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 12 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 Premium Plan 2011 Outline of Coverage (to include name brand drugs which can costs tens of thousands per year in some cancer or other dread disease situations)
Monthly premium $775
$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 $10 tier 1 generic (350 of which are now $4)
Prescription medication $50 tier 2 formulary name brand
Prescription medication $80 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 $422
$7,000 family calendar year deductible
Maximum out-of-pocket $7,000 per family
Take premium savings ($353/month) and deposit into HSA
Use HSA to pay smaller bills
If I don’t spend my HSA ($4,236 in the first year), I keep it.
The way I see it, the first $4,236 of all my medical bills are “paid” at 100% with money that would have gone to the insurance company!
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:
$9,300 annual premium ($775 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
= $12,800 TOTAL COST
Plan 2 summary:
$5,064 annual premium ($422 x 12)
+$7,000 family maximum out-of-pocket maximum
=$12,064 TOTAL COST
So even if a major claim occurs in the first year, the HSA qualified plan works best!
Once again – requires a little study and math, but not very difficult.
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?