Over on his personal blog, Platform for Good, our cofounder Shawn has written an excellent post on the advice he gave his daughter as she readied to select benefits through her employer for the first time. It’s chock-full of insights from an adult life spent contemplating how to make the best choices for your present and your future, organized into five helpful tips for making your benefits choices. Get on over there and give it a read!
As we have written about several times, getting benefits through your employer is essential to your FIRE plans but can also be very, very confusing. This article from a publication focused on brokers and consultants talks about exactly how confusing and frustrating it can be for you, the employee, to pick the right benefits for yourself and your family.
TL;DR: Only one in three of us feels like we’ve made the right decisions with our benefits selections — mainly because we haven’t been given the information we think will help us. As a result, we’re overly risk-averse.
Our advice is to do as much legwork as you can on your own. Put your analytical FI mind to work, build some spreadsheets, crunch some numbers, as your benefits administrator at your company loads and loads of questions. Then make your choices with more confidence. And if you find that your choices aren’t that great after all, let you benefits administrator know so that, hopefully, they’ll take your advice and do a better job for everyone the following year.
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…
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.
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…
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.
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.(more…)
As I’ve reading through blog entries and comments in the FIRE community, two things have come to mind:
- Y’all are some smart mofos! Seriously, reading what everyone is saying about how they consider their benefits in relation to their income, savings and wealth is endlessly entertaining and rewarding. People are taking the time to really think about what they’re doing, learning by trial and error, and experimenting with strategies that work for them based on where they are in their lives and, often, where they are in the world. Keep it up, people!
- It’s human nature to think of your health insurance in the same way that you think of other kinds of insurance, like your auto or house insurance (“P&C”), or life, disability and other accident indemnity insurances. It works to an extent, but be careful not to think of them as interchangeable. That’s what today’s post is about.
My wife went to the pharmacy the other day to refill a prescription. We changed insurance on January 1, so when they told her the first time she got the it filled three weeks ago that our plan didn’t cover the prescription we needed for one of our kids, it didn’t seem out of the ordinary. In fact, the pharmacy was nice enough to give us a discount through GoodRx — something I talked about in this post.
Well, it turns out that the discount was a whole lot more than we should have paid, anyway.
When the pharmacist told my wife our Rx would be $152, she texted me just to commiserate about the high cost and ask if it was because of our new insurance. I said yes but that they gave us a discount to get it down to $90 and that she should be sure to ask if they can give it to us again. That ask set off a series of events that blew our minds.(more…)
I saw an interesting question posted on Twitter this weekend that got me thinking about HSA eligibility. The question was about whether the new short-term, limited duration health plans being offered under a new expansion by the Trump Administration qualify as high-deductible health plans (HDHPs) and, as such, also qualify for health savings accounts (HSAs). I didn’t see that an answer was tracked down yet but the gist of the argument is that since HSAs are governed by the IRS and not Health and Human Services, which approves health insurance plan designs, then an STLD plan could also be an HDHP.
Why should this wonky distinction matter to you? Two reasons:(more…)
Whether you have regular health insurance or you are of the age/eligibility to receive Medicare coverage, one of the trickiest things to have to deal with is whether the service you need is covered. I have heard many stories about people who have gone into a doctor’s appointment thinking that Medicare will cover their needs and found out later, via a huge bill, that they did not. My mother spent more than a year reconciling a bill that my stepdad received and she would have loved to have easy access to coverage information on her smartphone while the doctors appointment was happening.(more…)