Atlanta Planning Guys

Arriving on the scene several years ago, 529 savings plans shoulda, coulda, woulda been the greatest thing since sliced bread.   There are hundreds of articles on the web and in magazines that deal with the pros and cons of 529 plans.  I can’t add anything to that collection of information.  However………….

There is one characteristic, unique to 529 plans, that JUST DOESN’T FEEL RIGHT.

Type “529 plan” into Google.  Interestingly, as of today, there are 10,800,000 entries for “529 plans” – yet only 1,200,000 for “529 plan”.  Why the lack of popularity for the singular?  Who knows? …  I digress.

There are so many hits in Google because each individual state sponsors their own 529 plan.  This makes the 529 landscape muddied at best, and outright confusing at worst.  The investment options and fees charged by different states’ plans varies….and if you live in a state that allows at least a partial deduction for contributions, you may HAVE to consider using the plan sponsored by your state…the deduction can be just too valuable to pass up versus investing in a plan of another state which may appeal to you more.  In Georgia, donors are allowed to deduct up to $2000 per beneficiary, per year, regardless of income (this was changed in 2007 – there used to be an income limit).  Since the top tax bracket in Georgia is 6%, this deduction is worth only $120 per year.  The more money one contributes over the $2000 threshold, the less attractive this deduction becomes (in terms of percentage of investment).  Particularly if another state’s plan has more appealing fees or investment options.  Some states don’t allow a state income tax deduction, thus giving that resident investor the ability to “shop the country” without any lost benefit.

To “shop the country” would require someone to look at almost 50 different plans!  Each plan is limited to the investments on that menu.  Some menus have 5 choices….some, many more.  Each plan has its own fee structure.

Just imagine if your retirement savings was in a “Georgia IRA” that was limited to 10 investment options and was the only provider you could use if you wanted to deduct your contributions!  You can’t.  Neither can I.

It’s time to fix this.  A 529 plan should be just like an IRA.  You can open it with any financial institution you choose and fund it any way you wish.  It would be SO MUCH EASIER and would be consistent with almost every type of investment account in existence today. 

 Note from the author: Other than offering that something needs to be done and that we could go about it in a more constructive manner, I have intentionally attempted to leave my opinion out of this posting.

I have just returned from a golf trip with friends.  One of them asked me what I thought about the healthcare debate.  Our short discussion was much more congenial than some of the stuff I have seen.

I don’t know what it is.  I can’t remember seeing this type of venom displayed over any topic in my lifetime.  People showing up at town hall meetings with the intention of disrupting them when anyone expresses an opinion that is different than theirs….  To me, it seems like bullying and a bit UN-American.

If you haven’t heard about this new phenomenon, here is a CNN article – http://www.cnn.com/2009/POLITICS/08/10/health.care.questions/index.html

I don’t have the answer to this debate but:

Something needs to be done

Two reasons:

#1 Health insurance costs are rising much faster than wages and inflation are. 

It doesn’t take a math wizard to see that eventually something has to give.  Anecdotally, I can tell you that our commercial clients experience a 15% increase in their group insurance FAR MORE than they experience an increase of 5%.  This usually leaves them in the unenviable position of increasing deductibles and co-pays (thus reducing the premium, but passing more of the risk along to their employees) or paying the higher premium.  In this economy, more of our clients have chosen the former rather than the latter. I am surprised at how much of the information that is being disseminated on this topic (usually via people usually yelling on TV) is either incorrect or lacking.  Insurance is largely regulated by the states.  Each state has some differences.  This is how it works in Georgia:

We are finding the same thing with our individual clients who have insurance on their own as opposed to being a part of an employer group.  30% rate increases are NOT uncommon.  This brings me to…..

#2  Access to health insurance is not the same for everyone, especially if you have a history of medical conditions.

