By In Around the Web, Prescription Drugs

How PBM’s Work, or, Why Being an Active Health Care Consumer Is Both Hard and Necessary

I was sitting down to write something and then saw this thread on Twitter and decided, to hell with it, this is a brilliant dissection of how pharmacy benefit managers (PBM’s) work and why and how they’re contributing to high prices in health care.

There are several ways to read this thread. Certainly PBM’s are not practicing fairly and with consumers in mind. But their dance partner, insurance companies, are to blame as well for turning the other cheek to the “kickbacks” that the DJ, pharmaceutical companies, are paying the PBMs for promoting certain brand-named drugs over available (and much cheaper) generics.

This scenario is not an uncommon abstraction. In fact, I’m dealing with two similar scenarios right now:

1) a drug I’ve taken for 15 years isn’t covered through my pharmacy of choice, Walgreens, because my PBM is CVS Caremark.

Price to buy through CVS: $12
Price to buy through Walgreens: $421

2) A drug prescribed for my son that is not yet available in generic form costs $309 after the GoodRx discount. I don’t have any option other than to go without or take my chances on a different drug with different/more side effects.

I wrote about a similar type of phenomenon on my LinkedIn profile last week, with a link to the definition of a “Mexican standoff.” For the uninitiated, that’s when two or more people have guns pointed at each other and the only way out is mutually assured destruction…or working together. It’s a favorite movie trope of Quentin Tarantino, and it usually doesn’t end in cooperation.

Until the lords of health care figure out how to work together, it’s on us to look out for our own interests.

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By In Accident & Disability Insurance, Voluntary Benefits

Best Laid Plans Need Best Laid Plans

This stat, from the nonprofit Council for Disability Awareness, is a great reminder that it’s not only a good idea to have an emergency fund but to take a serious look at some kind of disability insurance. Maybe you’ll get your emergency fund to a point where insurance isn’t as critical. Until then, don’t forget to be multi-layered in your hedges against the unexpected.

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By In Financial Independence, General Benefits Knowledge

The Russian Proverb for Employee Benefits: Trust, but Verify

On my personal Twitter profile, I describe myself as a “progressive pragmatist and vice-versa.” What that means is that I tend to look at things optimistically but with a healthy dose of realism. I want things to go well. I want everyone (myself included) to be prosperous and feel important. But I know, from my own upbringing and experiences of family and friends, that positive thinking alone won’t overcome bad odds.

Why am I thinking so philosophically on a Thursday afternoon? Well, I’m sitting in Reagan National Airport — fun fact: “trust, but verify” was a favorite saying of his in relation, ironically, to the Russians, who originated the saying — after attending an event focused on employee benefits. I’ve been to a lot of these types of events and the mood at the more research-focused ones is generally somewhere between unbridled optimism and abject despair.

“The economy is great right now, unemployment is at an all-time low and benefits have never been more important!” 🥳

“Yeah but employees are paying more and have no idea how to use their benefits.” 😩

The thing is, both perspectives are a little bit right. That’s where you come in.

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By In Budgeting, Do the Math, Financial Independence, General Benefits Knowledge, Health Insurance

Congratulations, You’re FIRED! Health (and Health Coverage) Tips for Early Retirees

If you’re in the FIRE vanguard, retiring in your late 20s to mid-30s, you’re (hopefully) living the dream healthy enough to enjoy your retirement to its fullest. If you’ve planned your housing, transportation and other common living expenses well, they will be quite manageable within your budget until it’s time to shuffle off this mortal coil.

But keeping that coil tightly wrapped gets harder with each passing year. Don’t risk your financial health by compromising on your physical health — get insurance. And not just the cheapest insurance. Make sure it’s good enough that it doesn’t leave you with huge bills if something bad happens. Such decisions and expenses should all be part of your FI plan, even if it means a few extra years of saving to be fully prepared for a long, healthy life of early retirement freedom.

Here are some tips for that early retirement health care party…

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By In Financial Independence, Savings and Budgets

An Essential(ism) Approach to Financial Independence

I’m currently attending the DIG South Conference, which was created by my friends Stan and Sunny Gray, here in Charleston. It’s a fantastic event — so important to promoting new kinds of business in a South that could use it.

