Health Care Reform Information
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strategies for managing healthcare costs
Note: Health Care Reform is extremely complex and implementation is dynamic with new laws and rules being issued constantly.
This page represents a good faith effort to aid in understanding the changes.
This page represents a good faith effort to aid in understanding the changes.
Individuals and Families
Buy Health Insurance and Accept a Large Deductible
Generally, no matter what kind of insurance you are purchasing, it makes sense to accept as large of a deductible as possible. This will do a couple of things for you:
Sometimes people with expensive chronic conditions can come out ahead by paying extra premium each month for additional medical bill cost sharing with the insurance company. However, most healthy people should consider taking the higher deductible, saving the premium difference, and only spending the money if they need to. The alternative is to give this extra money to the insurance company, which invests it for its own gain, and they would only give it back to you in the form of benefits if you need it. Healthy people should consider retaining control and benefit of their own money by paying a low premium and only shift 'catastrophic' medical bill risk to an insurance company.
Buy a Health Savings Account (HSA) Qualified Health Insurance Plan
Health Savings Account qualified plans will still be available under the new healthcare reform rules. HSAs are medical insurance plans that have higher deductibles but allow for the funding of Health Savings Accounts at a bank. Contributions to these accounts are designed to be deductible for purposes of calculating federal income taxes (see your CPA for personal advice regarding deductibility).
Advantages of an HSA insurance plan include: lower premiums, potential tax advantages, and pre-negotiated medical service pricing. Prescription drugs and office visit copay's are subject to the deductible, so the insured person would pay for these services from their HSA bank account, essentially getting these services paid for on a pre-tax basis.
Offset Large Deductible Risk With Supplemental Insurance
Even under healthcare reform, plans will be offered that can expose a family to over $10,000 of financial risk every calendar year. Fortunately, Supplemental insurance plans are comparatively affordable and significantly reduce the risk of large medical bills eroding family savings accounts. These plans pay cash directly to the family upon diagnosis of cancer, heart attack, stroke, or accidental injury. Many times the premium savings between two levels of health insurance deductible options is significantly higher than the cost of these supplemental plans, which allows for a wiser use of premium dollars. Choose an amount of benefit that will cover one to three years of annual out of pocket exposure ($10,000 to $50,000).
This Supplemental Insurance strategy can also be effective when choosing no insurance (and paying the federal penalty) or even when choosing a faith based cost sharing plan. Choose an amount of benefit that would likely cover the cost of a procedure insured against: anywhere from $100,000 to $500,000 of coverage.
NOTE: SONOMA VALLEY INSURANCE AGENCY, INC. DOES NOT RECOMMEND THAT ANY PERSON GO WITHOUT CONVENTIONAL INSURANCE, WHICH IS GUARANTEED ISSUE AND COMPREHENSIVE IN SCOPE OF COVERAGE.
Generally, no matter what kind of insurance you are purchasing, it makes sense to accept as large of a deductible as possible. This will do a couple of things for you:
- Saves your cash flow today.
- Allows you use of and interest on your money today.
Sometimes people with expensive chronic conditions can come out ahead by paying extra premium each month for additional medical bill cost sharing with the insurance company. However, most healthy people should consider taking the higher deductible, saving the premium difference, and only spending the money if they need to. The alternative is to give this extra money to the insurance company, which invests it for its own gain, and they would only give it back to you in the form of benefits if you need it. Healthy people should consider retaining control and benefit of their own money by paying a low premium and only shift 'catastrophic' medical bill risk to an insurance company.
Buy a Health Savings Account (HSA) Qualified Health Insurance Plan
Health Savings Account qualified plans will still be available under the new healthcare reform rules. HSAs are medical insurance plans that have higher deductibles but allow for the funding of Health Savings Accounts at a bank. Contributions to these accounts are designed to be deductible for purposes of calculating federal income taxes (see your CPA for personal advice regarding deductibility).
Advantages of an HSA insurance plan include: lower premiums, potential tax advantages, and pre-negotiated medical service pricing. Prescription drugs and office visit copay's are subject to the deductible, so the insured person would pay for these services from their HSA bank account, essentially getting these services paid for on a pre-tax basis.
Offset Large Deductible Risk With Supplemental Insurance
Even under healthcare reform, plans will be offered that can expose a family to over $10,000 of financial risk every calendar year. Fortunately, Supplemental insurance plans are comparatively affordable and significantly reduce the risk of large medical bills eroding family savings accounts. These plans pay cash directly to the family upon diagnosis of cancer, heart attack, stroke, or accidental injury. Many times the premium savings between two levels of health insurance deductible options is significantly higher than the cost of these supplemental plans, which allows for a wiser use of premium dollars. Choose an amount of benefit that will cover one to three years of annual out of pocket exposure ($10,000 to $50,000).
This Supplemental Insurance strategy can also be effective when choosing no insurance (and paying the federal penalty) or even when choosing a faith based cost sharing plan. Choose an amount of benefit that would likely cover the cost of a procedure insured against: anywhere from $100,000 to $500,000 of coverage.
NOTE: SONOMA VALLEY INSURANCE AGENCY, INC. DOES NOT RECOMMEND THAT ANY PERSON GO WITHOUT CONVENTIONAL INSURANCE, WHICH IS GUARANTEED ISSUE AND COMPREHENSIVE IN SCOPE OF COVERAGE.