Hear the best tips from a healthcare expert.
HMO or PPO? Go for the high-deductible health plan, or accept the higher premiums? Opt for the copay or coinsurance model? Can you trust the little brochures that subtly guide you to a “lower-cost” option, or are those marketing materials? How does healthcare use big data to offload more of your medical costs onto you?
It’s fascinating that personal finance content doesn’t focus more on navigating the US healthcare marketplace—after all, just one mistake that leaves you underinsured can wipe out months (if not years) of accumulated savings from buying store-brand options and trimming back on subscriptions. When your out-of-pocket maximum is more than $10,000, the stakes are high.
My guest this week, Sarah Khan of My Voice My Health, is a healthcare executive by day and a patient advocate by night. She answers all my questions with a level of insight I hadn’t considered before, and they’re sure to help you make the best choices this open enrollment season.
And in this week's Rich Girl Roundup, we talk about if pausing your investment contributions in a bear market is the right move.
To learn more about our sponsor, Vin Social, check out http://vinsocialvip.com/.
Episode transcripts can be found at https://www.podpage.com/money-with-katie-show/.
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Katie: Our healthcare marketplace in the US is rife for expensive mistakes. Thousand-dollar bill for a mole removal, anyone? So how do we make the best of a bad situation? Today we're doing an open enrollment deep dive with an executive from a Fortune 500 healthcare company who is passionate about advocating for patients. She's here to spill the healthcare tea. We are asking the questions you probably don't even know that you have. Let's get into it.
Welcome back to The Money with Katie Show, Rich Girls and Boys. I'm your host, Katie Gatti Tassin. And this week we are exploring the exciting world of healthcare open enrollment season. In my mind, this is an example of how we can make the best of a bad situation. I will try my hardest not to devolve too often into an absolute dunkfest on the dystopian for-profit financialized marketplace we have in the US, and instead focus on solutions with my guest today, Sarah Khan. Sarah is a board-certified doctor of pharmacy and by day she's an executive of a Fortune 500 healthcare company, where you can find her advocating for patients and science. By night, she runs My Voice My Health, a platform dedicated to empowering patients to improve their care situation and elevate their health.
She reached out to us a few weeks ago, offering to do an open enrollment deep dive, since open enrollment in the national marketplaces running now at the time of publish through January 15, 2023, in most states. And I know everyone's companies probably are somewhere in that general timeframe as well. And as someone who is currently many thousands of dollars deep in health issues for one of my uninsured pets, seems like an amazing time to review the tricky cost/benefit analysis that is insurance.
A few housekeeping notes before we jump to our conversation with Sarah. We have covered this topic in other ways in the past. So number one, if you're looking for a more foundational explanation of health insurance terms and a tactical way to budget for your healthcare costs, check out the blog post linked in the description called “How I'm Budgeting for Healthcare in the US in the Least Frustrating Way.” Number two, if you are looking for a deep-ass deep dive on the convoluted US healthcare system and some context for why I feel so strongly about this topic, check out the previous episode, also linked in the description, called “Navigating the US Healthcare System without Getting Financially Effed.” And number three, I spent several months reading books, listening to other shows, and talking with healthcare experts about this very topic, which is why I stand so firmly in my beliefs about the benefits of a single-payer system.
This week's blog post, which we’ll link in in the show notes, is called “Three Common Misconceptions about Universal Single-Payer Healthcare,” especially because, hey, you know, we're voting, we live in a democracy. We have a say in how these things happen. If you are skeptical about single-payer systems and you kind of wanna see what's up, check out the blog post. So anyway, yes, it's candidly challenging for me to talk about this topic in a solely solution-oriented way because I find the entire thing to be such an egregious and obvious grift. But I'm glad I have Sarah here today to answer some of the questions that we need answered for as long as we have to exist within this system and we don't want it to bankrupt us. So we will be right back after a message from the sponsors of today's episode.
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Katie: Let's welcome our guest, Sarah. Sarah, welcome to The Money with Katie Show. Thank you for being here. Tell me about you. How do you have the healthcare scoop? Why are you passionate about this topic?
Sarah Khan: Hi Katie, thanks so much for having me. As you mentioned, I'm a pharmacist by training and I've had the unique experience to spend my entire career in healthcare, but in several different aspects. So I was the person counting pills behind the counter. I was the person [inaudible] with doctors, but I've even had time with benefits managers and also in drug development. So I've seen every aspect from a healthcare provider setting and from a personal perspective, I mean this is, it doesn't get more personal for me.
