Health insurance is scary

IT’S SPOOKY SZN ON THE JOINT ACCOUNT

Hello, friends. Heather here. Before you put on your Travis Kelce and Taylor Swift costumes tomorrow, please wish my better half and Halloween baby Douglas a happy birthday! Now onto something much less pleasant.

Halloween is the perfect time for horror, so grab your popcorn. This scary movie stars me as the damsel in distress, a postpartum woman haunted by a straggling medical bill. In 2019, I prepared to give birth to our second daughter, Ruby, by filling out hospital pre-authorization paperwork to make the health insurance claims associated with childbirth as seamless as possible. All seemed quiet and peaceful (not literally but financially) in the months following her arrival, until a knock at the door. Okay, not an actual knock at the door but something just as ominous: a hardcopy bill sent via snail mail. A random LLC I’d never heard of charged me about $4,000 for services rendered on Ruby’s birthday. The bill was past due.

I called the hospital’s billing department. Through them, I learned the LLC belonged to an anesthesiology group. Apparently, the young doctor who stuck a giant needle in my spine while telling me about her medical student loan debt worked for an outside LLC. The bill was denied by my insurance carrier without me even knowing. I spent several hours on the phone with my insurance provider and the LLC to learn the claim was coded wrong. The hospital’s billing department assured me they’d resubmit it.

Just like the movies, my life resumed with a false sense of security until seven months later in October when the phone rang. I didn’t pick up, because who picks up? In a voicemail, a man half-yelled vague unpleasantries at me—something about owing debt and collecting it, but he had my full name so it felt real enough to investigate.

Turns out, they sent me to collections. No one took care of it. My hospital contact? Gone. My insurance contact? Gone. I would take on the final fight scene alone. Many hours, escalations, conference calls, demands, and a sternly worded legal-ish letter later, I won. Not in any sort of noble way. I just saw the claim process in my insurance portal, and the debt monster faded back into the woods. My Nightmare on Claims Street was over. But most people aren’t as lucky as me.

Most people aren’t equipped to navigate the hellscape of the American healthcare system. Before pivoting careers, I spent 12 years as a lawyer in the commercial insurance industry. Yet even with my experience, my minor issue snowballed into a seven-month saga that landed me in collections. My only fault was assuming someone would do their job. If this could happen to me, the average person doesn’t stand a shot.

Scary medical bills are the downstream impact of a threshold issue: the ability to select the right health insurance plan for you and your family. With open enrollment about to begin and private employers circulating their options for next year, now is the time to pay attention.

Each fall, I receive at least a few requests from friends seeking help with their annual election for their health insurance plans. Usually, they send me a screenshot of some chart and an “idk” emoji. I say this with the utmost love and respect for my gals, but that ain’t it.

In my former life, I observed the way companies assessed and then mitigated the risks they faced. I mapped out decision trees for the businesspeople I supported. Into every complicated issue, I took with me a phrase my ethics professor sang on repeat: it’s all about your “appetite for risk.” Moving through life, I realize how many major decisions require you to explore your own appetite for risk. In this newsletter, I hope to frame many issues around our personal appetites for risk in hopes of reaching more informed decisions and more prepared outcomes.

Risk involves questions of chance that warrant dynamic thinking—almost nothing is black and white. The sooner you see it that way, the sounder your judgment will be. The goal is that when things don’t go as planned, you can at least find solace in the fact that you considered it could happen. You envisioned it. Planned for it. The outcome did not catch you by surprise.

Examining your health insurance through this lens is super important. The amount deducted from your paycheck is only one element of the larger conversation you need to be having. When you’re married and/or have children, the decision needs to capture your partner’s appetite and your whole family’s risk factors, too.

In other words, you are the risk managers of your own lives. Let’s explore what that means.

The conversation

Health insurance is what you buy to offset financial risks related to your health. The more insurance you buy, the less risk you keep. This is, of course, an insane oversimplification. But it’s an important baseline to return to when you’re faced with an important decision like selecting a plan.

We aim to help couples talk better about money, but that doesn’t always mean you should rush to the numbers. First, you and your partner should have a big-picture talk about your risk tolerance, your general health, and any personal circumstances that might have changed over the past year.

Here are some examples of questions you should be asking each other:

Do you visit doctors often? If so, you will likely satisfy a deductible at some point during the year.

Do you have specific health concerns or see specialists on a regular basis? If you do, you will also likely satisfy a deductible. Review how expansive your in-network coverage is, and see whether these plans require pre-approval for specialists, imaging, and testing.

Do you travel often to remote locations? If so, having some out-of-network coverage is a good idea.

Do you engage in high-risk physical activities? If so, your risk of hospitalization might be higher than the average person. Check the out-of-pocket maximums on the plans you’re being offered. 

Do you have kids, or are you planning to this year? When young children are involved, you have to just assume that anything can happen on the health front. You will visit the doctor. You very well might need specialists or emergency care. You just don’t know. From a financial standpoint, plan on spending money. Take advantage of an HSA, if applicable. More on that later.

Are you comfortable with how much you pay for health insurance now? This is a loaded question, obv. But seeing how your premiums impact your paycheck, and thus, your cash flow, matters.

