Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Rethinking High Deductible Policies
Old 09-02-2008, 01:54 PM   #1
Full time employment: Posting here.
tangomonster's Avatar
 
Join Date: Mar 2006
Posts: 756
Rethinking High Deductible Policies

With the brash optimism of youth (well, okay, not really young---just two years younger), when I was FIREing at 52, I deliberately chose a high deductible ($10K) policy to keep premiums low. It seemed okay to just have it for catastrophic illnesses since I've always been healthy.

But two years later, I'm beginning to think it wasn't a good choice. Even things that are relatively minor (shoulder pain and bunions) have cropped up. I never would have anticipated this. I've not yet seen doctors for these conditions, but I know it would add up (visits, diagnostic procedures, drugs, surgery if needed). Yup, my premium would probably double or triple if I reduced the deductible, but it seems like almost a given that it would be at least a wash (that the medical costs would at least equal, if not exceed, the premiums). And I'd be less hesitant to go to the doctor if not paying for it completely out of pocket.

I tried to do a search here and couldn't find what I was looking for. Maybe I'm just imagining it, but was there a thread about health issues really kicking in when people are in their fifties? It seems like in obituaries, people are either in their fifties or else seventies through nineties. So maybe it isn't realistic to think that good/perfect health in your forties is no predictor of your fifties or sixties? And thus, high deductibles should be avoided by people in their fifties because even not-very-serious problems are still going to be costly?
__________________

__________________
“It is not a sign of good health to be well adjusted to a sick society”.------Krishnamurti
tangomonster is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-02-2008, 02:36 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Dawg52's Avatar
 
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 7,434
I also went the 10k ded route. I decided that I would self insure for the first 10k, and insure the balance. I still have Dr and drug copays so I'm not hesitate to go to the doctor. Had a colon scope done a year ago, but that was paid by the wellness benefit. So I am happy with my decision. For you, it's something you need to be comfortable with so I would lower it if it will make you sleep better.
__________________

__________________
Retired 3/31/2007@52
Full time wuss.......
Dawg52 is offline   Reply With Quote
Old 09-02-2008, 02:39 PM   #3
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,308
A lot of folks here seem to like the Health Savings Account (HSA) concept, where you combine a high-deductible policy with a sort of medical IRA. The deductibles are lower than 10K - more like 3K or so for a single policy. The advantage is you can deposit the deductible into the medical IRA and take a tax deduction without itemizing for it. You can then use the medical IRA to pay for medical and dental expenses that come up. You might want to look into this.

If you go to a very low deductible, the premiums for an individual policy will be sky-high.

In any case, if you want to go to a lower deductible or HSA, you should do it now when you don't have "pre-existing" conditions. Most insurance companies will allow you to raise the deductible without underwriting, but not lower it.
__________________
FIRE'd@51 is offline   Reply With Quote
Old 09-02-2008, 03:15 PM   #4
Moderator Emeritus
Khan's Avatar
 
Join Date: Aug 2006
Location: Pine Island, Florida
Posts: 6,868
Send a message via AIM to Khan
I have a deductible of $2500, and an HSA.

Have spent less than $200/year since retirement.

Am 58, things could change.
__________________
"Knowin' no one nowhere's gonna miss us when we're gone..."
Khan is offline   Reply With Quote
Old 09-02-2008, 06:07 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 9,878
I don't see a down side to having an HSA with a high deductible policy. I just funnel money in as needed through a credit union checking acct. set up as an HSA, then reimburse myself for any out of pocket medical expenses, including OTC drugs. At the end of the year, I deduct whatever I put into the HSA (up to the legal limit). I'm in the 25% bracket, so the tax deduction is all free money.
__________________
Yes, I have achieved work / life balance.
travelover is offline   Reply With Quote
Old 09-02-2008, 06:25 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
A couple thoughts:

- Over the long run, you will likely pay for all the non-catastrophic losses you incur. Insurance has its issues, but they aren't entirely stupid. So the low deductible policies generally aren't a great deal.

- Can you afford $10k in a year? If so, (like most early retirees), don't worry about the financial impact.

- Make sure you get all of the medical care you need. Do not skimp on care.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 09-02-2008, 06:54 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
TromboneAl's Avatar
 
Join Date: Jun 2006
Posts: 11,197
Be sure to analyze it rather than go by gut feel. Last time I compared them, the high deductible plan came out ahead, except when expenses were right at the deductible level. I'll try to find that post.
__________________
Al
TromboneAl is offline   Reply With Quote
Old 09-02-2008, 08:11 PM   #8
Thinks s/he gets paid by the post
 
Join Date: May 2006
Location: Largo
Posts: 1,945
Tango - Your long term health is far more valuable than your deductible. Don't see the doctor for every ache and pain but don't put visits/treatment off because of the fact it's coming out of your pocket while meeting the deductible. If you lost your good health, I think you would "buy" it back on any day for $10,000. I know I would. As I get older, I see that good health is the most valuable asset a person can have.

