Archive for the 'Insurance' Category
Starting a new job means signing up for benefits. In terms of health insurance, this has usually boiled down to choosing either an HMO or PPO plan for us. I still have never been offered the option of a High Deductible Health Plan (HDHP) with a Health Savings Account, even though I think it would be neat to have one.
After reading through all the paperwork and talking to the benefits administrator, talking with my parents (who’ve had lots of different insurance companies), and reading various articles online - here is my limited understanding of the differences, at least in my case. Please add your own thoughts too.
Health Maintenance Organizations (HMOs)
- Usually have the lowest premiums and lower annual deductibles. In return, you must submit to various cost-saving restrictions.
- You must get care from providers in your HMO network. You can’t use a doctor from outside the network unless in some special case it is explicitly approved (unless you pay for it yourself).
- You must find a primary care physician (PCP) who acts as a gatekeeper to other (in-network) specialists. For instance, your PCP decides if you need to see a cardiologist, dermatologist, urologist, whatever. Although this is designed to limit unneeded care, it can also be frustrating if you disagree with your PCP. It also underscores the importance of finding a good PCP.
- Often have less paperwork and forms to fill out.
- You are still covered for emergencies at whatever hospital can best provide care at the time, although they may transfer you shortly afterwards to an in-network hospital.
Preferred Provider Organizations (PPOs)
- Usually have higher premiums and higher annual deductibles than HMOs. In exchange it offers more flexibility.
- You can see any doctor, but the costs for you are lower if you see an in-network provider vs. an out-of-network provider. In-network doctors have agreed to a discounted fee schedule for people in the PPO, essentially providing a bulk discount. This is the PPO method of limiting costs.
- Even if you disagree with your PCP, you can still go to whoever you want (in-network or not).
In the end, I guess one has to balance the details of each HMO and PPO plans carefully with the price differential. How much choice do you give up by going with your specific HMO? Do they have a history of complaints? In looking at cost, it’s important to understand the whole picture beside just premiums - there are also annual deductibles, co-pays, and lifetime maximum benefits.
In our case, the HMO and the PPO are by the same big insurance company, so that simplifies things for us. In addition, our family actually already has an PCP that they’ve been going to for a while, so I’m pretty sure we’re going to go with the HMO over the PPO. The HMO is $200 cheaper per month, has no annual deductible, and has lower co-pays. Otherwise, I think the best bet is to ask co-workers and friends who have the same insurance plan about their experiences and if they know of a good PCP.
Posted in Insurance | 42 Comments »
August’s issue of Money Magazine asks: Are You Doing The Right Things (For Retirement)? Although a bit mundane, it’s offers a quick gut check. Here are the questions and my answers:
1) Are you maxing out your 401(k)?
I think I put in $10,000 last year, which wasn’t the max. This year I haven’t been on pace for the $15,500 maximum either, but I do plan on reaching it by year’s end. I’ll need to run the numbers to see how much I’ll need to increase my contributions in order to catch up in time.
Maxing out a 401(k) does seem like a tall order for the average U.S. household though, considering the median income is about $46,000 a year.
2) Are you keeping tabs on your progress?
Yup, every month. Next update is coming up soon.
3) Are you grabbing every tax break you can?
This is mostly directed at IRAs. I’m probably not going to be eligible for a Roth IRA this year due to the income restrictions. However, I will likely fund a non-tax-deductible IRA, which has the potential to be converted to a Roth in 2010. Otherwise, I’ll settle for the watered-down tax advantages and stick some bonds in there. 
4) Have you created a safety net?
In an addition to an emergency fund (they say 3 months), the article states you should have adequate life and disability insurance. Life insurance is something I definitely want to get within the next year, and definitely before we buy a house.
Posted in Insurance, Retirement | 24 Comments »
Unless you have unlimited ATM access to the Bank of Mom and Dad, most of us keep some money around for the unexpected. I haven’t been worrying about this much, as we have over $80,000 in cash split between our savings accounts at Washington Mutual (5% APY) and FNBO Direct (6% APY). (See bank reviews and more here.) Although this is for a mortgage down payment, technically all of it could be tapped if needed.
But, if we do buy a place, we’ll need to decide exactly how much we want to keep in cash. Instead of absolute numbers, I like measuring it in terms of “months of basic expenses”. This expense total will be different for everyone, but it is essentially what you would spend if you had no income anymore. For most people, they would still need to pay things like rent, utilities, and insurance. But maybe they would spend less on dining out, travel, or entertainment.