So back in 2012, my brother was diagnosed with a very rare brain tumor. He's doing great now, but at the time it was so rare that people in the rural town that he lived in had never even heard of one, let alone knew how to treat it. So I very quickly became his partner in his healthcare journey and we worked tirelessly to find doctors, interview surgeons, liaise with his health plan to determine what's covered, what's not. And it was really eye-opening for me. You know, I had spent my entire career in healthcare and it was so complicated and it was scary. And you know, since then I've had this situation come up again and again: My husband has been diagnosed with multiple autoimmune conditions. Most recently my daughter has been diagnosed with food allergies, and each time I say, thank god I have a background in healthcare 'cause I don't know how I would do it without it.
And then I feel really almost guilty and think, wow, like what do people do if they don't have a background in healthcare? So this is kinda my answer to that, and hopefully we can help affect some positive change.
Katie: Wow. I completely relate from the standpoint of, I feel like a relatively educated individual and someone that tries to do my due diligence with these types of things. And yet I still feel totally in the dark most of the time, that it is kind of a stressor. Like if something were to happen to me or a family member, I don't think I would even know where to begin. So when I look at my private healthcare options, you know, from my company plan, or I've had several different employers now, which means I've seen several different plans of options. I see a shitload of acronyms that I don't really understand; I'm not even really sure what I'm looking at. And choosing the right one kind of feels like you're just throwing darts at the wall, especially when everything has different dollar values associated and there's all these graphs and charts, and it's kind of hard to make heads or tails of it. What advice can you give someone trying to make the best Rich Girl decision in a healthcare system that feels like it's intentionally confusing?
Sarah Khan: Yeah, and it is confusing, number one, and I hope it gets less confusing, but here we are today. First things first is that you have to make it personal. Just like the financial advice that might be good for you isn't good for me, healthcare can be the same thing, right? So you have to really get personal with it and be honest with yourself about your healthcare or your family's healthcare situation and do a little bit of crystal balling as to, you know, what could come in the future, which is super fun. The second thing is, you know, you have to educate yourself. So you talked about the acronyms and how they can be really confusing and they are. Today, we'll talk about how some of those things…it doesn't really matter what the acronym means, but you have to educate yourself and consider yourself a consumer. Because healthcare is a business, even though we think of it as, you know, a right, it is a business. And so we have to be educated consumers, just like when you're going to go purchase any other commodity. The quick rundown of some of the most common acronyms that you'll see and what they mean and kind of my take on them.
First and foremost, you have PPOs, POSs, and HMOs. It really doesn't matter what those stand for, but you can think of them in varying levels of flexibility. So the more flexible something is, the more expensive it is, and vice versa. So an HMO is the least flexible option. So you have to have a PCP named on file with your insurance plan, and that PCP has to refer you anywhere for anything. And if they don't, then you lose coverage. So think of this as being in middle school at home with your parents. If you wanna go visit your friends, you gotta have their permission. And if you don't have their permission, things can go sideways really fast.
So a PPO is the exact opposite. It has the most flexibility. So this is like you're out on your own, right? You can go see who you want when you want, but it also has the most cost associated with it. And when I talk about cost, I'm talking about premiums, which is what you pay every single month.
And a POS or there's also an EPO, those are just somewhere in between. They're like really weird alternatives where the rules sort of apply and sort of don't apply. They're not incredibly common. So for this episode, I wouldn't spend a whole lot of time worrying about them, but can certainly give more thorough definitions maybe in a guide later. But in essence, it's again, if we're going for the life stages analogy, this is like you've got your driver's license so you can kind of go where you want, but you still need to get permission, just not in the same way as when you're in middle school.
So hopefully that helps a little bit. What all these plans have in common is the amount that you pay for a service will vary significantly, depending on whether you're in-network or you're out-of-network. So I would honestly argue that what's more important is knowing your network, and a network can change. Aetna can have a different network for a PPO versus an HMO. So knowing your network status is honestly gonna be the more impactful thing here.
Katie: Sure. So yeah, you mentioned in-network, out-of-network. In our healthcare episode several months ago now, we talked a lot about how you could go to a doctor or go to a hospital and experience something wherein you’re interfacing with all these different medical professionals, and you think your procedure, what you're having done, is in-network, but you might see somebody that's out-of-network and that it can be very complicated up front, kind of making those verifications.
