213: Health Insurance Basics with Scott Dowling
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Do you have health insurance? Some believe it’s not necessary or may be too expensive, but as entrepreneurs, there are many reasons why it's critical to have some level of coverage for you, and even your staff. Scott Dowling, insurance broker and host of Doxcost, breaks down the misconceptions around health insurance and how to find an affordable policy. Scott shares how health insurance has changed over the years and what our options are for health insurance as a sole-proprietor. We also discuss exactly what an HSA is and why it's one of the best ways to get coverage for less.
Topics on this episode:
Basic health insurance terms
How does it fit in with other insurances
Choosing an option
Common misconceptions
Main take away? Insurance may seem expensive, but the alternative is a massive risk for you and your business. Insurance is not gambling!
About our guest:
Scott W. Dowling shares his 30+ years of insurance industry knowledge and experience to assist you in tackling your health insurance; making it work best for you, your family, your company and your employees. The head of CIGNA Group Insurance once remarked that, “He just won’t take no for an answer!” Very true. I won’t stop until I can help you get what you need to get the most value from your health insurance benefits.
Links:
Email Scott: Scott@doxcost.com
Listen to Doxcost: https://doxcost.com
Episode on terms: https://doxcost.com/hmo-ppo-epo-wtf-idk-nvm/
Compare plans: www.ehealthinsurance.com
Give us a call! (636) 364-8260
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Email us at: feedback@petsitterconfessional.com
A VERY ROUGH TRANSCRIPT OF THE EPISODE
Provided by otter.ai
SUMMARY KEYWORDS
insurance, pay, employer, insurance company, coinsurance, money, health insurance, employees, deductible, coverage, health savings account, hospital, business, doctor, covered, hmo, carriers, premium, hsa, blue cross
SPEAKERS
Collin, Scott
Collin 00:17
Hi, I'm Meghan. I'm Collin. And this is pet sitter confessional, and open and honest discussion about life as a pet sitter brought to you by time to pet and pet sitters International. Well, hello, everybody and welcome back. Navigating the world of health insurance can be pretty daunting, especially as solopreneurs or when you start to add staff. And so we're really excited to have Scott Dowling podcaster, and insurance broker in health insurance on the show today to give us some of the ins and outs and how to navigate that world. So Scott, thank you so much for coming on the show today. Could you tell us a little bit more about yourself?
Scott 00:53
Sure. Thanks, Colin. It's my pleasure to be here. It's my pleasure to meet your audience. I've been in the insurance business for over 30 years. My youngest would call me an old man, but not yet that old. But I've been in the business for a long time seen a lot of ins and outs. what works and what doesn't. I've been mostly in the employer employees side, I have dealt with associations. And so that gets down to individual insurance to some extent. But it's basically been health insurance I've been in I've done Medicare Supplement in the past, done life and disability and that kind of thing. dabbled in property casualty, but that's a completely different animal. But I am well versed with the all the health insurance from an employer group side and from the employee side.
Collin 01:47
You mentioned you've been in it for over 30 years now. I was curious how the health insurance landscape has changed over that time.
Scott 01:56
Wow. I saw that question. I can it's changed a bunch. I mean, in the last 30 years, it's changed a bunch but I can go all the way back to the beginning of it. My podcast is called doc Scott's do x CST Doc's cost. It's the ultimate guide to health insurance. And the first couple episodes, I go back to history of health insurance. I mean, basically started out in in Dallas, Baylor hospital, and they had a bunch of empty beds, and they were trying to figure out how to fill the beds up. So they basically went out and went to teachers in in the Dallas area, and sold them a prepaid plan and said you give us 25 cents a week and come to our hospital and you'll be taken care of. That's That's how Blue Cross started. That's the that's the origins of Blue Cross. And the Blue Cross is the hospital side. Up in the Pacific Northwest. It started out as as doctors services, physician services, and it was plans that were sold to loggers in the same vein, and that's how they got to me Blue Shield and then back in the middle 80s Blue Cross and Blue Shield joined together as one company. And then they operate separately in every state. It's almost like a licensee situations with what they call it, but it's sort of like being a franchise sort of not. But that's changed. I mean, I can go back to it used to be that all state sold health insurance and Metropolitan sold and health insurance and Prudential sold health insurance company I worked for a long time ago CNA sold health insurance. I was at a meeting it CNA down in Michigan Avenue in Chicago, probably back in 1992 9182. And the CEO is addressing a lot of the employees and he said the days of the multi line insurance company are over. And that's when there is a big consolidation going on. You can go in and you can go back into the Medicare act of 1965 is when I think everything changed, and Medicare was finally implemented and people over 65 could get insurance through Medicare instead of trying to do it on their own because they no longer had employer sponsored insurance. But the companies are completely different. Everything's consolidated. Their government regulation insurance is regulated by the states but the government regulations gotten a little bit more robust on a federal level. And that goes back to like, risk is the Employee Retirement Income Security Act that was back in 74. And a minute ad for Cobra. everybody hears about Cobra. Cobra is a Consolidated Omnibus record the Omnibus Budget Reconciliation Act of 1985. That basically says that you can't get kicked off your employer's insurance. If you separate from the company whether you quit or whether they fire you or you're laid off or whatever it may be. You still have the opportunity to stay on the insurance you If you pay the full price that that came into effect that was big. HIPAA was the Health Insurance Portability and Accountability Act. That happened in the 90s. during the Clinton administration, that basically I was that was known as the Kennedy kassebaum. Bill. So back when things used to be bipartisan, Nancy, Kathy Obama's republican senator from your neighboring state over there in Kansas, and then Ted Kennedy, obviously in Massachusetts, they put a bill together. HIPAA has to do with privacy, and a lot of people here the privacy stuff, but it's a Health Insurance Portability and Accountability Act. And that basically said that if you are an employer with at least two employees, that you cannot be turned down for insurance. If you apply for it, you must have an issue to you by any insurance carrier that offers coverage in your state. So you know, speaking to some of your listeners out there who may be wanting to form a group or they may be an individual looking to pay an employee's HIPAA basically says that it has to be guaranteed issue and that's long before the Obamacare stuff came around. So everything's changed. I mean, you know, they wouldn't, I'm actually an alum now, my first job out of school was to work for Metropolitan Life in Chicago, and our largest client was Amica. We were in the Amoco building, we used to ride the elevator 3535 floors below and we'd go for a meeting. And we ensured that, you know, 50,000 employees of Amoco standard rail in Indiana, you know, I mean, now BP has it all that stuff, but, and now, Metropolitan got out of the business a long time ago. And they went to life insurance and PNC, and the small PNC, but Metropolitan was they merged with travelers. They merged their group insurance business with travelers and became Metro health. And then Metro health was purchased by United Healthcare. So there's been all kinds of consolidation. I mean, now you have something called the bukas. It's Blue Cross united healthcare, Cigna, and Aetna. B UCA, that's the acronym everybody uses. Blue Cross is like I said, it's completely independent across the United States. Some of them Anthem Blue Cross is kind of that standard, or the standard. That's Blue Cross of Indiana merge with Blue Cross California. So there's a lot of consolidation on the blue side. But there's limited numbers of carriers anymore. So yeah, it's changed a bunch with that. You
Collin 07:27
mentioned several acronyms and terms. I think that's one of the places where a lot of us get tripped up when we start looking at insurance or trying to understand what's going on. So what are some basic terms that everybody needs to be familiar with when we're talking health insurance?