If you work for a company that has more than 20 employees and offers health insurance you can get on their plan without a pre-existing condition exclusion provided you come on the plan during open enrollment or as the result of a qualifying event (usually because your spouse lost coverage at their job).  The insurance company cannot deny you this coverage.  You could be a ticking time bomb, and know it.  They have to take you.  If you lose your job (or quit), you would be entitled (with some exceptions) to COBRA.  This would allow you to pay premiums on your own, usually for a period of 18 months (with several exceptions).  At the end of COBRA, assuming that you could not qualify for individual coverage (more on that in a second), you would be able to contractually convert your coverage to a guaranteed issue medical plan.  The state mandates that all group insurers offer this but it is a policy of last resort.  That dreaded combination of a high premium coupled with reduced coverage (large out of pocket exposure).  But since you had a group policy, and worked for a company, you can have coverage as long as you can pay (see #1 above) the premiums. 

If you work for a company that has less than 20 employees, and offers health insurance, you can get on their plan without restriction (just like those who work for an employer with more than 20 employees). They have to take you.  The main difference is what happens with loss of employment.  Employers this size are not part of COBRA.  Instead, their employees fall under the Georgia State Continuation rules.  These provisions allow an employee (with several exceptions) to continue their coverage on their own for up to 3 months.  After that, it’s on to a guaranteed policy.  But since you had a group policy, and worked for a company, you can have coverage as long as you can pay the premiums.

If you are not part of a group, (like the self-employed, unemployed, or those who work for an employer who doesn’t offer insurance – or has discontinued it) cross your fingers and hold your breath.  In Georgia, as is the case in many states, individual insurance is a tricky thing.  The insurer can deny your application, exclude any pre-existing condition, or take you with open arms (if you are among those will little, or no, medical history).  If you are denied a policy by the insurance company you have NO place to go.  Your ONLY option is to get a job with an employer who offers group insurance or go without insurance.

The issues surrounding healthcare are complex.  There is not a magic pill that will fix this.  We should look for an honest, open, constructive discussion.  WE can do this.

Uninsured Motorist (UIM) is part of every auto policy in Georgia (and most other states too).  It covers you and anyone in your car during an accident when you are hit by a hit and run driver, a driver that does not have automobile insurance, or a driver that does not have enough coverage.  At the end of 2008 the Georgia General Assembly passed Senate Bill 276 (effective January 1, 2009).  Now, insured’s can choose to elect one of two different Uninsured Motorist coverages, “Traditional” (some companies are calling this “Reduced”) or “Added On”.  

Traditional coverage provides that you will have coverage UP TO your policy limits, regardless of the coverage of the person that hit you.

Example: You are rear ended at a stop sign
                                            
• Total damage is $150,000
• At fault driver has $50,000 in liability coverage
• Your policy has $100,000 in Uninsured Motorist coverage (Traditional)
• You will receive a TOTAL of $100,000 (50k from the other person’s insurance and 50k from your insurance).

Added On Uninsured Motorist coverage provides coverage IN ADDITION to the coverage of the person that hit you.

Same example above: You are rear ended at a stop sign

• Total damage is $150,000
• At fault driver has $50,000 in liability coverage
• Your policy has $100,000 in Uninsured Motorist coverage (Added On)
• You will receive a TOTAL of $150,000 (50K from the other person’s insurance PLUS 100k from your insurance)

Added On Uninsured Motorist coverage is more expensive than Traditional coverage (since, in some cases the insurance company will have to pay out more).  We know of several companies that changed their insured’s coverage by default, even though they may not have desired this increased coverage.  It is important to review your insurance documents and the level of coverage that you have.

When choosing the amount of Uninsured Motorist coverage, keep in mind, Georgia’s minimum coverage laws allow people to drive with only $25,000 of coverage.  

Whichever type of coverage you choose, make sure it is enough to protect you, your family, and your car.   This part of your auto insurance policy protects YOU.

While each person’s situation is different, most of our clients have at least $100,000 of Uninsured Motorist coverage……

But what if the old still works?  Well, I guess you want a little bit of both.

