, but we don't want government taking away our freedom of choice and the only way to ensure that is to practice individual responsibility.  ...<< MORE >>