Will Costly Health Care Wipe You Out?
This month’s newsletter is addressing at length the issue of private health insurance in
response to all the hoopla currently going on about it. Paying for health care is expensive
and can be financially devastating. Receiving affordable and high-quality health care is a
number one concern for most people. The future structure of the U.S. health care system
is uncertain. What is certain is that the structure will change out of necessity. For your
own certainty, the best advice is to proactively take charge of your particular situation,
whether you are young and raising a family or elderly and living on a fixed income.
Being informed about your health care insurance options, you can plan how to manage
and adequately fund your own specific needs for health care. There are many challenging
decisions and changes on the horizon in how affordable health care is delivered, received,
and paid for. Informed planning is the only sure way to make the most intelligent choices
for you and implement affordable strategies that will prevent the costs of health care from
financially wiping you out.
Most people who have medical, dental, and vision insurance participate on a group basis
through their employer, which helps make the protective coverage more available,
especially if you have adverse health issues. This is because there is usually no individual
health underwriting requirement in order to participate in a group plan. Also, group
health insurance is usually more affordable because some employers subsidize some of
the out-of-pocket premium costs for their employees.
QUIET MILLIONAIRE WISDOM
Always plan ahead to make sure that you never become
financially vulnerable by being without affordable
catastrophic health insurance.
Despite all of the benefits associated with group health insurance, there are some
downsides to the plans with no easy solutions to these problems. Retaining affordable
health insurance coverage is a huge problem affecting a larger number of people who
leave their employment because of career change, termination, or retirement. Many
workers are being forced to remain in jobs they dislike because they would otherwise be
without affordable health insurance. Losing affordable health insurance is a particular
hardship for others who are being involuntarily “let go” from their employer and now
must face a life without affordable health insurance until they are eligible for Medicare at
age sixty-five. Those people without group health coverage always have the option to buy
an individual policy; however, if you have a preexisting adverse health issue, an
individual policy can be prohibitively expensive and can lack the full coverage if it
excludes the preexisting condition.
The likelihood of needing health care is a matter of when, not if. This is why the
premiums to insure against medical risks are high. In addition to the premium, there are
often other out-of pocket costs associated with medical insurance coverage. The
health insurance company begins to contribute any money toward your medical costs. In
addition to the deductible, there may be
certain dollar figure for each medical service provided, and/or
are required to pay a certain percentage of your health care costs.
Medical insurance companies are protected by a “lifetime payout provision” that limits
the total amount they will have to pay out over the lifetime of the insured. The amounts
usually range between one to five million, and the higher maximum lifetime payout
assures that the coverage will not be prematurely depleted.is a predetermined dollar amount that you have to satisfy every year before thecopayments, where you are required to pay acoinsurance, where you
Types of Private Health Insurance
Deciding about which type of medical plan is best to purchase, whether as a group
participant or individually, is a confusing process. The following is a review of the
features and benefits of the various types of plans available: indemnity, health
maintenance organization (HMO), preferred provider organization (PPO), point of
service (POS), and health savings account (HSA).
Indemnity Insurance Plan
Indemnity insurance plans are the
the treatment of unexpected illnesses as opposed to preventive medicine. The insured is
allowed total control over the choice of physicians and hospitals to be used. After an
annual deductible and copay or coinsurance is paid, the insurance company indemnifies
in full for
flexible and provides payment benefits regardless of which physician and medical facility
are used, it is the patient’s responsibility for keeping medical receipts and bills and for
completing the claim forms for payment.
The indemnity health plan does not usually cover preventive medicine services; fees for
checkups, office visits, and shots are your responsibility. This can make indemnity
insurance impractical for a large family that requires a lot of routine visits and
preventative care. Because of skyrocketing health care costs and an emphasis on
preventive medicine, managed health care has become the more prevalent medical
service approach. While the managed health care form of insurance is a more affordable
insurance alternative to the pure indemnity type plans, the offset is that there are
restrictions in your choices for getting medical treatment.original type of health plan, where the emphasis is onany medical service provided. While the indemnity type plan is the most
Health Maintenance Organization (HMO)
HMOs paved the way for the development of managed-care medical insurance plans.
Unlike the consumer-driven, higher-cost indemnity plans, HMOs are medical provider
driven and, with controlled costs, are a lower-premium health insurance alternative. The
basic concept is to manage care and control costs by limiting medical care access to an
assembled preapproved network of physicians and hospitals.