Scott 07:41
Well, I actually had a couple of episodes on that, I think, Episode 25 and 26. On Doc's got to be looked that one up, but it was EPO, HMO, EPO, WTF, and Nv nvm. So the whole thing is about all of these goofy acronyms. And what do they mean? And what are they what do they do? And what are they for? So in the author of a couple others atcha, HSA and hdhp. So no, PPO is Preferred Provider Organization that really started back in the early 1980s. And it was to give doctors away to gain patients it was to gain scale, just get the volume and they would give. So there would be a Preferred Provider Organization that somebody would start in didn't have to be a hospital or a doctor. And it wasn't necessarily an insurance company. fact, one of the largest operators of networks is a company. It's a publicly traded company out of New York City called multi plan. And very outside of the insurance business, you wouldn't know what multiplan is, but multiplan goes to doctors and hospitals, and they, they create so called networks. PPO is when they started back in the 80s was to give volume to doctors and was sort of like what Blue Cross did down at Baylor hospital, they needed business. So they said, Okay, well, you know, you bring us all of your employees, you you bring us the the 500 employees in Sedalia, and we'll give you a discount on what we charge. And then the doctor say great, and then the operator turns around and goes the insurance company says I've got all these doctors, it'll take a lower amount for the charges, you know, for an appendectomy or an office visit or whatever it may be. They'll give us a discount on what they charge. If you sign this contract, and I bring all your insurance, your 500 insurance to them. So that's what they did. That's That's what a PPO network is it's just a list of doctors that agree to charge a certain amount, or a group of hospitals that agree to charge certain amount based on that contract. So the PPO is not enough. necessarily a plan of insurance. It's basically a lie I like to say so called network. It's just a list. It's a list of doctors a list of hospitals that agreed to charge a certain amount of money. And under that PPO agreement, one of the issues that's going on now and talk about all the surprise billing and balance, billing and all that kind of stuff. That's because the PPO agreement or the HMO Ah, come on a second. But those agreements say that you cannot disclose any of the information that's in this contract. You can't disclose what you charge. So an HMO is the same way it's a list but HMOs started Henry J. Kaiser answer. You might have heard of Kaiser aluminum. Kaiser steel. Well, that's Henry J. Kaiser. He was he was an industrialist. And he was he was out in New York, and then he's out in California Pacific Northwest, he started a hospital in I believe it was Emeryville, California is up in the East Bay. And he started a hospital for the employees. And he said, you come in here, you know, you're, you're an employee, you come to our hospital and you're taking care of won't pay for everything. That's the original HMO. And the HMO Kai when Kaiser started and Kaiser Permanente is still out there. It's not really affiliated with Kaiser, the company anymore. It's a separate entity. And there's Carrick Kaiser Family Foundation and all that stuff. That's separate as well. But then, when Kaiser started the HMO, you had to go to the Kaiser hospital, you couldn't go to a doctor you wanted to stay, you couldn't go to, you know, anybody of your choice, you had to go to a specific place the specific hospital, and you got your doctor's care, and you got your hospitalization and everything else. And that's how they started bringing it in. I think some of the teachers out in California and some of the other stuff, some of the other groups, and they would go into the Kaiser plan, but then they couldn't see anybody else. It was a self contained. Little deal. That's how HMO started. And then when the PPO a and actually back in the Nixon administration, HMOs were required to be offered by employers by law. That's another one of the changes when you asked how things have changed. And And next, the next administration said, if you're an employer, and you have this many employees, you have to offer an HMO have to by law, and you can also offer other insurance, but you have to offer an HMO and people started using the HMOs a little bit and then when the PPO came around about 10 years later, the doctors were like, I'd rather be doing the PPO thing rather than doing the HMO thing. And people started, you know, the insurance companies that that least the network's the employers that went on there. They started to go after the PPO. So the HMOs started low started to lose favor. And then what happened was the HMO kind of morphed into a sort of PPO. And that meant that if you were on the list, you would have coverage. If you weren't on the list, then you could go to that doctor but you wouldn't have any coverage. It's like an all or nothing proposition. So it's almost like an HMO. If you go to the hospital and they that's their hospital. You're covered. If you go some other hospital you're not covered. This is sort of like that, but HMOs have kind of gone by the wayside.
Collin 13:27
Is that where these idea of in network and out of network coverage starts coming in when we look at our policies
Scott 13:32
correct? Yeah, I mean in network it like I said, it network is just a list. It's not like they're all affiliate and they're all chummy. And they know everybody else. It's they're on a list. And they're on a list that says that you know, I'm going to charge this much money for an office visit this much money for surgery, and the hospital is on the same list. If you're on the list, you're in network if you're not in the list, you're out of network.
Collin 13:59
Have you heard of time to pet Claire from Acton? criticizers has this to say
14:03
time to pet has honestly revolutionized how we do business. My sitters can work much more independently because they have ongoing access to customer and pet information without relying on me. I save hours upon hours of administrative time on billing, processing payments and generating paychecks
Collin 14:20
if you are looking for new petsitting software give time to pet a try. listeners of our show can get 50% off your first three months by visiting timed pet.com forward slash confessional. thinking more broadly about insurance coverage was was wondering how it fits in with how we run and operate our business and other insurances that we may have.
