by David Bach
You should also make sure your attorney has a copy of your will or trust documents on file. Most do this as a matter of routine, but double-check, just to be sure.
3. Not keeping things up to date
I often meet couples whose wills or trusts were written 20 or 30 years ago and haven’t been revised since. Indeed, I know plenty of couples whose wills still specify who should get custody of their children in the event both parents die—even though the children are now in their forties with children of their own. People at my seminars laugh when I tell them this, but it’s more common than you might think.
As the circumstances of your life change, your will or trust should change along with them. At the very least, make sure your will or trust is updated regularly. This means at least every five years…or anytime something material changes in your life.
One last suggestion: if you have elderly parents, make sure they’ve got a will or trust in place. You’d be surprised how many don’t.
The reality is, if your parents don’t get their act together, you will more than likely end up faced with a big mess. While the idea of initiating a conversation with your parents about wills and such may make you a bit uncomfortable—believe me, it will ultimately be more than worth the trouble.
SAFEGUARD NO. 3
Buy the best health coverage the two of you can afford.
When I originally wrote this book I said, “The U.S. health-care industry is a mess, and it’s probably going to get worse before it gets better.” To say that was an understatement is putting it mildly. It’s almost impossible to update this section of this book right now as our politicians fight about the direction of our healthcare system and the healthcare system is in such flux. The truly sad part about healthcare is that it’s simply not affordable for too many people. And yet we all need medical insurance! This is a life-or-death issue.
Government data on Heathcare.gov shows that the average three-day stay in a hospital can cost about $30,000. On average around the country, the minimum hospital stay is around $1,500 to $2,000 a day, not including the actually treatment you may be receiving or your doctors’ fees. I had a client who was never sick a day in his life suddenly discover he had cancer. He wound up spending $50,000 on chemotherapy in just a few months. Another otherwise healthy client of mine was involved in a car accident. In less than two weeks, he ran up medical bills totaling more than $100,000. In fact, a similar thing happened to me. When I was 15, I got hit by a car while I was riding my moped. It took six surgeries and three months in the hospital, followed by a year of physical therapy, before I was able to walk again. The bills totaled well into six figures.
Fortunately, both my clients and my parents had medical insurance that covered virtually all the costs.
Unfortunately, not everyone is so lucky. According to a recent study by the Kaiser Family Foundation, about 29 million people still lack health insurance. This is frightening.
So no debating here. You must have health insurance. Furthermore, as of now under the Affordable Care Act (ACA), most Americans are required to have some form of health coverage or pay a tax penalty. The only questions in your mind should be how do you get it and what are your options.
Most couples fall into one of two categories. Either you’re covered by an employer-provided healthcare plan or you’re not—in which case the two of you will need to do some research and find a plan on your own. This process today is done through an insurance broker or through the ACA healthcare portal at www.healthcare.gov. I would start by going to www.healthcare.gov and checking the open enrollment dates. From that website you will ultimately link to the website for your state. Depending on your state, you should also have links to the type of financial assistance you may qualify for. In most cases you can complete the application online, or you can do it by phone or even in person. This may sound scary and difficult, and each state continues to work to make it easier. The health plans now come in four tiers: Bronze, Silver, Gold, and Platinum. According to a recent USA Today article, 70 percent of participants have chosen the Silver tier health plan.
My advice about health insurance hasn’t changed with this update. When it comes to choosing a plan, I still recommend you purchase the best insurance you can afford. My caveat today, however, is that you make sure the plan you buy is NOT a plan that you can barely afford, because when rates go up you may simply not be able to afford it.
If individual coverage turns out to be too expensive for you, you may be able to get a group rate through a professional organization or association. You might even check with your church or synagogue.
If you happen to have corporate medical coverage, don’t think that lets you off the hook. In the end, every couple—even if they are covered by their employer—has to make some basic decisions about healthcare insurance for themselves.
With that in mind, let’s take a little time to go over the basics of the most commonly available types of coverage. Frankly, it’s quite confusing.
WHAT A SMART COUPLE NEEDS TO KNOW ABOUT HEALTH INSURANCE
Today’s plans come with a variety of “letters”—a.k.a. “HMO, PPO, EPO, POS.” There are basically two types of health-insurance programs to choose from these days: fee-for-service plans and managed care. Fee for service allows patients the kind of healthcare most of us grew up with. Unfortunately, because of the cost, fewer and fewer companies are offering it to their employees. Managed care is less expensive and, as a result, far more popular.
FEE-FOR-SERVICE PLANS
These are referred to as FFS plans. Once upon a time, most Americans had a family doctor whom they really knew and who really knew them. They went to this doctor whenever something was wrong with them, and if that something turned out to be especially complicated or obscure, the family doctor would refer them to a specialist.