From the network, you choose a primary care physician, who, acting as a
responsible for your overall health care as well as for making referrals to specialists and
approving further medical treatment. Usually, your choice of doctors and hospitals is
limited to those that have contract agreements with the HMO to provide for your health
Because the HMO managed-care emphasis is on preventive medicine and treatment, most
doctor visits, checkups, and shots are typically covered, with the possibility of a copay or
coinsurance requirement for each service activity being the only out-of-pocket cost.
Generally, there is a standard copayment amount per doctor visit and a preapproved
payment amount to cover prescriptions. No claim forms are required to be filed for
services provided. Instead, as an HMO member, you merely present an ID card at the
doctor’s office or hospital, which then submits the service claim directly to the HMO for
The drawback of any HMO policy is that no care can be received outside of the network
without a highly restrictive prior approval being obtained. Therefore, except for
emergency treatment, any medical service sought outside of the network is limited, and
the expenses incurred are usually not fully covered, if at all. This restricted network
referral process makes it difficult to access specialized care outside the HMO network,
which can be a detriment to you receiving the best required medical treatment available
without incurring a huge out-of-pocket financial cost.gatekeeper, is
Preferred Provider Organization (PPO)
The PPO is an evolved type of managed-care plan that is growing rapidly in popularity. It
was developed to combine the lower cost of a managed-care plan with the greater degree
of choice found in traditional indemnity health insurance plan.
Although your health care is managed with restrictions, you are granted a more lenient
degree of choice in providers. A PPO health insurance plan operates in a similar manner
as an HMO in that you pay a fixed monthly premium, and in return you receive medical
services from the health care provider network. However, a PPO does differ from the
original HMO blueprint in that under a PPO insurance plan, a primary care physician or
“gatekeeper” physician is not required. As a result, seeing a specialist does not require a
If you need or want health care provided from
pay a higher copayment than if the provider were from within the PPO network. In
essence, each time you need medical attention, you can decide between a higher-costing
indemnity plan format with freedom of choice for provider care or a lower-costing
managed-care option that restricts your care to within the provider network.
PPO insurance is typically more expensive than an HMO managed-care plan. Even if the
premium is comparable to an HMO, there are other out-of-pocket costs associated with a
PPO. For receiving nonnetwork care, you must satisfy a deductible before the health
insurance company begins payment benefits. After the deductible is met, you must pay
coinsurance, which is higher than network provider coinsurance amounts. Furthermore,
you might also be required to pay the difference between what the nonnetwork health
care provider charges and what the plan deems to be “reasonable and customary” for the
service. However, these extra costs associated with a PPO may be worthwhile to you
because overall the PPO is less costly than an indemnity plan and more flexible about
accessing provider services than an HMO.outside the network, you are required to
Point of Service Plan (POS)
POS plans are a lesser known type of managed health care plan operating similar to a
PPO, but they are slightly less expensive and more restrictive about provider choices than
a PPO. When you enroll in a POS plan, unlike the PPO, you are required to select a
network physician who is primarily responsible for your health care and who is
designated as your “point of service” physician. The primary POS physician is permitted
to make referrals
nonnetwork provider by the health insurance company. For medical visits within the
health care network, there is no claims paperwork to complete. For services provided
outside the network, it is your responsibility to keep track of health care receipts,
complete the claims forms, and submit bills for payment.outside the network but with limited payments being made to the
Health Savings Account (HSA)
A health savings account (HSA) is not a health insurance plan unto itself. Instead, it is a
tax-favored savings account that is used in combination with a high deductible health
insurance policy. The HSA is used for paying out-of-pocket medical expenses with
pretax, nontaxable dollars. Here is how the combination HSA-health insurance policy
works. The managed health care policy has a high deductible, which allows a relatively
low premium. With the premium savings, the extra money available can be regularly
deposited into the completely tax-free HSA. The maximum amount that can be
contributed annually to the HSA is the lesser of the amount of the health plan’s high
deductible or the maximum specified by law, which is annually inflation adjusted. As of
2009, the maximum allowable contribution amounts to a HSA are $3,000 for individual
coverage and $5,950 for family coverage.
The HSA includes a checkbook and/or a debit card that may be used to pay for medical
expenses using nontaxable, pretax dollars until the health insurance high deductible is
met and the policy’s benefits begin. Any HSA account funds not used during a given year
remain in the account, invested to grow without taxation, and are available for future
medical expenses or for retirement income purposes similar to a traditional IRA. Note:
This is unlike the employer sponsored group Section 125 “cafeteria plan,” which requires
that all pretax contributed money must be entirely used within a given tax year or the
money is forfeited under the “use it or lose it” rule.