With those new kinds of business come new kinds of thinking about both business and personal goals. That’s where I found myself thinking about FI and FIRE as the opening keynote speaker Greg McKeown laid out his model for Essentialism. It should be a familiar idea if you are currently taking in the better wisdom of FI — you need to reduce and/or remove the unnecessary to truly be able to focus on your most important goals. You cut your needs to the essential. It was a simple message delivered with incredible enthusiasm and it really got me motivated.

(For anyone looking for a quick primer on McKeown’s thoughts on Essentialism, he did an episode of the Tim Ferriss podcast that’ll get you up to speed and motivate you as well.)

After the presentation, I got to chat with Greg a bit more and told him about the FI movement and he said something that I’ve been feeling that I’ll now share with you: while he saw the great value of setting goals to achieve financial independence at an early age, he wasn’t fully sold on the notion of retiring early.

“I don’t see myself ever ‘retiring’ because I’m doing something that I love and want to keep doing,” he said. In other words, he’s applied his essentialism practice to his career and found one that he wants to do, as opposed to having something for a period of time as a means to an end.

It’s a thought that I’ve had as well because I quite enjoy writing and consulting and hope that I’m doing it for a very long time to come. Likewise, I know my BofFI cofounder has become very busy in his “early retirement.” In fact, most of the people I see in the FI blogger community aren’t really retired at all, even if they say they are. They’ve simply found a way to gain financial independence and then “retire” from having others dictate their daily grind.

It resonated perfectly as I read more and more posts from smart, driven people who are convinced that they will be retired at 40, or 35, or 29. If you have that drive, then you will certainly not settle for whatever notion you may have in your mind of being retired to travel the world untethered to a dependent source of income for the remaining 40-70 years of your life. You’ll need to have something to keep you going. And if you find yourself doing well at cutting out the nonessential early in life, you’ll be able to do it again and again as you grow older. I think that’s ultimately what I took from McKeown’s presentation and comments — the ends don’t justify the means, it’s the means that will sustain you before, during and after your FIRE journey.

Now I’m off to read the book so I can soak in some more essentialism!

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By In Do the Math, High-Deductible Health Plan (HDHP), Money-Saving Tips

HDHP: Managing Your Costs Before Meeting Your Deductible

With car insurance, deductibles are relatively straightforward — anything not related to damage of some kind, i.e. any maintenance or services, is not covered. You get your oil changed, you pay for it. You get your car washed, you pay for it. You get in a wreck and your car is totaled, your insurance pays for all costs over your deductible. Simple as that.

With high-deductible health plans (HDHPs), it’s almost the opposite. There are a number of preventive care services that you can have covered at no cost to you, provided they are “in-network,” meaning the doctor or healthcare provider you choose much be “covered” by your insurance. That’s lesson 1: even though you’re paying out of your own pocket for most things, if you want your insurance to pay for something before your deductible it met, you have to follow their network rules.

These preventive services are things like an annual check-up or physical, as well as screenings and diagnostic tests frequently associated with an annual physical, and other tests like cancer screenings. These services are mostly mandated to be free under the Affordable Care Act, but some employers have “grandfathered plans,” which means the plans were exempted from ACA regulations on the premise that they would remain cheaper than ACA coverage (something that hasn’t proven to be true, but I digress…).

The best thing for you to do is to find your plan details or request them from your company’s HR/benefits manager or directly through your health insurance provider. My family is currently on an individual ACA plan and I found my information pretty easily through the site where I bought my insurance, HealthSherpa (full disclosure: I do consulting work for HealthSherpa but don’t get paid to post the link I just posted — I just think they’re a great company if you qualify for ACA coverage), as well as through my health insurance provider site, SCBlues (full disclosure: I don’t consult for SCBlues 😜).

Anyway, take a look at what pre-deductible services you get for free and take advantage of the ones you think you need or that a doctor recommends for you.

Now, lesson 2: Even before the deductible is met, you want to pay attention to your expenses, because they will impact your overall costs. How? Well, sadly, pre-deductible costs are not created equally, nor are qualifying expenses.

