With all the hoopla/controversy about health care in the news, I thought a post on your health insurance, and how “Millionaire Nurses” deal with health insurance issues. Another reason this is a good time to discuss health insurance is it is open enrollment for many organizations.
For those of you who are not familiar with the term, open enrollment is the time when many businesses/organizations allow changes to be made in the businesses benefit plans. These might include, in addition to health insurance, retirement plans, short and long-term disability, dental, pharmacy benefits, and vision plans.
We will discuss the health insurance option today. My wife’s employer offers health insurance options through two major national insurers. They offer the same options: a PPO plan, a HMO plan, and a high deductible plan that can be tied to a health savings account.
These choices can be difficult to make. Most PPO’s give you the most choice regarding which physician you use. Most PPO plans have a slightly higher deductible and co-pay than the HMO’s- both of which have gone up in the last few years. If you use an out-of- network provider, then your co-pay, deductible’s are more expensive.
With a HMO, you lose freedom in regards to your choices of primary care providers and your options of sub-specialists.
The high deductible options may have deductibles from 1,000-2,000 bucks. These plans are the least expensive, but require the most financial planning on your part. You can open a Health Savings Account, to help you with meeting these out-of-pocket expenses. The money you put into these accounts are pre-tax, which means you pay no income tax on the money set aside in your HSA.
The downside is you have less flexibility with this money, compared to money in a normal savings account. The money in a health savings account, can only be spent on health related expenses. These would include deductibles, c0-pays, medications, dental and vision expenses and other health related items.
If you have a large amount of money build up in that account over time, then there are times the money can be spent on college costs and other limited categories. You must check with a CPA or other expert to make sure you follow the rules or there may be un-expected taxes and penalties.
Most people with a HSA have an amount of money taken out of each paycheck. It is important to have an emergency fund to handle the unexpected medical expenses that may occur while you build up your HSA account to a point that it can handle all your expenses. Most large banks and brokerage firms can help you set up a HSA.
Your benefits manager should also be able to answer specific questions.
So what is the right choice? The HMO is usually the cheapest option. If you co-workers that use the HMO are satisfied, and especially if you are young and healthy, then this is a good choice. But remember, with a HMO you go to the Doctor or medical provider of their choice, not yours. The limitations do allow this option to be cheaper.
The PPO, for a little extra money, gives you more flexibility in your choices of physicians. If you have a favorite physician, that is already a member of your plan, and especially if you have a chronic illness, you may prefer to pay a little more for this option.
If you have emergency savings, and you want to save money and taxes, then the Health Savings Accounts are probably a great option. Just remember the importance of setting aside money monthly, and allow the account time to build up to enough to handle your usual medical expenses. Over time, this tax advantaged account can grow to a substantial nest egg. The closer you get to retirement the more flexible the rules are on what you can spend this money on.
So, make sure you read and understand all your options regarding your health insurance during this time of open enrollment. The most important issue, is the thought and planning so you make the correct decision. You may have to stay with your choice until next years open enrollment.
One choice you shouldn’t make is to not have health insurance. One of the most common causes of bankruptcy is an unexpected illness or injury, which these days can cost into the hundreds of thousands of dollars in expenses.
If you have questions or comments about your choices and options, please leave us a comment.
Also remember I have a free ebook ”Emergency Money Resuscitation” available at my website, www.themillionairenurse.com .
