As a purchase moves into the several thousand-dollar range, a deeper analysis is required. It might even require an excel spreadsheet or two. This assessment should be at the bedrock of any responsible personal finance philosophy. Frankly, when we are spending thousands of dollars on something, we need to make sure we understand the product or service we are buying.

Unfortunately, this analysis just doesn’t happen with most medical insurance plans when they are provided by our employer. We might briefly flip through the hundred-page document provided by the Human Resources department, but we do not go much deeper than that. We tend to trust that our employer is vetting the purchase on our behalf.

Max is here to change that.

Every single year, I carefully read through the specs of my medical plan to make sure I understand what I am getting. Last year, I noted that I could buy a couple of used cars for what was being paid for my premiums and still have a few thousand dollars left in my pocket. This year, I am sticking to just talking about the specific specs of my plan.

If you want to follow along at home, go grab your summary of benefits and coverage. You have a right to this document per the Affordable Care Act.

Premiums

Premiums are the payments made to have health insurance. A membership fee to be dumped into an actuarially sound country club pool that helps pay down your medical bills.

In 2020, the high-deductible health plan (HDHP) that covers me and Mrs. Max Out of Pocket will run $22,450 for the calendar year 2020. These premiums are split between me and my employer. I will pay approximately 22% of the tab and my employer will pick up the remaining 88%. Here is how the split looks in real dollars:

• Max pays $4,950
• My employer will pay $17,500

2020 Premiums = $22,450

This is a 3.85% increase of about $860 from 2019.

My current employer is the first of my career that shares the full premium information. It is nice to see how much money is really exchanging hands on my behalf behind the scenes.   

Even though it is just me and Mrs. Max OOP, our plan is still considered a “family plan”. There is not an “employee and spouse only” option. In other words, I pay the same amount as an employee who has a spouse and four children.

Most of my previous employers had three separate premium rates depending on the employee’s situation.

• Employee Only
• Employee and Spouse Only
• Family

Health Savings Account Match

It is important to note here that my employer gives $600 of my premiums right back to me to start the year. This $600 is deposited directly into my health savings account and I can use it to pay down out-of-pocket costs throughout the year. Access to an HSA is one of the perks of having a high-deductible health plan.

This deposit hits my health savings account the first pay period of the calendar year.

Here is where it hit my Health Equity account back in January.

Max Out-Of-Pocket

The very next thing I look at is the “out-of-pocket maximum”. Believe it or not, I prefer to call this the max out-of-pocket. That’s what Michiganders call it at least.

In theory, this is the maximum we would have to pay for covered medical services in 2020. I like to think of it as a bucket. Once the bucket is filled up, I no longer need to pay for medical services and my insurance will pick up the full tab for the rest of the year. This, of course, assumes we follow the sometimes-confusing policies and procedures of my plan, including staying in-network.

My plan sets both Mrs. Max OOP and I up with our own individual max out-of-pocket. In other words, we both get our own bucket to fill up. This helps us mitigate risk and is much like the individual deductible concept.

In 2020, our individual max out-of-pocket bucket is $3,300, for a total of $6,600.

The nice thing about having separate buckets is it helps us further mitigate risk. Although our family max out-of-pocket is $6,600, if one of us has a bad accident, the most we would pay is $3,300.

The max out-of-pocket is an accumulation of out-of-pocket costs like deductibles, coinsurances, and co-payments. In other words, you can generally use ANY of your out-of-pocket costs to fill the max out-of-pocket bucket. So, a $100 co-payment here and a $1,000 deductible there can both be dumped into this.  

I tend to consider this the fully weighted “risk” associated with my medical insurance plan. So, between my spouse and I, the most we should have to pay out-of-pocket for medical services in 2020 is $6,600. This is our “health risk”, and it is relatively easy for us to plan for.

Deductible

The deductible is just another bucket. Aside from preventive care, we need to fill this one up before my health insurance starts helping us pay for medical services. In 2020, our family deductible is $3,300.

So, as a family, we are expected to pay the first $3,300 for medical services before our insurance starts paying.

Just like the max out-of-pocket, we each get individual deductible buckets of $1,650. This means if either of us has an issue, our insurance will start paying for our individual services after we pay the first $1,650.

And again, at the risk of being redundant, these deductible buckets are dumped right into our max out-of-pocket bucket.

Coinsurance

Coinsurance is a little more complicated. Once we fill up the deductible bucket, our insurance will start helping us pay for medical services. But there is a catch. They still expect us to pay a portion of the bill until we reach our max out-of-pocket.

In my case, our coinsurance for an in-network provider is 10%.   

The coinsurance is generally the portion of the bill I am expected to pay after I reach my deductible. This is usually based on the rate the insurance company will pay the medical provider for the services provided. We often do not know this rate because these prices are negotiated behind the scenes. If I go to an in-network hospital for a diagnostic lipid panel, they might negotiate that bill to $100. Since my coinsurance is 10%, I would have to pay $10.00 of the $100 negotiated rate. Since I already met my deductible, my insurance will pick up the other $90.00.

