Jan Sherman of The Benefits Edge is known as "The Benefits Tamer." He helps his clients make sense of the complicated world of insurance, and that's what he's going to do with Paula Christine today.
We start with the basics. What is health insurance? It's a contract - Jan explains.
We also cover differences between HMO's and PPO's, referrals, copays, and more. We define terms like "deductible" and premium," and the different levels of insurance you hit as you spend more money each year. We talk a lot about co-pays, but Jan says it's much more important to think about out-of-pocket maximums in the event of something catastrophic.
Jan explains the key difference between "preventive" and "diagnostic," and why your doctor, at a physical, will often schedule you for a follow-up. And don't be afraid to read and question your bills, and your explanation of benefits (EOB).
Finally. Paula asks Jan about HSA plans - and all the ways that money can be spent, tax free.
To find Jan Sherman at The Benefits Edge, you can call him at 248-788-0476. You can also visit his website, https://benefitstamer.com/ - or send him an email - jan@benefitstamer.com.
Contact Paula Christine:
Website:http://paulachistine.com/
Email: paula@paulachristine.com
Paula: Welcome to Beyond the Paycheck. I'm Paula Christine. I want to help you make smarter money decisions to create better habits and to enjoy your life. Most people live paycheck to paycheck, never seeming to get ahead. It's not a fun way to live. What if we could change that? That is my goal. One podcast at a time.
Health insurance. We all need it. We all want it, but who the heck understands it today? I'm joined by Jan Sherman with the Benefits Edge. He's been in the insurance industry for over 40 years and is known as "The Benefits Tamer." Welcome. Jan. I wanna know what the heck benefits Tamer means.
Jan: Well, thanks Paula. Thanks for having me today. Yeah, Benefits Tamer. That started back when I first joined the chamber of commerce and we had six people that did the same thing. And I hated being a "me too." So when they went around the room, Instead of saying "me too," I said, well, I'm a benefits tamer. I help companies, families, and individuals tame their benefits piece.
Then that worked better for me. So that's where it came from. And it sort of stuck for all these years.
Paula: So we all have to have health insurance. Some of us, it's provided through our employer and others have to buy it individually. But what is exactly health insurance?
Jan: So simple question and probably a complicated answer.
Health insurance actually is a contract. So there's an agreement, that in exchange for a monthly premium, we have our own language here. It's just like when you're at a restaurant, you ask for the check and they bring you a bill. "Premium" sounds like a good thing, but that's what you pay every month. So you pay your premium every month. And in exchange for that, the insurance company agrees to pay some and very often most of your medical bills.
Paula: Okay. I'm looking online or my employer drops a packet on my desk and it says, I have to choose between a PPO and an HMO.
Jan: Gets very confusing cuz there's different shades here, but main difference between a PPO and an HMO is that PPOs have coverage out of network.
So they both have network doctors that they would prefer that you use. But with the PPO, if you go out of network, you still have coverage. But typically your deductibles will double, your maximum amount of pockets will double, we'll talk about what those words mean later, but more out of pocket, but still coverage out of network.
HMOs are pretty strict about that. If you don't use one of their HMO network doctors, then you're out of network and you have no coverage.
Paula: Doesn't with HMO too, don't I need a referral from my primary doctor to see a specialist?
Jan: Yeah. So that's typical, but not always. In Michigan priority health does not require referrals to see specialists. With your HMOs, you know, Blue Cross, actually Blue Care Network, would have that requirement. So it varies from company to company. It is typical to have referrals and that's one of the people's biggest objections to an HMO, is they don't like that hassle of having to get a referral.
Paula: Yeah. Every time you need to go to the doctor, you have to get a referral.
So you mentioned so a few terms there and one of them was copay. So I know that, if I go to the doctor, I have, well, actually I have an HSA, so I have to meet my deductible before I have any copays. But I know that normally if I have a $10 copay, that means I pay the doctor $10 every time I go in and everything else is covered, correct?
Jan: Well, almost. So copays are, if you think about it as a fee for service or a fee for a product. So you may have a $10 copay for a generic drug. The $30 co-pay for your office visit. It's important to understand that that gets you the minute and a half the doctor stands with his hand on the door waiting to leave, but anything they do beyond that will generally go toward your deductible.
