Case Studies - Health Insurance
I want to share with you how we market health insurance.
May I ask you a question? Think about your favorite eating place: Joe's Mile-High Burgers or Paul's Grill-buster Steaks, etc. Can you think of any item on the menu that the business will price intending to lose money on that item? I can tell you, the answer is "NO." They plan on making money on every item on the menu. The insurance business works the same way. If we offer "Doctor Office Co-pay," "RX Co-pay," "First Dollar Accident Coverage"... you guessed it, we plan on charging enough so that we make money on every benefit we offer you.
Let's look at Typical Family USA: husband, 38, wife, 40 and two children. Here are two quotes to consider: a $500 deductible, DR office co-pays, RX co-pays with a monthly price tag of $640, yearly $7680. We will call this the Cadillac Plan. The second quote, the Volkswagen Plan (and the plan I recommend) has a $2500 deductible. All DR office and RX charges count toward the deductible. The monthly price tag is $291, yearly $3492. The difference is a savings of $4188 per year!
The Volkswagen Plan, a High-Deductible Health Plan (HDHP), also qualifies the customer to own a Health Savings Account (HSA) which is significantly advantageous.
For the typical family, here are the disadvantages to the Cadillac Plan:
- The price is probably not a realistic number to plug into the budget.
- The price is fixed. If you hit hard times, you may not be able to make the payment. You will lose your insurance if you don't pay the premium.
- The DR and RX co-pays look nice, however, they never count toward the deductible. The extra cost built into the premium for co-pay coverage doesn't count toward the deductible.
- If you don't need the coverage, you have paid a lot of money for peace of mind.
For the typical family, here are the advantages of the Volkswagen Plan:
- The lower monthly premium is easier to budget and pay in a financially down time. You are less likely to lose your insurance because you are unable to pay your premium.
- Knowing the big bills are covered gives you peace of mind.
- Contributions to the Health Savings Account (HSA) are tax deductible. You can shelter up to $3000 (single) or $5950 (family) by placing money into an HSA (2009 limits; see IRS publication on contribution limits).
- Contributions are flexible. If you hit hard times, you can suspend contributions and restart later.
- Eligible medical expenses such as eye glasses, dental work, crutches, even DR Office and RX costs--the list is very generous--may be paid with tax-free dollars from the HSA.
- Contributions to the HSA accumulate. If you don't need the coverage, when you reach Medicare age, you can access your accumulated savings and pay tax on it as you use it. Money you otherwise would have paid to the insurance company will be additional retirement income for you!
- When you pay DR and RX charges, you pay the REDUCED contract price that the insurance company has negotiated for you. You get the price advantages of network charges vs regular "street rates."
Are you curious about how I buy my own insurance? I personally have a choice of three plans where my wife works. I call them the Cadillac, Chevy and Volkswagen (VW) Plans. I studied the plans' prices and benefits and chose the VW Plan. We have the opportunity to change plans each October, and we have continued to stay with the lower-priced plan. Even after two surgeries, we are still money ahead!
Below you will see a chart comparing side by side the two plans we discussed here. I would love to visit with you personally and see if we can help you stay within budget and find peace of mind all while stashing away potential retirement income. Let's talk!