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Understanding the True Costs of Consumer-Driven Health Insurance

Dive into the complexities of consumer-driven health insurance and learn why most Americans rely on employer-subsidized plans without grasping their true costs. This insightful analysis reveals the pitfalls of confusing terminology, unnecessary options, and the financial burden of co-pays and deductibles. We'll break down real-world examples and indicate how health savings accounts (HSAs) empower consumers to make better financial decisions regarding their health care. Educate yourself to save money and find the best insurance coverage for your needs.

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Understanding the True Costs of Consumer-Driven Health Insurance

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  1. The Alternativeis Consumer Driven Health Insurance Proprietary Information of Lee Benham and Associates. Permission Required for all distribution.

  2. Where are American’s getting their health insurance? • 80% of Americans get their health insurance through work. • Employer subsidized health insurance causes people to not understand it’s true cost.

  3. What’s wrong with that? • Insurance companies add options into policies that are a waste of money! • Terminology is being used to confuse people!

  4. Confusing the Consumer $1000 Deductible $1000 Deductible $1000 Deductible 90/10 Co-Ins 80/20 Co-Ins 50/50 Co-Ins Which Looks Better? 10% of $10,000 20% of $5,000 50% of $2,000 $1,000 $1,000 $1,000 What is the total out of pocket for each of these? $2,000 $2,000 $2,000

  5. Family Example • 40 year old male, non-smoker 40 year old female, non-smoker 2 kids • Zip Code: 68133

  6. 80/20 To $5,000.00 $500 Deductible $1000 Co-Ins $1500 Max Out of Pocket $779.57 x 12 months= $9354.84 Max out of pocket +$1,500.00 Total Yearly Risk $10854.85 50/50 To $2,500.00 $1000 Deductible $1250 Co-Ins $2250 Max Out of Pocket $487.28 x 12 months=$5847.36 Max out of pocket +$2,250.00 Total Yearly Risk $8097.36 Example Yearly Costs 50/50 To $2,500.00 $500.00 Deductible $1250 Co-Ins $1750 Max Out of Pocket $647.73 x 12 months=$7772.76 Max out of pocket +$1,750.00 Total Yearly Risk $9272.76 50/50 To $2,500.00 $1500 Deductible $1250 Co-Ins $2750 Max Out of Pocket $422.26 x 12 months=$5067.12 Max out of pocket +$2,750.00 Total Yearly Risk $7817.12 • 50/50 To $2,500.00 $2500 Deductible $1250 Co-Ins $3750 Max Out of Pocket $343.5 x 12 months=$4122 Max out of pocket +$3,750.00 Total Yearly Risk: $7872 As you can see, there is very little difference between plans!!!

  7. Your Actual Costs • Lets run these quotes on you and see the actual numbers.

  8. Options • Doctor’s Office • Co-Pay • Health Insurance is expensive. • Paying $20 or $30 at the doctor seems like a bargain. • The Reality, it’s a giant waste of money!

  9. How It Really Works • How many times does an average family of 4 go to the doctor in a year? • 4, 5, or maybe 6 times • What does a doctor’s office visit actually cost? • $70 - $80

  10. How It Really Works • Let’s assume this family has a $1,000 deductible. With a 50/50 Co-Ins up to $2,500 • This Family has a really bad year and they go to the Doctor 20 times and each visit costs them $100. Visits Doctors Charge Total Deductible 20 x $100 = $2000 $1000

  11. The Deductible Visits Doctors Charge Total Deductible 20 x $100 = $2000 $1000 If you are the one paying the office visit, then the cost would go towards your deductible, so after the first $1000, your deductible would be satisfied. Visits Doctors Charge Total Deductible 20 x $100 = $2000 $1000 You Pay $1000 SATISFIED!

  12. The Co-Ins Visits Doctors Charge Total Deductible 20 x $100 = $2000 $1000 You Paid Deductible $1000SATISFIED! You Pay Co-Ins $500 Insurance Pays (50%) $500 Total $2000 So, for this example you have paid $1500 and the Insurance Company paid $500, BUT THE YEARLY DEDUCTIBLE HAS BEEN SATISFIED.

  13. Lets Add The Doc Option • First Replace the words co-pay with the words Penalty Payment • When the co-pay is made to the doctor, the amount does not go towards the deductible or the co-insurance. It is just extra money out of your pocket. • Remember: Insurance Companies aren’t in the habit of losing money. So what they have set up here is a smoke and mirror cost shift. Where you the consumer are guaranteed to pay more than you can ever collect.

