When it’s open season I’ve had several friends come and ask me which insurance plan they should choose. Obviously everyone’s health situation is different, but I’m going to briefly explain the process I use when I choose my insurance carriers. I am not going to include the pros and cons of high deductible health care plans (HDHPs) in this analysis for simplicity. So I am going to assume that this is for more risk averse individuals, or individuals who know HDHPs are not for them.

These are the points I will cover:

1. Access to Healthcare
2. Premiums
3. Copays & Coinsurance
4. Deductibles
5. Reward Programs
6. Medication Costs
7. Out of Pocket Maximum
8. Hospital Stays & Surgeries
9. In-Network & Out-of-Network Benefits

1. Access to Healthcare

First and foremost when  considering any health insurance plan consider how much access is necessary to healthcare. I live in the DC metro area. Some plans I choose from are national, while others are regional, only allowing access to doctors in DC, Maryland and Virginia. Be sure to consider if you will experience:

• Extended periods of time out of state. If your child or spouse has extended periods of time out of state
• Second opinions outside of your region (Mayo Clinic, Cleveland Clinic, John Hopkins etc.)
• Regularly seeing a doctor out of your region

 

2. Premium

The premium is pretty straight forward. It’s how much you pay for insurance every pay period.  For a single person in my area, some range from as low as $50 to as high as $150.  Multiply this by the number of pay periods in a year to get the annual cost. I have noticed a lot of people ONLY consider the premiums when determining their health insurance carrier. This is the biggest mistake! 

3. Copays

Copays is a fixed amount of money you pay for an office visit or procedure. Coinsurance is the percentage you pay for an office visit or procedure. A good rule of thumb is to:

• Estimate number of visits to primary doctor and times it by the copay/coinsurance
  • 3 visits x $20 = $60
• Estimate number of specialty care visits and multiply by the copay/coinsurance
  • 3 visits x $30 = $90
• Consider testing you need. X-rays, MRIs, blood work, etc.

4. Deductible

A deductible is generally the amount of money you must pay before the insurance company will start paying your medical bills.  One thing I have learned is sometimes not everything applies towards the deductible! This is a good thing! I have a $500 deductible, but it only applies if I end up in the hospital. So other than the copay, my insurance will fully cover doctor visits, testing etc. on the very first day of coverage. This year I hit my out-of-pocket maximum without reaching my deductible.

5. Rewards Program

Some insurance programs reward you for being healthy. I get a $500 reward card if I am not overweight, diabetic or hypertensive. I can use this to pay my copays or deductible.

6. Medication Costs

Don’t forget to compare this as well!

7. Out of Pocket Maximum

This is the most you will pay out of pocket. This is important to consider, because if one plan is slightly cheaper in every way but has an out of pocket maximum that is significantly higher then it might not be the plan for you.

8. Hospital Stays & Surgeries

If you know you have a hospital stay or a surgery coming up, or that you are likely to end up needing either or. Compare these benefits. Some insurance plans bill hospitals stays each day. Others are per stay. Then there are the coinsurance plans.

9. Network Benefits

If you want to see an out of network doctor be sure to check the out of network benefits your plan has to offer. Remember if the doctor bills beyond what the insurance company is willing to pay you will owe them the copay/coinsurance plus the unpaid amount.

Simplified Example

Below is a simplified example of two health care plans. It is similar to a decision I had to make when I was choosing health care plans this open season:

	Plan A	Plan B	Conclusions
Premium	50	85	Plan A costs $1300/year Plan B costs $2210/year
Copays/Coinsurance	20% copay for appts 20% coinsurance for all other services	$10 copay for Primary $30 copay for specialist $50 Urgent Care … various fixed copays for all other services	Plan A – 3 appts = $210 Plan B – 3 appts = $160
Deductible	0	$500
Rewards Program	None	$500 Reward
Medications	$10 copay	$5 copay	Plan A – 5 meds/month = $600 Plan B – 5 meds/month = $300
Out of Pocket Maximum	3000	3000

Conclusions

The estimated costs for each plan is as follows

• Plan A = 1300 + 210 + 600 = 2110
• Plan B  = 2210 +160 + 300 – 460 = 2210

The most I would pay with Plan A is 1300 * (0.70) + 3000 =  3900
The most I would pay with Plan B is 2210 * (0.70) + 3000 – 500 (reward) = 4047

Where 0.70 is a multiplication factor to convert pre-tax dollars (my health care isn’t taxed by my employer) to after tax dollars.

