A fair number of us are inserted into some sort of group Health Insurance plan without much input. If you work for a large employer, a government entity or if you are in a union, you may have very little choice as to what type of plan you have. However, many of those groups have several different plans from which to choose. If you have any say-so in your health insurance plan, knowing the correct one for you can save you hundreds of dollars every year, and thousands of dollars over your lifetime.
The first thing you need to do is ask yourself what kind of risks you pose. Is pregnancy in your future? Do you have some preexisting condition? Do you need to add a spouse or children to your plan? Is your high-school student on the football team or driving? After you have done a risk analysis, you are prepared to select the policy that best suits you. In most cases that means, paying the least amount possible for your protection and care.
If you are not automatically inserted into a group plan, do not assume that you need to be in one. Many people get better value through good individual policies. (Pros and Cons of Group Insurance Plans) In fact, my wife and I performed a quick on-line search, and ended up cutting our monthly premiums by nearly 40% by leaving a group and finding our own individual plan. (Example of How) Here is why.
When insurance companies offer group plans they have to spread their total risk over the total group. (How group rates are determined) Therefore people with higher risks can pass along some of the cost for their risks to the younger and healthier people within the group. Conversely, the healthy young person is less likely to have a heart attack or come down with certain types of cancer, so their share of the premium will probably be disproportionally high to the risk they represent. If you are a male and there are women of child-bearing age in your group, your premiums are higher to help the insurance carrier offset the expenses that do not affect you. On the other hand, if you select an individual policy you can eliminate paying for other people’s risks.
There are three different ways you can contribute to your health care costs. You should create a couple of possible scenarios to determine which plan suits you best. Your time might reward you with big savings.
Co Pay
Many people write relatively small checks for their visits to the doctor’s office. Oddly, some of those people really think they only had to pay $20 for the doctor to put a cast on their broken arm, because they do not factor in the monthly premiums that they also pay…whether they get hurt or not.
Deductibles
If you have a deductible, you have to pay that amount for any claim before the insurance company pays any of their money. It is fairly common for consumers to take on more of the financial risk via their deductible. In our case, we agreed to a $2,500 per year deductible. In exchange for taking this risk off of the insurance company’s shoulders, our premiums were lowered by nearly an identical amount. Therefore in any year that we spend less than $2,500 in doctor’s visits, we come out ahead. If we spend more than that the insurance company shares the cost.
Co-Insurance
If you will agree to share the risk with the insurance company via Co-Insurance, your premiums should come down. For example, you might agree to pay 20% of any claim up to a maximum of $2,000 out of your pocket. So, if you should break your arm, for which the doctor charges $1,400, you would first pay your deductible, lets say $200. That leaves $1,200 unpaid. Since you have not reached your maximum contribution, you would have to kick in an additional 20% of that amount, or an additional $240. In the end, you will have paid $200 for the deductible and $240 for the co-insurance, for a total of $440, and the insurance company would have paid the remaining $960.
Now let’s suppose you have a mountain climbing accident and need major knee surgery, which carries a cost of $16,000. You will first have to pay your deductible of $200 and then 20% of the remainder, but not more than $2,000. So, you will pay the maximum under your policy terms of $2,000, and the insurance company will pay the remaining $14,000.
People often get disappointed when they are submitted a medical bill and have to pay hundreds or thousands of dollars; but, they will frequently discover that the cheapest route, in the long run, is to keep the premiums down each and every month and then accept a bigger share of the responsibility when there is an actual claim. Unfortunately, too many of them fail to set aside the premium savings as they go and then the random problems they encounter are more financially painful.
So, in most cases, I suggest the consumer share the risk by accepting relatively high deductibles and co-Insurance. That will lower premiums substantially. Then set aside the monthly savings until there is enough money in reserves to cover the annual maximum out-of-pocket expense. (Which is exactly what the insurance company does) From then on, you should have some extra money in your pocket to save and invest.
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My Brother, Eddie
13 years ago
Insurance must be a pretty boring topic, or at least one nobody wants to spend time thinking about. So far there hasn't been any comments on the insurance entries. I guess that it just shows peoples' disdain for the industry.