$100 negotiated rate X 10% coinsurance = $10.00

Along with my $1,650 deductible, that $10.00 will be dropped into my max out-of-pocket bucket.

Co-Payments

My plan does not have any co-payments for medical services, but it does have them for prescriptions. Co-payments typically go hand in hand with office visits in the clinic or visits to the emergency room.

Co-payments are generally “fixed amounts” that are incurred with each visit regardless of what occurs at the visit. I often see $25 co-payments for office visits and $100 co-payments for visits to the emergency room. Once we meet the max out-of-pocket, we no longer need to worry about co-payments.

We are going to stay out of the prescription realm today, but it is important to note that my plan does cover prescriptions and there are co-payments tied to those transactions.

Final Thoughts

This stuff matters. It is part of your compensation package. Taking a few minutes to understand it makes a difference. You can even throw it all into a nicely organized Excel spreadsheet as I did for your viewing pleasure.

Last year I complained a bit about the cost of this plan. This year, I tried to stick to the specs. I still think the fact that these total premiums cost almost double what it cost for us to put a roof over our heads for the entire year is a bit obnoxious. This also represents 44% of our entire 2019 spending on regular life. There are people out there that make less than this for an entire year of work. But I digress. Ultimately, I am thankful to have health insurance.

The specs of my plan are relatively simple to understand, but unfortunately, that is not always the case. Some plans are extremely confusing, so I tend to focus on my premium liability and total max out-of-pocket for the entire year. This gives me a good feel for my worst-case out-of-pocket risk for the calendar year.

$6,600 (max out-of-pocket) + $4,950 (employee premiums) – $600 H.S.A. match = $10,950

Fortunately, we have not had any medical expenses so far in 2020. Hopefully, we can keep it that way.

What’s the total ticket price for your medical insurance premiums?

*I very lightly rounded my total premium figures in an effort to stay anonymous.

The post 2020 Insurance Premiums – My $22,450 Health Insurance Plan appeared first on Max Out of Pocket.

But I get it. I’m not going to sell any books hyping a 32-hour workweek. It’s just not as sexy as the four-hour workweek. But what if I said this 32-hour workweek came with full-time benefits?

Don’t worry, I’m not selling anything here. Ideas are free here at Max Out of Pocket.

I used to read article after article about people retiring early and having all the flexibility in the world. I was envious. They could travel, sit around on the beach, volunteer, start a business, or just do nothing. Here I was working 60+ hour weeks. I supercharged my savings rate to make their option my reality. I was pretty successful. But did I need to go to all that effort?

As time went on, my view on this started to evolve. What I was really craving was flexibility. I already had enough FU money to decide where I work, where I live, and where I play. I didn’t necessarily need to retire early to prove I could do what I want. Just a few small tweaks provided some of the flexibility I wanted. But could I do better? 

A few months ago, I noticed my employer released an updated policy outlining the requirements to be considered a regular full-time employee. The Human Resources department at my health system got creative and named it the “Employee-Classification” policy. This policy is used to determine benefit eligibility. I was surprised to find out only working 32 hours met the requirements to be considered a full-time employee; a full-time employee with full health benefits.

Is this even more of the flexibility I am looking for?

Max: The Workaholic

I’ll admit it, at times throughout my career, I have struggled with balance. My first job out of college quickly offered “unlimited-overtime”. It was on a high priority travel project in Ohio that one of our clients had me working on. There is not a lot going on in Ohio (unless you count Sandusky), so it is a good place to be in when an “unlimited-overtime” opportunity presents itself. My first job paid an hourly wage that turned into time-and-a-half for overtime. This adds up quickly.

Fortunately, this was also a 100% travel position, so my expenses dropped dramatically for close to a year. Considering I had virtually $0.00 saved at that time, higher income with almost $0.00 expenses was a great combination to have. I also got to live in fancy hotels and became a Marriott Platinum member. Free meals and rental cars also came with the deal. I worked a ton that first year and would not take it back. I enjoyed the work and experience. 

Salary Position – No More Time Clock

When I got exposed to a salary position a few years into my career, the work became much more analytical. I was all in. With the help of a mentor, those skills matured, and my skillset became a much-needed resource. It almost seemed as if there was unlimited value to provide to my organization. I would often work Sunday evenings and late nights when projects demanded it.

Working in healthcare finance, it is often easy to quantify the exact dollar value of efforts. It’s a nice feeling. I probably learned the most in those formative years of my career. I also worked a lot and wouldn’t take it back because I enjoyed the work.    

This has been a common theme. I like to work and work hard on projects I am interested in. But after moving to New England, I became more interested in having the choice of what I work on. That might be skiing, working out, writing a blog, attending a bar, healthcare finance, building a house, or operating a lift at a ski resort. The thing is, working 55-65 hours a week didn’t leave much time to even make a choice.    