Scott 14:43
Sure. Well, the when you run a business and obviously you want one I run one. There are certain things that are required if you have a you know if you lease your property or if you buy and you have a mortgage. If you If you want to have a car or any other equipment, there are certain things in the contract or certain things in the lease, say you must produce property coverage at this amount, or if you have a mortgage, you must have this covered for this amount. If you want to have a contract with some other providers, some other partner, they're gonna say, hey, you need to have liability insurance at this much money, you know, at this level, you certainly want to have errors and omissions coverage. So the business side is completely separate from from the hell life and health side so when a business owner goes into business, first thing they're going to do is get you're gonna get a property coverage, you're gonna get liability coverage, general liability coverage, so they might get more specific coverage, like professional liability, which is also called errors and omissions. You might if you're, you know, if you have shareholders and that kind of thing, you might get something called directors and officers coverage, you have employees, you might get something called employer practices liability coverage. If you're online, you might get cyber security coverage, that kind of thing. And a lot like I mean, pet sitters, I'm, you know, I'm generalizing here, but you're not the same thing is a Petco or PetSmart, or some other company that provides services to pet owners. It's the same thing for insurance, life and health, and PNC are like two different animals completely different, the risks are different, the carriers are different, the brokers are different, the policies are written differently, the premiums charged are a lot different. So, you know, from a business owner standpoint, you're gonna have all your property casualty liability, and then from the life and health side, those are kind of nice to have things versus the ones that are required by the by the, you know, by your partners or by your landlord or your bank. So in the but on the business side, you want to take care of your employees, don't take care of yourself, and you have to take care of your employees. So on the on the life and health side for business, you would look at something along the lines of health insurance is usually primary. And then dental insurance follows that. Life Insurance is important, as well, they all serve different functions. One of the things that I think is very important that a lot of people miss is disability insurance. Disability Insurance is basically covering your income, it's insuring your income when you can't work, but it's ensuring your income, that's all it's doing. I mean, life insurance is covering your income when you're gone. You know, you're no longer there, you have no means of of generating any income for yourself through work. And you have to cover your debts you got to provide for the rest of your family over the rest of the years and everything else. But disability income often gets overlooked. So there's, there's a lot of stuff there employers can also look at retiree medical insurance and that, you know, there's there's other things there's other supplements that go into it. I don't know if that fits for you know, your your listeners, but there's all kinds of other ancillary life and health coverages that go into it that are that are part of the business plan. If you're, you know, if you're a large employer, smaller employers tend to stick to health insurance, dental insurance, life insurance, maybe disability insurance, maybe, even though I think those are really important.
Collin 18:20
I think Disability Insurance gets overlooked a lot. Because that's an something that many of us don't consider that's not in our risk management thought process, when we're looking at how to cover ourselves. We're looking more at the here and now. And so yeah, reminding ourselves well, you know, there may be a time especially in this industry, where you're walking dogs, you get bit you get pulled down, you break a shoulder or you break a leg or something like that, where all of a sudden you are no as you said no longer able to generate income. It's a big fear for many independent business owners who if the business relies on me, what am I going to do whenever I get hurt? Well, having something like that, that kind of coverage really does help help those fears.
Scott 19:02
There is something called workers compensation coverage. But when you get into a sole proprietor or where you are the owner or officer of the company, generally speaking then workers comp doesn't cover those types of employees because you're you're basically making a claim against the owner of the company. They're that you know, they that's how that's how it's seen as you're basically making a claim against the owner in you really wouldn't be doing that. As the owner, you wouldn't be suing yourself
Collin 19:36
right? What are my options for insurance? If I am self employed, and I'm running my and operating my business by myself because many people feel like they're they don't know where to start? Because we're always used to getting it from an employer or either not having it and so I've started my business. I'm looking to get coverage, what what kind of options do I have?
Scott 20:00
Well, you have, you have a few wouldn't say you have many, you have a few in the way that Obamacare has kind of changed the landscape a little bit, you're probably as a sole proprietor as an individual, you're going to be going through one of the exchanges. And that's where most of the most of the individual coverage is available. The other thing to remember it with insurance I kind of alluded to it before is their states govern insurance. So every state is different. And every state has different carriers. So it's not a one size fits all kind of thing. The federal government oversees some of it, obviously, the Obamacare you know, it's a patient protection Affordable Care Act is the technical term for it. That that is the law of the land. The way it's been enacted, some states have exchanges, some states went with the federal exchange. And not all carriers want to play. So there are some, that's what I mean by the, the options are limited. There are some that are off exchange, but it depends on wherever you live depends on it can even depend on what county you're in, you could get off exchange plans, but you'd have to search for those, I mean, the easiest thing to do, one of the ways that I look, when I'm looking and I'm not endorsing this organization, I used to compete against them, but I'm not endorsing them. But they do offer a good search tool. And that's e health insurance calm. They'll if you put in your zip code, and everything else, you can see what plans are available. And then we'll show you on exchange off exchange. If there are any off exchange, if you're an employer, then there's a couple different things. There are still some Association plans, depending on the state you're in, and depending on where you're at, there's still some state plans and association plans in your state that you can get involved in. So some chambers of commerce had the plans available. It all depends on what they're doing, how they interpret how the state interpret, interprets the Affordable Care Act, and what they do with it. But you could get down to one life. And when you look at group insurance, it's usually like I said before with them, with the HIPAA can spam bill that went down to two employees. So if you were a sole proprietor, you weren't covered under HIPAA, Obamacare goes down to one employee being guaranteed issues, so you can you're never gonna get turned down for insurance at all. So if you apply, you can get it. What the premium is, is different story. So and then there's a subsidy subsidies and everything else that go with the individual exchanges. There are there are choices. But it's limited by the state you're in. Sometimes it's you have more choices in a certain County, depending on who wants to sell in that county. That's how a lot of the carriers look at things. If you go into the group side, there are a lot of other choices. But you need to have at least two employees. So if you have yourself and your spouse, depending on the state you're in, depending on what's recognized if you have yourself and your spouse or partner, and you want to form a group, and you can name yourselves as the two members of the group. And like I said, it depends on the carrier depends on the state. But you can do that. And what they use, what they usually utilize, is a wage and tax statement. So if you're a sole proprietor, sometimes you don't take wages, you just take, you know, quarterly payments as dividends or whatever it may be, depending how you're structured, whether it's an LLC or C Corp, S Corp. So you wouldn't have a wage and tax statement that's being supplied to the state. So in lieu of that, the insurance company will take an attestation where you sign that you are an employee or you work 40 hours a week for the company. You don't take wages, you take distributions, however there may be you could do that and still meet the to life group. underwriting recognition. And so it's like I said, it's up to the carrier. It's up to the state that the carriers that
Collin 24:26
are there any requirements that if I bring on staff, I have to provide health insurance. When does that kick in when it's a requirement of my company?