  14. The Cost of Co-Pay • The Doctors Office Co-Pay option by itself costs $178 per month $178 x 12months = $2136 in premiums And 20 visits x $30 per visit = $600 in penalty payments The Total Doc Co-pay + Premium is $2736. Thiswould have only cost you $1500 ……. if you paid it yourself!

  15. When do you come out ahead? • NEVER!! • It does not matter how many times you visit the doctor when using a co-pay, you will never come out ahead. • Why? The cost is never going towards your deductible.

  16. Prescription Co-Pays • These work the same as other deductible plans. • A $500 deductible with 10/25 co-pay is part of the base plan. • BUT…you have the option of buying the card down to $0.

  17. The Math • Insurance companies immediately see potential claim losses of $500 as well as administrative fees. How much is this savings going to cost you? Deductible: $500 $0 Your Cost: $0 $181/month Total: $500 $2172

  18. The Cost of Saving Deductible: $500 $0 Your Cost: $0 $181/month Total: $500 $2172 You are spending $2172 to save $500. Now that you understand the cost, who in their right mind would do this?

  19. What is the SOLUTION ? • An Educated Consumer • An Empowered Consumer • An Enlightened Consumer • AND……

  20. Health Savings Account (HSA) • The HSA simplifies the consumers choices when buying a Health plan. • You the consumer, know what is best for your family! • How are you going to spend your hard earned Dollars?

  21. Understanding How an HSA Works • There are two moving parts to an HSA. There is the Health insurance portion and the cash portion. Your cash $ High deductible insurance plan

  22. Health Insurance portion • In order for you to have an HSA. You must first establish a high deductible health insurance plan… • A high deductible insurance plan must have an individual deductible of at least $1000 up to a maximum of $5000. • Family deductibles range from $2000 up to a maximum of $10000. • The current maximum contributions for an HSA are $2650 for individual $5250 family.

  23. Cash Portion • Only after you have established a high deductible health plan. • You can then place up to 100% of your deductible into a tax free cash account. • These are the funds that you may use to pay your health care expenses. • If you do not have any health expenses you keep the money.

  24. Comparing Plans • Lets go back and look at the 50/50 plan to $2500 with the $1500 deductible. • This is a $2750 max out of pocket. • This is times two for a family with a total family max out of pocket of $5500 • Cost of this plan is $5067.12 per year. • Total family maximum risk is $10567.12

  25. Comparing Plans • Now lets look at an HSA plan with a family deductible of $5250. • The coinsurance is 100%. • The cost of this plan is $3613.44 per year. • The risk factor for the family is now $8863.44 • The family risk factor drops by $1703.68

  26. Deductible $3000 Co-Insurance $2500 Total $5500 Cost $5067 Risk $10567 $5500 max out of pocket is a after tax out of pocket. Deductible $5250 Co-Insurance $0 Total $5250 Cost $3613 Risk $8863 $5250 max out of pocket is now pre tax out of pocket Side By Side Comparison

  27. Consumer Driven Plan • By Taking the savings in premiums from the traditional plan and placing them in an HSA account. • The consumer is paying themselves instead of paying the insurance companies. • Creating a Tax deduction even if the funds are not needed. • Lowering their yearly risk factor if they due become sick or injured. • Controlling there own funds. By paying only if and when they need their health program not every month in the hopes that they will.-

  28. IS There A Downside • Yes there is a down side to an HSA. • The down side to an HSA is in the first few months of an HSA people have not had sufficient time to fund their savings.

  29. Is There A Solution • Absolutely • By using insurance wrap around products. Clients will be able to fund their HSA’s with funds from other companies indemnity products.- • Clients purchase small Accident, Critical Illness, and Hospital Indemnity polices from other carriers, • This spreads the risk over several companies and drives the cost down even further.

  30. Example • 40 year old couple with 2 kids in 68133 area code. • HSA health plan. Monthly cost $232.50 • HSA contribution $25.00 • Accident policy with Hospital cash option rider. Monthly cost $32.41 • $5,000 Critical Illness policy monthly cost $17.06 • Total monthly cost of all plans $306.97

  31. You Now Have The Power • Now You Are An Educated Consumer! • Now You Are An Empowered Consumer! • Now You Are An Enlightened Consumer! • How Are You Going To Spend Your Hard Earned Dollars?

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