Every Monday is Intents and Purchases day at Living Behind the Curve.
Health insurance is one of those must-haves, right? Everybody needs it, and living without it can be devastating… except when it’s not. When I made the decision to look for part-time work, I had to take a very hard look at not only our finances, but also how I would take care of my health (Mer’s company doesn’t offer Domestic Partner coverage.) I did some research into self-insurance, and then sat Mer down in front of the whiteboard a little over a week ago to spew out some numbers, with surprising results.
I headed over to eHealthInsurance to gather some data. As I poked through the the different plans and delved into the exclusions and limitations docs, it suddenly occurred to me that if I didn’t have experience in the health insurance industry, I wouldn’t have known what I was looking at, or what I should be looking for. I’ve heard stories of people feeling ripped off by their policies, and I can see why. If you’re looking into insurance for yourself, try to find a friend that has experience with the terminology or at least knows what to look for — it can save you some major headaches.
Once I sorted through all of the information, the best plan I came up with for my needs laid out like this:
- $89.11/month
- 24-month exclusion for pre-existing conditions
- $5000 annual deductible
- doctor visits, hospital care, and prescriptions are covered at 100% after deductible
Sounds good, right? Not really. Let’s examine that a little bit closer, in reverse order:
- doctor visits, hospital care, and prescriptions are covered at 100% after deductible
100% coverage is good, yes, but only after I meet the deductible, so after I’ve spent $5000 out of pocket, the insurance covers everything. - $5000 annual deductible
I looked up my EOBs* from the last year, researched cash prices for the drugs I’ve taken, and totaled up the amount that I would have spent on medical care and ’scripts if I had not had insurance. I rounded up, and even with generous cushioning, I spent less than $1200. If I had this plan, I would have spent $1069.32 on premiums and $1200 on medical care, and the insurance would not have covered a single thing because I had not yet met my deductible. (*An Explanation Of Benefits, or EOB, is that annoying statement your insurance company sends you after you’ve been to the doctor. It basically says, “your doctor billed us $80, we paid $35 under our agreement, and you’re responsible for your $25 co-pay.” It’s an excellent resource to see how much — or how little — your doctor is actually charging.) - 24-month exclusion for pre-existing conditions
This exclusion, which most (if not all) individual insurance policies have, says that if you have been treated for something in the last 24 months, it will not be covered for the first 12 months that you are insured under this policy. (Time frames may vary.) This doesn’t apply to things like the common cold, but for me this does apply to all the reasons I would want to have insurance — my migraines, fibromyalgia, and bipolar disorder. To make things a bit more interesting, this particular policy also defines pre-existing conditions as “symptoms which would cause an ordinarily prudent person to seek diagnosis or treatment”, so even if I hadn’t been to see my rheumatologist in the past 2 years, but a normal person would have gone, they could deny any coverage for my fibro. - $89.11/month
$89.11 every month for a plan that would only cover my routine care if I had a catastrophically bad year of health, and even then only if that catastrophe was not connected to my pre-existing conditions (in the first year). Hmm. I’m certifiably mental and I hurt all the time — most things can tie back to those issues in one way or another.
But…did I really have any other options?
Well, I am a student, so I can take advantage of the free health care offered by the college’s nursing staff. That would cut about $500 out of the annual medical costs. My school, unfortunately, does not offer a student insurance program. That may change when I transfer in ‘08 from community college to the 4-year university to finish my bachelor’s, so cheaper insurance may be available to me at that time.
I took a step back and thought about car insurance. I have insurance on my truck so that I can replace it if it’s damaged beyond repair (and because it’s required by the state). Car insurance doesn’t cover oil changes or flat tires; it won’t replace my clutch or fill my windshield washer fluid. Why would I expect health insurance to do the same? I know that if my truck gets squashed, Progressive will be out in their cute white trucks, take pictures, and eventually give me a big chunk of change — I don’t have $15,000 sitting around to replace my truck, but they do (well, part of it, anyway.)
What if I could have the money laying around? What if I had $10,000 or so hidden away in a high-yield savings account, and paid $89.11 to that account every month instead of paying an insurance company? I decided that I could make that work, and be truly self-insured…but where on earth was I going to come up with that kind of money? I looked at a list of things I needed to take care of when I left my job, and Vanguard’s name shone brightly off the page.
I could cash out my 401(k).
Next Monday, I’ll recap the research I did on 401(k) cashout, and how theoretically cutting my income in half and delaying my retirement savings for 2 years will actually put us way ahead of the game.