Scott 24:34
Yeah, I mean, it gets it gets into the 2030 4050 where all the regulations kick in. So but it you know, it's what do you have to offer? How much can you offer? What category do you fit in for the underwriter? So, some underwriters do it at 50. You know, they'll do an under 50 group or an over 50 group, depending on Look at experience. I mean, there's, there's plans out there that you can go down to lives and be self funded. So there's a number of different options for those, that category of employer. And I, you know, I would think if they've got 20 employees that I would rather I mean, I recommend to all employers that employee benefit that is that far outweighs the cost is health insurance, the money that they spend on the premium, we they and they can, depending on the insurance carrier, whoever it may be, they could say, okay, we're going to cover 50% of the premium and the employee needs to cover 50% of the premium. At a minimum, some carriers would say, Now we want the, we want the employee to only have to pick up 15, and you pick up, you pick up the other 85. And that has to do with collecting premiums. They want to collect the premium, it's easier to get it from the employer than any employee. But the reason I say it's so valuable, is if if you know if I've got a son or a daughter, and I can give you a for instance, and I actually covered it on one of my recent episodes, my youngest broke his thumb. Anything on it's no big deal. Well, he was playing rugby. And it was not just a small little Brook. I mean, if you look at it, it'll get broken pump. He had nine screws and a plate printed. He had to go for surgery. It didn't look I mean, if you if you saw it, you just saw Yeah, okay, it looks like it's swollen, it was in the same spot. It wouldn't. It wasn't no malformed or anything else. But the after all was said and done. And then you talk about the PPO networks, the hospital bill, without any discounts from the insurance carrier, which is you know, I mean, it's like double the price. And I'll give you, I'll give you half off, they end up the hospital charge shuts the hospital charge, not the surgeon, not any anesthesia or anything else, just the hospital charges $40,000. Whoa, and they discounted it, they discounted it to 12,000. Oh, and then you get the surgeons fees went up, they wound up costing about 16,000, I think, in total, and it was just for a broken thumb. So, you know, I mean, look at the premium that the employer is paying on your behalf. And it might only be, you know, you might well, even the amount of money that you would pay for premium as the employee is going it maybe it's 100 200 bucks a month, right? I mean, it could be, it all depends on where the group falls and everything else, and you got to get it right and everything else. But look at the benefit that we got from that. Because we don't have we don't have to pay 16,000 bucks in my own pocket. Right? I mean, the risk is spread and everything else. I got a lot of that on the podcast, too. But the benefit for that is the measurable. So I would rather rather than give somebody, you know, $1,000 raise for this year, why don't you get it instead of you don't have any health insurances in lieu of giving $1,000 raise? Why don't you give them health insurance? Right? I mean, to me, there's a bigger benefit. I mean, then I'm in I'm in the business, right? And I'm not advocating for people to go out and buy insurance just to go buy insurance. There is a benefit to it. There's there's risk to you know, one of the things I like to say is, insurance is not gambling. Right, insurance is not there's a difference between insurance and gambling. And, you know, what's, what's the risk, right? Now when when you get in the car and pull out of the driveway? What's the risk you can get in an accident? It might be it might be, you know, one half of 1% today, right? But what's the risk? And besides, there's risk, you have risk, you have risk of getting hit by a car walking down the street, when you cross the street? There's risk involved, right? But what's the what's the risk of you rolling a seven right now. There's no risk. You don't have to roll the dice. It means nothing. You don't have to do it. There's no risk involved. So that's gambling is when you want to roll a steep put money down to roll a seven. Right? And I didn't roll a seven or you lose the money. Well, there's risk going down the street in the car and you know, you got a let's say you got a 510 15 $30,000 car, it could get racked and all of a sudden you got you know you got liability for it. If you hit somebody or you ruin somebody else's car and all of a sudden the money starts it up. You have risk there. It's the transfer of risk. So you know there's risk involved in in in just daily living and in for an employer to offer health insurance is going to mitigate that in a measurable way. For any employee. It might not happen to every employee every day. It might only happen to one employee over the course of the next Yours, but it's worth it. So I mean, it, I would rather see them rather than give a raise, if they have the means to do it, give them health insurance.
Collin 30:09
Well, and especially in the market today of trying to hire people and bring them on, it's really rough, I hear of a lot of people who are having trouble attracting the quality workers and the quality employees and staff that they're looking for. And so this could be a way to say, Okay, I'm not, I'm not offering an additional $1,000. But we're helping you mitigate risk. Maybe you spruce up the language a little bit more than that. But offering health insurance is a big thing that that's going to attract more people.
Scott 30:37
Absolutely. And for small employers, it makes you look like a large employer. It's no different. The benefits are the same.
