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NOV
02
The Value of (Employer Subsidized) Health Insurance

I am going to tell you a story. A story about my own personal experience with open market health insurance, as it relates to my son, who was born on July 20, 2015. My goal here is not to bemoan how much my wife's pregnancy cost us, nor to make a comment on the validity of Obamacare, but rather to emphasize the value of employer-paid health insurance as part of an overall compensation package.

Like most of the country, I had employer subsidized health insurance for the much of my professional life. And, like most of the country, I didn't pay that much attention to the benefits, and the real costs associated with what I was being offered. I focused only on cost to me, and the out of pocket costs I would have to bear. As a young family, we never really had significant medical bills, so, I am embarrassed to admit, I was largely naive about what my benefits were costing someone else, and how fortunate I was to have the insurance that I did.

When I opened my practice, all of that changed. Sure, I knew, philosophically, that it would cost more, but never imagined how much more, nor how much more my out of pocket expenses were. So that brings me to the financial story of my wife's pregnancy.

Let's start with the basics. Since I am self-employed, I am one of the millions of Americans who purchase their health insurance on the open market, through the Federal Marketplace. Because our household income is higher than $79,160 (this number varies from state to state) we receive no federal subsidy to offset the cost of the insurance itself, or the out of pocket expenses that come along with the various plans. So technically, we are not purchasing insurance ON the exchange, just through it, since we don't qualify.

I looked at a number of carriers. Because of our need to do in-vitro fertilization, there were not many options that would help us offset the tremendous costs associated with that procedure. While New Jersey, where we live, has a state mandate that requires plans to cover IVF, it only applies to group plans of 50 or more employees. For the time being I am going to leave out those costs, because I recognize that not everybody has to go through it. Though I am happy to discuss that with anyone reading this article...just ask.

So, when shopping for insurance you basically have four options; Bronze, Silver, Gold and Platinum. These options do not change WHAT is covered...just how much you share in the cost. So for example, in a bronze plan, you will have a lower premium, but will pay a higher share of medical costs actually incurred during the year (usually 50%). In a platinum plan, you will have a higher premium, but will have lower out of pocket costs (usually 10% of medical costs incurred). All plans have a deductible and out of pocket maximum, which are also factors to consider. After significant research, we opted for a bronze plan because it was more cost effective to pay for services rendered, as opposed to paying for services we did not know if we would use. Our premium for this bronze plan, for a family of three, was $919. (went up to more than $1,100 per month after our son was born). That's right. The low-end plan was more than $11,000.

Now that we paid our entry fee, let's talk about sharing costs. The first $5,000 of our expenses were our responsibility, as a deductible. After that, we paid 50% up to $12,900 at which point we were done paying for the year.

So now the details. Let's start with ultrasounds, of which there can be many. While conventional wisdom would say that these are all covered under prenatal benefits, they are not. One secret that the insurance company didn't want us to know is that ultrasounds are billed as radiology, and therefore are not covered at 100% like most prenatal benefits, but at a lower percentage after deductible. While for many this would go unnoticed, it doesn't when you pay your own health insurance. In total, we paid more than $3,300 out of pocket just for ultrasounds.

And then came the false alarm. Like so many couples preparing to be parents, we paid a visit to the hospital about a month before our son was born. They monitored my wife overnight, and sent us home to wait out the remaining term of our pregnancy.  Well that little visit cost us $1,339.

Then, the day we had been waiting for came. Our son was born on July 20th, a healthy, happy little boy brought into a family that couldn't wait to meet him. But of course, there were plenty of people that needed to be paid for their services (and rightfully, we had a wonderful experience at the hospital). Between the doctors, the hospital, the anesthesia for the c-section, the neonatal doctor required by law to be in the room, and other medical services, the delivery cost us over $5,300.

All told, this pregnancy cost us $10,450 out of pocket, on top of the more than $11,000 we paid in insurance premiums during that time. Like I said at the outset of this article, I am not bemoaning the cost. The truth is that we would have paid any amount of money to bring our son into this world. But this is the reality for those of us who own small businesses or work for in companies that do not pay for health insurance.

For those who have employer subsidized insurance, cherish it. Your costs are not only lower, but your coverage and out of pocket expenses are a fraction of what it costs for those who do not. Depending on the industry you work in, and the benefits that your employer provides, the value of this benefit can be a significant portion your total compensation package. In today's world, it should absolutely be a consideration when you make career moves or transitions.

The cost differences are staggering. Below, I compared three middle class households, each with income of $140,000 (the upper band of middle class in New Jersey, according to Business Insider). One, where the primary source of income is a small business. Another, with two incomes, one of which from a teacher, and a third, with income coming from the corporate sector. These are real experiences from real people.

 

 

Small Business Owner

Educator Income

Corporate Sector

Premium Cost*

$11,037

(7.9% of household income)

$3,960

(2.8% of household income)

$4,800

(3.4% of household income)

Out of Pocket Cost of Pregnancy**

$10,450

(7.5% of household income)

$5

(0% of household income)

$365

(0.3% of household income)

Tax Savings***

$3,537

(2.5% of household income)

$990

$1,200

Net Cost of Pregnancy

$17,950

(12.8% of household income)

$2,975

(2.1% of household income)

$3,965

(2.8% of household income)

Real Value of Employer Benefit****

N/A

$13,011.50

$12,071.50

* Based on family rate for each participant.

** Based on actual experiences of three separate households

*** Based on 2015 tax brackets, assuming no other deductions. Actual tax savings can only be calculated by a qualified tax professional and on an individual basis.

****Difference in assumed take-home income based on 2015 tax brackets. Actual take home pay is based on individual circumstances and deductions.

 

Now, let me be clear. There is no amount of money that would not have been worth it in order to bring my son into this world. I would do it again in a heartbeat. That is not what this is about. It is about my own ignorance and what I have learned, now that I pay 100% of the premium bill, and see every bill we get for medical services rendered. This is just one example of one benefit of health insurance. And in all cases, pales in comparison to what the insurance company actually paid for each of the three examples.

 

As we stand at the beginning of open enrollment of the Federal Marketplace, and millions of people begin to look at their health insurance options for 2016, let us all remember that there is a lot more to the story than the premium. Understanding your benefits, what your costs are, and the value of what your employer provides (even if it is less than they used to) are critical to making the most informed decisions about not only your insurance, but your professional life in total.

 

If you have questions about your health insurance or what is available to you, please do not hesitate to reach out. It is something to be taken very seriously.

 

Sources

http://www.businessinsider.com/middle-class-in-every-us-state-2015-4

http://www.irs.com/articles/2015-federal-tax-rates-personal-exemptions-and-standard-deductions



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 Securities offered through American Portfolios Financial Services, Inc. Member FINRA/SIPC (FINRA/SIPC). American Portfolios Financial Services, Inc. and American Portfolios Advisors, Inc. are not affiliated with any other named business entities mentioned.

This communication is strictly intended for individuals residing in the state(s) of CA, CO, CT, FL, IL, KY, MA, MD, NJ, NY, PA and VA. No offers may be made or accepted from any resident outside the specific states referenced.
 


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