Medical costs have run amok in our broken health care system. With higher premiums, copays and out-of-pocket costs, health care expenses are a concern for everyone, not just retirees.

Since you have very little power to fix the health care system, what can you do in your practice to help clients with this big worry? Picking the right health insurance and learning to use the health care system effectively can help mitigate the costs.

Employer based coverage: About half of the population continues to receive their health insurance through employer-based coverage.

In general, for single people, employer-based coverage is going to be the best deal. For a family, it depends. If the employer does not pay part of the family premium, it may be worthwhile to buy separate coverage for the family on the individual market, especially if the family is healthy and doesn’t access services often.

The danger in this approach is if a major health event occurs, there will be two sets of deductibles to meet, so it is important to have savings set aside to cover these costs.

Using an HSA eligible plan and fully funding an HSA account can save taxes and serve as a great vehicle to set aside money that may be needed to cover large expenses. Coverage can be revisited and changed yearly depending on the circumstances.

COBRA coverage: COBRA can offer temporary coverage at group rates, in the event that your client loses a job or a death or divorce results in the loss of coverage under a spouse’s plan. This option can be very expensive, though, as COBRA recipients are usually required to pay the entire premium.

It often pays to compare individual coverage or short-term coverage to COBRA before making a decision. Once COBRA is elected, individual coverage is not an option until COBRA runs out or until open enrollment season occurs from November 1 through December 15.

If a client already has COBRA coverage, can they change to a marketplace plan?

If your COBRA is running out

If you are ending COBRA early

If your COBRA costs change because your employer stops contributing

During Open Enrollment

Yes, you can change

Yes, you can change

Yes, you can change

Outside Open Enrollment

Yes, you can change - you qualify for a Special Enrollment Period

No, you can’t change until the next Open Enrollment Period, your coverage runs out, or you qualify for a Special Enrollment Period another way.

Yes, you can change – you qualify for a Special Enrollment Period

(Source: Healthcare.gov)

Individual coverage: The Affordable Care Act is still alive and coverage is still guaranteed issue, but the individual mandate goes away in 2019. At that time, premium costs are expected to increase significantly since many people will quit buying coverage.

If income is below 400% of the poverty level (which amounted to $48,560 for an individual and $100,400 for a family of four in 2018), the best insurance will be an ACA-based plan obtained through healthcare.gov as tax credits can be significant. In our firm, if possible, we help clients plan income to maximize their health insurance tax credits.

If income is above 400% poverty level, there are other options.

  • If a client is a high health care user or has significant health problems, it is usually better to buy a traditional plan. Based on current pricing structure, gold level plans tend to be the best deal.
  • If a person is healthy and a low health care user and can’t afford a traditional plan, consider short-term coverage or Christian medical cost-sharing plans. The current administration is planning to expand association plans, so keep your eye out for these options, too.

Short-term coverage, cost-sharing plans and association plans have many limitations. Essential benefits may not be covered, there can be caps on coverage, and there are restrictions to entry. The good news? If a client develops a significant illness, they can change to a traditional plan during open enrollment. You only have to hope that serious illness doesn’t occur in January because it can be a long wait until November.

Network issues: Most people understand deductibles, copays and maximum out-of-pocket expenses, but health care networks are harder to compare. Two insurance policies may look identical but have vastly different premiums. The difference is they usually vary on the available network of doctors and hospitals. Cheaper policies may have narrow networks and not cover many physicians. If a client needs flexibility, have them choose the bigger network.

When making an appointment with a physician, it is important to ask if the doctor is in network, not if they take certain insurance. Just because a doctor takes insurance doesn’t mean they are in network. Make certain that testing facilities are also in network. Similarly, if in the hospital, write on contracts “only use doctors and labs in my network”.

Why is this important? Out-of-network coverage can be very expensive for three reasons:

  1. The patient is charged full price for a service instead of the lower rate negotiated by the insurer. If the hospital charges $10,000 for a service and the insurer only pays $2,000, the patient will be saddled with the other $8,000. This is called balance billing.
  2. The insurer may pay only a percentage of the allowed in-network charges. For example, if the insurer pays $2,000 for a service in network, it may cover only 50% of that when the service is delivered out of network.
  3. The balance bill doesn’t apply to the maximum out-of-pocket limit.

Being an empowered patient: Doctors mostly think about patient care and not the cost to the patient. Since much of what they do drives up the bill, patients need to make them aware that money is an issue.

If testing is ordered, the patient should ask what the doctor hopes to learn from testing and how the results will change their approach. If the doctor cannot provide a clear answer, the test may not be necessary.

If medication is ordered, it is important to ask if there is anything that can be done other than medication. Sometimes lifestyle changes or watchful waiting are suitable alternatives. Doctors often won’t take the time to discuss alternatives because they think patients are not motivated to follow through. Pills are an easy fix.

Beat the drum for fixing the system: People worry about the cost of health care in the future. The annual inflation rate of medical costs in the U. S. has averaged 7.76% annually since 1970. If this continues, in the next 30 years, health care will consume 50% of GDP. This is not sustainable.

We all must fight to fix the health care system and our only power is to barrage our elected officials to do something constructive. If enough people call their legislators, change will be made.

Make it a point to take five minutes a week to contact one of your representatives. I can vouch that they listen and some will even engage. Other countries have good systems with reasonable costs, and we should follow their lead.

Carolyn McClanahan

Carolyn McClanahan

Carolyn is a CFP and M.D., and is the director of financial planning at Life Planning Partners in Jacksonville, Florida. Follow her on Twitter at @CarolynMcC.