My MIL who is 94 has $3,000 in the bank, a monthly income of $1300 and almost perfect health. She is a rich woman!
__________________
Buckeye is offline   Reply With Quote
Old 09-02-2008, 09:06 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
If you've got a high deductible policy, see if you can find a local walmart/walgreens or whoever in your area has an in-house clinic. They're usually around $50-80 per visit and they can write/fill prescriptions in house. Many prescriptions are $1 a week.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Old 09-02-2008, 09:08 PM   #10
Full time employment: Posting here.
tangomonster's Avatar
 
Join Date: Mar 2006
Posts: 756
Thanks everyone. Dawg, I'm amazed that your high deductible plan paid for a colonoscopy---don't think mine would. Brewer and Al, you are probably right that the high deductible plan may be advantageous in the long run. Buckeye, yes, your MIL IS a rich woman, having her health at that age.

But in terms of a HSA---unless I am totally misunderstanding the rules, your deductible has to fall within certain limits. I can understand the lower limit of $1100 for individual coverage. But why do they cap it at $5600? :confused:

The Essential Guide to HSAs - HR World

According to this, not every hi deductible plan qualifies:

Before an employee can open an HSA, he or she must first obtain a qualifying high-deductible health-insurance plan. Not all high-deductible health plans qualify for HSA compatibility, and the employee must verify a plan’s qualification. A plan is not HSA-qualified if any of the following conditions apply:


  • The plan does not qualify if there are any co-pays prior to meeting the deductible for anything except purely preventive care. For example, a plan that provides $30 co-pays for office visits and/or $15 co-pays for drugs does not qualify.
  • The deductible and total out-of-pocket maximum expense must fall within specified ranges for individual and family coverage. The deductible range for individual plans is $1,100 to $5,600. For families, the deductible range is $2,200 to $11,200. The maximum out-of-pocket expense per year must be $5,600 for individuals or $11,200 for families.
  • Anyone younger than age 65 can open an HSA. Unlike with many other tax breaks, there are no income limits to qualify for an HSA.
  • The maximum amount of money that a worker can contribute to an HSA per year is $2,900 for individuals and $5,800 for families. Persons over the age of 55 can contribute an additional $900.
  • An employee generally cannot have any other health coverage, such as a spouse’s health plan or an FSA. However, if an FSA covers only wellness care (such as annual physicals) and vision and dental care, the employee can also have an HSA.
The qualifications for a tax-free HSA are complex, perhaps because Congress and the IRS (Internal Revenue Service) are concerned about limiting the use of this benefit to avoid tax-revenue shortfalls. An HSA requires careful health-care and tax-planning choices.


__________________________________________________


So---now my question is whether I should try to get a plan with a deductible of $5000 so I will be under the $5600 limit and can therefore have a HSA?
__________________
“It is not a sign of good health to be well adjusted to a sick society”.------Krishnamurti
tangomonster is offline   Reply With Quote
Old 09-02-2008, 09:14 PM   #11
Full time employment: Posting here.
tangomonster's Avatar
 
Join Date: Mar 2006
Posts: 756
CFB, I think those walk-in clinics staffed by nurse practitioners are a good idea and can keep costs down, but they really only treat a limited number of things:

Treatment and Cost at MinuteClinic

So for something like a cold, it's fine (I never go to the doctor for a cold, but I know a lot of people do), but they would not diagnose and treat something like a shoulder problem.
__________________
“It is not a sign of good health to be well adjusted to a sick society”.------Krishnamurti
tangomonster is offline   Reply With Quote
Old 09-02-2008, 09:17 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Oh I definitely wouldnt go there for a major issue but they're a much cheaper way to handle everyday issues or at least have someone with medical training have a peek at something.

Beats the heck out of sitting at home and not seeing anyone because its expensive.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Old 09-03-2008, 02:55 AM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
You did not mention the difference between the premium cost per years (high deductible vs low). How much is the premium savings versus the $10k deductible?
__________________
chinaco is offline   Reply With Quote
Old 09-03-2008, 03:39 AM   #14
Full time employment: Posting here.
 
Join Date: May 2008
Posts: 589
Would any of you recommend using a high-deductible/HSA over a semi-decent normal healthcare plan? My employer provides bluecross PPO-10 or a high-deductible/HSA at no cost.

Does it matter if I am very young, have extremely good health and believe the likelihood is very low that I will need anything significant for at least another 15-20 years (I stopped getting sick around when I was 14, which was 10 years ago).

Just trying to weigh the potential benefits of having another tax-free "retirement" account.
__________________
plex is offline   Reply With Quote
Old 09-03-2008, 07:21 AM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 9,878
Quote:
Originally Posted by plex View Post
Would any of you recommend using a high-deductible/HSA over a semi-decent normal healthcare plan? My employer provides bluecross PPO-10 or a high-deductible/HSA at no cost.

Does it matter if I am very young, have extremely good health and believe the likelihood is very low that I will need anything significant for at least another 15-20 years (I stopped getting sick around when I was 14, which was 10 years ago).

Just trying to weigh the potential benefits of having another tax-free "retirement" account.
This is the coverage I have and I'm 56. I've found that the extra premiums for lower deductible coverage would be more, on average, than what I've been spending. Naturally, a big illness could change all that, but my risk is limited to about $1100.