Update
Since I originally researched this topic and wrote this post, I have accepted a new position at a local company, and given my notice at the far-away job. My new position is full-time with benefits, so I no longer need to consider self-insuring. I am presenting the series in its entirety, however. The purpose of this blog is to share information and our experiences, and if just one person looks into their insurance policy a bit deeper before signing on the dotted line, I’ll be extremely happy. Even though I will be insured almost immediately, there is a good chance that I will still be cashing out my 401(k) — tune in next week to find out why.
Disclaimer: I am not a professional, and my experience at an insurance company is outdated. I am not now and never have been licensed or trained to sell or otherwise professionally discuss insurance. The research I did online was for my own personal purposes. The plan I refer to above is the United Health Care Single HSA 100.
Categories: career| frugality| goals| health and fitness| insurance| intents and purchases| personal finance| retirement
My husband was a contractor for many years and for the last 5 years, we had NO INSURANCE. Sorry…what was that? Yes, I said NO INSURANCE. One reason we had no insurance was that I am basically “uninsurable” because…you know…I’m fat. No other health problems. At all. But since I am fat, I require the same about of coverage as a 60 year old brittle diabetic with cancer…it would have been over 2000 a month just for me, let alone the rest of my family. So we sat down and looked at the Cobra package that was offered to us and for a mere 875 a month (that’s MORE than our mortgage) we could have a very basic plan with a 3500$ deductable. We laughed, then told the kids not to break anything. they didn’t! For 5 years we paid out of pocket for Dr’s visits and anything else we needed and we spent, in total, over those 5 years, about 500$. And that includes the dentist.
We now have insurace because my husband is a permanent employee, but it is possible to live without insurance in this country. We’re living proof.
The thing to remember about the high deductible catastrophic plan is that it is for catastrophic emergencies. Yes, as long as your health continues as well as it is now, you will be losing money. But unlike putting 10,000 in the bank and calling it car insurance — in that you know approximately how much replacing your car will cost if you have to — if you actually have a true emergency (maybe that same car accident that totals your car) You health care costs could easily be in the 100s of thousands, not something you can easily save up for. It’s more like life insurance — hopefully the money you spend on it will be “wasted” (in that you don’t die) But it would suck for your loved ones if you died without it.
@Ann -
I knew he didn’t have bennies, but I didn’t realize it was that long. That’s exactly what I’m talking about, though.
@Rebecca -
I agree that there’s no price cap on potential medical costs, however, I don’t think that fear of the unknown makes insurance a requirement. If I were to be seriously ill*, I would be out of work, and the loss of income alone would require us to sell or re-mortgage our house and tap other resources. If expenses were that severe, we would also have credit available to cover them (debt is a bad thing, but sometimes necessary). It’s a highly personal choice, akin to investing in stocks vs. mutual funds — do I invest my money in an insurance plan because I fear that something will go wrong, or do I invest my money in other places, and build the financial reserves that it will cost to care for myself? In this hypothetical situation, I chose to fend for myself. In the second post in this series, I’ll talk about growing the initial $10,000 investment from my 401(k), and how that growth not only provides a pool to draw on in the event of a medical catastrophe, but also moves our lives forward in line with our goals.
(*I focus on illness here and not accident, because in the event of an auto accident, my medical bills would be covered by my car insurance, not my medical insurance. The same holds true if I am injured at work — that would fall under workman’s compensation, and not individual medical.)
[...] last we left our tale of financial intrigue, I had given up on the medical insurance game and was seeking a $10,000 self-insurance starter kit, [...]
I have to agree with Rebecca here. Self-insuring a car is pretty easy to do, since you know the replacement value of the vehicle. But self-insuring your health is a completely different animal, since nobody knows when their health could take a sudden turn for the worse. My father had never taken a sick day from work in 30 years, was athletic and fit, didn’t drink or smoke, was basically a picture of health. Then in the summer of 2001, his kidneys failed, and he was diagnosed with Wegener’s Granulomatosis. He’s been on dialysis for 6 years, and spent 4 months in the hospital in 2004, including 2 weeks in ICU. His medical bills for 2004 alone were half a million dollars. Luckily my parents have always had health insurance, including all the years that they were self-employed and had to buy the insurance themselves. Other than my dad’s sudden, unexplainable illness, my family has not needed medical insurance. All of us were born at home with midwives that my parents paid in cash. None of us take medications, and my 61 year old mother has never had a single medical condition. Good thing my parents didn’t go on the assumption that just because they had been healthy for 54 years, they didn’t need health insurance. If they had, they would have lost their life savings in addition to all that they have lost in terms of hopes and dreams for the future.