Could you survive a catastrophic medical bill? Worst-case scenarios aren’t fun to think about. But if you don’t think your available cash can support an uncovered treatment or unexpected hospital stay, you should look for ways to cap your financial exposure, like making sure your plan has some out-of-network coverage or an out-of-pocket maximum.

I’ll share with you how we approach health insurance for our family. My risk tolerance is very low. We have two children who are just now emerging from their “walking petri dish” era. I live with a bit of fear over my health, because I have a congenital heart condition and have suffered from mysterious autoimmune issues for years. These circumstances drive our decision to purchase more expansive healthcare coverage. I want the best coverage we can afford.

Now, WTF is an out-of-pocket maximum?

The terms

Once you’ve “talked the talk” with your partner, you should familiarize yourself with some Healthcare Speak before you “walk the walk” of choosing your plan. This isn’t an exhaustive list of terms but covers the key concepts in a way I hope makes good sense.

Premiums: These are upfront payments you make to participate in your plan. If you’re offered health insurance through your employer, they will likely cover a portion of your premiums. Typically, premiums are tax deductible.

Deductible: Most plans also require you to front a certain amount of money for medical services before the insurer pays anything. For example, if your plan has a $2,000 deductible, you will need to first pay $2,000 in qualifying healthcare costs before your plan pays for anything.

Coinsurance: If a plan has coinsurance, consider yourself the “coninsurer” of your medical treatment. Coinsurance requires you to pay a percentage of all your medical expenses, even after you’ve met your deductible. Plans with coinsurance typically cover 70-90 percent of eligible costs, leaving you to pay the remaining 10-30 percent. For example, let’s assume you already satisfied your deductible. If your plan requires 20 percent coinsurance, and your next $1,000 medical bill rolls in, you would be responsible for paying $200 of that bill.

Copayment: This is an upfront payment for medical services. If you’re visiting a specialist, like a dermatologist, your plan might dictate you pay a flat amount, say $30, for that appointment. This isn’t the same as coinsurance. Plans usually have one or the other (unless you’re unlucky enough to have both).

In and out of network: Most plans limit coverage to certain doctors and facilities associated with the plan’s network. You’ll receive less generous coverage for doctors and services outside of the network. There could be a separate deductible for out-of-network services or simply no coverage at all. See what healthcare providers are in-network before selecting a plan. I’m a fan of plans that offer some sort of out-of-network coverage, even if it’s limited.

Out-of-pocket maximum: You’re probably not having a good year if you reach your out-of-pocket maximum. That’s the most money you can possibly be charged before your insurance picks up 100 percent of covered costs. The silver lining for whatever road of illness brought you or your family to the brink of your out-of-pocket maximum is that it’s there. You’re done for the year. Check that number.

Now that you’ve asked each other the hard questions and learned the lingo, you’re as ready as you’re going to be to take on the final goblin in this financial thriller.

The decision

You will likely have several plans to choose from, all with different prices, features, and limits. I can’t account for the design and cost of every plan out there, but I can offer this (non-legal, non-client, non-advice) advice:

1. There is usually not a “better deal.” Plans with higher premiums usually have lower deductibles. Plans with high deductibles have much lower premiums. Remember, these are questions about your appetite for risk. If you and your partner are healthy and don’t visit doctors often, it might make sense for you to choose a high-deductible plan and not pay much money in premiums up front. Take your chances on not needing that coverage to kick in at a lower dollar spend.

2. Kids change the game. If you have young children, you will probably satisfy your deductible whether it’s high or low. In those instances, examine each plan’s network of healthcare providers. Refer back to your answers to the big-picture questions and be sure you’ve accounted for your worst-case scenarios by selecting a plan that accounts for them.

3. But pay attention to employer incentives. Sometimes, employers offer financial incentives to choose a certain plan. I’ve seen companies highlight a Consumer Directed Health Plan (“CDHP”) option, which typically has higher deductibles, but then offer employees a monetary stipend to cover all or part of the deductible. Uh, hello! You’d be receiving the benefit of lower premiums and help from your employer to cover your deductible. It’s definitely worth giving that plan extra consideration.

4. Don’t be stingy with your HSA. One final note on CDHP and similar plans, which are designed with high deductibles to ostensibly give you more “control” over your medical care, because you’re personally paying for the bulk of expenses at first. Typically, selecting a plan like this comes with an option to fund a Health Savings Account, or “HSA,” with pre-tax dollars, and then withdraw that money tax-free to cover qualified medical expenses, which notably include allllll the money outlined in those fancy terms above: co-pays, co-insurance, deductibles, etc. This is why I’d tell couples that you should be funding your HSA with at least the amount of your annual deductible. Probably more. The maximum amount of money you can put in an HSA for 2024 is $8,300 for families. If affordable, I wouldn’t hesitate to max out your HSA. This tax-free money is yours no matter how long it takes you to spend it.

I understand that health insurance is scary to talk about, scary to look at, and scary to deal with. Ultimately, you’ll need to take a good look at your medical needs, your cash flow, and your appetite for risk to make a decision that’s best for you.

Even being a pro may not stop the claims goblin from terrorizing your mailbox, but at least when problems arise, being informed will help you fix them, instead of turning you into another victim.

If you found this helpful, please use it and share with friends!

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