Collin 30:46
Let's talk a little bit about I think we've done a little bit but exactly how to choose an option, maybe give us a little bit of insight into your thought process of how someone could look at they get on the exchange, or they're looking at stuff for their employer, that their employees, what's a good way for us to start thinking about what option is going to be best for us, given everything that's out there? Well,
Scott 31:09
you want to be 100% covered. That's what I like to say do you want to be 100% covered. And by being 100% covered, I mean, that no matter what happens, whether it's a broken thumb, or whether you know, you have a you have first occurrence for cancer or whatever it may be that you don't have any unexpected costs that you're going to have to come out of pocket for during during the course of one year. Because insurance, it renews once a year, it's an annual contract. So you want to be 100% covered. So the money that's out of your pocket is the premium that you pay. It could be if you're paying on your own through the exchange and you're paying monthly, then it's how much you pay every month. If you are you know you're an employee and your employer is picking up part of it. It's how much are you paying per pay period and usually is 26. So how much money am I paying in premium and annualize that. So if it's 12 months, it's 12 times and it's 26 periods, you'd multiply it by 26, you get your annual premium expenditure. That's one thing. Then the next thing is you look at your plan design. And you say okay, do I have a you know, $1,000 deductible, whatever the deductible is take that. And then you have your coinsurance rate. And coinsurance is basically sharing cost after you meet a deductible the deductible is the money you have to pay it first upfront before the insurance kicks in coinsurance is you're sharing the expense to a certain level. And then after you hit whatever the insurance policy says, once you hit the maximum out of pocket limit, then the insurance picks up at 100%. So what you want to cover is your your deductible and your your coinsurance and I know co payments are in there too. And I'm not co payments are like a little bit of money that you pay, and they make it sound like it's just a little pinprick, it's not gonna hurt that much you pay $20 when you show up at the doctor's office, and we'll take care of it. Right? So I think to me, that's that's like coinsurance. I mean, it's $100 $100 charge, you pay 20 and the plans paying 80 and the doctor gets paid $100, then that's 20% coinsurance. And so a co payment to me is a gimmick, it's still coinsurance. So you but you add up the deductible and the coinsurance and that's how much you would that maximum out of pocket what I call that as the worst coop? The worst coop is the worst case out of pocket. And that you're that so that's if you maxed out like we did with with our son with his with his with his thumb. 16,000 bucks blew us out of them out of pocket maximum. So we had a certain amount we had to pay, and we knew what that amount was. So if you look at that, and then you figure out, okay, what's my worst case, so you're going to cover the covering the premium, you're covering the deductible and then you're gonna cover the coinsurance the out of pocket maximum. That's how much I'm going to pay in any one year. For for me and the family, right? If you're an individual, it's certain way if it's for an employee and a spouse, or if you have a spouse, or if it's an independent, or if you have complete family, it's a little bit higher, right? All those all those numbers double, but you want to figure that out. Once you figure that out, you have to realize, oh, okay, well, I have to pay all this money after I paid Uncle Sam in taxes. So you have to figure out what your tax rate is. And you can again, go to my website and listen to the x class and you'll find out you know, it's where the IRS site is to find out but it's pretty simple to find out your tax rates. You're going to have to figure out okay, I need to earn this much money, pay Uncle Sam taxes and then what I have left over I can pay for my I like to pay for my deductible and my coinsurance, okay, so you have to add in that tax amount to, because you'd have to earn that much pay the taxes and then pay your deductible and then pay your coinsurance, right, and then that's how much you total that up. Then, if you if you, if you are like me and you like this, and it makes sense, because to me it does and I advocate for it all the time, is you get a high deductible health plan that is eligible for a health savings account. And when you do that, and the high deductible is not that high, I've got a one of my most listened to episodes is don't for the high deductible. So the high deductible only has to be 14 $100. If the employer opposite, or if you can get out of the exchange, that's the minimum right now for an individual is 14 $100, which is not a lot in the grand scheme of things. So if you have a health savings account, you can pay your deductible and pay your coinsurance out of the health savings account. And the health savings account is not taxed. So the money you put in your health savings account is pre tax, you don't get taxed on it. So when you look at a regular traditional PPO or HMO, you'd have to earn the money, pay the tax and then pay your deductible and then pay your coinsurance if you have a high deductible health plan with a health savings account. You don't have to pay Uncle Sam any tax. So you're saving money on the taxes. And if you look at it, if you multiply in a 22% tax bracket, which is like I think if you make below, it's like 40,000 to 80,000 somewhere in there annually, depending on what you're an individual or whether you're whether you're married, filing jointly, you're going to save at the factor is 1.28. Right, so you need to make $1.28 for every dollar you need to spend on your deductible and your coinsurance if you have a traditional HMO or traditional PPO, you have a health savings account, you don't need $1.28, you just need $1. So you're saving 28 cents for every dollar. So if it's $1,000 deductible, right, then you're you're saving. One of them is $1,000. The other one's 12 182, you're saving 280 bucks, just because you have a health savings account. So you need to set the money aside, I advocate for health savings accounts all the time in high deductible health plans. So I mean, that's, that's where you figure out what plan works for me what's best, if you go to the doc all the time. Or if you have a you have a a situation where we got a maintenance drug. And a lot of us take maintenance drugs. And the doc says take these when they could be, you know, 10 bucks a month at Walgreens or something like that, right? You know, what your expenses are going to be, you can lay those out and you know how much you're going to spend. But for accidents and unforeseen that's really what insurance is for is for unforeseen accidents, like the broken families by rugby. Right. So we don't know that's coming, we just always playing rugby, nobody's gonna break a stomp, think gonna see him break his neck. But you know that those are unforeseen, and that's what the insurance is really for. If you have a maintenance drug, or you know, I mean, if you say okay, well, we go to the ER, you know, once a month, the one that you hopefully you're not doing that. But to that gets expensive. And that that's difficult to measure. You know that? If you think okay, well, I want a $500 deductible, because I'm going to go I don't want to pay a lot of money. When I go to the you know, if I need it, well, you're paying that in the premium, there's an inverse relationship between the premium you pay, which is upfront. And the higher the deductible, the lower the premium. So if your employer is paying 85% of the premium, if you are an employer and you're paying 85% of your employees premium, the lower the deductible, you're paying a lot more premium. So if you if you fund employers can funds, health savings accounts, they can contribute, anybody can contribute to a health savings account. So if you want to save money, you're trying to get a higher deductible or a higher out of pocket maximum to have lower premium. And then it's only when and if you have a claim, are you paying a full boat? You're paying more but even with a savings account, you're paying less than if you were paying on a taxable account with a PPO or an HMO.