And there's another piece of this in-network, out-of-network. We mentioned premiums, obviously you have a deductible, but something that I don't often hear discussed: coinsurance and copays. These were new to me when I started navigating this kind of world of healthcare on my own. It feels like these get swept under the rug. How important are these?
Sarah Khan: Yes. So these are huge, honestly, and I'm glad you bring it up. So coinsurance and copay is usually not top of mind, but it is arguably more important than, say, even reviewing your deductible, because these can increase your cost significantly. So let's take a step back. Your deductible is what you're going to pay before your insurance kicks in at all. So most people have a deductible that they don't meet until say, April or May of the year. So consider yourself being completely without insurance until then. Now once you've met your deductible, you'll go into either a copay or a coinsurance model. In a copay model, this is where you'll pay maybe $10 to see your PCP, $30 to see a specialist, a hundred dollars to go to a hospital. And those remain standard. Again, assuming you're in-network. Soon as you go outta network, all the rules go away. But assuming you're in-network, you're always going to pay those same amounts.
With coinsurance, you're going to pay a percentage. The Kaiser Family Foundation does a study every single year looking at all of these different metrics, and based on their data, the average percentage a coinsurance plan offers is 18%. So you're on the hook for 18% of your healthcare costs, whether that's, you know, like me, you've got a cold and you decide to go to the doctor to see if you need an antibiotic, whether that's, you know, needing a trip to urgent care or the emergency room, you're on the hook for 18% until you reach your out-of-pocket maximum. And that's the, again, I would call it the in-network out-of-pocket maximum that you'll pay for the entire year. So the one and only time I've ever reached my out-of-pocket maximum is when I've had a coinsurance as opposed to a copay.
Katie: Mm, wow.
Sarah Khan: Yeah, it's a big deal and something that you need to think about.
Katie: The interesting thing too about the…it's very difficult for me to talk about these things without being like, this system is so dystopian, but…
Sarah Khan: It is.
Katie: Just for anyone that's maybe new to this that is like, okay, wait, we've already mentioned so many different terms. Yes, when you pay your premium every month, if you work for someone that's giving you health insurance or providing healthcare to you, you're probably seeing something being taken out of your paycheck every month for insurance, right? That's the premium, that's your monthly cost. But to Sarah's point, you're not actually gonna benefit from that insurance until you surpass the deductible amount, which as she said, you probably…I mean I've never hit a deductible, personally, but I have never had children, like my plan only covers me, right? So I'm very fortunate. But then you have that other thing beyond the deductible, which is your out-of-pocket maximum. So that's what Sarah's referring to when she's talking about things like coinsurance, where until you have, until you are 18%, you've paid 18% enough times that you've hit the out-of-pocket maximum for your in-network services, you're kind of just on the hook continuously. And anyway, it drives me crazy.
Sarah Khan: And I can give you actually a really good example. So we had a baby this year in February; we met our deductible with the baby. But let's say that we had already met our deductible and we were in a coinsurance versus a copay model. So we were in a copay model and that cost a hundred dollars for me, also a hundred dollars for the baby, because we're two separate individuals receiving two separate forms of care.
Katie: I hate everything.
Sarah Khan: But again, if you think of it from a business perspective, right? If I go buy an iPhone and you go buy an iPhone, we're both gonna be charged for that iPhone, even if we're on the same plan. So as you start to kind of condition your mind to think of this as a more ruthless setting, which is sad because it's care for your health, you start to kind of see the pattern, if you will.
But anyway, back to the example. So if we were on coinsurance, that one hospital visit was well over $30,000. So 18% of that we would've been, you know, at home with a newborn baby paying for a shit ton of diapers and also having a $5,000 health insurance bill on our hands right at the beginning of the year. So this is why, you know, when we start to talk about making a smart choice and not knowing how to budget for it, honestly, how you budget for healthcare is really gonna depend on which of these options are available to you and which you're able to choose.
Katie: Absolutely. And in the investing world, you know, especially coming from the perspective of being someone that is not pregnant or planning to become pregnant at any time in the near future, and on a plan that is only covering me as a young and—knock on wood—like currently healthy individual, I was very drawn to the HSA plans, the high-deductible health plan that offered an HSA. You know, in the investing world we talk about how they have these amazing tax benefits. Tell me the case against the HSA. Like is it ever a bad idea to choose the plan with the HSA?