ReplyDeleteTrue, but there really isn't much room for discussion. We can only hope that somebody actually learned something they can use when the opportunity presents itself.
ReplyDeleteI know from recent experience that I will go to my annual exams BEFORE open enrollment from now on. I found out some news that might end up costing me $3,000 this year (my annual maximum) because I thought I was in exemplary health and chose the most basic option for myself when it came time to open enroll. In hindsight I wish I had chosen the more premium insurance that covered more and had less annual maximum. All in all though I've saved quite a bit of money over the years in chosing the 80/20 plan through my employer. I rarely go to the Dr. and overall, until recently, am very healthy with no medical issues to speak of. So even if I do have to pay my $3,000 annual maximum this year, I'm still ahead of the game as far as premiums go so I guess I can't have too many regrets! Matt carries himself and the kids through his work which is cheaper for us than a family plan.
ReplyDeleteI have MUCH disdain for the insurance industry. This is unrelated to medical insurance, but recently I've been hit 3 times in our poor little car. Our car isn't worth very much (3,000 at most), and so we have liability only, especially since we don't drive very often (maybe 3 times a week and short distances.) Now, I'm sure this will be laughable to people who have had insurance for a while, but I was stunned to find out that if someone ruins my car, through no fault of my own, I'm screwed. My insurance company will not represent me to other insurance companies and won't even give me helpful hints on the phone as to how to deal with the other insurance company. What's more, insurance companies will try to subtly screw you out of every penny. One lesson I learned; if your car is hit and needs to be repaired, don't just take a check that they send you. Have them pay the auto shop direct. I saved myself a lot of hassling (which the mechanic had to do) because obviously the actual cost of repairs was different from the estimate. Insurance companies will try to save $40 on a new safety latch for your hood if they can possibly do so. It's absolutely disgusting what they'll do to pinch a penny, including avoiding calls and making everything impossible to encourage you to forget the whole thing.
ReplyDeleteOk Sharon, I'll bite. Your post begs questions.
ReplyDeleteFirst of all, let me commend you for having liability-only insurance. Your car isn't worth enough for more, you made a wise move.
Ok now for some questions. You were hit 3 times? Not your fault? You received a check each time? How about some more information.
You are correct that the insurance company will not "go to bat" for you, they are in the business of making money, not getting you the best deal possible. It is incumbent upon you to be your own advocate. However, you are not "screwed". Stand up for yourself, fight at every step, courts and insurance commissions will normally come down on your side.
I disagree with you about the check. In your situation, you should take the check and have your car repaired at your leisure. Every second you involve the insurance company in your repairs will be charged to your claim. Take the money, and shop your repairs. Mechanics shouldn't be talking to insurance companies, only to customers.
Let's hear how you fared with the three accidents.
The first accident was a hit and run when I was parked on the street (the only parking available in Chicago, if you want to even label it 'available'.) It was a huge dent on the front left side.
ReplyDeleteThe second was when I was on an off ramp outside of Indianapolis. A semi-truck backed into my car. Now, despite whatever you may say about staying out of their blind spot or what not, the guy was in the wrong lane to make a left turn and decided to put his truck in reverse into my car. Illegal in any situation, and he immediately admitted blame.
The third accident was a woman who smacked into the back of my car when it was icy outside. She was too close to my car and didn't leave enough room for stopping on icy roads.
I did not receive a check each time. In the case of the first accident, I was screwed. I didn't even bother calling my insurance agent because even if they would have given us money to fix it, it would have raised our rates. Not worth it to fix a vanity dent.
The second accident I did receive a check, but the third accident didn't do any damage outside of bending my license plate and scratching some paint. Not worth the time to report it.
I don't really care that you disagree with me about the check. I think I made the right move and I would still advise people to have the mechanic deal with it, because most people don't have your car knowledge. They don't know what things are worth or how much cars cost. The time that would have to be put into 1. Finding an honest mechanic (hah!) and 2.Fighting with the insurance are not really worth it, especially to people who are not in the know, as you are.
