Open Enrollment Only Happens Once a Year

The original premise for writing a blog post on BP was to create a dialog on health insurance. Educate you to better understand what your looking at to make an informed choice. People will spend hours learning to clip coupons or hours meal prepping to lower costs (And live healthier). But once a year we have this opportunity to look at our healthcare and everyone is overwhelmed, throws their hands up and bashes the system.

Per simple google search, there are 10,294 CPT codes for the year 2019 and 68,000 ICD 10 codes. I just went to a calculator online and all it gave me was an infinity symbol when I tried to figure out how many combinations that would create. The healthcare system and the payers are expected to calculate and charge for 10,000 known services, and the type of service is not determined until you walk in with a complaint and diagnosis starts.

Insurance is risk mitigation. And for the FI community it would mean keeping from paying out the retirement funds or liquidating assets for things other than retirement. We can look at the number of bankruptcies in the US and use that as a top 5 common reasons I can lose my nest egg approach. And one of those is going to be healthcare costs for an extraordinary health event.

Here is a true story, at least as true as I can make it without violating HIPAA. A person walks into a healthcare provider and they need a cardiac cath to remove a blockage and have a stent placed to bring the blood flow back to normal levels for the body to work. And this procedure, because of its complexity and other factors is around $105,000 self-pay cost.

Pt has a short term MEC policy. They have been paying $150 a month instead of $400 a month for an ACA plan. The MEC/Short term plan has an IP stay benefit of $500 a day for up to 5 days. So you will get reimbursed $500 because it is only an outpatient 1 day procedure, now I can offer you a prompt pay discount if you can pay the remaining $104,500 in 30 days. The person who had insurance through the health exchange, doesn’t have to prove they didn’t have the condition and will pay co insurance on the contracted rate of the insurance company which might be 70% of self pay rate. So just by having insurance you reduced your cost to around $75,000. Of that you now have to pay your deductible and out of pocket. And the clinic/dr visit and all the tests have already started to apply to both of those. The patient with the MEC/short term insurance paid out of pocket and will continue to pay out of pocket for the dr visits after.

Short term insurance – really cheap – and for this real-life situation cost $100,000 out of pocket for the procedure. The person who got insurance, may have been out $20,000 all said and done. By the way – the person who may have a balance left over of $20,000 can also choose to come up with a payment option, allowing that person to wait for their income stream to pay some or all of the payments without touching the nest egg affecting the compound interest side of a FI equation.

Ever hear of someone saying that you should buy low sell high, but in a crash, people tend to buy high and sell low – unless it is a Chinese orange juice company. The more you have to lose, the more insurance you need to buy to prevent the loss. If you are retiring at 30 and need to have that nest egg ride you into a sunset ripe old age of 80 – you need to buy more insurance, not less, if the financial risk is that high.

And we can talk blue in the face how those numbers are outrageous, but that doesn’t help you keep your hard-earned money in an event like above for the world we live in right now.

Go on the exchange and get the numbers for the high deductible cheaper H S A plan.  Compare buying a short term MEC policy if you have a high net worth or use passive income to fund your life. Run the numbers of a couple high dollar event values - $50,000 broken hip, $100,000 cardiac event, $250,000 for a baby Jesus let me live acute health event.  See what risk you are taking at each level.  Oh, and baby Jesus acute event is going to also mean you cant work for a while, add that into your calculation.  Baby Jesus acute event is where a short term insurance is suppose to kick in and provide a replacement for your income and possibly some additional money to help offset losses.  

If your working and the H S A program is available to you at work – there are a bunch of things that you can do with that plan. Like you can pay COBRA premiums with the H S A if you need to or want to take a gap year between jobs.

If you have a chronic condition – do the math. If you have a high net worth with a chronic condition you may still be able to hack an H S A program to your advantage depending on your ability to self-pay that high deductible while saving in the H S A and getting the income tax reduction. How much of a discount does the contracted rate get you for the things you need?

Your question when looking at this open enrollment period for healthcare options is not what is the least premium per month only, but to look at paying the least with the most coverage for what you need and are protecting for your future and your assets in that one off outlier event.