You can help us decide by sharing your own situation. Just divide your current Emergency Fund balance by your Basic Expenses, and vote below. One is for what you actually have saved, and one is what you think you should have saved. You can view the results right after voting.
How Many Months Of Basic Expenses Can Your Emergency Fund Cover?
How Many Months Of Basic Expenses SHOULD An Emergency Fund Cover?
If you’re curious, you can also check out the results of the last poll: Do You Have A Speculation Portion Of Your Portfolio?
Posted in Frugal Living, Insurance | 35 Comments »
Yesterday I received the list of charges for my emergency room visit earlier this month (for what was found to be a kidney stone). I added my best guess for what each of the charges were for:
| Summary of Charges |
| Emergency Room (Doc + Room) |
$926.00 |
| Laboratory (Blood Tests) |
$137.00 |
| Pharmacy (Morphine + Others) |
$91.26 |
| Professional Fees (Nursing?) |
$387.00 |
| Radiology (CT Scan + Radiologist reading) |
$2,375.61 |
| Total |
$3,916.87 |
Of course, this is just what was submitted to my insurance, not what I’m actually going to have to pay. My insurance company may have negotiated lower prices, and I have an overall maximum out-of-pocket cap of $1,200 per year. I estimate my eventual bill to be between $500 and $1,000. I guess no Costco Vizio LCD TV this year for Jonathan 
I’m still just happy to be living a pain-free life right now, and am keeping myself well hydrated.
Posted in Insurance | 22 Comments »
Several people have asked me for some tips on how to find health insurance. I didn’t mean to scare anyone, but if my intense pain reminds someone to get insurance, at least something good came out of it! I did do some searching myself last year - the good news is that if you are young and in good health, you can get some high-deductible insurance for around $100 a month. The deductibles may still reach in the thousands, but $5,000 would be the least of your worries if you had just one serious incident. A reader got billed $3,075 for each CT scan taken!
Full-time Students
If your parents have family health insurance, you can usually remain covered under their plan until age 23 as long as you are a full-time student. For some states the age limit is even higher now. I know I did this as long as I could.
Otherwise, many universities will offer their own insurance package at a reduced cost. I knew someone over 40 who took a few units of community college every semester solely to qualify for the school’s cheap health coverage because it was cheap and took everyone regardless of pre-existing medical conditions. In my experience the quality of the plans varies wildly though, so I’d call around and compare first before signing up for rocks for jocks. I wonder if any online colleges are part of an affordable group plan?
Plans For Young Adults
A popular comparison site for health insurance is eHealthInsurance. I like it because they list a lot of the major insurers like Blue Cross Blue Shield, and you don’t have to give them your name or other personal information before seeing the plan’s specifics like monthly premium, deductible, and coinsurance percentage. They do require birth date and zip code. The quotes are usually for those in good health, so if you have pre-existing health problems the actual cost will be higher. Here are some sample results for a 28 year old male non-smoker in Oregon:
Cheapest:
Middle of the road: Lower deductible, higher monthly premium:
Another option to check out for those in CA, CO, GA, CT, NH, and NV is Tonik Health. It’s specifically for young hip folks (could they make the website any more tacky?), and they have plans starting from about $75 a month.
In certain states like Massachusetts, there may be special programs available directly from the state targeting young adults.
Otherwise, one might try a local independent insurance broker. (Yellow Pages?) I’ve never used one, but if you have specific needs or requests they might be able to better tailor a custom package. I did ask my State Farm insurance agent for a quote back when I was looking around, and it was pretty competitive.
Posted in Insurance | 23 Comments »
This week was filled with wonderful firsts. I had:
- my first time cowering for an hour in the fetal position,
- my first emergency room visit,
- my first morphine shot,
- my first CT scan,
- …and my very first kidney stone!!
Ironically, I was just talking to a friend about how they planned to quit their corporate job and wander around the world for a while, working odd jobs like ski resort seasonal worker, bartender, or barista. Being the ever-practical geek, I pointed out that she should be sure to buy some health insurance or use COBRA. “I’ll just be real careful”, was the dreaded reply. Careful only gets you so far… (And I’m still waiting on my stone to pass!)
I haven’t gotten the hospital bill yet, but I’m sure it would be thousands of dollars without insurance. I’ll have to do the math and see if my decision to stay on my wife’s employer plan for $200 a month instead of going for the high-deductible HSA plan for $100-$150 per month was a good idea mathematically.