Sarah Khan: Yeah, so you're right. An HSA is only an option if you enroll in a high-deductible health plan. So these are actually quite popular. People who get insurance from their employer, more than a third actually opt into a high-deductible health plan. Simply put, a high-deductible health plan is an insurance plan that meets IRS requirements for both deductibles and out-of-pocket expenses. And honestly, they're a way for employers to share more of the cost with an employee. So deductibles in these plans are usually higher: around $1,200 to $1,800 as compared to, say, the PPO or the HMO that we spoke about. And they usually follow a coinsurance model, kind of that one [inaudible]. There are certainly some that have a copay model, but you have to look out for that. Premiums can be lower, which is a great advantage of a high-deductible health plan—especially, you know, in your situation, you're young, you're healthy, you don't have kids.
But actually again, the Kaiser Family Foundation found that for single coverage, premiums actually aren't that much lower. Maybe like $150, $200 bucks lower than, say, a PPO. For a family, they're significantly lower, like we're talking thousands of dollars. So the main benefit, though, of a high-deductible health plan is that HSA…and you're right, HSAs are great long-term investments. But again, sometimes I think as we're making these decisions, acronyms are thrown at us left and right and we don't always necessarily understand how to use these tools. And so an HSA, you can think of it like an investment account, and you can put money into it as long as you're in the high-deductible health plan. Your employer can also put money into it, whether they do or not, and you can invest it and grow it. You own it, which is different from an FSA, which an employer owns, which you can't take with you and it doesn't roll over. An HSA you can grow, but you can only invest in it when you're in a high-deductible health plan.
And so I would argue that a high-deductible health plan and an HSA can be extremely advantageous if you're single or you're married with no kids; if you're relatively healthy, meaning you don't really plan to use your HSA to cover costs for your healthcare in that year. And if you’re financially stable enough to front-load your health insurance costs—because again, your deductible's gonna have to be much higher than the average PPO, and you're gonna have to pay all of that before you see any benefit whatsoever from your health plan. So can you afford to do that without putting yourself in any sort of financial jeopardy?
Katie: Sarah and I will pick this conversation right back up after a message from the sponsors of today's episode.
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Katie: I kind of wanna dig a little bit deeper here, if you don't mind, because I think in the past I have looked at the tax benefits of loading the HSA: marginal tax rate, payroll tax liability multiplied by the amount that you're contributing. It can easily be in the thousands of dollars in tax savings. And so when I've kind of done these types of comparisons between the higher-deductible health plan that I had access to and the lower-deductible plans that had higher premiums, I would find that in a lot of cases, when I factored in the tax savings, I was getting further ahead from the high-deductible plan. Can you walk me through, I guess, the issue that you see with them maybe not being as lucrative as they seem?
Sarah Khan: Absolutely. And first, let's just make sure we're all on the same page. An HSA is triple tax-advantaged, which means the money you're putting into it is pre-tax. When you invest it, the growth is not taxed. And then when you ultimately use it for qualified expenses, that is not taxed either. So it is a really awesome tool. I would think of it and invest in it similar to a 401(k). Say you have an HSA contribution that has a limit, just like a 401(k) has a limit. For 2023, those limits are around like $3,800 for individuals and $7,800 for families. And so you're right: You can crunch the numbers and you can look at the tax savings and easily be in the thousands. When you crunch the numbers, say, for the federal tax advantage, the maximum family contribution can be a few hundred dollars to a few thousand dollars. But when you then put that up against your high deductible, which is again going to be thousands of dollars, it starts to become a wash for that specific year. So there again, that's why I go back to, don't think of your HSA as the money you're putting in a tax-advantaged account to use in the same year. That's not where you're actually gonna get the tax advantage. You're gonna get it in the growth, and you're gonna get it in the compounding over the next 10, 20, 30 years. That's where you really start to see the advantage.
Having said all of that, an HSA is a very powerful long-term investment tool. And even, say, you only enroll in an HSA once, right? So you're very healthy, you feel confident that, god forbid, nothing catastrophic is gonna happen to you. So let's get in the high-deductible health plan. You're financially stable. If things go sideways, you're still gonna be fine. And you contribute the maximum you can into your HSA. That can easily grow into six digits by the time you retire. So it is incredibly powerful, and especially given that healthcare retirement costs today are north of $300k, it's something folks should really consider.
