Hello! My name is Scott Borden I am a self-employed independent health insurance agent. I purchase health insurance for my family of 5. If I worked for a big company they would be paying for a portion of my health insurance. There are advantages and disadvantages to being self-employed. No help for health insurance is a big disadvantage.
Is there a smart way to purchase health insurance without breaking the bank?
There are millions of self-employed Americans out there facing the same situation. Over the past 10 years since I first found Medical Savings Accounts (MSAs), I have worked with hundreds of health insurance agents trying to get them to recommend the lower cost Health Savings Account (HSA) qualified plans to self-employed people and businesses. Still today very few health insurance agents agree with me. The most common complaint I hear from agents is that HSAs are too confusing and too complicated. People just don’t understand them. They are too risky. You name it, I’ve heard it all.
Are HSAs really difficult to understand?
I’ll let you decide…
Which health insurance plan should I choose for my family of 5 living in Kansas?
Plan 1: Blue Cross Blue Shield of KC Preferred-Care Blue Premium
Monthly premium $725
$500 calendar year deductible per person usually with a maximum of 3 decuctibles per family
Co-Insurance – 80% up to the stop loss of $10,000
Example: $10,000 x 20% = $2,000 co-insurance out-of-pocket
Primary care physician $20 co-pay (some plans charge more for specialists)
Prescription medication $12 tier 1 generic (350 of which are now $4)
Prescription medication $35 tier 2 formulary name brand
Prescription medication $60 tier 3 non-formulary name brand
Emergency Room $100 co-pay then deductibe and 20% co-insurance
Maximum out-of-pocket $2,500 per individual (NOT including co-pays)
Maximum out-of-pocket $7,500 per family (NOT including co-pays)
Plan 2: Humana Autograph Total + Rx HSA
Monthly premium $365
$5,000 family calendar year deductible
Maximum out-of-pocket $5,000 per family
Take premium savings ($360/month) and deposit into HSA
Use HSA to pay smaller bills
If I don’t spend my HSA ($4,320 in the first year), I KEEP IT!
Which is more confusing? That wasn’t very difficult to understand, now was it. Plan 2 simply requires a deductible be satisfied then covers all remaining expenses including inpatient, outpatient, physician visits, and prescription drugs for my entire family at 100% for the rest of the calendar year.
Which would be the best to own in a healthy year?
The lower premium plan always saves money in a healthy year.
Which would be the best to own should I come down with a major disease?
In order to decide which plan “would be the best” we have to calculate which plan would cover the disease at the lowest out-of-pocket expense. Does my monthly premium play a role in this calculation? ABSOLUTELY!
With Plan1 we have to know how many physician visits, how many prescription drugs, how many outpatient treatments, how many emergency room visits, was surgery involved, etc. The policy claims “$2,500 maximum out-of-pocket per person” but unfortunately that didn’t include the co-pays. It is possible in this type of a situation to have literally thousands of dollars worth of co-pays above and beyond the “$2,500 maximum out-of-pocket”
Plan 1 summary:
$8,700 annual premium ($725 x 12)
+$2,500 “maximum out-of-pocket” (deductible + co-insurance)
+$1,000 (hypothetical) additional co-pays for additional services
+ $0 assuming no additional expenses for the rest of the family
= $12,200 TOTAL COST
Plan 2 summary:
$4,380 annual premium ($365 x 12)
+$5,000 family maximum out-of-pocket
=$9,380 TOTAL COST
Once again – requires a little study and math, but not very difficult.
I own the Humana plan now with a $7,000 family deductible that costs me just over $300 per month. Once money starts accumulating in the HSA then feel free to go to a higher deductible which saves even more money. This grows my HSA even faster!
Unfortunately most health insurance agents don’t want to take the time to educate the public on a lower cost way of managing health care expenses. The lower monthly insurance premiums results in lower commissions. Why should they work harder to make less? As long as 95% of the public is willing to keep paying rediculous health insurance premiums they will keep on selling them.
If I hear one more health insurance agent saying HSAs are too complicated for people to understand I am going to… 
I feel much better now!
Did I mention that HSAs offer tremendous tax advantages also?
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The problem with HSA’s is that they are connected to insurance plans. Insurance lobbyists were successful in requiring HSA’s to be sold only with a high deductible plan. On the surface it makes sense because most people would want something to kick in during a catastrophic illness. Instead, HSA’s are the same old thing. Insurance companies cherry pick applicants and the premiums are more than most people can afford to pay. In my case the premiums were so high that I would never have been able to save anything in the HSA.
Thanks to the insurance companies, MSA’s are no longer an option as they were legally eliminated in most states. It’s not that they weren’t affordable as that is an outright lie.
Dear forHealth,
Thanks for your comment!
I can tell you are passionate about incredibly high health insurance costs. After visiting your blog I understand why you are stating that the insurance premiums are too high. You are also self-employed. You have chosen to not carry any health insurance. You are trying to fund a savings account $80 per month. As long as you don’t have a major sickness or injury you can probably pay for your annual physical and your occasional minor sicknesses that way.