So if there are any tests, any injections, things like that depending on your coverage. There can be costs that are attached beyond the copay. The copay gets you the appointment.
Paula: So is that just the fee for the visit? And then if I have tests, do I have other copays that go with that test?
Jan: There can be. Normally tests, diagnostic labs, and x-rays will be applied to the deductible.
Paula: Okay.
Jan: So there are some plans that you actually would have a copay for them, but more normally they get applied to a deductible.
Paula: Okay, so there's another term. What's a deductible?
Jan: That's a good question. So I like to use memory hooks, cuz we do have our own language here. So a deductible, if you think about that. That's the amount that the insurance company can deduct before they start paying your claims.
The hospitals typically are not gonna say "don't worry about it." So the deductible is the amount you pay because the insurance company has deducted that from the bill before they start figuring out their part. So copays often can be before deductible, but sometimes they're after as well on individual policies. Visits to the specialist may have a copay after deductible, so that can vary. You really need to understand your policy, to know how that works out.
Paula: So in my policy, I have a $1,500 deductible. So once I meet that deductible, then what happens?
Jan: Then we get to the next level, which is co-insurance. So insurance really is sort of built in levels.
And frankly, it goes from least important to most important. Your copays are the things that people focus on most, cuz that's their everyday stuff. But most of us don't need insurance to make a $100 office visit $30. That's not gonna pose a financial hardship to us, but that's what we use every day.
That's what we think about. So the next level is your deductible. Beyond that, that's your 80/20, 70/30. That's what people talk about. And the insurance company will pay the bigger number. If it's 80/20, the insurance company's gonna pay 80% of the bills after the deductible. And then the insured will pay the 20%.
So that's that next level. And it's co-insurance, so, again, think about that. Literally you're co- insuring with the insurance company. You both are paying the bills.
Paula: Okay. So I have a $1,500 deductible, and then I have, let's say an 80/20 after that, but up to a certain amount, correct? Most, I know all policies are different, but typically they're like to $5,000 or $10,000?
Jan: Right. So again, just depends on the policy. There are two ways that can end. One is through employee benefits through group plans. Some of the plans, it's a new invention to make things more confusing. They have an embedded co-insurance maximum and on the documentation often you'll see it abbreviated ECM.
So that will be an amount that you'll pay beyond the deductible, through your co-insurance. And that number ends your co-insurance. Your 80/20, 70/30 ends when you pay that additional amount but you've not yet reached your maximum amount of pocket. Individual policies don't have ECMs. So you pay your 80/20 until you reach your max out of pocket.
Paula: Okay. So again, my deductible's $1,500, my max out of pocket is say $5,000. So I reach my max out of pocket. What happens after I reach my max out of pocket?
Jan: That's really critical. And to me, when I talk about health insurance, this is the number that matters. As I mentioned, you don't really need insurance for the most part to cover office visits or generic drugs, things like that.
What you need insurance for is if you go into the hospital and you get a bill for a half million dollars. At that point, if you owe five or six or seven thousand,, that's not nothing, but that's manageable. You can dig out from that. Half a million. It can be a million. I had a client who was in a motorcycle accident, had $980,000 in bills in one week.
Paula: Wow.
Jan: So those are the things that we need protection from. And to answer your question, once you reach your maximum amount of pocket, Everything covered by your health insurance is then covered a hundred percent for the rest of the year, including drugs, follow up, visits, everything. So it truly is your maximum out of pocket. That's the most you're gonna spend on expenses in a year.
Paula: So everything starts over again next year.
Jan: Yes. And that will depend if it's individual policies, that's always gonna be January 1st, everything resets. If you have employee benefits. That can be all over the board. That can be mid-year if that's when the plan renews, it can be January 1st.
That's something that you would have to check with your HR department on.
Paula: If I remember correctly in reading an insurance health insurance policy before sometimes it has a lifetime maximum?
Jan: Well, that's sort of old stuff before healthcare reform policies had lifetime maximums. They're not allowed to do that anymore.
So if you're getting a marketplace plan or employee benefits that are compliant, that won't apply. There are plans out there, short term medical plans, different ways of ensuring that could have a lifetime maximum, but if you're getting a standard plan, you know, something off the shelf, that's compliant with healthcare reform, they don't have that.