The biggest caveat here is that you have to be prepared in case you encounter those unexpected healthcare issues. So a really stark statistic is that 50% of bankruptcies in the US are due to illness or illness-related job loss. So when you think of that, again, you just want to be educated when you're making that decision. You want to make sure that you're not putting yourself or your family in financial jeopardy just in hopes that you have a good year, you don't have to use your health plan, and things go well. The other reason I'm not the biggest fan of this kind of carrot incentive is because it really does incentivize people to not use their healthcare. So for me, you know, I've got a cold, yeah, do I feel like crap? Sure. Am I gonna go to the doctor? I probably would be more likely if I had a PPO and I'd already met my deductible, but not as likely if I have a high-deductible health plan and I haven't.
And then again, when you throw kids into the mix, I'm never gonna say, ugh, my kid has a fever, but let's not send 'em to the doctor 'cause I don't wanna have to pay my deductible. But sometimes people are put in positions to make those choices. So just don't put yourself in that position if you're not able.
So I have a few key questions that I tell people to always ask themselves when they're trying to decide, is an HSA a good idea for me today? And again, maybe it is today, maybe it's not. Next year could be different. But one, can you afford to pay your entire deductible in the first three to five months of the year? Is that in your budget? Two, if necessary, can you pay your entire out-of-pocket maximum for the year without putting yourself into any sort of financial turmoil? And three, can you pay your healthcare costs without dipping into your HSA? Because again, the tax advantage for the year versus the deductible for the year make the year-to-year kind of a wash. So if you can answer yes to all those questions, then yeah, go for it.
Katie: Amazing. I wanna reiterate too, just to really drive it home, that, you know, you're absolutely right: If your plan is to put the funds in and then turn around and spend them same year, you're not really getting the tax advantage, like you probably would've been better off going with the lower-deductible plan. You get the tax advantage when you think about the HSA as a long-term investment strategy, a long-term investment tool.
And then to your point, if you're on the fence, I love that you highlighted, 'cause we've talked about this before with budgeting for healthcare expenses. When you're signing up for the plan, you wanna look at that out-of-pocket maximum and make sure that you have a plan in place with your budget and the way that you're allocating your income every month to be setting aside that much money over the course of a year. Like you wanna have at least your out-of-pocket max in an emergency fund, right? Because theoretically, you could be paying that much through one freak accident. So I love that you highlighted that and kind of raised…I mean it is a trade-off, right? It's a risk, and I think in some cases it's a risk worth taking, because to your point, by the time you reach retirement, you're going to need hundreds of thousands of dollars. So what better way than by investing through an HSA and getting all of it tax-free? But by the same token, if you are someone that is maybe not earning a lot now, and the out-of-pocket max for the high-deductible plan is $15,000, well, it's a risk analysis that you wanna take.
So the other thing that I noticed: We keep kind of coming back to this idea of, like, if you are single or if you don't have any kids, and kind of how this whole picture changes once the healthcare plan is covering a family. Can you explain why children would become the high-deductible health plan dealbreaker for you?
Sarah Khan: Oh my god. Gladly. So because kids are just crazy expensive, like in every…I love them, they're so worth it, but in every aspect of life they're expensive. Health is no different, and things are just really unpredictable. You know, my son two weeks ago was standing at the bottom of our stairs, behaving himself, holding a railing, and a gust of wind blew by and he slipped. Just like out of nowhere slipped. And it would've been a nothing issue, except for he slipped into the staircase and we ended up in the hospital for eight hours getting, you know, a plastic surgeon putting in three stitches. And he's fine, he's great. He loved all the attention and the balloons and everything that he got with it. But that is, again, thousands and thousands and…like not all of it has even hit our account yet. And I saw one person's bill who literally saw him for 30 seconds and it's like $2,000.
So again, usually that won't happen to me. Like I usually can catch myself if I slip while I'm just standing randomly near the staircase. But it's like that for kids all the time. And as they get older, they're in sports, they're doing different things, and they just are more prone. So if you want to reach your high deductible really quickly, or if you really wanna give your out-of-pocket maximum a run for its money, then yeah, go for the high-deductible health plan.
Katie: Oh my goodness, I feel so bad for your son, but I'm also chuckling that you're like, oh, he loved the attention.
Sarah Khan: Oh my god, it was unbelievable. He was teaching people how to like use his iPad while he's getting stitches in. It was great.
Katie: You should charge them. That's too funny. So you mentioned earlier in the interview, healthcare brochures are marketing materials. Like, most companies that give employees these thick-ass PDF packets that feel like, oh, this is designed to, you know, help me choose my plan. If we're thinking about it like a marketing material, I'm starting to think that maybe that's not really what they're for. Are they actually helpful?