Under a fee-for-service plan (also known as an indemnity plan), you can still be treated this way. You can continue to see the same family doctor, whether or not he or she is part of any program. You can switch physicians anytime you’d like, without needing anyone’s permission. If you want to see a particular specialist, you go to that particular specialist. Once you’ve paid the deductible, the plan typically pays 80 percent of your bill up to an annual cap.
There is, of course, a catch. The premiums for these sorts of policies are expensive—so expensive in fact that fewer than one out of every five companies is still willing to offer fee-for-service or indemnity coverage to their employees.
Despite the cost, if your employer happens to be one of the few who still offers the option of electing an indemnity or fee-for-service plan, I would urge you to consider it seriously. Yes, it will probably be the most expensive plan you can choose, but it’s also bound to be the most flexible one, providing you with the most freedom and the most choices. Personally, when it comes to my healthcare, I like having the freedom to choose. It’s highly unlikely this will be the type of plan you consider today because it’s more than likely not an option.
MANAGED CARE
Because of their lower cost, most employers—not to mention most self-employed people—prefer managed-care plans these days. Managed care comes in four basic forms: through health maintenance organizations (HMOs), through preferred-provider organizations (PPOs), through exclusive provider organizations (EPOs), and through point-of-service (POS) plans.
HMO COVERAGE
A health maintenance organization is, in effect, a group of healthcare providers who have joined together to provide comprehensive healthcare coverage for subscribers. HMOs are generally the oldest managed-care systems around. They are also among the most restrictive.
When you sign up with an HMO, you are given a list of doctors from which you must select a “primary-care physician.” Otherwise known as a “gatekeeper,” this doctor is the one you must see whenever you have a medical problem, regardless of what the problem might be. In other words, if you wake up one morning and notice a spot on your leg, you can’t go directly to your
dermatologist. You have to make an appointment with your gatekeeper first. If it turns out you need to see a specialist, the gatekeeper will refer you to one within the HMO. If for some reason you want to see a specialist who’s not part of your HMO, too bad. The visit will not be covered.
The good news about HMOs is that they are less expensive. Chances are they’ll be the cheapest healthcare option your employer offers. In most cases, you’ll have to make a $10 to $50 copayment when you visit your primary-care physician. The same is generally true for prescription drugs; indeed, some HMOs don’t make you pay anything for drugs.
HMOs vary widely in cost and quality of service. Some people love their HMOs and will tell you they are the only way to go because they are so affordable and easy to use. Others will complain bitterly about not being able to see the doctors they want or get the treatment they feel they need. All things being equal, I’d spend more money and consider the next two options.
PPO COVERAGE
A preferred-provider organization usually consists of a group of individual physicians, medical practices, and hospitals that have joined together in a loose coalition to create a “group network.” In some ways, PPOs look and feel a lot like HMOs, but there are some distinct differences that I think make the PPO approach much better. For one thing, PPOs may not require you to have a gatekeeper. You still have a primary-care physician, but if you want to see a specialist, you can go on your own without a referral. Also, you can use a specialist who’s not a member of your PPO’s group network and the PPO will still cover at least part of the bill.
Not surprisingly, all this flexibility comes at a price—literally. PPOs are more expensive than HMOs. Their premiums are slightly higher, the copayment will be higher, and some PPOs require you to pay an annual out-of-pocket deductible of from $250 to $500, or even $1,000 or more before their coverage kicks in. But, again, the costs depend on the deductible and tier you select—they could be much higher.
EPO COVERAGE
Exclusive provider organizations are a lot like HMOs; they generally DO NOT provide out-of-network coverage. There has been a lot of controversy over these plans; class action lawsuits have claimed the EPOs did not clearly disclose that people were signing up for an EPO and instead thought they were getting a PPO. Be very careful about these before you go forward—get the clear facts. The fees cover a wide range based on the plan level and deductible.
POS COVERAGE
Point-of-service plans are becoming increasingly popular, probably because they offer subscribers the widest array of choices of any managed-care plan. Combining features from both HMOs and PPOs, the POS plan allows you either to stay within the plan’s network of doctors (thus saving money) or to elect to go outside, in which case you have to pay a deductible (as with a PPO). This is often referred to as “hybrid” plan because it’s a combination of an HMO and a PPO.
CONCIERGE MEDICINE
This is a new type of medical service, more expensive, with higher-touch service. According to MarketWatch, this type of medical care practice has grown sixfold in recent years, and there are now over 4,400 nationwide. The doctor or medical practice typically charges annually between $2,000 and $5,000, depending on the practice, service, and city in which it is located. The big draw is that you can get an appointment with these doctors quickly, and some will even come to your home. Some of the doctors or medical practices accept insurance and some do not. There are also new medical practices that are a more affordable version of concierge services. I recently joined a new practice in New York City called One Medical (www.onemedical.com); membership costs $199 a year (on top of my insurance, which allows me to use them). This company is currently in eight major cities and the number is growing. My most recent experience with my doctor blew me away. I was able to get a next-day appointment (which is amazing considering that the average time it takes to book a doctor, according to New York Times, is now 29 days), and the doctor spent an hour with me just going over my routine bloodwork. This doctor, with 30 years of experience, really took the time to review the results of my physical and make suggestions. With One Medical, everything is now done online with an app—also a vast improvement over my previous doctor. Many medical practices are becoming available in the twenty-first century that are on the cutting edge of service and technology. If you don’t have one now, it may be time to take a look.