In every way Plan A is estimated to be cheaper, but  personally I went with Plan B because I’d be able to smooth my spending. The fact that plan A has coinsurance rather than fixed copays suggests that I may be paying a large sum of money very early on in the year and hit my out of pocket maximum quickly. $147 is not enough for me to pick Plan A over Plan B unless I had a very solid emergency fund to fork over $3,000 all at once and then some in the case of a catastrophic health situation.

This year marks the beginning of my personal finance journey, which began one month after completing my PhD.  Thanks to a financially savvy friend, who was well on their way to financial independence, I quickly became motivated to do better. I also realized it would be a good idea to prepare for the unfortunate but likely scenario of disability retirement.

Liquid Assets	Jan-16	Dec-16	$ Change
Cash & Savings	$3,946	$2,357	($1,589)
FSA	$1,625	$0	($1,625)
Other	$0	$290	+$290
Retirement	Jan-16	Dec-16	$ Change
Roth IRA	$3,620	$11,749	+$8,129
401K	$4,069	$11,339	+$7,270
Liabilities	Oct-16	Dec-16	$ Change
Credit Cards	$773	$0	+$773
Medical	$0	$175	($175)
Piano	$2,893	$0	+$2,893
Net Worth	$9,594	$25,749	+$16,165
% Change			+286.5%

In the aspect of personal finances, 2016 went by smoothly.  My net worth almost tripled, and I surpassed  a $25,000 net worth!

Typically a bad health year is seen as a catastrophic event, but for me every year tends to not be so hot for my health. While I didn’t mention or record all of my medical expenses, they were high.  I ended up reaching my out of pocket maximum. This happened last year as well. Thankfully, my FSA cushioned a lot of the blow and I am do well at cost minimization when shopping for a health insurance plan.

Overall  I’m pleased with where I ended up.  The only thing that disappoints me is the lack of liquid assets. When I skim through my entries I can see that $2,000 in catch up IRA contributions and a $2,900 loan repayment were big contributing factors to this. With that in mind, my Cash & Savings did increase otherwise. Still this is one thing I really need to work on.

Half way through 2016 I changed the software I use to track my spending. I started off using both mint and personal capital, but after further consideration, I no longer feel comfortable having a third-party know my login/banking information. I now manually enter my transactions into Quicken, That being said,  below is my spending for the year.

According to Quicken, I spent $35,233.48 in 2016. There is a “Bill & Utility” payment for $2,375 to my company for over-reimbursment for my relocation. Therefore, I really only spent $32.858.48.  For reference, in 2015 I spent $37,389. A lot of this had to do with a $4,000 piano purchase, moving expenses (such as paying double rent) etc. When I lived exclusively in the midwest, I spent $22,569 in 2014, $19,409 in 2013, and $22,623 in 2012.

When I moved to this city I did so knowing that the first twelve months would be financially difficult. If I delayed my entry onto the job market, I may have been able to increase my income by $10,000-$25,000/year but I decided not to take that risk. Instead I started working 6 months early knowing that I’d more than likely get a $10,000 promotion in exactly 1 year (and I did!).

One of my friends was fortunate enough to get a higher paying job and started earning $23,000/year more than I did.  We moved to the city around the same, we are both statisticians, have comparable rents  and thus we both should have a fairly good grasp about the importance of financial planning and budgets. But what shocked me was the realization that she finds it extremely difficult to live on her income and her income equates to roughly $1,000/month more in take home pay.

From our conversations, I gathered that on a good month she was able to tuck away $600 into savings, basically the amount of money I was managing to tuck away on my income prior to promotion!  Where her money is going is beyond me, but I’m beginning to realize that intentionally starting off at a lower income for one year may actually have been a savvy financial move.

Now that I’ve received my promotion, I’ll still be earning about $10,000 less pre-taxes than my friend. But I’m already seeing this as a year in which I can max out my Roth IRA and 401K plan while tucking about $200/month into a regular savings account . I’m definitely patting myself on the back for a job well done on this one. Even though I do manage to fall short of some of my goals on some months, overall, I’m still doing very well.

