E224- Knowing Your Benefits

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Introduction

Denis O’Brien [0:37]
Welcome to Episode 224. Knowing Your Benefits. Hey money clan, a warm welcome to the Chain of Wealth podcast. I’m your host, Denis O’Brien.

Katie Welsh [0:48]
and I’m Katie Welsh.

Denis O’Brien [0:49]
So Katie, today I’d love to dive into benefits.

Katie Welsh [0:55]
Like what kind of benefits?

Denis O’Brien [0:56]
So talking about, like from a work perspective. Right now it’s open enrollment. And, you know, like, I think that knowing what your paying for is really important and you know, like you can save a bit of money at it if you choose a plan that’s right for you.

Katie Welsh [1:13]
Yeah, definitely. And making sure that you are properly medically covered, I think is such an important thing that people always think that they have a grasp on or they think I’ll get to it later.

Denis O’Brien [1:28]
Yeah, it’s super easy to just over look it and like we said anything when it comes to money, you know, like, the sooner you get a hold on it, the better off you are.

Katie Welsh [1:28]
Yeah.

Denis O’Brien [1:37]
Cool. Well right before we dive into today’s show, if you guys haven’t already, we’d love to hear. Do you know what you’re doing with your benefits? Hit us up. It’s @chainofwealth on Instagram. Alright Kate you ready to dive on in.

Katie Welsh [1:50]
Yeah,

Denis O’Brien [1:50]
Fantastic. Let’s do it.

The Episode

Denis O’Brien [2:9]
Alright Kate so diving right in and chatting about benefits and you know what exactly stuff is. So let’s talk about the big one. And that’s really the health plans.

Katie Welsh [2:16]
Okay.

Denis O’Brien [2:17]
So I’ll talk about our employer. So my employer offers three different plans and it’s the High Deductible Health Savings Plan, the normal like sort of entry level insurance for health. And then there’s also the buy up plan, which is sort of like the, you know, the more expensive one that has a lower deductible.

Katie Welsh [2:39]
Okay,

Denis O’Brien [2:39]
So when it comes to medical, there are a whole bunch of different plans available and really knowing and understanding the plans can have a massive impact on how much do you pay each month and what’s covered.

Katie Welsh [2:53]
Right. So, like you said earlier, open enrollment just passed for us and since we have been married, we decided to go on to your insurance plan because the benefits offered at your job are a little bit better than what my company offers me. So in the long run switching over to yours was more cost effective and like the benefits were better. So that was one perk, you know, not that, you know, loving each other and everything isn’t enough, but that was a perk of getting married. So we really went through and I say Den this is the first time we really went through probably because we just did join medical plans together and we looked at all of our options and really weighed in each other. And we saw that changing our plan from like, the middle of the road plan, the core plan that, you know, a lot of times I feel like people will take that plan if they’re not super sure what they’re doing. It’s a lot of like young professionals. And I know I need to have insurance. I’m not super sure which insurance to get.

Denis O’Brien [4:6]
Yeah, so I’m just going to get the sort of middle ground one that seems to fit everyone but isn’t necessarily the right plan that you should be on for where you are in your life.

Katie Welsh [4:15]
Right. And I think, you know, when you’re starting out, just even getting your footing, I think that’s perfectly fine. But, you know, you and I were, you know, married, we’re in our 30s. We’re trying to really map stuff out. Now,

Denis O’Brien [4:27]
Right,

Katie Welsh [4:28]
Um we have been fortunate enough with the podcast that we’ve talked to a lot of people about the retirement plan. And one of the reasons I asked that question in the value link round to so many people, is because I’m curious to know like, what are other people who are really successful and they know what they’re doing. What are you doing? Because sometimes I don’t know. And when we first started the podcast, I really didn’t know. So it was more of like, a nosy kind of question for me because I wanted to learn and I was curious. And we’ve talked to so many people who have talked about the HSA or the Health Savings Account, being a big part of their retirement plan. And after hearing about it over and over and over and over again, it became more credible in my brain. And then we started doing a lot of research about it. And now we have decided to change our medical plan from you know, the basic, you know, entry one in to the high deductible ones so that we can start our HSA.