And all of them will cover preventive a hundred percent. That's federally mandated. So no matter what plan you have, that will be one of the few things that will be consistent with your plan.
Paula: So preventative is like a physical. I know for women it's a mammogram, their annual visit to the gynecologist. I don't know what it is for men, but so all of those are covered 100%?
Jan: Yes. But I'm very specific when I say that, it's your preventive. Because it's possible that not everything that is done during your physical will be coded that way you go for your physical. The first thing the doctor asks you is how you doing, if you say, well, I'm good, but my neck hurts.
If the doctor looks at your neck, that's the diagnostic procedure. And that changes the game. So now you have to pay for that. If you're getting lab work done because it's typical physical, that's fine. That will be covered a hundred percent. But if they're monitoring a condition, they may code that as diagnostic.
And I always like to make that clear, because if you go for your physical and you think everything should be preventive and you get a bill, don't roll over and pay it. Call the doctor's office and ask them, why was this not all preventive? And very often I have... I saved about $170 one year with that quick phone call.
They resubmitted it and I didn't have to pay. So it's important to be educated. People make mistakes. I don't think it's ever intentional, but you have to be your own best advocate these days. Cuz insurance has gotten so much more complicated.
Paula: Right? I know. I haven't done it lately, but usually when my explanation of benefits, I think that's the term, comes in the mail. I used to review it. I know you should just to make sure that you're being charged correctly.
Jan: Yeah. And that's also why when you go for your physical, if you say my neck hurts. The doctor these days is very likely to say, well, let's schedule a follow up visit. And we'll take a look at your neck because they know you're expecting to pay nothing.
So they separate the diagnostic from the preventive to keep things consistent.
Paula: Good to know. So how do I know? I know it goes down to, you know, what fits in my budget, but there's so many options out there. And when you look at the marketplace, there's a ton of different choices. How do you determine what's the best policy for yourself?
Jan: That's the trick because it, it really depends on what's important to you. My job is to give you professional advice and what I can evaluate is the cost. I can tell you where it makes sense to spend the most money. The thing that's always interesting to me is health insurance certainly has an emotional component.
Part of what you're buying is peace of mind. So sometimes even though it makes sense on paper, High deductible of $8,700 means you're not gonna sleep at night. So even though the dollars work and you're healthy and it makes sense. It doesn't make sense for you. So what's important is to figure out what's your priority?
What's gonna give you peace of mind? Is it important to have your doctors in network? If it is then find out how much more you're spending. To get your doctors in network, make sure it truly is worth that money. Cuz sometimes it can be $20 a month, but sometimes it can end up being $200 or $300 a month. And at that point you're better off just going to your doctor out of network and paying out of pocket a couple hundred dollars.
So it's not a simple answer. If I wanted to give you a simple answer, it would be get the cheapest policy you can that lets you sleep at night. You know, if you're perfectly healthy, then an HSA qualified plan would be a good option possibly. Or, you know, a bronze plan with a $8,700 deductible, which is the highest allowed today.
That's all fine because if you're healthy, having a thousand dollars deductible doesn't benefit you, cuz you're not gonna reach a thousand anyway, you might as well make it 8,700 and keep that money in your pocket and invest it. Let it work for you.
Paula: When I talk about it with clients, I always say in the first year, you know, you, I just wanna make sure you have that $8,700 in the bank.
So if something does happen and you need to meet that deductible, you have other options too.
Jan: So say I would just back up a little bit on that $8,700. One of the things that people also, I think don't realize.
Is that that's sort of negotiable. So you can set up a payment plan with the hospital. They don't expect you to write a check up front. And you know, if you had a bill for a hundred thousand dollars and you owe 8,700, the hospital already got $93,000. So your piece is not gonna make or break them. They'll work with you on it.
If you can pay upfront, you can usually negotiate also that they'll take less just to get it off the books. So it's something to be aware of. Don't feel that pressure that they're not gonna release you until you write a check for $8,000.
Paula: Okay. Good to know. And we've mentioned it a couple of times is HSA, which is a health savings account. Can you talk about that for just a few minutes?
Jan: Yeah, yeah, absolutely HSA is a different concept and HSA is a health savings account.