Sarah Khan: So I hope you're ready for my soapbox.
Katie: Soapbox away.
Sarah Khan: Thank you. So, yes and no. They are the place that you start, right, to understand what options your employer’s providing you, what will be the deductible versus the coinsurance versus the copay. But they're not the only place you should look. So I mentioned previously that the pretty packets are a hundred percent marketing. If you're ever looking at a document of health insurance that is not the most boring piece of paper you have ever read, then it is marketing. And so let's just take a step back for a minute. So some of these brochures, I've seen some crazy things. They'll call a plan the “consumer choice plan.” Well, like, why would I not wanna be in the consumer choice plan? First, there is no such thing as a consumer choice plan. That is a marketing term to not say “high-deductible health plan,” because that kind of sounds a little scary. They'll have things that say the “lowest-cost option,” or one of my favorites was “A majority of your coworkers opted for this plan last year.” Great, awesome. Why is that relevant?
To put this in a bit more context, when an employer offers a healthcare benefit to an employee, it comes at a cost to them as well, right? So they go to the health plans, the Aetnas, the UHCs, and they say, “Okay, here's my group of employees. I wanna offer them this plan. What can we do?” And health plans can use big data, right? And they can analyze it and predict pretty well, based on the population that the company has, how much they're going to spend in a year in healthcare. And then they can start to devise plans accordingly. And then it's up to the employer to say, “Okay, for each employee I'm gonna shoulder this much cost and I'm gonna give the rest of the cost to the employee.”
So you can start to imagine that, you know, there's tons of variables that they can play with to change these costs, but at the end of the day, they really hope you pick the one that's more advantageous for them. And that's what the pretty brochures do. So when the benefits guides come in, bottom line is that you use it as a starting point. What you need to look at is the really ugly, thick, confusing brochure, and those are called the detailed medical benefits coverage. And the reason that's so important is because this is going to be the litmus test for when you have something weird that happens, or maybe even not that weird, just weird to you. This is what's going to decide if it's covered, if not, how is it covered, et cetera. That's also where you're going to learn things like if there are any exclusions. If your in-network plan, for example, has an emergency clause. Or, you know, if you need a hospital and you really can't find one that's in-network, are you kinda screwed? So a quick example. Your benefit summary document will say something like, you have a hundred dollars hospital copay. Your detailed medical summary will say, unless you're having a baby, then it's $500 for you and $500 for the baby. So these are really important things to look at.
Do your due diligence and if something isn't really explicit…so if you know you have a rare disease or an autoimmune disease and you're gonna need a certain therapy, do control + F in that huge document and see if it comes up. If it doesn't, call the plan, ask for clarity and ask them to email you that clarity so that you have it for future.
Katie: Paper trail, baby.
Sarah Khan: Yeah, yeah, exactly. A few other critical steps. The biggest one being is that you have to confirm your network status for all of your providers. We're in an in-network only plan, so this is extremely critical for us, but even for those who aren't in an in-network only plan, you'll end up paying more of a coinsurance, for example, for something out-of-network. Sometimes out-of-network costs won't go towards your deductible at all. So confirming network status is critical.
Katie: So the big ugly packet that you just mentioned is the detailed medical benefits coverage. And to Sarah's point, you know you have the right one if it's ugly and boring. This is also funny because ever since our first episode about this, I have been so much more diligent about getting in writing confirmation that a doctor that I'm about to see is in-network, and having screenshots of everything, and really taking it upon myself to assume that if this gets denied, it's gonna be on me to prove that I was allowed to see this care provider. So just something to note. And on that same kind of in-network/out-of-network status thing, you mentioned calling each plan and checking the network status for all providers. I imagine you're referring to providers that maybe you already have an ongoing relationship with, if you have some sort of, you know, whether you have a chronic illness that requires you to see specific doctors, or you just have a primary care physician that you like. Can you elaborate? Because I could see someone kind of hearing this advice and being like, well, I don't know where to start. Can you give us an example script, almost, of what you would do and say if you were doing this?
Sarah Khan: Yeah, absolutely. So this is an awesome question. So first, let me take a step back for a minute because your employer, again, should be providing you with links to each provider network. So my employer offers me the option of a UHC network or an Aetna network, and they can be very different. And again, they can be different if I enroll in the UHC PPO or the UHC consumer choice plan, but they should be giving you a link so you can go in even if you aren't enrolled, and use that link and type in every single doctor. I would also type in hospitals in your area. If you know that you travel somewhere for long amounts of time, you're visiting family, type in hospitals in that area as well, and make sure that you're in-network.