Denis O’Brien [6:15]
Yeah Kate, so just a couple of things like generally when it comes to health insurance. There’s a whole bunch of terms which sort of gets thrown around, you know, and these terms of stuff such as your copay or coinsurance your deductible, and your out of pocket maximums.

Katie Welsh [5:50]
Yeah, like what does all that mean?

Denis O’Brien [5:52]
Kate like there’s a lot going on but like, just real quick so your copayment is typically the amount that you pay to see someone so it might be to see your primary care physician, you know, and depending on like, once again what plan you’re on that amount may vary if you’re on that sort of like medium plan, like I think ours is about $30 to actually go and see someone.

Katie Welsh [6:15]
Like a regular doctor not a specialist.

Denis O’Brien [6:17]
Right yeah. So like if you need to go to see someone like say you at a CVS, you see walk in clinic there, you’re going to pay your 30 bucks, and your health insurance provider will sort of cover the rest of that. So that’s one thing. What you then have is coinsurance.

Katie Welsh [6:33]
Now, can you explain that to me because I don’t think I’ve ever even heard of coinsurance actually.

Denis O’Brien [6:40]
Yes, sir coinsurance is more wants you to have if maybe your copay doesn’t apply for a particular category. So maybe as an example, you have to reach your deductible first. And once you’ve made your deductible, you’ll see certain things then kick in, right? So your coinsurance is typically a percentage of the total medical bill that you will be liable for. So as an example, your insurance may say to you, all right, well, you will be liable for 20% coinsurance once you’ve met your deductible.

Katie Welsh [7:17]
So I have a question for you. And I’m not sure if you’re gonna know the answer for that.

Denis O’Brien [7:21]
Yeah.

Katie Welsh [7:22]
So a few times we have gone to the dentist and I feel like this happens the most when we go to the dentist and I know dental insurance is not the same as health insurance. I might be completely off wrong here. Yeah, but whenever we go to the dentist, she always says, Oh, no, you’re fine. Go ahead and go. And we’re just like they look but like, isn’t there’s like something that we’re supposed to pay Right and she always says, Oh, no, no, I just charge it to your insurance. And then if you owe us anything, then we’ll send you a bill in the mail right. Yes, is that coinsurance? Like an example of it.

Denis O’Brien [7:59]
No, so coinsurance is like a typically a percentage that you’d pay. But coinsurance could also be at zero percent. Okay. So in some cases, that may be a case of you pay to have your insurance, and it’s at zero percent of to whatever level but once again, like dental is a little bit different from health, so it would be slightly difference. Okay. Yeah, but a long story short, it’s basically just a percentage that you will pay. That’s kind of like once you’ve hit your deductible, so typically your deductible will be the amount that you owe for health care until your insurance starts paying. So as an example, on our, on our H, one on our high deductible plan, we have to basically spend, I think it’s $2,000 $1,000. We cover the first, let’s say 2000, we cover the first $2,000 before the regular insurance like kicks in. Okay, right. So, in other words, if you go to the doctor and it’s $400, you’re liable for $400. But the next time you go say it’s another $400, you know, up to $800. So once you’ve hit your deductible, it then kicks in. So the idea is that you might not even hit your deductible in a year. So say, for example, that two grand over a whole year, if you only go to the doctor one time and you spend $400, that’s all you’re going to pay.

Katie Welsh [9:32]
I’m glad you brought that up because I want to touch on that because they offer different health plans because something is going to work for everybody. What works for you won’t always work for your best friend and won’t work for the person who works down the hall from you. Right? It depends like, are you somebody who goes to the doctor often maybe you suffer from allergies or you need to go to the doctor regularly for something, your plan is going to look different from a plan of somebody who maybe never goes to the doctor, maybe they don’t get sick very often. Or maybe I know a lot of people really just avoid going to the doctor at all costs unless they are like dying. So it really depends on your usage is I think what people need to keep in mind.