I strongly disagree that the decision to have health insurance is a personal one. That would be true if the decision only affected the person or family that chooses to go without health insurance. But unfortunately, when people who have chosen to go without health insurance have a serious medical condition, the result is often bankruptcy, which means that the bills go unpaid. So the provider has to charge more to insured patients to make up the difference. This means that those of us with health insurance are subsidizing the care for those who don’t have health insurance. High-deductible, catastrophic health insurance should be mandatory, just as liability auto insurance is.
@FrugalBabe -
I’m sorry your dad had to go through that. I can’t imagine how royally that must have sucked.
To clarify from the original article, I did not mean to imply that my health could be completely insured for $10,000; it was simply the minimum amount I would be comfortable having in highly liquid assets if I were to attempt something like this. As I stated in my response to Rebecca above, if I were to be seriously ill, even if I had insurance, we would be completely and utterly screwed. The loss of my income, even if it were only a part-time income, would be enough that we would need to sell our cars, re-mortgage or sell our house, and go into debt just so Mer could cope with monthly expenses. If I were out of work for more than about 3 months, that would be the situation whether or not I had health insurance. If it would lead us to bankruptcy, it would be due to loss of income in addition to, but not because of, medical bills.
As far as medical bills, I call bullshit on your logic. Medical bills are subject to the same collections procedure that standard credit bills are: the credit issuer attempts collection, and if the debt is not paid, it is sold to a collection agency for a fee. This is standard procedure and is not the cost for rising medical bills. The cost of health care does outpace inflation, but that is due to so many other things. The price of drugs and new high-tech equipment is skyrocketing. Bullshit malpractice claims are high. (I used to review malpractice claims; I know all too well that there are legit ones and non-legit ones.) Doctors over-test and over-drug because of the fear of malpractice. The biggest factor, though, may very well be that patients with insurance see trips to the doctor and ER and “free” or nearly free, and go for everything, and demand every new drug, test, and technology in the market.
I am not out to say that insurance is bad and evil, etc. I’m pretty damn happy that I have it at the job I’m about to start, so that I don’t have to worry about all this nonsense. I do not want to be scared every time I cough that I’m coming down with something that will eventually wipe every last bit of cash, equity, and retirement. (I am an ex-smoker, so that is not an unreal possibility.)
What I am out to say is that there’s information out there. When you get an idea, or you see something, research it for yourself and challenge assumptions. Life isn’t about how things have always been, and it damn sure isn’t a popularity contest. Figure out your options, and form an opinion on them. Thanks for sharing yours.
I’d say you’re in a pretty big crowd (myself included) that would have a tough time without an income for three months. My dad had long term disability insurance aswell (he’s a big believer in insurance) and for the last 6 years has been getting 60% of his previous income. This will continue until he’s 65. I’ve toyed with the idea of disability insurance, but I have to admit that we don’t have any. My mom is a SAHM, so my dad’s income was all they had. In our case, there are two earners, and a pretty tight budget. Haven’t been able to justify disability ins yet, but thinking about it.
There are lots of reasons that health care costs are rising so fast, but I’m in the health insurance industry and I can assure you that the nearly 45 million uninsured Americans is absolutely a factor. Sorry if my description wasn’t clear earlier - I didn’t mean that the unpaid bills from uninsured patients are passed directly to insured patients and their insurance carriers. But when hospitals and doctors have to write off bills that don’t get collected, they include this in their operating expenses and pass on the higher cost to insurance companies and paying patients. All of the reasons you mentioned for rising costs are true, but so is mine.
I have a brother who has gone without health insurance for several years. He and I have had this debate too many times to count, and we never can see eye to eye on it. My husband and I have always had insurance, even when we were so poor that just about all of our living expenses were going on a credit card.
I’m glad you got a job that offers full benefits - I’m a believer in universal health coverage (even with the tax increases and government intervention that would go along with it). I think that health insurance should be mandatory, but I also think that it should be a fair and equitable system. There are too many people who fall through the cracks because of pre-existing conditions or shady agents. The system is not regulated enough, varies far too much from one state to another, and should not be a for-profit industry. So I’m not in favor of the status quo. But I don’t think that going without is a good solution either.
[...] just read a blog post by Dani at Living Behind the Curve. She writes about her thoughts on going without health insurance in order to work part-time. Initially, she goes looking for individual health insurance, but talks [...]