Say you tweak your knee skiing. You need an x-ray, so you call around to some places (always ask the price!) and get the costs. You will likely find, as I have multiple times, that there is a huge difference between the “covered” pre-deductible cost for the service and the “cash” cost. It’s not uncommon for covered costs to be double that of cash costs. That seems like a no-brainer to go with the cash cost, right? Well, here’s the kicker: If you opt to pay the cash cost (not “cash” per se but rather the listed “cash cost,” because you can pay the “covered cost” with cash), that amount DOES NOT COUNT TOWARD covering your deductible. Sadface.

I don’t know why it’s done this way and I wish a law will be passed that will outlaw this “network cost” practice, but in the meantime you need to be mindful of the consequences of cash vs. covered.

While there is never a guarantee, if the service you need is relatively minor with little or no need for follow-ups (read: no additional costs), you may be better off paying cash to save the money right there and then. It seems like a smart move if the covered cost is, say, $500 and the cash cost is $250, which is a realistic scenario. If you think that there’s no way that you’ll cover your deductible without some kind of catastrophic accident happening, then pay cash — sort of like paying cash for a minor ding to your car rather than going through the hassle of filing a claim.

Now, you may end up having more costs and then you will want to shift to paying the deductible cost, but that would seem to make sense only if you truly expect to exceed your deductible by a large margin. (As a reminder, once you cover your deductible, you pay $0 for any additional services through most HDHP arrangements.)

Obviously this scenario doesn’t apply for people with chronic conditions or planned medical needs like childbirth. But for those minor scratches and dings, always ask the price and decide on your own whether cash is best or you want to make sure you’re paying down your deductible. YMMV.

And yes, take advantage or your free preventive care! Not just because you can, but because keeping track of your health could save you a ton of money AND give you a happier, healthier life in retirement, early or otherwise.

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By In Taxes

It’s Tax Day. Yay! Bleh.

I’ve been noticing that pretty much every day has some kind of designation now. Sibling day. Work-from-home day. Pizza day. Pie day. Laundry day?

But April 15 is and always will be Tax Day. Well, maybe not always but I’m a realist and don’t see any circumstances that might cause such a change in the tax system that we wouldn’t have an annual day to declare our income and figure out how much we get back/owe.

I know that it’s a big goal for some in the community to not pay taxes. I respect the goal but, while I’ll stop short of saying I’m a fan of paying taxes, I generally subscribe to Harold Pollack’s personal finance philosophy of supporting social safety-net programs. Those programs are paid with taxes, so there you have it. Maybe it’s too much to ask that we celebrate Tax Day but there is a silver lining to it.

But with that said, we also don’t want to overpay, right? Of course not.

Here are just a few things to remember for this Tax Day:

  1. There’s still an Individual Mandate: You may have heard that the individual mandate was “repealed.” Technically, it wasn’t — the tax that applies to the Individual Mandate was just set to $0, which basically means that even though you’re supposed to have health coverage, nothing’s gonna happen to you tax-wise if you don’t. Either way, that doesn’t kick in until the 2019 tax year, so you still need to provide a 1095-A, 1095-B, or 1095-C tax form. What’s the difference?
    1. 1095-A forms are for those who have coverage through a state or federal marketplace — Obamacare plans.
    2. 1095-B forms generally come from your health insurer if your employer is “fully insured,” which is most small businesses.
    3. 1095-C forms generally come from your employer if they are “self-insured,” which is the majority of large companies (like 1,000 or more employees).
  2. Even though you’re probably not going to have to pay for not getting health insurance, you still need good health insurance. Don’t bet on your invincibility and don’t buy bad insurance!
  3. If you have an HSA (or medical savings account, AKA MSA) and you’ve used the funds, either for qualifying medical expenses or not, you need to report that amount on your taxes. You should get form 1099-SA from your HSA bank. You may also need form 8889 to itemize your HSA funds for which you “took a distribution,” to determine how much you owe in taxes if any of it was not a qualifying medical expense and to prove to the IRS that you don’t owe additional taxes if the expenses qualify. Here’s more information from TurboTax.
  4. If you don’t have an HSA or you aren’t taking a distribution (i.e. paying for medical expenses) from your HSA, you can still deduct medical expenses equaling up to 7.5% or your adjusted gross income. (This amount goes to 10% for the 2019 tax year and beyond.) There are a lot of different types of things you can deduct that look a lot like the qualifying expenses list for HSAs and FSAs. Here’s a helpful link from H&R Block.

