The drama in Washington never seems to stop over health care. And if getting health care legislation depends on getting Republicans and Democrats to find common ground, then it's a dream at best. I'm a firm believer that what makes the United States great is that the people are independent and do not wait on the government to take care of them, but are determined to take care of themselves. With that in mind, let me suggest how you should write your own health care bill.
Get Health Insurance When You Don't Need ItOne of the biggest issues is the inability to get coverage for pre-existing conditions. Some want to make insurance companies out to be evil villains for not covering these conditions, but it really just makes sense that they wouldn't. The purpose of an insurance company is to take on part of your risk in exchange for your premiums. So when you are healthy you pay the insurance company to cover you in the event you develop cancer, heart disease, diabetes, or any of a number of ailments. If people don't get insurance when they are healthy, and then come seeking a policy when they have a condition, it's no longer a risk, it's a certain liability. This is the reason that the democrats insist on mandating coverage if they are going to require insurance companies to cover people with pre-existing conditions. It keeps people from gaming the system by waiting until they are less healthy to buy insurance. Thank goodness we still live in a free country where you are not (yet) mandated to buy insurance if you don't want it. However, having the freedom not to buy doesn't make it smart.
Understand the purpose of Health InsuranceThere is a perception in our nation that the purpose of Insurance is to pay your health care costs. Just seems obvious, that's why it's called Health Insurance, right? Wrong. Remember, the purpose of buying insurance is to pay someone else to protect you from a risk. If we want to be healthy, we plan to have regular checkups, dental cleanings, eye exams, etc. And we expect some minor illnesses in our family each year. Those are not risks, those are reasonably planned expenses. One of the reasons health care insurance has become so expensive is that we expect it to pay for expenses we know we will incur. That really isn't a good use for insurance. It comes from an idea that says I'm not responsible for my own expenses, I want someone else to take care of me.
The real purpose of health insurance is not to pay for your health care, it is to protect your assets. That is, if you have catastrophic expenses, you would not want to lose your home, or your retirement nest egg, to have to pay medical bills. This is why I'm a big believer in a high deductible insurance plan. This plan means I'm not likely to cost the insurance company anything as long as I am just getting routine medical care and treatment for minor illnesses and injuries. As such they can charge me much lower premiums.
Become Self-InsuredTake the savings from those lower premiums and put them in a tax sheltered
Health Savings Account (HSA). For a person in a 15% federal and 5% state income tax bracket you will save 20 cents in taxes on every dollar you put into your HSA. So if your premiums are going to be $200 per month lower for your high deductible policy than for a traditional policy, you could afford to put $240 ($200 + $40 in tax savings) per month in your HSA. Also consider how much your deductible would have been on the traditional plan. If you would have had a $500 deductible, then that's money you would have spent anyway. If you put that $500 plus another $100 in tax savings into your HSA, you now have it up to $290 per month with just money you were already going to spend. But it gets better than that. How much do you spend out of pocket each year for over the counter medications, eyeglasses, dental visits, and other cost not covered by your medical insurance? All of that can be paid from your HSA also. If you spend $600 a year (to make the math easy) that's another $60 a month you can put in your HSA ($50 expenses and $10 in tax savings). That brings your total up to $350 per month, $4,200 per year, that you can put into your HSA. As long as your medical expenses are not catastrophic, this will more than cover the size deductible required become eligible for one of these plans. If you do have a catastrophic event, that's what the insurance is there for.
If you can afford to pay for routine visits, over the counter medications, etc. without tapping into this account, so much the better. It grows tax free and will give you a great safety net in the future. If you need it though, it's always there. If you can afford to put more than just what you are saving by switching to a high deductible plan in it, by all means do so. The limit for a family is $6,150 in 2010.
Plan for unemploymentOne of the great things about the HSA is that it can be used to pay insurance premiums on
COBRA. COBRA allows an employee to keep their insurance for a period of time after leaving their employer, but they must pay the premiums out of pocket. If you lose your job due to a layoff, it's difficult enough to pay ordinary living expenses, much less the full premium that previously was paid by, or at least subsidized by, your employer. Switching to a high deductible plan with an HSA now allows you to begin building cash reserves that could help you pay those premiums until you find other employment. This not only keeps you insured in the short term, it helps avoid becoming uninsured and getting caught in that "pre-existing condition" trap.
Posted via email from mikehardin's posterous