If for some reason you can't readily find that link in the pretty brochure, the first thing you should do is reach out to your HR department and say that you would like a link to confirm coverage of your providers prior to selecting your health insurance plan. If that still fails, the big-ass boring book will absolutely have a 1-800 number that you can call. Call it, let them know, “Hi, my name is Sarah, I work for X company, and I would like to confirm coverage for 2023.” They'll ask you, “Which plan are you looking into?” You'll say, “I'm looking into the PPO plan because the girl on the internet said ‘Don't do the high-deductible health plan.’” Just kidding. You should definitely do it. And then they will ask you to give names of your providers. Again, you'll give them the names; they'll tell you if they're in-network or out-of-network.
There are three key follow-up questions here that I would again write down, and I'm happy to give these to you to share in the links below.
But first have them confirm the provider address. So make sure that the Dr. Smith you're referring to is the Dr. Smith that they're looking at on their screen, because it's absolutely happened where it could be a different Dr. Smith. Ask if the entire practice is in-network. Sometimes a doctor can be in-network, but say, for example, the nurse practitioner is out-of-network, or in my case we had, my OB GYN was in-network, but the radiologist who read ultrasounds was not in-network at her office. Now in a hospital setting, this is taken care of due to recent legislation, but when you're talking about, you know, cardiologists, specialists, or even just your PCPs, it makes a difference. And then finally ask them to send you that information in an email.
Again, nobody's gonna care if you called Sue and Sue told you this was in-network. You really need to be able to pull up the email and say it was in-network.
Katie: Okay, so to recap, first we call the 1-800 number, we confirm that the provider address matches so that we're talking about the same doctor. Second, we ask if the entire practice is in-network and to make sure that maybe it's not just the one doctor, but we wanna understand if everyone that we're likely to see on a visit will also be covered. And then number three, we wanna request this information in writing via email. That way we have some documentation.
Sarah Khan: Yep, exactly. If I can give you a tiny bit of good news, the good news is that health insurance plans want to charge money and get paid, and doctors also want to get paid. So generally, if you know, there's a situation where they know that you have this health insurance plan and only the doctor's covered, as long as they know that you're an in-network only plan, for example, or that they know up front like, this is my insurance, can you just double check this? They'll usually try to make sure to accommodate such that you see the in-network provider. So it's not always…like you'll see negotiation happening on the back end that we don't ever see, but still you always have to do your due diligence.
Katie: Totally. So the last thing, Sarah, that I wanted to dig into a little bit. You had mentioned pulling out an Excel sheet, doing a cost comparison. You know I am all about the Excel sheets. Do you have a real-life example to kind of help us wrap our heads around the difference in costs that we are talking about here?
Sarah Khan: Yeah, absolutely. And you're right. So once you know what your healthcare status is, once you've checked your in-network/out-of-network status, you've gotta pull out the Excel sheet and actually start to crunch the numbers and do the comparisons. So this year I had a baby, I had a few PT sessions for, you know, a sprained knee, and I had a really weird lab result that ended up in me getting a bone density scan, which you can think of as kind of like an x-ray. It literally took, I'm not kidding you, door to door, like five minutes. So it was a little bit of a busier healthcare year for me than normal, but nothing like, wow, I was at the doctor all the time this year. Our insurance was billed $102,000 this year, and that does not include my son's random fall. We still haven't gotten the bill for that. Because we chose a plan without coinsurance, and because we chose the PPO and not the high-deductible health plan, we have paid a total of $3,000. So our premium was $600 per year more than the high-deductible health plan. And so the total cost was significantly less. Had we chosen the high-deductible health plan, we would've met our deductible when our daughter was born in February. We also easily would've met our out-of-pocket maximum, which for 2022 was $8,800.
So net net, we saved over $5,000 just by enrolling in the in-network only plan, and forgoing the high-deductible health plan. Now we don't have an HSA, but luckily we contributed to one before we had children. So it's growing, it's doing its thing. But yeah, like I said, you really have to crunch the numbers and almost spitball and scenario-plan, because the difference here is easily thousands and thousands of dollars. Again, this wasn't even a busy year for us.