 As many of you have probably guessed from one of Cass’ recent posts (http://atlantaplanningguys.com/?p=239), he is a huge fan of the ponies.  I’m not sure that Cass has missed the fastest two minutes in sports since I have known him.  Myself, I’m a big fan of that little white golf ball.  I grew up with my grandfather having taped every single Masters since I was born.  I recall talking him into throwing the old VHS tapes in the player and we would watch Arnie, Jack & Gary duke it out.  My first live Augusta experience was in 2000.  I was second row on 18 and had a perfect view from behind the ball when Vijay rolled it in for his first and only green jacket.  I have some pretty amazing memories when it comes to the game of golf.  It has offered me tons of perspective on the world and given me tons of joy.

That said, this Sunday was truly a final round that I will not soon forget.  Talk about being torn up.  I went to school with Stewart Cink and have always admired his game.  I knew that seeing him win his first major would be an amazing sight.  However, to watch Tom Watson at the tender age of 59 become the oldest player in history to win a major (by 11 years)…that would have been something special.  Frankly, I really didn’t start the day thinking that Cink was going to be there…but as is his normal game…he stuck around and made the field work for every shot.  When the playoff started, I really didn’t know who I was going to cheer for.  I guess, in the end, I was happy with either.  It was another amazing Sunday, and I couldn’t help but think how happy everyone should be for Stewart.

Are you happy with your portfolio’s performance in the past 18 months?  Chances are pretty good that you’re still getting over some of the shock from your statements in February/March of this year.  I’d be hard pressed to find many folks that would have a resounding “yes” for that question.  Relative performance is always a good measure to gauge how you well you stacked up against the rest of the world.  By relative, I mean how you performed against indexes and peers.  These are things that we measure constantly for our clients.

 So how does all this comparing portfolio returns relate to the British Open this Sunday?  Simple…you usually cannot count out traditional (time tested) strategies when it comes to making your money work hard for you.  Watson’s steady hand and consistent play got him to within an 8 foot putt of victory.  In the end, he faded hard and couldn’t finish the job.  Your portfolio might have seen its better days.  It might be time to usher in some new tactics and ways of looking at diversification and asset allocation.  Depending on your situation, if you aren’t incorporating at least a small to modest portion of your portfolio to non-traditional investments (i.e.: alternatives), you may be missing the boat.  We can’t forget Tom Watson and what he means to the game, but to compete day in and day out, it may be time to bring in a Cink or two.

Investing in alternative investments may not be suitable for all investors and involves special risks such as risk associated with leveraging the investment, potential adverse market forces, regulatory changes, and potential illiquidity.  There is no assurance that the investment objective will be maintained.

Diversification nor asset allocation guarantees against loss nor ensures a profit.

The recent months in the equities market have seen some pretty serious returns.  Are we over this slump?  Is the future going to be bright from here on?  If you know Cass and me, you know that our philosophy on the market is reasonably consistent whether up or down.  Our mantra is to develop a plan and stick to it.  There will be times when most plans will require minor changes to adjust for different life circumstances.  However, for many of our clients…now is not one of those times.

 You may remember my blog posting from September 15^th, 2008 (http://atlantaplanningguys.com/?p=28).  I believe we were in the midst of the downward spiral at that time.  I think Cass and I went a solid week of daily posts and all of them market related.  My post in September had to do with avoiding those knee jerk reactions to market fluctuation.  Staying the course in good and bad times and standing fast by the portfolio and plan that had been put in place is of the utmost importance.  This was certainly applicable in September of 2008 and now with several months of pretty strong performance under our belt, I believe, still holds true today.