And if you think about it sort of like a medical IRA, much better. That gets you a good start. So this year an individual under 55 could put $3,650 in an account. Over 55, they can add a thousand as a catch up and couples can double those numbers. That money comes right off of their taxable income.
So sort of like putting in an, a qualified IRA, but much better, cuz with a qualified IRA, you need to wait till you're at least 59 and a half to take that money. And when you do, you're gonna pay taxes on it. With an HSA. It's not a use it or lose it. People confuse them with flexible spending accounts that they had at work.
This is a different animal. So you can put that money in, take the write off today. And as long as you eventually spend it on medically related expenses, you never pay taxes on it. If you amass a lot of money in an HSA, it can even be invested. So all that growth also is tax free. As long as you use it for medical expenses.
That includes dental. That includes vision. So it doesn't have to be health insurance related. Kids' braces, LASIK, glasses, all of that can be paid. If you go on Amazon, I know that Priority Health, for example, has an HSA store on Amazon. So you can't buy a flat screen TV there, but things that are on there might surprise you.
You know, things like a pillow, certain pillows are considered medically related expenses. There are ways to spend the money. I have clients that manage it many different ways. I have an attorney client who has maxed it out forever since they were invented. And her intention is to use it for long term care purposes to cover nursing home if she needs it down the road. It's amazingly flexible. It's a tremendous tool. There aren't many ways that you cannot just not pay taxes on income. This is one of the very few and it's very powerful.
Paula: Oh, no, I love my HSA.
Jan: Yeah. The thing that people have to be aware of though is a whole different structure.
So within HSA, the only thing that's covered before the deductible is your preventive. So beyond that doctor's visits, tests, drugs, everything you'll get a network discount, but all of that is gonna go toward your deductible.
Paula: But that's the point of putting money away in your HSA to cover. The deductible, if you need to use that.
Jan: Yes. And normally you'll be able to put in just about enough to do that if you reach it, but there is sort of little tips and tricks there. One thing that people need to understand is that if you have an HSA qualified plan, often they wait until they have a medical expense to open the health savings account.
And one of the wrinkles in the law is that you can only deduct expenses that occur after you open the account. So even though you had a qualified plan, if the account isn't open you miss out on that. So opening it right away, put in the $50, have it there. And then you can add to it later, as you need to, you can funnel money through. You go to the doctor, you get a bill for a hundred bucks, put a hundred in, pay it.
They usually give you a debit card, pay it through that account. Lot of little things. You know, it's very easy to go to the doctor, have them say, you know what, this isn't covered. This office visit. You need to pay up front and that's not a good thing to do, cuz you'll likely lose your network discount.
Because they won't figure it in. And even more importantly, the insurance company's now out of the loop, so they don't know you're paid toward your deductible. So it's important to sort of stand firm, tell 'em bill my insurance. When I got my EOB, my explanation of benefits, I will pay you what they tell me to pay you.
Paula: I wanna ask this one question about the Priority Health for Amazon. Is that just for Priority clients or?
Jan: Actually you don't need any kind of membership if you went to Amazon orI'm not sure how to get to it. If you search priority health, Amazon, probably their Priority Health store would come up.
Paula: Okay. I'm gonna have to check that out. It's such a cool thing, having that debit card in and using it to pay for expenses.
Jan: Yeah. Amazon also will designate things that are HSA qualified. I was looking for a walker for my mom. And I could see that the designations were on there for certain things.
Paula: Good information. So I've learned a couple things today. So Jan, I want to thank you for talking with us today. How can someone get ahold of you?
Jan: Easiest thing is a phone call. So my office line is 248-788-0476. And they can go to my website, which is, we talked about this- BenefitsTamer.com. And there's even link on there, if they wanna schedule an appointment, they can do that right online, just click on the button and they can schedule an appointment or send me an email. And that's Jan@benefitstamer.com. I'm always happy to hear from you and no obligation. If I can help in any way, information is valuable.
Education is important. I started in this world as a teacher and that hasn't changed. I just educate about something different now.
Paula: Thank you. So if anybody would like to get ahold of me, you can reach me at Paula@Paulachristine.com, or visit my website at paulachristine.com. Thanks again for being with us today, Jan.
Jan: Thanks for having me, Paula. It was my pleasure.