I also stand by my original statement. If our car had been totaled in an accident, we would get a big enough check to buy a computer and put some money into savings. It wouldn't be enough to buy a reliable car, like the one we have now. Like I said, I can't just buy a cheap car and repair it as it goes along myself for super cheap...I don't have that skill. Now, would my world be crushed if I didn't have a car? No. Majorly inconvenienced? Yes. Is that the end of my life? Again, no. But I still think screwed is the appropriate term. You can disagree all you like.
Sharon,
ReplyDeleteIn your Facebook post, you capitalized the word "ALL" when referring to which repairs were made. Were you able to get the dented front fender from accident one paid for by the check you got for accident two? If so, I think you did extremely well. If not, you still came out fine.
As far as the claim process is concerned I side with Sharon. The mechanic is skilled at negotiating and squeezing insurance companies, although they are primarily doing it for their own benefit, not the customers. However, when they get the claim amount raised, they have some breathing room to cover things like your deductible, or even to repair a fender that was damaged in some other accident.
Admittedly, there are some people who can do better on their own, as Matt has done. He is the only person I know who has collected so many checks for accidents to one vehicle, it has become a reliable source of passive income for him.
But most people, including Sharon, don't want to do that. She may have traded a few dollars for convenience, but I think she made an understandable choice under the circumstances.
Luckily, the mechanic the insurance company suggested to us turned out to be a nice guy. He first offered to fix the first dent on our car for $200 (usually it would be $450). We don't have extra money to fix cars, so I declined. When I picked the car up, I found out that they pounded out the dent, sanded it, and put some paint on it. It isn't a perfect fix, but it looks leagues better than it did before.
ReplyDeleteThe insurance company didn't want to pay for the safety latch on our hood (because the initial appraiser said it looked fine), but the mechanic said it's better safe than sorry, so he installed a new one. It was $36. For some sort of paperwork reasons, he wanted me to pay for it and he was going to write me a check for the amount so I wouldn't have to pay. (I imagine he was going to haggle with the insurance some more). But since he fixed a dent he did not have to fix and wasn't going to charge me for it, I told him to keep it.
Your points are well taken Sharon, but I needed the rest of the story, hence why I asked. I guess I shouldn't have formulated an opinion without all the facts.
ReplyDeleteBut NOW . . .
1st accident: You're right. Screwed.
2nd accident: if I were you I would've taken the check, left the dent and the hood latch. If you were really scared you could fix the hood latch, anyone that can afford a car can afford $36. But still leave the dent, and spend the money elsewhere. How much was the check? I think vanity is one of those evil sin thingies.
3rd accident: If it's just a bent license plate, who cares, and why would you want any money?
So I modify my original statement. You were only slightly, or ONE-THIRDLY screwed.
I guess I should clarify some more.
ReplyDelete2nd accident: I didn't ask him to fix the dent from the 1st accident; he took it upon himself to do that for free. The whole hood had to be replaced because it was so crunched from the 2nd accident, along with the headlights and some stuff inside the car, under the hood. I got a check for $1200.
3rd accident: I realize it wasn't worth getting money for a bent license plate. That's why I didn't report it to anyone and just drove away. I was just noting it because it was annoying to me how many times I've been hit.
Now, I could have taken the $1200 and spent it. As a matter of fact, if the car had been deemed totaled, Chris and I were going to buy a new computer, because both of ours are over 4 years old (his is 7). But, we're going to have this car for quite a long time, seeing as it only has 55,000 miles on it. It doesn't seem unreasonable to want to fix it to the way it was before as long as it doesn't cost me anything. I could have bought myself some nice stuff with the money or put it away in savings, but we have no debt and save 15% of our check as it is. Doesn't seem a big deal to fix the car.
My main point through all of this was basically to note how it doesn't seem fair that if someone totals my car without it being my fault, I take the brunt of it because my car isn't worth anything. But, then again, no one said life is fair and occasionally, you do get screwed. Maybe I shouldn't complain that my car was hit and instead be happy that I even have a car.
Thank you that's much clearer. Given that information it sounds like you made the right choice to fix the car.
ReplyDeleteBut you still feel screwed, and you aren't. If you don't want to take the brunt of the damage you can carry comprehensive collision coverage, but that costs a lot more in premiums. So you made a concsious choice to take the risk with cheaper liability coverage on a cheap car. A good gamble I say, since accidents don't happen that often.