According to this PBS article Young Adults Fastest-Growing Group of Uninsured, the out-of-pocket costs can be pretty crazy:
Average day in hospital: $7,157
Burst appendix: $48,151
Fractured ankle, and a tib-fib fracture: $101,790
Geez, now I really want to see my bill.
Posted in Insurance | 72 Comments »
People love pensions because of the security that they offer - a steady, guaranteed stream of income that you can’t outlive. Another way to achieve this reliability is to buy an immediate annuity, also called an income annuity. It lets you convert a lump-sum payment into a regular stream of income payments that can last for your lifetime, or the longer of you or your spouse’s lifetime.
Although there are many factors that come into play, very generally immediate annuities pay about 6-7% of the lump-sum back to you every year. So if you bought a $500,000 lifetime annuity, you might get $35,000 every year until you die. You can also play with the quotes at ImmediateAnnuities.com for different ages and survivorship scenarios.
This is much higher than the “safe withdrawal rate” of 4% that many financial folks quote as the amount of your nest egg that you can spend each each without running out of money before expiring. 4% of $500,000 is only $20,000 per year. More info on safe withdrawal rates can be found here.
But remember, with an annuity the $500,000 is gone. If you live another 50 years or just one, after you die there is nothing left to inherit. Also, annuity providers are like life insurance companies in that you really need to make sure they are stable enough that they’ll be around to pay you! Look for ratings from A.M. Best Company, Moody?s, and Standard & Poor?s.
The last article I mentioned when talking about how pensions will be gone soon also suggested annuities as a possible reform to current retirement plans:
If defined benefits are on their last legs, then it would make sense to try to incorporate their best features into 401(k)’s. The drawback to 401(k)’s, remember, is that people are imperfect savers. They don’t save enough, they don’t invest wisely what they do save and they don’t know what to do with their money once they are free to withdraw it. Quite often, they spend it.
Here there is much the government could do. For instance, it could require that a portion of 401(k) accounts be set aside in a lifelong annuity, with all the security of a pension. Behavioral economists like Richard Thaler have demonstrated that you can change people’s behavior even without mandatory rules. For instance, by making a high contribution rate the “default option” for employees, they would tend to deduct (and save) more from their paychecks. If you make an annuity a prominent choice, more people will convert their accounts into annuities.
If you think of pensions as annuities, you can use this to get a feel for how much those pensions are worth! For example, let’s say you’re a teacher and about to retire with a pension paying 70% of the average of your highest 3 years of income. If that number is $50,000, then you’ll be receiving $35,000 every year. If you refer back a few paragraphs, you’ll remember that’s the same as having saved up half a million dollars! Now you see how pensions are so expensive.
Although I’m still far from retiring, I have started considering using part of my savings to by an immediate annuity in order to cover my most basic spending needs and reduce the risk of retiring early in the event of a turbulent stock market. It would be almost like buying my own Social Security safety net But I’ll also need to learn more about how this plan should affect my current asset allocation. Some papers that are on my (really, really, long) reading list can be found here.
(There are also probably some tax considerations that I’m ignoring here.)
Posted in Insurance, Retirement | 20 Comments »
Here is an interesting survey from the Pew Research Center - Americans Assess Their Saving Habits. A lot of the results are what you would guess:
- Most people (77%) say they are always trying to save money.
- Most people (63%) also say they aren’t saving enough.
- Housing, cars, and utility bills are the hardest to afford.
- Dining out, entertainment, and shopping are the most common areas that people splurge on.
What caught my eye was the section on unexpected expenses. About a third of adults say they had an unexpected expense in the past year that “seriously set them back financially.” Among this group, here is the breakdown of the top 4 most common expenses:
By these numbers, the average American this year will have:
- 11% chance of having a significant unexpected medical bill, and a
- 8% chance of having a significant unexpected car expense, and a
- 7% chance of having a significant unexpected housing-related expense
My conclusion? Expect the unexpected. It’s only February and we’ve already had unexpected family-related expenses in 2007. I think an allowance for such occurrences should be included in our budgets specifically, and not just reserved as a reason to use the emergency fund.
Do you budget for the unexpected? Or do you just let it happen and deal with the ups and downs?