Indeed you can use the HSA as an extra tax deferred savings vehicle and some HSAs have decent investment options. And if you incur out of pocket costs, you can pay with pretax money.
__________________
Yes, I have achieved work / life balance.
travelover is offline   Reply With Quote
Old 09-03-2008, 07:57 AM   #16
Full time employment: Posting here.
tangomonster's Avatar
 
Join Date: Mar 2006
Posts: 756
Yeah, Chinaco, I should have mentioned the cost.

Right now my $10,000 policy is about $147 a month.

Interestingly, a $20,000 deductible policy isn't half that amount---it's still $119.

A $5000 policy is $234, $2600 is $249, $750 is $544.

With the $5000, $2600, and $750 policies, a HSA would be allowed, unlike the $10,000 deductible policy.

Some of these policies aren't exactly the same. Some are 20% copay, some 30%, but for the sake of brevity, let's think of them as the same.

So---what do you all think now that you've seen the costs?
__________________
“It is not a sign of good health to be well adjusted to a sick society”.------Krishnamurti
tangomonster is offline   Reply With Quote
Old 09-03-2008, 08:37 AM   #17
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
For what it's worth, Megacorp offered us an HSA option for the first time this year. It sounded like a good idea in our situation, but we had to crunch the numbers to confirm it.

First of all, our HSA-eligible plan had a $2500 family deductible (regular preventative care is 100% covered first-dollar) compared to $1200 for the PPO option. So worst case, the HDHP costs us an extra $1300 in deductible. After the deductible is met, the plan generally pays 85% in-network and the out of pocket maximums were $4000 for the HDHP and $1500 for the PPO, so the worst-case overall is $2500 out of pocket more with the HSA route.

Most of our years would have been nowhere near worst case, and we could self-insure the extra out of pocket exposure. The HDHP is $1000 less taken from my paycheck in terms of premium (which is used to fund the HSA), plus Megacorp is kicking in $600 into the HSA, meaning $1600 in guaranteed "savings" from the HSA. Added to that the tax-advantaged savings you don't lose at the end of the year as opposed to a typical HRA/MSA arrangement, and it seemed to make sense in our case.

It's made us look at some things. My wife switched from a name-brand medication with no generic alternative to a very similar medication which has generics and cut our bill from $90 to $8 a month on that medication. So far we've only paid out about $600 total in medical expenses and prescriptions -- still below the PPO's deductible anyway. And we've managed to accumulate over $3000 in the HSA so far; my ultimate objective is to always keep about two years of out of pocket maximums in cash and invest the rest.

Not for everyone, but it works well for us -- at least when compared to the PPO we were offered.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 09-03-2008, 09:57 AM   #18
Recycles dryer sheets
gettingthere's Avatar
 
Join Date: Jul 2006
Location: Massachusetts
Posts: 150
Quote:
Originally Posted by cute fuzzy bunny View Post
Beats the heck out of sitting at home and not seeing anyone because its expensive.

Also good for an urent problems - such as a bladder infection - that happens on a weekend, when your normal doctor's office is closed, and the alternative would be a hospital emergency room.
__________________
gettingthere is offline   Reply With Quote
Old 09-03-2008, 10:42 AM   #19
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Quote:
Originally Posted by tangomonster View Post
... but they would not diagnose and treat something like a shoulder problem.
Quote:
Originally Posted by chinaco View Post
How much is the premium savings versus the $10k deductible?
Quote:
Originally Posted by tangomonster View Post
Right now my $10,000 policy is about $147 a month.
A $5000 policy is $234, $2600 is $249, $750 is $544.
So---what do you all think now that you've seen the costs?
Just between the $2600 & $10K deductibles you've more than paid for the annual plane fare to Bumrungrad. You'd probably be treated better, by American-trained physicians, with less risk of infection.

You'd be seeing the sights of Bangkok in a shoulder sling, but I'm not sure there's a downside. You'd have a bit of a logistics/scheduling problem for followup visits, but the physical therapy could be quite entertaining...

If there are lifestyle health issues (weight, smoking, non-hereditary BP & cholesterol) then again the savings on the high-deductible policy would more than pay for the yardwork tools or exercise equipment or fitness-club membership or martial-arts instruction-- whichever approach is more motivating.

Just ER'ing has saved me from a dozen respiratory infections a year (plus the odd ear infection & bacterial bronchitis/pneumonia). I don't know if I was catching them because co-workers were coming to work while they were contagious instead of staying home, or if work stress/fatigue was hammering my immune system.
__________________

__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
High Deductible Health plan Allegany Health and Early Retirement 22 06-12-2008 09:01 AM
40 yr old - rethinking priorities in life willowbeezer Hi, I am... 16 05-12-2008 03:56 AM
Rethinking Retirement??? bots2019 FIRE and Money 53 07-25-2007 05:45 PM
Disability/Umbrella policies Scout Young Dreamers 21 11-04-2006 09:41 AM
Forum Policies Martha Forum Admin 3 06-16-2005 05:51 PM

 

 
All times are GMT -6. The time now is 01:07 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.