Collin 39:39
Are you a member of fencers international psi is the largest Educational Association for professional pet sitters and dog walkers with a mission to promote pets and excellence through education. After the tumultuous past year. Having the support of a strong community and direct access to educational resources and business tools is more important than ever as we rebuild our businesses. DSI is To help with a free monthly member toolkit, monthly bonus resources, online trainings private member Facebook group and more, along with group rates on insurance and background checks, psi is one stop shop for everything you need for your petsitting or dog walking business. As an Educational Association, psi believes that if you know better, you'll do better, and invites you to join 1000s of other like minded professionals who are committed to offering the best possible pet care services and elevating our industry that this sounds like you visit pets.com slash PSC To learn more, our listeners can save $15 off your first year membership by using promo code PSC 15 at checkout. I think that that's a really important factor too. It's the HSA and the high deductible, you're saving money, not just because they tend to be a little cheaper because that deductible is a little higher. But also, as you said that money is is pre tax. So you're not having to save extra to cover those costs. And I know that I just read a report about how in the United States one of the things that what a lot of us are know is that health insurances. We feel like it's very costly. And it can be extremely expensive, given some needs and things. So what are what are some recommendations that you have for people to save money on health insurance, and what things to look into?
Scott 41:19
Well, you have to look at the different offers that are out there. Like I said, there's an inverse relationship between the amount of the deductible the out of pocket maximum, and in what the premium is. But there are certain carriers are going to charge you less, there are certain plans that may have less benefit. There's there's because of Obamacare, it's basically leveled the field. And there's so many requirements, so that the differences are small. But the carriers that are out there, all have to be rated by am best, and also some of the other and you can go to am best calm there, they do all the insurance companies, but you want to have somebody that's there, that's going to be able to pay the claim. So just because it's a lower price, doesn't necessarily mean that it's better coverage. But because of Obamacare, of laying everything out, making sure that all the you know, you got to have the essential health benefits, all those things need to be covered. as an individual, you need to get a quote from every insurance company that's available to you, and then compare those, that's the easiest way to do it. It's not there's not a lot of differentiation between insurance companies. On the employer side, one way to save money is to go into what's called a level funded or a self funded plan. And those are out there. And they're not necessarily available from the traditional carriers. And you're going to want to talk to an insurance broker for the most part to find out where those are available. And those come from and I know particular work with some that come from the Association of Professional Association, I don't know what professional associations your listeners may belong to. It couldn't even be good. I know an alumni association. But self funded plans can be less expensive. There's certainly there's no state income tax because considered insurance premium, self funded and level funded are completely different than a traditional insurance plans. And they can save you money. On the flip side, if you have poor experience and poor experience, meaning that you have a lot of claims that were unanticipated that that weren't priced in when the premium was first collected, you could have a higher renewal, you know, in the subsequent year, so you if you have poor experience, and that means adverse or, or unexpected claims, then it couldn't be more expensive The following year, but that's one way to do it. But by and large, like I said that the high deductible health plans are going to have lower premiums than traditional PPO HMOs. And that's one way of looking at it. Another is you just have to lay all the cards on the table. And to be honest, there's not a lot of different carriers out there, you look at the same plan, measure apples to apples and you're going to get different quotes from different people. Now, one of the things you got to keep in mind, especially as an individual, is you're applying for insurance. There, you're asking them to give you an offer. They're not offering you insurance, you have to ask them to provide you with insurance and then they can you know, do it or not to price it the way they want to. So when you get a quote, you're getting a generic quote. You're getting A generic quote based on on your age and your zip code, and your your gender. And the makeup, you got a family if you got a spouse or not a spouse, or if you have a child and what what age is the child, that kind of thing. They're giving you a generic quote. And then they're going to send you an application. And it's going to ask a bunch of health questions. And then once you give them, they give them the application and answer all the health questions, then they're going to underwrite it, and then that's when they price it. So there's a limit on how high they can price it. But you're not going to get that until you go through the entire process. So the initial quote that you get isn't the final price, the final price isn't until it's actually been underwritten. And if you want it, you know, a lot of people like I don't want to fill out the questionnaire like pretend different companies and see what come back. They also say, write us a check, or, you know, give us your your bank account information. So they can they can debit the first payment. And you don't want to do that 10 times either. Right. So that's the tricky part. And that's unfortunate from the insurance company standpoint that they would do that. But if you want to see what the actual price is, it has to go through underwriting.
Collin 46:09
assess what risks you're willing to take on, look at that budget, how much money you're bringing in, what your what your outflow what your expenses are going to be. So you can look at that deductible, and then compare, compare, compare, compare, and really figure out what exactly you're willing to take on and what you're comfortable with. And then definitely give a hard look at the those health savings accounts because they are a great way to help control and manage costs both pre and post taxes, you're paying out for expenses too, because they are attached to that high deductible. And I know you have that episode about don't fear it, don't be afraid of that, because many of us think high deductible, okay, it's gonna be like $40,000. And that at that point, why even bother. But as you mentioned, a lot of them aren't even that high. And you can still qualify for the health savings account and get savings on both ends, there's,
Scott 46:56
there is one thing to keep in mind when you're looking at a health savings account is that there are limits as to what you can contribute in any year term. So for in 2021, the most you can put in there is an individual's 30 $600 that's the most you can put in. So when you get your plan, when you're looking at a plan, you don't want to have a deductible, that's $7,000. Because now you're gonna have to pay the difference, right, you're gonna have, you're gonna have a 30 $400 difference in there that you can pay with after tax money, if you should you have the, you know, unfortunate accident incident where you got to have a $7,000 payment. So when you set it up in your first year, you wanted it that 3600 or less, right, and that includes, I like to I like to to advocate for a deductible and then 100% coinsurance, so you don't even have to worry about it, you pay your deductible, you're done. And then everything kicks in 100%. A lot of carriers don't offer that they still want to have, you know, 80% or 90% coinsurance up to a certain amount. But if you can find one that's got 100% coinsurance, that's easiest to understand. It's the deductible. And that's it once you're done with the deductible. And so you fund your HSA up to the deductible, and then you covered it 100%, you never have to worry about it during that year. And then you can continue to add after that. So next year, you can add another 3600. And then the year after and keep going. The other thing to keep in mind is you can make lump sum payments that don't have to come through your employer, you can have more than one HSA account. You can anybody can contribute to your HSA, it doesn't have to be just you, you can get it, you know, your your parents, your grandparents, your siblings, anybody can contribute to your HSA.