One of the biggest issues we see when markets are on the way up is constant chasing of the leaders.  I liken it to a dog chasing its tail.  That dog will likely never catch its tail and will ultimately end up really tired and dizzy.  We are coming to the end of the second quarter.  Those performance reports will come out for your IRA’s, 401k’s and other accounts.  Don’t chase returns.  Let me create a classic example for you. (This is hypothetical and for illustrative purposes only. Actual results may vary):

John is 46 years old and has worked for his company for 12 years.  He has built a nice nest egg by constantly investing in his retirement plan and has a very diverse portfolio.  John stayed invested through the market decline and continued to defer money every paycheck.  He pulled up his account yesterday just to see how things were doing and noticed something interesting: his international emerging growth investment had grown 37% in the last two month.  John knows he has another international investment in his portfolio and it only gained 22%.  What does John decide to do?  John does what most folks would have the tendency to do…click a few buttons with his mouse and sell the investment that only gained 22% to purchase more of the investment that grew 37%.

 Ask yourself, what John has done that’s so wrong.  The mistake I want to focus on is his complete removal of an asset class in his portfolio (international large cap).  John has decided to chase after the performance of his emerging investment and is comparing its performance to a completely different kind of investment (one in a different asset class).  This would be like firing your plumber and hiring an extra electrician.  You don’t need two electricians.  What you need are both and if you aren’t happy with the job one of them is doing…go replace them properly. 

Take a look at this chart that tracks the performance of several major asset classes over a 10-15 year term.  You will notice that rarely is the same sector the leader from year to year.  In most cases, you can see patterns of several years at the top followed by several years at the bottom.

When you open that statement in the coming weeks, don’t be so quick to chase the best performers.  Pay attention to how your investments stacked up to their peers and benchmarks…not one another.

Chart courtesy of Prudential, 2007.

One could ask this question of several different people and get several different answers. 

Insurance agent: “Now.  You can potentially lock in the rate and you don’t have to worry about whether you will be insurable in the future.  Something could happen to you today that might render you in need of long term care for the rest of your life.”

Financial publication X:  “When you are 60.  This is the time to start thinking about long term care expenses.  Sure you could potentially lock your rates in at a lower rate if you buy it sooner, but you will be paying the premiums longer.  The average stay in a facility only lasts 2.2 years anyway.”  [note:  any statistic meant to justify their position could have been inserted in that last sentence.  I hear "2.2" more than any other.]

Financial publication Y:  “Consider whether you really need it.  Many people should self- insure this expense.  Since the average stay is only 2.2 years, you should easily be able to weather the storm of these expenses.  Paying premiums for many years to avoid only 2.2 years of expenses is a waste of money.”

Cass Chappell:  “It depends.”

The insurance agent and the two financial publications have oversimplified the need and made some dangerous assumptions.  

My belief is that there is no concrete answer to this question.  No simple test that will give you the answer.  However, there are four basic variables to consider:

1. Current Financial Situation

Charles wrote a great article about long term care insurance on November 10, 2008 http://atlantaplanningguys.com/?p=67 .   His article discussed the different things to consider when you have decided to purchase the policy, such as what policy limits and elimination periods to consider.   Even if you purchase a policy with a lifetime benefit, there is still some maximum amount that the policy could reasonably be expected to payout.  Because of this, it REALLY IS POSSIBLE to self-insure against the costs of a long term care need.  The number of people that fall into that category, however, is smaller than you might think.

Consider a couple with $2 million in savings.  This is the sole source of their retirement savings.  They are currently living on about $80,000 a year in withdrawals from their investment accounts.  [Let's ignore ANY social security or pension payments that they might have coming in].  We subscribe to a withdrawal rate from a nest egg of about 4.5%.  As you can see, this couple is already cutting it close.  If a long term care event were to happen and an added expense of, say, $30,000 per year were added, this could be detrimental to their nest egg. 

Self-insuring should be considered only when a nest egg is large enough to withstand withdrawals of 4.5% INCLUDING long term care expenses.  In that situation, one might purchase the insurance ANYWAY (since the premiums are so small in relation to the nest egg).

2. Appetite for Risk

Many people live their lives and never need to pay for assistance.  Many people who do pay for assistance only pay for a very short time (because they pass away after 2.2 years, remember?).  Deciding to “roll the dice” and forego the purchase of an LTCI policy is something many Americans have decided to do (LTCI sales have recently slowed somewhat). 

