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8 years ago · by · 1 comment

Why Buying Health Insurance Across State Lines Won’t Help

I never heard my Great Uncle Reverend McFadden accuse anyone of telling a lie. He would at times inform us that someone that we told a “falsehood.” If you say something that isn’t true it is only a lie or a sin if you know that what you said was not factual when you said it.

In honor of Reverend, I’m not going to call the politicians and others who have created and promulgated this myth liars. They could be stupid and/or uninformed. It actually does sound like a good idea until you think about it a little and do a little arithmetic.

Increasing the competition among private health insurance companies by allowing the companies to compete more easily across state lines could help a little. But it could also be the one of the worst things that you could do to those who need health insurance coverage the most.

There are several reasons why simply increasing the competition among medical insurance companies won’t have the positive impact on health insurance plans that many people think it will. We’ll just cover one in this post.

Let’s say that there are two kids in your neighborhood who are competing to be the kid who gets to buy your groceries for you. Little Bobby wants to charge you $5.00 and little Suzie wants to charge you only 60% of that or $3.00.

If you decide to use Suzie’s services, she will go to the store for you and buy your groceries. How much money will she ask you for? $103. Why? She will be buying $100 worth of groceries for you.

So she’s a little cheaper than Bobby, but not enough to make an impactful difference. If you give them both the same shopping list and they do their buying at the same store, they are both going to cost about the same.

No matter where I buy my health insurance coverage from, I’ll probably visit the same doctor, go to the same pharmacy and use one of the hospitals that is a short drive from my home. Do you get the idea?

The bulk of the costs that matter are going to be the same whether my insurance company is in the State of Connecticut, the State of Wyoming or in Paris, France.

Your share of the cost of your fellow policyholders’ doctors’ services, medicines, hospital stays and other health care costs make up 80 to 90 percent of your monthly health insurance premiums. Most of the rest of the costs are expenses that any business or government agency that provided the same service would also have to pay.

We have been told a falsehood by the individuals we’ve seen interviewed on the news. We have been told that the problem is that insurance companies’ profits are too high and that this is the main reason our policies cost so much.

The next time you hear someone on the news tell you how high an insurance company’s profits are, find out how many people they insure. Then divide the profit figure by that number. Then divide again by 12 to get a good idea as to how much impact their profits have on what you pay for your policy.

(By the way, insurance companies are already competing across state lines and have been for a long time. They just have to get their plans approved by each state insurance department separately. They are many medical insurance companies that sell policies in multiple states a few are in almost all of them.)

A little extra competition could help things a little bit, but not enough to fix our problems.

Unbridled competition would destroy the system. I will explain why in a soon-to-come blog post.

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8 years ago · by · Comments Off on What Is a Deferred Annuity?

What Is a Deferred Annuity?

Annuities are unique insurance vehicles. They are considered life insurance policies, but can act like a typical life insurance policy in reverse.

(You can request information and rates for deferred annuities on this site.)

With a life insurance contract, the insurance company makes more money the longer you live. Since an annuity can pay you an income for the rest of your life, the reverse can be true.

An annuity plan has an accumulation phase and an annuitization phase. During the accumulation phase, you the policy owner, send funds to the insurance company much like you might invest in a mutual fund or add to a savings account.

Depositing money into an annuity can be a safer alternative to investing in stocks or bonds. One of the benefits of an annuity is that it can give you a lot of guarantees. (This is truer for fixed annuities than variable annuities.)

You won’t necessarily have to make regular payments. You can make one lump sum payment or make unscheduled payments over a period of time.

At some point, you may want some or all of your money and interest returned to you. (People typically do this after they have reached retirement age.) Your contract will probably give you several options when it is time to receive your funds. You can receive payments or you can get a lump sum. You can receive the payments over a specific period of time. You can receive a guaranteed amount of money each month for as long as you live. You can also receive interest only and leave your principal intact.

There may be tax advantages of waiting until you have reached retirement age, but you can receive your funds at any time.

If you decide to receive your money over a period of years, your policy will be in the annuitization phase.

What is a deferred annuity? A deferred annuity is an annuity that you put money into, but do not expect to receive any money back from the plan immediately.

This is contrasted with an immediate annuity where an individual deposits a lump sum of money and annuitizes it immediately. Often people will take funds that they have been investing in riskier vehicles and place those funds into an annuity when they are want to receive a steady income.

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8 years ago · by · Comments Off on Health Insurance – Lowering Your Monthly Cost

Health Insurance – Lowering Your Monthly Cost

There are ways to lower your monthly cost for health insurance. Three powerful ways include raising your deductible, shopping for a better price and becoming a better risk.

Your Deductible Matters

Raising your deductible even a small amount may result in a significantly lower premium. Although this strategy means that you will have less coverage, it may result in your having more coverage per dollar spent on medical premiums.

Compare Annual Premiums with Annual Deductibles

When making a decision about raising your deductible, be sure to consider how much you will save per year. Deductibles for health insurance are not monthly they are based on a 12 month period in most cases. To compare apples to apples, you should compare your savings over the same time period.

Shop Around for Medical Insurance

Comparison shopping is always a good idea. You may be able to dramatically reduce your monthly cost for health insurance by getting quotes on websites like this one. However, before making a final decision, be sure that the insurance company is approved by your state’s insurance department and that the policy covers what you need.

Healthier People Pay Less for Health Insurance

One little talked about way to lower your rates for health insurance is to become a better risk. This can mean that you have to do some research.

If, for example, you are in a higher rate category because of your weight it will pay to know what weight you need to be to get into the cheaper category. You may be paying 25% more because of five or ten pounds.

If you have are paying more because of a medical condition that is now resolved, you may be able to reapply and get a lower rate. If you don’t know why you are paying more, you will not know that you should shop around after you have been released by your doctor.

Taking on a little more risk by increasing your deductible can result in your paying much less for your insurance policy. You may also reduce your monthly costs for health insurance by doing some comparison shopping on websites like this one. Becoming healthier can also help you get a better rate. Combining these strategies can result in your monthly cost for medical insurance dropping substantially.

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