Denis O’Brien [10:23]
Yeah Kate. And I totally agree and, you know, it has such a major impact on how much you end up paying. And, you know, we we kind of reviewed our usage in the last year, and we barely even used our plans, you know, and that’s really what made us want to change is that we looked at it and we were like, well, we’re not really using it. And look, to be honest health insurance is expensive, you know, and my employer was kind enough to sort of do a quick calculation, you know, if you were on the family plan under the Health Savings Account versus the regular insurance, and it’s like $4,000 a year, right. And that’s a lot of money. So, I think like, what, what I really wanted to get to was, you know, when it comes to the high deductible plans, at one point, a lot of people are very skeptical of them, but they’ve come a lot more common and a lot of employers actually have started offering them right after the break and say thanks to our sponsors. We can dive all into the HSA accounts and really just chat a little bit about that. Okay, so, on that note, let’s take a very quick break.

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Value Link Round

Denis O’Brien [12:25]
Alright Kate. So chatting about the HSA account. So the HSA account is a health savings account. Now this type of savings account is basically like a bank account right.

Katie Welsh [12:37]
Yeah. So let’s pause for a minute and explain a little bit more of what an HSA is Den in case somebody doesn’t know.

Denis O’Brien [12:46]
Well, yeah, it’s effectively just a bank account right. And what this bank account is, it’s typically opened and it’s sort of this tax advantaged savings account that you can start putting money into. So for my employer, Kate and I pay our regular insurance, which is significantly cheaper now, because we’re under the

Katie Welsh [13:6]
now that we changed our plan.

Denis O’Brien [13:7]
On the high deductible plan. It’s significantly cheaper. But the idea is that you use this HSA account to start saving up money in case you need to pay for stuff

Katie Welsh [13:18]
Like something major, like a major operation that insurance won’t cover all of it. Or Heaven forbid one of us gets like terminally ill, or something like that.

Denis O’Brien [13:28]
Yeah, that’s exactly it Kate. And you know what the thing is, is that the Health Savings Account is really the idea that you stop putting money into it and you don’t lose that which is very important.

Katie Welsh [13:39]
And it moves with you.

Denis O’Brien [13:40]
Exactly. So the HSA account is different to an FSA account.

Katie Welsh [13:46]
Which is a flexible spending account

Denis O’Brien [13:48]
Correct. Now, that’s also good for medical expenses. However, here’s the kicker, you can only roll of $500 from year to year. So if you don’t spend like say you contributed $1,000 to it and a given period, you will lose $500. If you didn’t spend it.

Katie Welsh [14:7]
That’s a bummer.

Denis O’Brien [14:8]
And you can only really use that account if you’re not on a high deductible plan. So effectively, if you’re on a high deductible plan, you want to have an HSA, you can have an FSA as well. But if you have an FSA, you can’t really use it for typical medical expenditure. It will typically go towards your vision, or your dental

Katie Welsh [14:28]
Or I also want to say like a perscription.

Denis O’Brien [14:32]
Yeah or prescription.

Katie Welsh [14:33]
Yes.

Denis O’Brien [14:34]
But now the HSA account is tax advantaged and now Kate here’s why people really love this account, is it’s tax free. So in other words, if I get paid $100 a year, and I contribute a $10, that $10 is totally tax free. So that $10 goes straight into there. I’m already taxed on $90 of taxable income instead of 100 instead of 100.

Katie Welsh [14:55]
And that’s huge when you start talking about a year’s worth of salary.

Denis O’Brien [14:59]
Exactly. Yeah. Like, let’s take that example. $4,000 The difference between the two plans, if you were to take that $4,000 and rather put it into an HSA account, number one, like that’s tax free money, and I think that’s cool. It grows tax free as well. And it can be used to like be invested in like, you basically grow it and it never runs out as such. So from year to year rolls over 100% and it’s a bank account and your name, so even if you change employers or you lose your health insurance or something, it’s still yours, you own that money, so What a lot of people started doing is saving up a significant amount of money in their HSA account because it’s tax advantaged. So when these medical expenses come up in later life, which they will they have this nice cushion that they can start drawing off.