Max: Cutting Back

These days I have a much better balance on things.

I eventually went through back-to-back-to-back electronic health records (EHR) implementations. These projects will suck the life out of just about anyone. Although they were a great learning experience, it is usually over a year of planning followed by another six months to a year or more of “stabilization” depending on the system. It got me away from what I wanted to be working on and made me put my “regular work” aside. The last EHR implementation was the first taste I had of working on something that really didn’t interest me. We also had an unexpected death in the family around that time and that certainly didn’t help things or my attitude. 

The 8-Hour Day, a Novel Idea

Since then I have been making a conscious effort to work a more normal schedule. Over the last 9 months or so, I regularly leave work at about 4:30 pm and head to the gym for my weight lifting routine. I usually go into the office between 7:30 am and 8:15 am. My weekly hours have been drifting closer and closer to a normal 40 hour per week schedule. When I first relocated to New England, I was working well over 60 hours a week.

I do not feel bad about the reduced schedule. I am still putting up significant value for my employer and I go all-in for 40 hours. They are reaping the benefits of the sweat equity I developed in those early years.

It seems like I am hitting a sweet spot here. I clearly have plenty of other things I am interested in working on. I am probably approaching the best physical shape of my life. This questionable blog project has been keeping me busy. We squeezed in a trip to Ecuador in late 2019. I even built a $50,000 medical office building portfolio in my free time. But could I take this thing to the next level?

32 Hours Per Week?

One of my hang-ups about taking a sabbatical or even retiring out of healthcare early is medical insurance. My medical insurance is valued at about $22,430 in 2020, up from $21,564 in 2019. I do not want to deal with getting this off the open market or playing the subsidy game if I can help it.

But what if I could retain that “full-time” benefit while working fewer hours. The “Employee-Classification” policy at my current employer allows just that. It says if an employee works a minimum of 32 hours per week, they are considered full-time and get health insurance. The bi-weekly premiums stay the same.

So, someone in my organization working 32 hours per week is getting the same level of healthcare benefits I get from working 40 hours. They also get the same level of benefit when I work for 60 hours. If we do the math, that is a significant benefit.

The employer portion of my premiums is $17,455 in 2020:

$17,455 / 2,080 hours (40-hour workweek) = $8.40 / hour

$17,455 / 1,664 hours (32-hour workweek) = $10.49 / hour

A 32-hour employee is essentially getting paid $2.09 more per hour than a 40-hour employee. This is tax-free since we do not pay Medicare or Social Security taxes on it.

$10.49 hour – $8.40 hour = $2.09

But could I get an approval for a reduced work schedule as a salaried employee? Maybe.

Approval

I like to think I am well-liked in my organization. Thankfully, I have common sense and know-how to play nicely with others. This kind of thing goes a long way. But as a financial professional, do I really think I can get approval for a 32-hour workweek?

It would probably be a tough one to explain, but I think I could likely get this through. I have put my time in and demonstrated I add value. That said, I also do not think it would be something easy for me to reverse once I put it in place, at least in my current position.

I would make the case that in a 32-hour workweek I could get most of my core tasks done and continue to support my department. A lot of my work is analytical tasks that are difficult to cross-train people on so keeping me around 32 hours would be the path of least resistance. We could also transition into this cushy scenario over several months with a slow reduction in hours.

Now, I am technically a salaried employee. But on paper, my “rate” is based on a 40-hour work-week just like anyone else. In order to make this agreement work without having to count hours, I would probably opt to try and work 4 days instead of 5 each week.

I would be willing to take a 20% pay cut to make this a reality. I think that would only be fair for both sides. We already have more money saved than we need, so this really wouldn’t impact our day-to-day standard of living.

Final Thoughts

I usually need to think about these things for about a year before implementing them, so I am not necessarily planning to go this route this week or even in 2020.

There are several projects going on at work that I am really enjoying and I have all the autonomy in the world right now. I also have a ton of paid time off in my bank right now that will give me flexibility.

But I know this policy is there if I need it. If this 32-hour workweek is a trend across the hospital industry, I could probably take advantage of this in other ways. Hospitals are like mini-universities and require a lot of the same type of support staff. I could pivot into a lower stress maintenance or cleaning position and request 32 hours a week. This would open my brain up for other opportunities like the blog, consulting, or freelancing. It would also help me fill up my $572,750 standard deduction bucket.

We will all benefit as organizations continue to get more liberal with their benefit structure. If I was willing to go down to part-time, I could still get health insurance, but it would come with a stiffer premium that would come out of my pocket. That could be an option for phase two of my tiered down early retirement strategy.

Max is all over the board here though. If an interesting project came up at work that required a few 70-hour workweeks, I would probably jump on it, but only if I liked it. It would just have to be interesting and something that was making a difference.

The bottom line is I like to work, but I want to be able to choose what I work on.

How many hours does your company require to capture full-time health insurance benefits?

Max

The post Max Considers a 32-Hour Workweek appeared first on Max Out of Pocket.