“It won’t happen to me.”  “My mom and dad lived to 90….never any problems.”

I have heard every variation of the two statements above.

The worst excuse I have ever heard?

“If I need to someone to take care of me because I can’t do it myself, just shoot me.”

Believe it or not, I have heard that EXACT statement many times.  I don’t really need to address what is wrong with that logic.

In all seriousness, you could take the risk of not purchasing the insurance.  I would point out that the premiums are small compared to the devastating effects of a prolonged long term care event.  Modern medicine is keeping people alive that would have died after a few years in the past.  This trend is likely to continue, meaning that the chance of a prolonged, financially devastating, event will only grow larger.  Just understand this risk before you take it………

3. Other Types of Insurance

You might have a disability policy that provided for benefit payments to age 65.  Benefit payments are usually expressed as a percentage of income.  For most people, this payment would be larger than the payments from an LTCI policy.  Some policies allow for conversion to an LTCI policy at a stated age.  If you fall into this category, you might consider delaying the purchase of an LTCI policy until either your disability policy terminated or your conversion period was set to expire.

4. Health Status

Buying insurance NOW does eliminate the risk that you may not be insurable in the future.  With the exception of someone who has an insurance policy that allows for the guaranteed conversion to an LTCI policy, you ARE taking a risk that you may not be insurable in the future.  Once you have been diagnosed with a cognitive impairment it is too late to get a policy.  Once a degenerative bone condition has been diagnosed it is too late to get a policy.  Once you have a stroke,…. ETC, ETC, ETC, ETC.

This is a REAL risk.  In our experience, many people decide to purchase a policy simply because they are currently healthy and don’t want to risk being denied in the future.

So we have covered some important things to consider when choosing or designing your health care plan.  In addition to figuring out networks, deductibles and co-pays, there are several underlying themes that transcend most every health insurance plan.  These simple guidelines, over the long run, will help you keep health insurance costs under control and stress at bay.

1.      Utilize your plan properly:  by using your plan properly, it will save you out of pocket expenses and time.

a.      Emergency rooms are for exactly that…emergencies

         i.     Don’t use that as your primary entry for treatment

         ii.     It should be a last resort

b.      Plan ahead with testing and lab work

c.      Understand how your deductible/co-pays/coinsurance works

2.      Check all your plan options: you may be able to get better coverage or a better premium by exploring what is available to you.

a.      Could an individual plan cost you less?

b.      The rates at your spouse’s company plan may be lower than yours

c.       What programs are available for my children?

3.      Be SMART with your health: there are just too many things that are well within your control that will help your premiums and general medical costs stay lower over time.  I’m not a nutritionist or doctor…but it’s hard to argue with the potential impact these can have on your overall health:

a.      Proper Diet/Nutrition

b.      Drinking the right fluids to stay hydrated

c.       Quitting that nasty tobacco habit

In part 1 of this series, we addressed several considerations for how your health insurance plan could be designed if you were trying to reduce your premium.  The aim of this blog is to potentially help you reduce your health insurance costs without reducing too much of the benefits you pay for.  As stated in the previous blog, “Once you have paid a premium dollar to the insurance company, it’s GONE!”

How else might you curb those premium dollars?

• Be realistic about your Network Needs: There are generally three network options to choose from
  • Health Maintenance Organization (HMO)- Typically, the most restrictive plan model.
    • Coverage must stay “in network” for coverage
    • Network is generally smaller
    • Least expensive form of network option
  • Point of Service (POS)- Generally a more open architecture that lends itself to broader provider options
    • Network size is significantly larger than HMO (in most cases)
    • Primary Care Physician (PCP) selection is usually required
    • Referrals must usually come from PCP to qualify for coverage
    • Mid-tier cost relative to HMO and PPO
  • Preferred Provider Organization (PPO)- Completely open architecture within a large network of doctors
    • Networks stretch over the nation in some cases
    • No PCP required, with few exceptions for special treatments
    • No referral required
    • Cost is highest of three plan options
    • Out of Network Benefit is available

Let’s apply some real life situations to the above information and see what we come up with (keeping in mind that this is general advice and meant to get you thinking along the lines of saving money on health insurance):

Single Male/Female: Just starting a career or still looking for one…either way the younger you are…the less likely you are to need health insurance for routine maintenance.  In many cases, the only trips to the doctor are for emergencies.  Bottom line; don’t spend a penny more than you have to for your health network.  HMO’s may be the way to go for you.  It reduces your premium as much as possible and still gives you access to a huge network of hospitals and doctors to select from.