Collin 48:43
Well, and as you mentioned there It does roll over, it's not a use it or lose it within a year. So I think that may be a misconception A lot of people have about an HSA as Okay, well 30 $600 I, you know, I'm only going to go doctor one time, I don't want to put all that money in there and then have it disappear, what you're saying is you can actually keep putting money in there. So that if something really catastrophic happens, you've got that money saved away, kind of like, as a separate savings account. As you know, for those
Scott 49:10
of it's actually everybody's familiar with the 401k. an HSA is exactly like a 401k. Except that it's better than a 401k. Because when you spend the money, you don't pay taxes, when you take your money out of your 401k you have to get you're getting taxed at ordinary income rates at the you know, the age when you take it out. Right. And if you're in the tax bracket, you know, you may be in a lower tax bracket when you're 70 rather than when you're, you know, 40 right. And that's that's a better tax situation, but you're still getting taxed. HSA never gets taxed as long as you spend it on medically necessary things then, you know, it could be it could it could be over the counter medication as well. But as long as you spend it on that you're not paying tax on it. So you could and the other thing is you get the tax deduction. If you put in lump sums out of your savings, rather than do your payroll deduct, at the beginning of the year, I always tell everybody to get 100% of your deductible and your coinsurance and your current your out of pocket maximum covered on January 1. So you could, let's say you got a, let's say you got a, your plan is a $7,000 deductible for 2022. And you have $5,000, in your in your HSA. And on December 31 of 2021. Well, if you make a $2,000 lump sum contribution on january first to your HSA, now you have $7,000 in your HSA, and you're covered for the whole year and 100%, you can contribute that you get 30 $600 to contribute, so you can contribute 16 $100 over the rest of the year. But on January 1, you have $7,000 in your HSA and your out of pocket maximum for 2022 is $7,000. So you will not have any expense whatsoever. It'll all be paid. So you can have more than one HSA, you don't have to rely on your employer. Sometimes HSA providers don't give you the opportunity, or give you a limited opportunity to invest the money. So if you had a separate HSA that you control, then you can invest it whatever way you want it in some employers might have one that has investment options or a lot of investment options. If they do, it's usually limited with mutual funds, that kind of thing. Some of them like lively and someone I work with they you basically get a TD Ameritrade account, and you can invest the money whenever you want. So and they don't they don't care, I wouldn't invest all the money, I would make sure that you're 100% covered in your deductible, and you don't have all that risk. But it's an it's another option. And then the other thing is if you're over 55, an individual can contribute an extra $1,000. So if you've got a spouse that's also over 55, they would need to open up a separate account because you can't do two, you can't do the spouse together in one account and add both $1,000 additions to one accounts, you have to open a separate one anyway. But each is available to get $1,000 over 55 every year.
Collin 52:12
Yeah, so there's a lot of advantages when thinking about insurance. What are some of the most common misconceptions that you hear or you see a lot that people discuss?
Scott 52:23
There's a bunch of them. One of them is I've got a bunch of episodes on this. Your employer is really your health insurance company. There's over 50% of insureds are individually the United States are covered through their employer. And their employer is basically the insurance company. What happens is you get a UnitedHealthcare, his signature card or Blue Cross card, whatever it may be. They're basically providing a network. Like I said, Let PPO network HMO network which is a list, they're providing that multiplayer does the same thing. And you get a card says multiplayer with a little bug on it. They're providing what's called Administrative Services only. So they're, they're collecting the premium. They're issuing certificates of coverage. They're paying claims. They're answering the phones, they're sending you all the documentation there interacting with the doctors and the hospitals and a farm and all that stuff. But the insurance, the money is in a pot in an account that your employer has. So they're taking it out of your employer's account to pay the claims. They're not taking it out of the insurance company's big cash bend over there. They're taken out of your employer's account, the internet, the internet's that self funded plan, and most employers are on a self funded plan. So a lot of people think oh, yeah, the insurance company is is denying my claim, right? Are the insurance companies doing this are insurance companies doing that they're just following the contract for the most part, but the employer is really the insurance company. So a lot of times if you have an issue with a claim being paid, especially if you have an employer plan, the first thing you want to do is go talk to HR and tell them you got an issue because it they're they're the ones interact with the insurer, and are they not the instructor with the insurance company and its activity administrator, when claims get denied? A lot of times it's because the doctor's office or the doctor, maybe charging an amount they shouldn't be charging or they miss quoted something when they send the code in, there's there's like a bazillion codes. If they have one number off, an insurance company looks at and says well, you know, I mean, they don't call up the provider and say, Hey, did you mean to put this number down there instead of this one? They just say no, it's denied. You can't we're not paying that. We're not paying that amount for that. That code. So there's sometimes it's an issue like that. The other thing is, you know, the doctor may say, Well, we will talk to the insurance company and see what we can do. And then they come back and say, well, the insurance company won't pay for this or won't pay for that. Well, it's not You can't get your service from the doctor, it's that it doesn't fall within what the insurance is supposed to pay for. So, you know, a lot of times people think that the, you know, the the insurance companies denying my surgery, when they're not denying the surgery, they're not going to pay the doctor, an exorbitant amount of money for something, you know, that shouldn't be covered. Right. But you can still get the surgery from the doctor. I mean, that's the thing to work out with the doctor, then here's this leads to the next misperception is that the insurance company is paying the doctor bench insurance that when you look at your insurance contract, the insurance contracts either between the employer and the insurance company, or the individual and the insurance company, and they have no relationship whatsoever to the doctor. When you go into the doctor's office, the next time you go in any of your listeners, next time you go in or the hospital, there will be a clause in you get a clipboard with a pen, or you get one of those electronic things. But the laminated card they said spine here, when you sign that you're giving your money to the doctor, you're giving your money to the hospital, you're at you are legally assigning your rights to your insurance benefit over to the doctor and over to the hospital. It's called it's a legal assignment. If you look at the language, they bury it in the third or fourth paragraph and you can't see it and you don't look at the thing. You just go gay, okay, fine, sign it, you don't care. Yeah. And I have a whole episode on that, say you're giving your money away, I can't remember which episode that is, I'm gonna find out. But you're giving your money away. And you don't even know it. You