Katie: So wild. I have a friend that…she's had quite a few health problems. She's in her early thirties, but she recently had kind of a freak emergency surgery, and they billed her insurance, I think, $60,000. But since she pays for kind of like the platinum PPO, I think she paid 50 bucks for it, if that. I mean, it was one of those things where she was like, “Yeah, my premiums are pretty high, like I'm spending $600 a month on my premiums.” But that is something you can budget for, right? You can build that into a monthly budget, you can plan around it. It's much harder to plan around a $60,000 surgery expense. Obviously that would be assuming you have no insurance at all. But even with a more expensive plan, I just think it's important, as you said.
So I wanna reiterate to run the numbers and to, I like this idea of kind of, when you're single or you're married but you don't have kids, and assuming you're kind of young and relatively healthy and you know you can do that risk assessment, sure. Have the high-deductible plan, assuming you meet all the other criteria we talked about, contribute to the HSA, get it growing, but then recognize when life is shifting in the direction of like, okay, time to maybe spring for the better plan that's gonna ultimately probably save us money based on our life stage and the things that we are having to deal with.
Sarah Khan: Absolutely. Tap out before the house wins.
Katie: I love it. Sarah, thank you so much for joining us today.
Sarah Khan: Thanks for having me, Katie.
Katie: Welcome back to Rich Girl Roundup. As a reminder, we take listener questions about every month on Instagram and we pick one that feels interesting and widely applicable. This is really a “What would Katie do?” segment. So as my standard disclaimer, I am not a licensed financial professional. Please don't consider this financial advice.
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This week's question is also from someone named Sarah. “I'm having a hard time convincing myself to put more of my paycheck into my 401(k) when it just keeps losing money every month. Isn't that just throwing it away? Should I wait until it's at least going in the right direction to increase my monthly contribution?”
First, I wanna validate that these feelings are totally natural. If you are feeling like you are lighting money on fire, because every dollar you throw in immediately loses value, that is a completely rational and understandable reaction, right? We want to stop the bleeding. That's human. It's a natural emotion that does not help us very much, especially when we consider the data. So I wanna offer a different way to think about this. Let's say you are buying shares of the S&P 500 in your 401(k) via the index fund, VFIAX, just as an example. Every single contribution you make will buy a certain number of shares, depending on how much VFIAX is valued at at the time you buy the shares.
Now, for example’s sake, let's imagine I get paid every Friday, right? So if my 401(k) contribution is deposited and used to buy shares on the following Monday, that means I would've paid $350 per share on October 24, $339 per share on the Monday before that, $333 per share the week before that, $339 the week before that, right? et cetera. If I'm putting in a thousand dollars at a time, my thousand dollars goes further when the shares are priced lower. I can buy more shares for less money. Now, on the outside looking in, that doesn't feel very good, because if prices are lower, that means the money I put in the week before that, or you know, six months before, it probably looks lower too. But the key thing to remember is that you still own the same number of shares, and you're actually buying more shares more quickly when things are going down or when they're lower than they were six months ago. So it may not feel fun, but I personally am pretty comfortable with this in my 401(k) because I know my 401(k) is not going to be used for a very long time. Even if I'm retiring early and it's part of my early retirement plan, I still have at least 10 years, but more likely closer to 20 plus, before I need this money, right? By definition, these plans have a long time horizon, because they face penalties if you were to withdraw the money before you're 59 and a half. So it's not a question of “Will the money I put in be worth more next month?” It's “Do I believe the S&P 500, in this example, is going to be worth more than it is right now in 20 years from now?”
The other part of your question I wanna address is waiting until the market goes in the right direction to start contributing again. Now, while this is very, very tempting, like we wanna feel safe when we are investing money, history tells us that when the stock market rebounds, it often does so very quickly, and without warning. JPMorgan Asset Management found that in the last 20 years, seven of the best 10 days overall, the days with the highest returns in the stock market, were within two weeks of the 10 worst days overall. So the takeaway is the tides turn very, very quickly, and if you were to miss those 10 best days, your returns are cut in half. Staying fully invested and continuing to dollar cost average into a crashing market the way one does naturally with a 401(k) plan that occurs systematically after every payday, is one of the best approaches to investing out there.
All right, y'all, that is all for this week. I will see you next week, same time, same place on The Money with Katie Show. Our show is a production of Morning Brew and is produced by Henah Velez and me, Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Sarah Singer is our VP of multimedia, and additional fact checking comes from Kate Brandt.