Young Couple wanting to start a family:  You may want to do a little shopping around for your OB/GYN before you select the network option you want.  Chances are pretty good that your doctor will be in an HMO network…it might not be the right one though.  Your situation may call for a little more open architecture.  Check into the POS first, then the PPO.  Keep in mind that you may also want to consider changing doctors if the network isn’t going to work.  The savings between HMO and POS/PPO could be in the thousands per year.

Family of Five:  This is perhaps the most difficult situation to figure out.  There are a number of factors that play a role in network selection for a family.  As is the case with everyone of our scenarios, the HMO is always going to save you the most money.  That is no different here.  Some considerations to venture into a more open network might be:

- Children with Allergies: some of the best specialists usually hang out in the bigger networks structures (POS/PPO’s).

- If you travel a good bit with your children (vacations, sports, distant family visits): HMO’s usually extend coverage out of network if it’s life/limb threatening. However you might get stuck on a family trip with a sick child that isn’t in real danger but should see a physician. This could get costly with “out-of-pocket” expenses.

Kids are out of the House:  Time seems to begin catching up with most of us by the time we hit 50.  Chances are pretty good that you are going to end up at the hospital or clinic for tests.  All three traditional network options are going to give you access to these tests.  Sounds like homework time again.  These are largest earning years for many people.  With the early detection capability of many screening exams today, don’t short yourself on access to the best testing possible. 

A few dollars in extra premiums will more than be made up if they catch that cancer before it spreads or pick up on that slight blockage you have near your heart.  Remember that prudence still wins the day.  If access to all the necessary doctors and clinics is available through the HMO network…go for it.

It has been called “The Fastest Two Minutes in Sports” and, of course, “The Run for The Roses”.  The Kentucky Derby is my favorite sporting event of the year and a GREAT EXCUSE TO WEAR A SEERSUCKER SUIT!

My success in picking the actual winner has been rocky, at best.  I attended my first Derby in 1993 and haven’t missed one since.  For several years I doubted that I would ever cash a ticket on the winner, but that all changed in 2006 with Barbaro.  Ridden by my favorite jockey, Edgar Prado, I had been pulling for Barbaro well in advance of the 132^nd edition of the greatest horse race in the world.

That win snapped my 0 for 13 losing streak.

The following year brought Street Sense.  I had him too.  Two in a row!  My fortunes had changed and I was convinced that I was poised to pick the winner each and every year from now on.

Last year, Kentucky Derby 134, brought me back down to earth.  I went with Pyro. Big Brown ROLLED.

(On a side note: I went to the Belmont Stakes, convinced that I was about to see Big Brown win the first triple crown since Affirmed in 1978.  That didn’t work out too well…)

This year, I am going with……

#13 – I Want Revenge

 I Want Revenge, coincidentally, has the same connections as Big Brown.  Even though that fact alone makes me nervous (two years in a row for the same ownership team?), I still think he is just too good.

The young hotshot of Animal Planet’s “Jockeys” show, Joe Talamo, takes the reigns in the biggest race of his life.

Why I think he will win

• He has the highest lifetime Beyer speed figure (113) in the field, by far.

• The horse had an incredibly difficult trip in its last race, the Wood Memorial, but was able to post and impressive last to first win. This experience should come in handy in a 20 horse field that is traditionally crowded around the turns.