are assigning your legal right to your insurance benefits, and you're assigning it to the doctor and assigning it to the hospital. That's how they shut you out of the process. And the insurance company's like, Okay, well, we have a PPO agreement, we have an HMO agreement, we're just going to abide by that. And then the patient went ahead and assign their benefits, we don't we're not telling you not to assign your benefits, it's up to you to do what you want with your insurance benefits. If you assign it to your doctor, your hospital, okay. And that's when the whole relationship between, you know, when nothing should come between you and your doctor or your doctors introducing the insurance company into the equation by virtue of you signing the assignment when you go into their office. So that's another misperception. There shouldn't that didn't be that didn't used to be the way it was. A long time ago, before Medicare started, everybody went to the doctor, and they paid him out of their pocket, there was there wasn't anything called major medical insurance, it was called hospitalization insurance, and he went to the hospital. And what would happen is you'd go to the hospital, you'd get whatever happened, whatever surgery and everything else, and then you'd go home, and then the bill would come in the mail, and then you take your bill, and you'd send it to the insurance company, then the insurance company would send you a check, and you'd go to the bank and deposit the check, and then you'd pay the hospital that might have taken 30 or 60 days. But you know, there back in 1965, that's what you did. Now, these guys want their money now, they won't even see if you don't have any money. Right. So that's why they want the insurance benefits up front. And that's why they want you to legally assign your insurance benefits. But it doesn't have to happen, and you are the one in control of that. So that's another misperception coming in, there's a lot but it's just, you know, I mean, it was the other thing is, you know, the you know, it makes up $1 premium, I got a I got an info infographic on this one $1 premium, is made up mostly of the payments to the doctors and hospitals and pharma, that makes up paid claims typically make up almost 60% of an insurance dollar. And then you have what's called reserves reserves go on top of that, and the reserves are for if you have a claim today, and you know, it's it's August 4, but the claim doesn't get paid until January 2 of 2022. Because of whatever reason, the insurance company can't pay the claim for money they collected in 2022, they have to pay the claim for the money they collect in 2021. So they have to hold a reserve that back. And the reserves typically are about 25 cents, to about 45 cents on every dollar of paid claims. So now you got to add that on top of the paid claims reserves. And then the state collects two and a half cents typically depends on the state you're in. But typically, the state collects two and a half cents of tax on your premium. So when you pay premium, you're paying two and a half cents to the state that you reside in. As a tax in if you're self funded, they get rid of that tax. That's that's one of the reasons you do self funding. Just get rid of 20% that's one of the reasons but you pay premium is two and a half cents for that. And then you're gonna pay all the expenses for the administration. Right and that's the insurance company. You gotta have people answering the phones you got to have in paying claims you got to have them selling and all the other stuff. And then what's left over is about three three sentences profit for insurance costs. Now that everybody says, you know, the another misperception, the insurance companies are making a killing, making a ton of money and everything else. Blue Cross's route is not for profit, right. So they're, I mean, most of there are some that are incorporated, you know, the the anthems and that kind of thing. But they all own all kinds of other businesses. Like for instance, you hc owns optim, optimizer bank, and optimism is, is a network operator. And they're they do all kinds of analytics and all this other stuff. They charge a bunch of money through subsidiaries that they own, and they operate. And then, you know, that makes sense, but it's a separate business than the insurance. So there's a misperception that the insurance companies are making a killing, they really don't. And the states have to regulate all that stuff. So they really don't make a lot of money on the insurance and make a lot of money on all kinds of other stuff. Not on not on the insurance that you're purchasing. So and then they then they claim that you pay when you say, Oh, yeah, I'm gonna go, Well, I really don't care. I'm gonna go spend money over here, I'm gonna go to this doctor go to that doctor. Well, everybody in the group is paying for that. Remember, remember when George Bailey the building alone, and, and Potter was gonna go by everybody, and it's wonderful life. And he says, Well, your money's in his house, and your money's in his house and your money's at his house. It's the same thing. You're paying the doctor and you're paying the hospital and you're paying for the for your, for your fellow employees. Everybody's premium is paying for that. That's how it gets spread around in a group. How's that?
Collin 1:01:31
Well, there's, there's there's a lot obviously that we have to be aware of. And I really appreciate those misconceptions and and kind of walking us through that process and the development of the health insurance industry over time and then how we can look at and manage our risk assessment through all of this. I know that it's obviously a huge topic and there's so much more involved. So Scott, how can people find your podcast and reach out to you if they have any additional questions or concerns or want to pick your brain on stuff?
Scott 1:02:04
Sure. Well, the the podcast is called dogs cost the Ultimate Guide to health insurance. We are on all the major players you can find us on Apple podcast and Spotify. Tune in Google podcasts, a whole bunch of overcast castbox everything else been and we the websites Doc's cost do x co s t comm Twitter's at Doc's cost. And Instagram is my name at Scott W. Dolly and find me there. And if you want to send me an email, it's Scott, SEO TT at Doc's cost. com, feel free to send me an email if one
Collin 1:02:39
perfect, and I will have those links in the show notes. So people can click right to those on our website as well. Scott, this has been a fascinating conversation about health insurance. And I really appreciate you taking the time to come on today. And so thank you so much. Absolutely. My pleasure to be here. Thanks. So do you have health insurance? Have you believed any of those common misconceptions that Scott walked through? I know that cost is by far and away the biggest barrier for many of us to getting the health insurance coverage that we so desperately need. I hope that you do take some time to look at any existing coverage that you have, as well as looking to new coverage or adding coverage through an HSA and a high deductible account, at least getting able to get access to basic coverage, and really make sure that you are protected. In the case of a true emergency. That's where we can start and then see what our options go from there. It's not an easy thing to look into. But we really do believe that it's critically important that everybody be covered with their business insurance, like we've talked about many times on the podcast, but also on a personal level, having good quality health insurance to cover your needs and make sure that you're going to be cared for if you need. We want to thank our sponsors tied to pet and pet sitters international for making today's show possible. And we really want to thank you for listening. We're so happy you're here and happy that you continue to give ideas and share the episodes and be part of the community. So we hope you have a wonderful rest of your week and we will be back again soon.
