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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:


  1. The price is probably not a realistic number to plug into the budget.
  2. 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.
  3. 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.
  4. 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:


  1. 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.
  2. Knowing the big bills are covered gives you peace of mind.
  3. 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).
  4. Contributions are flexible. If you hit hard times, you can suspend contributions and restart later.
  5. 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.
  6. 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!
  7. 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!


Gary


Disclaimer: All plan details in the given narrative and chart are "in general." There are "in network" and "out of network" charges and pay schedules. The entire policy forms and details need to be studied for a full disclosure of benefits.

Insurance Plan Benefit:
"Volkswagen" Plan (HSA Compatible)
Details & Comparison
"Cadillac" Plan (Not HSA Compatible)
Estimated Cost
$291.00 monthly $640.00 monthly
Plan Type
PPO PPO
Office Visit for Primary Doctor
No Charge after deductible $20 Co-pay
Office Visit for Specialist
No Charge after deductible $35 Co-pay
Coinsurance
None 20% after deductible
Annual Deductible
Individual
$2500 $500
Family
$5000 $1,500
Annual Out-of-Pocket Limit
Individual
$2500 $2000
Family
$5000 $6000
Includes deductible Does not include deductible
Lifetime Maximum
$2 Million per person $2 Million per person
Health Savings Account (HSA) Eligible
Yes No
Out-of-Network Coverage
Yes Yes
Out of Country Coverage
Yes. Paid as out-of-network benefits Yes. Paid as out-of-network benefits
Optional Benefits
No No
Physicians
Primary Care Physician (PCP) Required
No No
Specialist Referrals Required
No No
Preventive Care Coverage
Periodic Health Exam
0% Coinsurance after deductible
(Preventive Services - $30 Co-pay)
$20 Co-pay; $35 Co-pay if provided by Specialist
Periodic OB-GYN Exam
0% Coinsurance after deductible
(Preventive Services - $30 Co-pay)
$20 Co-pay; $35 Co-pay if provided by Specialist
Well Baby Care
$30 Co-pay $20 Co-pay; $35 Co-pay if provided by Specialist
Prescription Drug Coverage
Generic Prescription Drugs
No Charge after deductible $10 Copay
Brand Prescription Drugs
No Charge after deductible $35 Copay
Non-formulary Prescription Drugs Coverage
No Charge after deductible $60 Copay
Mail Order for Prescription Drugs
Generic
No Charge after deductible $30 Copay
Brand
No Charge after deductible $105 Copay
Non-Formulary
No Charge after deductible $180 Copay
Days Supply
93 93
Separate Prescription Drugs Deductible
Medical Plan Deductible Applies None
Hospital Services Coverage
Emergency Room
No Charge after deductible $100 Copay plus 20% Coinsurance after deductible
Outpatient Lab/X-Ray
No Charge after deductible 20% Coinsurance after deductible
Outpatient Surgery
No Charge after deductible 20% Coinsurance after deductible
Hospitalization
No Charge after deductible 20% Coinsurance after deductible
Maternity Coverage
Pre & Postnatal Office Visit
Not Covered Not Covered
Labor & Delivery Hospital Stay
Not Covered Not Covered
Additional Coverage
Chiropractic Coverage
No Charge after deductible; 26 visits per year $20 Copay (PCP); $35 Copay (Specialist); 26 visits per year
Mental Health Coverage
Inpatient
Subject to member deductible, coinsurance and or copayment as listed in schedule of benefits, limited to 30 days per calendar year Subject to member deductible, coinsurance and or copayment as listed in schedule of benefits, limited to 30 days per calendar year
Outpatient
100% of the first $100 of allowable charges, 80% of the next $100 of allowable charges, then 50% of the next $1640 of allowable charges 100% of the first $100 of allowable charges, 80% of the next $100 of allowable charges, then 50% of the next $1640 of allowable charges