As you know you are running a high risk. I suppose if you had a heart attack you could go to the local public hospital and receive some sort of treatment and declare bankruptcy. Some people are comfortable with that. Most are not.
Maybe you are just starting out being self-employed and aren’t making any money yet. Hey, I started out in the insurance business at age 22 and I struggled. There was about a 2 year period when I didn’t have health insurance myself, and I’m in the biz!
According to http://www.freemarketcure.com,
18 million of America’s uninsured are between 18 and 34 and spend 4 x more money on alcohol, tobacco, entertainment, and dining out than health care.
17 million of America’s uninsured make over $50,000 per year.
9 million make over $75,000 per year.
Now I’m going to ask you some tough questions:
Do you have cable / satellite TV?
Are you making monthly payments for a newer car?
How many times per month do you eat out?
Do you use tobacco?
Do you have an expensive hobby ?
Most people do have the money to purchase health insurance, they are just spending it recreationally.
We live in a free country (for now). You can choose not to purchase health insurance. If you visit my website http://www.myHSAguy.com you can quote many health insurance plans in your state. Even if you go with a $5000 deductible you would still get the PPO network discount for whatever bills you do incur. You can pay off a $5000 deductible far easier than a $100,000 cancer.
I’ve said over and over again that I am an insurance agent that doesn’t like insurance.
I agree with you that health insurance premiums today are too high.
Believe it or not our beliefs are similar. I just feel there is a need for a safety net.
Scott
It is interesting because I have heard many of the same arguments. People assume that I am not taking a priority for my health. I must be foolishly spending money on wants and not needs, right?. The truth of the matter is that I was denied by the insurance company because of a certain medication I took, which I paid out of pocket for. Infertility treatment is an automatic denial for private insurance.
See that makes my situation more complicated. I practically begged for an HSA policy that I could afford. Instead I was turned over to the state subsidized high risk pool. That plan offered me NONE of the financial protection of a preferred policy. The premiums, deductibles, co-pays, and co-insurance was more than my annual income – and that was before I got to the actual HSA part. What a joke.
I like the concept of an HSA. I really do. But the major insurance companies are making it nearly impossible to even have one. So I kept my money and decided to invest it on my own, a little at a time. It is all I can do.
All of those financial questions you asked don’t apply to me. I eat out 1-2 times a year. 1 movie in the theater a year. No unhealthy, expensive habits like smoking or drinking. No vacations. I managed to figure out a budget for a policy that I could afford and the insurance company wouldn’t take it.
Most uninsureds do fit in the “wrong priority” list. I am glad to hear you are not one of them!
Thanks again for clarifying. You are an individual that needs the help of a real professional individual health insurance agent. Although health companies are extremely picky in their underswriting, don’t give up hope. I’m not saying I can get you coverage for the $80 per month you are now saving in your savings account, but according to underwriting guidelines for one of my companies any infertility medication that is beyond 3 years since last taken is STANDARD ISSUE!! Some medications only require 1 year since last taken.
I just got my 30 year old chiropractor here in Kansas a $5000 deductible HSA qualified plan for $57 per month. It includes first-dollar (before the deductible is satisfied) benefits for annual checkup, mammogram & pap at no extra charge. That gives her $5 million of coverage should something major happen plus her annual checkup at a very affordable rate.
Email me your info including name, age, home zip code, any other health conditions we haven’t discussed to scott@myHSAguy.com . I will see what I can do.
And now for the bad news… If I find you quality coverage you are going to have to make a major change to your blog!
Sorry I missed your radio talk but maybe I will catch it next time. Health insurance is so confusing so it is nice to get some information from you.!!
This is the best and simplest explanation I’ve seen. Good post!
The challenge is do consumers understand when to spend their HSA dollars wisely and when they can safely avoid care? A GAO study found that people using HSAs the most were those with high income who are using HSAs to fund retirement as well as accountants and doctors. The former know the tax advantages and the latter know when and how to spend their dollars carefully when it comes to medical costs.
That’s why I wrote the book Stay Healthy, Live Longer, Spend Wisely – Making Intelligent Choices in America’s Healthcare System. Written in an easy to understand format, it helps people be educated healthcare consumers so they know how to navigate the healthcare system like an insider. Save money. Stay healthy. Read free book excerpts at http://www.davisliumd.com.
Davis Liu, M.D.
Author of Stay Healthy, Live Longer, Spend Wisely – Making Intelligent Choices in America’s Healthcare System.
http://www.davisliumd.com.
I agree with Scott. Don’t give up on trying to get through an insurance companies underwritting process. There are many insurance companies available and they all have slightly different underwritting guidelines. Enlisting the help of a professional insurance agency is always your best bet, and the nice part about hiring one is they are free. They work for commission from the insurance companies, but by law, your rates are the same whether you use a professional agency or buy directly from the insurance company.