HOW DO WE CHOOSE WHICH PLAN IS BEST FOR US?
I used to recommend that you select the the most expensive choice. I said this because in almost every case the most expensive choice will provide you with the most options, and when it comes to your healthcare you want to try to cover all the bases.
I said that I used to recommend the most expensive option. Today, with health insurance costing literally two to three times more than it did 20 years ago, I can’t make a recommendation as simple as advising that you select the most expensive choice with the most options. I realize you may barely be able to afford what you have now. You are going to need to really look into your plan options. If you change providers can you continue to see your current doctors? If not, are you comfortable with the new plan’s doctor and hospital options? Does it cover your drug needs? What does the plan cover? How big is the deductible? Can you afford the deductible? And, most important, can you ultimately afford the plan you just selected?
If both of you happen to have corporate coverage, I’d suggest that you compare plans. One of them may be noticeably better than the other, in which case you may want to cancel the lesser plan and use the superior one to cover both of you. Over the long run, doubling up on one good plan may be cheaper than being on two separate ones. Don’t do this, however, if the partner with the good coverage is at all likely to change jobs in the near future! In many cases it makes sense to have two separate health care plans to protect you in case one of you loses your job or decides to leave.
IF YOU’RE PLANNING TO HAVE CHILDREN…
Needless to say, couples who are thinking about having children should make sure they choose a medical plan that offers first-rate maternity coverage. If the two of you are planning to have a baby in the next year or two, call your company’s benefits department and ask them which plan they recommend for prospective parents. If they won’t give you any guidance, ask any coworkers you know who have had children.
In addition, it’s always a good idea to contact the healthcare providers directly. A really smart strategy is to select your medical plan after you select your doctor and your hospital. First, find the doctor and hospital you want. Then ask them which plans cover their services. Hopefully, you’ll be able to sign up for one of these plans.
WHAT ABOUT SELF-EMPLOYED PEOPLE?
If one of you works for a company that offers healthcare coverage, your problem may be solved—simply go on your partner’s plan. If the two of you aren’t married, you’ll obviously need to make sure the program covers domestic partnerships. Happily, an increasing number of companies are starting to do this.
With that said, many entrepreneurs belong to professional organizations, and many of these offer group plans at bundled group rates. If you don’t belong to such a group, why not consider joining one? Beyond that, you can always ask an independent insurance professional about getting coverage. Or you can go online and do your own research. The following websites are a good place to start.
e-Insure Services, Inc.
(855) 372–7400
www.einsurance.com
Insure.com
http://www.insure.com/
eHealthInsurance.com
(844) 839–4346
www.ehealthinsurance.com
Health Insurance
(844) 337–4826
www.healthInsurance.org
Freelancers Union
www.freelancersunion.org
SAFEGUARD NO. 4
Protect those who depend on you with life insurance.
Most people hate to talk about life insurance, but if you’ve got anyone in your life who coun
ts on you for financial support, then you need to have some sort of protection plan in place in case something happens to you. And that’s all life insurance is—a protection plan. When you die, the person (or people) whom you’ve designated as your beneficiary will get a lump-sum cash payment known as a death benefit. Certainly, there’s no law that says when you die you have to leave someone else wealthy. But if there are people who depend on you—such as children or a nonworking significant other—you have a responsibility not to leave them in a world of financial pain.
SOME UNFORTUNATE STATISTICS
As a man, I hate to address this but the reality of life is that women tend to outlive us (on average, women live seven years longer than men). Combine this with the fact that women also tend to marry men older than they are and what results are some scary statistics. For one thing, the average age of widowhood is now 57 and 75 percent of married women will ultimately be widowed.
All this is sad enough. Even worse, however, is to see a widow who thought her husband was insured—only to find out later (after it was too late) that he wasn’t or that he didn’t have enough coverage. Since the original version of this book came out I have received many heartfelt letters from widows who have thanked me for this one section of the book. Jessica wrote to me and said, “David, thank you for Smart Couples Finish Rich—your book turned out to be a true blessing to me at the worst possible time in my family’s life. My husband, Reed, and I read your book together; the one thing we got done immediately after reading it was to buy a term insurance policy. We were only in our 40s but your book pointed out the importance of protecting our family. Reed was killed in a car accident last month. Were it not for your book and our taking out this term policy, my two kids and I would be homeless by the end of the year. Instead, we now have no mortgage and enough money for me to be a full-time mom and raise them. College will also be covered thanks to the amount of insurance we took out. Thank you!”