• The Louisville Courier Journal came up with an interesting predictor of Derby success several years ago. In a horse’s final 1 1/8 mile prep race, he should run the final eighth in under 13 seconds and the final 3/8 in under 38 seconds. This is a measure of stamina. In the Wood, I Want Revenge ran his last 1/8 in 11.91 and the last 3/8 in 36.37. Only Hold Me Back ran both of those distances faster in his final prep.

• I Want Revenge posted a BULLET workout (fastest of the day) on Tuesday, working 4 furlongs in 41.2 seconds – the fastest of 49 other horses.

Who I am fearful of

#16 – Pioneer of the Nile

• Career best Beyer of 96. Not fast enough??
• Trainer Baffert has won three Derbies and he is talking a good game.
• Never raced on dirt before. Can he handle the Churchill Downs dirt track?
• Garrett Gomez, the best jockey in America, chose this horse over Dunkirk.

#15 – Dunkirk

• Only three lifetime races. But Big Brown was lightly raced too. Look how that turned out?
• How long can trainer Todd Pletcher’s drought at the Derby last?
• Edgar Prado is onboard. I hate to bet against MY MAN!
• His Tomlinson Figure for 1 ¼ miles is only 281. I Want Revenge is 331 and Pioneer Of The Nile is 328. The higher the better.

#6 – Friesan Fire

• Larry Jones charge comes out of a good post position (6) and is fresh after posting a bullet workout of his own on Monday. This was very similar to two other horses Larry Jones trained for the Derby recently: Hard Spun – second in 2007, and Eight Belles – second in 2008.
• He has shown the ability to run well on an off track. Could it be soft on Derby Day?

#7 – Papa Clem

• Could he be peaking at the right time?
• Winner of the Arkansas Derby.
• Upward Beyer speed figure trend.

Post time is 6:24 (coverage begins at 4 pm on NBC).

Hopefully, at 6:26 I will be enjoying a tall frosty Mint Julep while celebrating the victory of I Want Revenge.

UPDATE

I Want Revenge scratched from the Kentucky Derby early on Saturday morning with some slight lameness.  My official Derby pick then became Dunkirk (at about 6-1 odds).  Mine That Bird pulled off a MAJOR UPSET at over 50-1 odds….on to Baltimore and the Preakness.

The problems continue to mount for our health care system in the US.  What can you do about it?  Your options may not be as limited as you think.  There are a number of things you can do as an insured to curb costs.  Let’s spend some time today discussing how to make wise decisions on your plan design.  Whether your choice is between two plan options sponsored by your employer or the endless offerings put forth by individual carriers, there are certainly some general guidelines to follow.

Things to consider about the plan design that can impact the premium:

• - Co-pays:  – $10 & $20 co-pays are too rich a benefit and cost a ton
  • o Any of the following could reduce your premium substantially
    • Consider $40 or $50
    • Many plans offer you the ability to limit the number of co-pays per calendar year (usually 4 or 6)
      • Once met, the deductible applies
    •  Consider removing co-pays altogether with an H.S.A plan
• - Deductibles: it seems so obvious, but I needed to say it
  •  The higher your deductible, the lower your premium
  • Be careful not to go too high.
    • You need to be able to afford the catastrophe
• - Co-Insurance: What you pay once the deductible is met
  • Represented as a percentage (100%, 90/10, 80/20, 70/30)
    • The more you pay (70/30), the lower your premium
  • Must consider deductible when choosing your coinsurance
• - Drug Benefits: premiums are certainly tied to prescriptions
  • Are you carrying a prescription deductible?
    • Even a $100 or $200 deductible helps
  • Know your formulary
    • What counts as generic?
    • Are my brand drugs covered?
  • Raise your Co-pays

Take a moment and really think about what benefits are most important to you.  Whether you’re a self employed person, business owner or employee trying to choose the right plan for you; these factors will ultimately impact your premium.

If you take away one thought from this article, let it be this: “Once you have paid a premium dollar to the insurance company, it’s GONE!  Reducing premiums can ultimately lead to substantial savings if you stay healthy.”