I’m finding it increasingly difficult to stick to my budget. It’s probably because I’m actually going out and doing more. While the title suggests it’s mid-month, I am actually 2/3rds of the way through September. Some things I’d like to highlight thus far in the month:

• I’m $110 over budget in my “Everything Else” category.
  • At first I was disappointed, but then I remembered my $140 passport. It was another unexpected expense due to my upcoming vacation.
• I’m $20 over my food budget. 
  • I’ve been eating out more and socializing. I’m still actively trying to cut corners in certain areas to increase savings.
• Preliminary numbers indicate a net worth of $21,500. 
  • This most likely indicates I won’t have the stellar increase in net worth I was hoping for. I still have 10 days left in the month, so there will most likely be some additional spending.
• Promotion?
  • I sense a promotion is on the horizon. If everything goes according to plan, I’ll be earning an additional $600/month after taxes.
• Project Downpayment
  • I’ve decided to start actively saving for a condo. I hope to be able to start the condo hunt by April of next year.

I want to do a mid-month update since August seems to be one of those atypical months. So as of today here are the major happenings:

• Earned an extra $170 from work
• Bought a $1,200 plane ticket for my November vacation.
• Gave myself permission to splurge $500 on various things
• Have $800 of incoming cash that will be paid over the course of the next 6 months.

Right now I’m estimating a net worth of $20,500 at the end of the month despite the additional expenditures of this month.

Somehow I forgot to mention and budget for my November vacation on this blog. It will be a good one, but it will definitely set me back. I highly doubt I’ll meet my goals for the year.

August is one of those rare months in which I receive three pay checks. I had said that I planned on saving the entirity of my third pay check in my “cash and savings” account. I have since changed my mind. Instead, I am allowing myself to spend an extra $600 in August on a few things:

• $150 – Personal Hobby
• $100 – Amazon Prime renewal (?)
• $250 – Clothing & Personal
• $100 – Wedding Gift

The only thing that is questionable is the Amazon prime renewal. If I see the need for it during August, I’ll go ahead and renew it, if not, I will let the subscription lapse and renew when I next deem it necessary. I have an inkling getting rid of Amazon prime may do me more good than harm, but with free same day shipping in my city it’s really a good bargain especially since i don’t have a car. We will see. If I don’t need Amazon prime during August, chances are I really don’t need it at all.

I anticipate earning at least an extra $100 this month.

So i am finally going to go through my June transactions to see how far i went over budget. I’m only using transactions that occurred outside of my vacation.

Category	Amount
Rent	$1,650/$1,650 ✓
Fixed Expenses	$64/$70 ✓
Food	$273/$200 ✗
Everything Else	$763/$280 ✗

I spent quite a bit extra on food, probably due to returning from vacation and to an empty fridge. I also was sick, so that tends to lead to an increase in convenience food consumption. Where I really went overboard was n the everything else category. My unexpected expenses included but was not limited to the following:

• $140 – Renter’s Insurance
• $100 – Gifts
• $100 – Clothing
• $300 – Amazon Purchases

The amazon purchases are really what got me. I actually hadn’t been keeping tabs on my amazon spending because I had an Amazon gift card for many months. I really need to pay attention to my spending online.

 

I budgeted $500 for my vacation. Aside from my fixed costs, I usually have $480 set aside for variable costs which include things like groceries and eating out. So the goal I had in mind was to spend $980 or less during the time period of May 1 until the end of my vacation on June 4. Here is a more detailed version of the actual spending that took place during this time frame.

Category	Amount
Food and Restaurants	$186.86
Shopping	$158.1
Misc	$350.23
Cash Withdrawal	$300.00
What my brother Owes Me	-$62
Left over Cash	-$35
Total	$898.19

Remember this vacation was funded through extra income I earned at work which totaled about $500. It seems I planned the vacation costs perfectly!

Basically a series of events has made things uncomfortably tight. I should be fine, but having an extra $1,000 or so would make me feel more comfortable.  Here is where I stand:

• $1,830 in cash in bank accounts
• -$1,300 in credit card bills
• -$1,650 in rent due next month

To be fair, I have $2,375 in my bank accounts that aren’t included in the above figures, but it’s not mine. I’ve been trying to not dip into it but it’s obvious I will have to. Income that’s coming in any day now.

• $1,500 paycheck
• $470 FSA reimbursement
• $300 reimbursement #1
• $600 reimbursement #2
• $200 reimbursement #3
• $700 state tax refund
• $260 owed to me from my mom (unexpected)

I should have ~$2,900 cash by the end of next month but with my trip coming up and being out of town, I’m not entirely sure.

I did open up a new credit card with 0% APR for the next 15 months, so that’ll help soften the blow.