QUIET MILLIONAIRE WISDOM
Research thoroughly what type of private health insurance
plan is best for your medical needs.
In evaluating whether to select a HMO, PPO, POS, or HSA health insurance plan, the
following checklist of questions can be used as a guide:
Health Plan Evaluation Checklist
•How many doctors in the network are there to select from?
•What hospitals are available through the plan?
preferred doctors and hospital choices in the network?Where are the offices and hospitals in the network located? Are my
•How are referrals to specialists handled?
•What is the coverage policy for emergency care?
•What health care treatment services are covered?
•What preventive services are covered?
•Are there limits on medical treatments or other services?
•How much is the health insurance premium?
•Are there deductible, copayment, or coinsurance requirements?
providers?What are the additional costs and restrictions for using nonnetwork
•Is there an annual out-of-pocket maximum?
In addition, depending upon how much you want to pay or what your family health
history is, you might want to include other less common coverage in your medical
insurance policy. Some of these “extra” coverage areas might include:
• Dental insurance
• Vision care
• Care by specialists
• Care for mental health
• Services for drug/alcohol abuse
• Family planning services, OB-GYN
• Chronic disease care
• Physical therapy
• Nursing home and hospice care
• Chiropractic care
• Maternity care
• Well baby care (immunizations, etc.)What is the lifetime maximum dollar benefit?
QUIET MILLIONAIRE WISDOM
Say “no” to specialized disease insurance.
Specialized disease insurance policies are available for specified diseases such as cancer,
heart attack, or stroke. These policies provide benefits only if you contract the specified
disease. However, the policy will not cover the specified disease diagnosed in existence
subsequently that you had the specified disease at the time of purchase, even if you did
not know it existed. Importantly, be sure you understand what conditions must be met
before the policy will start to pay your bills.
Purchasing specialized insurance is an emotional purchase decision, not an intelligent
purchase decision. Although a comprehensive medical insurance policy has a higher
premium than specialized insurance, it is a much better value because it covers all
diseases and medical treatment needs. In our opinion, buying specialized disease
insurance is a waste of money. Agents who sell it play on the purchaser’s emotions and
often use misleading sales practices that are scrutinized by state insurance regulatory
agencies.you applied for coverage. Some policies will deny coverage if learned
Can affordable health care be achieved?
Our society is challenged to provide affordable health care for everyone. Health care has
gotten so expensive because people live longer and expect to receive the highest quality
health care available. The costs for research, development, and delivery of modern
medical technology are astronomical. The amount of money spent on health care per
person and as a percentage of our gross domestic product (GDP) is spiraling out of
There are conflicting interests that must be addressed and need to be overcome in order to
stabilize our health care system. As medical service consumers, ideally we want
affordable health care for any medical reason, large or small, on demand any time we
want it and from the best physicians and medical facilities we choose to use. However,
this ideal vision conflicts with that of the health care and insurance companies, which
strive to control costs in order to be profitable. In addition, the government faces tough
and politically unpopular budgetary decisions necessary to publicly subsidize this
financially demanding social issue.
The challenge for affordable health care will have to be met, but as a society, we tend to
address difficult issues in a crisis management manner as opposed to a proactive manner.
We will be forced to respond to and implement a comprehensive system of more
responsible administrative and financial management by all parties: the health care
system, the government, and all of us individually. In the meantime, plan diligently to
manage and fund your own health care needs in order to avoid depending upon others.
FMG Welcomes Referrals for New Clients to Assist
FMG’s ideal client is one that we term the
destination or is on the journey to becoming one. Typically, quiet millionaires are good
wealth accumulators, live rewarding lives unpretentiously within their means, and tend to
give back some of their financial success in order to help others have more meaningful
Today, many people are distressed and confused about their financial situation and do not
know what to consider when looking for a financial advisor. FMG is available to offer
with no charge or obligation an introductory, get acquainted consultation to determine if
and how we might be able to assist with our services. FMG’s fee-only financial and
investment management services are structured to provide the following for clients:
1) Determine specifically current and future goals and objectives
2) Comprehensively plan and implement how to reach them
3) Monitor progress along the way and make required adjustments accordingly
Our most important resource for deriving new clients is from satisfied clients and
professionals who refer others to us. We welcome referrals and prospective clients can
view our Internet websites
telephone us at 513-984-6696quiet millionaire®, and has either reached thatwww.fmgonline.com and www.quietmillionaire.com or.