So there you have it. Just a few quick tips to get through Tax Day with a yay instead of a nay. Don’t leave any money on the table, people!

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By In Around the Web, Do the Math, General Benefits Knowledge, Health Insurance Utilization, Health Savings Accounts (HSAs), High-Deductible Health Plan (HDHP), Participating Provider Organization (PPO) Insurance

How to Make the Most of How Much It Sucks to Make the Most of Health Insurance

Tanja Hester at Our Next Life wrote a fantastic, comprehensive piece on the limitations and downsides of health savings accounts (HSAs) and high-deductible health plans (HDHPs). Before you dig deeper into this post, you should head over there and read it, because it’s chock full of awesomely useful information.

OK, see you back here when you’re finished…

Welcome back!

The Bottom Line

Now that you’ve read her post, you know that HSAs aren’t the magical “triple-tax-advantage” savior some might claim. Yes, there are definite benefits to HSAs if your circumstances are right (more on that in just a moment). But as we’ve said many times, HSAs are a contextually good idea attached to a pretty bad one — HDHPs — and you have to really lean in to avoid letting that bad idea drive your future more than the contextually good one.

Here’s the bottom line: Our “best in the world” health care system puts a great deal of pressure on us as individuals to make the right decisions about our health without giving us much to go on. It’s a system wrought with tradeoffs, and no one type of plan or solution it right for everyone. While HDHPs aren’t doing what they were meant to do, which is to make us better healthcare consumers, older plan designs like PPOs and HMOs aren’t doing that at all, and in fact could end up costing you more than an HDHP, with no added tax benefits and without drastically improving your health and longevity.

The TL;DR message is this: if you’re young and invincible or old and rich already, you can get an HDHP without much further consideration. For the other 99%, read on about some of the challenges we face as “consumers” of healthcare, with an HDHP and without one.

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By In Around the Web

Monday Reading: HDHPs, Health Expenses, and Student Loan Debt Paydown

It’s Monday. Yay! Time to take on the world…or maybe just procrastinate until lunch. Here are some quick reads for your FIRE brain while you’re processing the coffee.

First, a super-awesome and informative piece by FIRE pioneer blogger Tanja Hester about how, as we’ve said here on The Benefits of FI, HSAs can be great for planning but the HDHP you’re required to have with your HSA can be lousy. In particular, Hester shows how HDHPs can keep you from getting the medical care you may need. Great advice and I plan to write some additional thoughts later this week because it’s that important!

Second, a follow-up to our piece from last month about how much you might need in retirement to pay for health care expenses. Fidelity’s annual report is out and the new number is $285,000. That’s an even spicier meatball! In addition to saving with an HSA, it provides additional insight on how to be ready for these sizable expenses in retirement. (Spoiler alert: if you retire early, you’ll need more than $285k!

“How to Plan for Rising Healthcare Costs,” Fidelity Investments

Finally, a review of a newish idea — or perhaps just the oldest idea reinvented to sound new — for paying off student loan debt: equitization. The Lambda School doesn’t charge tuition and instead takes a percentage of earnings for the first several years. A big catch is that, if you don’t find work, you don’t pay for tuition. Other educational institutions have tried something similar. Is it a good idea? Maybe while the economy is doing well but maybe not so much when it’s not. What do you think?

“A new wrinkle on student debt: Pay-as-you-earn,” BenefitsPro

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By In Health Insurance Utilization, Health Savings Accounts (HSAs), High-Deductible Health Plan (HDHP)

Know Your HDHP’s Preventive-Care Benefits

If you have an HDHP, you may be working from the assumption that your insurance won’t cover anything before you meet your deductible. While the insurance company may wish that was the case, HDHPs are able to (and, in some cases, must) cover certain kinds of preventive care. These services can add up to hundreds or even thousands of dollars in essential services every year, so be sure to read the fine print on your plan before and after you choose it, and also to ask your company’s benefits administrator for these details if you can’t find them on your own.

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