Katie Welsh [15:46]
Yeah, I think it’s not a case of if something happens to me or a immediate family member, it’s more of a case of when. And then the other thing that I really liked about this was it’s not just like, Oh, I have, you know, the flu and I need to go to the doctor, right? Or, oh, you know, I’m really, really sick and I need to spend time in the hospital. I like to think of it as if you need to go to a doctor for anything. If you’re going to anybody called a doctor. Yes. You know, health doctor, a dentist, an eye doctor a orthodontist, mental health. I think everybody can can agree like that is a huge new thing and lots of people, you know, are really focusing on mental health. And you can honestly use it towards that as well because your mental health is as important as like your heart health and your blood health and everything like that. So you can use it varying across a whole bunch of things.

Denis O’Brien [16:51]
Yeah. So another thing Kate is, depending on your employer, they could also contribute to your HSA as well. So we’re fortunate in that my employer contributes $1200 a year for us.

Katie Welsh [17:4]
Man your Job is so good!

Denis O’Brien [17:6]
Which is a nice look, it’s a nice benefit to have, but we are still paying for you to be on that plan. If it was just me that was on this high deductible plan. I wouldn’t actually be paying anything for my insurance, which is really an interesting concept that they can kind of offer free health insurance.

Katie Welsh [17:23]
You’re welcome. Yeah, I tell you, you wouldn’t get it for free.

Denis O’Brien [19:0]
No definitely not for two people. But uh, yeah, so one thing I want to just call out is even though like say for example, I could have had it for free. That doesn’t mean you shouldn’t be contributing to HSA account. So the way I like to think of it is you get what you pay for. And if you aren’t really paying for your health insurance, you are probably gambling a little bit and you’re probably you could be paying out of pocket. If something does go wrong.

Katie Welsh [17:53]
That is so scary to me.

Denis O’Brien [17:55]
It totally is. The benefit of an HSA account, is you’re able to cushion money away that you can use for future expenses. And so the way that we rationalize that was, yes, we’re changing plans, but instead of going cheaper, and like just saying, Okay, well, we’re now saving four grand a year. We’re taking that money, and we’re putting it into our HSA. So we’re effectively spending the same amount of money that we would have. However, now we’re in a position better way we have this account, but we’re starting to save money into instead of just paying money to the insurance company.

Katie Welsh [18:30]
Right. So and The great thing about this and we touched on our new budgeting tool Tiller, a couple of episodes ago, and this is, you know, straight from our heart, like we’re not getting endorsed or anything for talking about Tiller is that we are able to link the HSA account straight into our Tiller, so then we can keep track of all the money that we’re, you know, also saving up into that account as well. So it’s really made it so streamlined. It’s incredible.

Denis O’Brien [19:0]
Yeah, definitely. And you know Kate at the end of the day, you want to have control of your money. And when it comes to health, you need to be choosing the plan that’s right for you. And I know open enrollment typically only happens like once a year or with a major life event or, you know, if you may be starting a new job or something, but you really want to know your benefits when you do sign up and try understand it. And I know it’s something that’s very easy to sort of glaze over background and Kate to be honest, I’ve been so guilty of this meeting. I’m like, Oh, I got benefits. Great. What plan do most people go for great. I’m just gonna pick that Yeah, without really doing the research, and you know, having been the personal finance space, HSA seem to be all the rage right now. And I think there’s a good reason for it in that if you know, it’s heavily rely on medical from year to year, it’s a great way to save up a lot of money that can be helpful to in future years, right. And look you can always change plans later and you will still have that money available to you that you did save up. Right. So it’s kind of like stashing money away and we know how we like to stash money away. Yeah, I think that’s basically all we have time for this episode. Unless you want to close on anything.

Katie Welsh [20:4]
No, I think we’ve touched on all the big things.

Denis O’Brien [20:7]
Fantastic. Well, we’ll catch you guys next time on another episode of Chain of Wealth.

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