Posted in Budgeting, Insurance | 19 Comments »
Follow-up: Not being a homeowner, I may not have adequately expressed the importance of knowing what’s on your free CLUE report. For a better explanation, see this MSN article titled “Insurers keep a secret history of your home“. If they decide your house is high-risk, even if you don’t file a claim, finding homeowners insurance may become next to impossible. This is also something to be wary of when buying a house. Link via Consumerist.
Don’t tell your insurer about problems unless you’re sure you’ll file a claim. This last piece of advice is unfortunate, because insurers and insurance agents can be a decent source of counsel on whether it’s worth filing a claim. Since any damage you report could get passed on to the CLUE database, however, it’s smart now to err on the side of caution.
Posted in Insurance | 5 Comments »
Before we get really close to the end of the year and things start getting frantic, I just wanted to remind everyone to get all the free stuff that the government promised you via the FACT Act:
Free Credit Reports from all three bureaus at AnnualCreditReport.com. I’ve already gotten all of mine. I put in a request to fix a minor error my address, but I don’t think I ever got a reply. Grrr. I’ll have to try again.
Free CLUE Insurance Report at ChoiceTrust. This shows your previous auto and home insurance claim history. More details here. Mine was thankfully mistake-free.
Posted in Deals & Offers, Insurance | 16 Comments »
If you would like to know what the insurance companies are saying about you behind your back, you definitely want to get a free copy of your CLUE report. Short for Comprehensive Loss Underwriting Exchange, it’s basically the insurance version of your credit report. In the past it used to cost you $20 a pop, but you can get it now for free courtesy of the FACT act, which also brought you free credit reports.
You get both a Personal Auto Report and Personal Property Report, which show how many insurance claims you’ve made on your car insurance and homeowner’s/renter’s insurance, respectively. Insurance companies use this data to decide your premiums, so you’ll want to clear up any mistakes right away as they are probably costing you money right now!
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Posted in Insurance | 19 Comments »
Normally you’d think of getting life insurance for your dependents - your significant other, your kids, even your grandkids. But over at Mapgirl’s Fiscal Challenge, she’s single with no children, but still has a sizeable life insurance policy. The beneficiary? Her parents. In case something happens, she wants to be sure that her parents have some money to help them in their retirement in her place. They have no idea.
First, I was surprised. Then I felt guilty for never thinking of doing that myself. Then, I remembered that I really don’t have much of a policy for my wife either. Right now, since it’s just the wife and me, we each just have a $100,000 policy through work. Basically the logic is that if something happens to either of us, we are each still able to support ourselves and move on financially. (Plus I’m not allowed to go skydiving anymore.) But once there gets to be even a whiff of possible daiper duty, we planned on getting significant policies.
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Posted in Insurance | 15 Comments »
A recent post at Miserly Bastard reminded to post about this - Like him, I don’t have dental insurance because I don’t think it’s worth it. It fits into my philosophy to only insure against large losses, especially as most plans have a cap on benefits (mine is $1,500 annually).
I recently went in for another semi-annual cleaning, exam, and bitewing x-rays for about $150. Last time I didn’t have to do any x-rays so it was only $100. So my total dental costs are $250 for the year, and I’m going to claim it on our Flexible Spending Account so it’s basically pre-tax. That’s almost a $400 annual savings over paying the insurance premiums and deductibles.
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Posted in Frugal Living, Insurance | 11 Comments »
Health Savings Accounts (HSAs) can be a great way for people to save money on health insurance, especially if you are young and healthy. I looked at compatible high-deductible plans last year but missed some deadlines, and need to start again. I found quotes online as low as $80 a month at eHealthInsurance
, whereas I currently pay about $200 a month as part of my wife’s plan. I could even stay with the same company (BlueCross/BlueShield), just with different deductibles.
Now, HSAs are great mainly due to the fact that earnings grow tax-free, and when used for healthcare expenses withdrawals are tax-free too. (I list additional HSA pros and cons here). I think of it as a Health Roth IRA. Accordingly, the ideal way to take advantage of this is to max out the HSA (up to your deductible) when you are young, and not use it. You want to pay out-of-pocket now, and leave the HSA money in some mutual funds to compound away until retirement (when you’ll really need it).
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Posted in Insurance | 35 Comments »
Did you know that they sell life insurance at the Taiwan airport? Big honking booths too. And people are buying it! Talk about preying on people’s fears. Especially considering that you’re much more likely to have died on your way to the airport than on the flight you’re about to take…
Posted in Insurance | 12 Comments »
