All articles, tagged with “inconsequential activism”

We just finished another open enrollment period at work. It is always stressful for me to be forced to lock in a health insurance selection for another 12 months. This is one of the most high risk and complicated decisions I make every year; there are loads of options, lots of trade-offs, and thousands of dollars at stake. All that is ignoring that my family’s physical well-being is directly impacted and there is a potential for life-and-death consequences. Perhaps I am a bit of a worrier.

As in years past, I built a spreadsheet model of all of the options and played with various tragic scenarios of how much it would cost me if my family went to the hospital X times. And as in years past, an HDHP + HSA comes out as the cheapest plan regardless of the variables I use.

A High Deductible Health Plan or HDHP is a plan that is meant to put the consumer in control of his or her health spending. The general features of an HDHP are mandated by law and don’t vary much, so I won’t go into great detail. Simply put:

• Preventive care is completely paid for,
• Nothing else is covered until an annual deductible is met,
• At which point everything is covered.

So I am responsible for covering the majority of my family’s health care needs out of my own pocket. However, I pay significantly lower health insurance premiums. This means:

• Less money to insurance,
• More money for my family,
• More flexibility in when we incur costs which fits our variable income,
• And more of a say in what type of medical care I receive.

HDHP’s are usually paired with a Health Savings Account or HSA. This is a special bank account where I can put pre-tax money to grow tax-free. I can only use the contents of the account on medical expenses for my family, but (unlike a Flex Spend Account) the money will always be mine and I can use it even if I go back to a traditional health insurance plan at some point in the future.

An HDHP + HSA has been a winning combination for our family. However, I have found that the features of an HSA vary widely so it takes some caution in selecting your financial institution. Even more than the plan features, I have found that most HSA providers are generally incompetent. I guess there is no pressure to provide a good product when the majority of your customers are forced into the relationship by the insurers. I have a few tips to help you get the most out of an HSA:

Choose who you bank with.

If your employer offers an HDHP, they will likely also setup an HSA for you at the bank which lobbied the HR department (or the insurer) most aggressively. I have not had an insurer suggest I bank with anyone competent. I suspect that they put all their resources into selling the insurer, and none of their resources into actually providing a quality product. Errors abound and hidden fees lurk. I have friends who have worked for some of the largest HSA providers in the country and their horror stories are appalling. These people do not have your best interests at heart.

I have had much better luck with community banks and credit unions. There is a trade-off, however, as these smaller institutions offer a much more limited range of investment options. Per my next point, I don’t think in practice this presents much of a problem.

Save enough to self insure.

This system will not work if you don’t have the discipline to put some of the money you save away to cover future medical expenses.

An HDHP caps your annual out-of-pocket expenses at around twelve thousand dollars for a family. You will probably not have that kind of money the first year, but you will probably not have enough cash to cover a major medical crisis that first year even with average insurance. My strategy is to look at what I would spend on regular insurance, and put the difference between the monthly cost of my HDHP and that insurance plan into my HSA as a direct deposit. You will be surprised how quickly this builds, and most employers that offer an HDHP will also provide some seed-money for the HSA.

Remember, you are acting as your own insurer for non-catastrophic medical events. Your HSA is not an investment that you expect to grow. I recommend keeping your first twenty-four thousand dollars in a secure and accessible savings account. Only once you have more than that two year catastrophe level saved should you worry about investment options. I’m not there yet.

Watch out for hidden HSA fees.

The big guys nickel and dime all over the place. I found the worst fees kicked in when I left my employer and thereby lost their sponsorship of my HSA.

Keep control of your money.

Once I noticed the monthly fees they were taking out, I decided to get my money into a local institution that I could trust. Unfortunately, that bank made it very difficult to get my money in a way that wouldn’t incur huge tax penalties. Be patient, and fill out all of their paperwork. They have to give it to you eventually.

Things to be aware of.

My recommendation is to not use the bank suggested by your insurer, but to use a community bank or credit union that you have can trust. This does have some implications that you should be aware of:

• You are indirectly (through your insurer) paying a bank for services you don’t use. This violates my sense of justice, but there is nothing I can do about it and it is still in my best interests to use another institution.
• Your might not be able to populate your account via payroll deductions if you don’t work with the bank your payroll company or insurer demands. Talk to your HR people, as this is kind of silly—they can direct deposit anywhere they want, so it isn’t a technical limitation. I solved it by doing an automatic withdrawl from my savings account a few days after my pay check is deposited. The accountant makes the post-tax dollars pre-tax at the end of the year.
• Understand that an HSA can only be owned by one person. If you are married, I suggest you pick one name and make all deposits under than name. When I naively allowed my insurer to setup my HSA, they did it under my wife’s name because she is a few months older than me. But my current employer will only contribute dollars under my name. Being able to chose which name gets used is another benefit of managing it yourself instead of letting your employer / insurer do it for you.

Name and shame!

• Wellsfargo—warned away due to horror stories.
• Mellon—really expensive.
• Health Equity—I did some work for them when they were a new startup but they refused to pay me (and were rude about it). Years later I was in the unfortunate position of having to use them as my HSA provider. Big mistake. They act like a bank, but are not regulated like one. It took months to get my money out and ended up being really expensive in terms of fees. Web site was annoying. Customer service couldn’t help me get to my money. They said they would wave fees and then didn’t. It was a real horror story with hospitals wanting to get paid and HealthEquity loosing five thousand dollars. Stay away!
• Chase—worst web site on the planet. Can’t directly deposit money outside of the payroll process. Wouldn’t work with HealthEquity to get my money rolled over to their accounts. Expensive fees.
• America First Credit Union—Aren’t credit unions wonderful! No fees. Good service. However, no investment options.
• Stanford Credit Union—Nationwide membership with only a donation to their museum.

Recommendation: Find a credit union.

I stumbled across this interesting post from 2009 detailing the principles behind an Open Source Hackers Cooperative:

http://scale-out-blog.blogspot.com/2009/08/building-open-source-hackers.html

It is interesting that Robert Hodges was thinking about the same issues around an open source cooperative I was testing with Coopercate. It is neat to see that he came to the same conclusions that I did, and that they are essentially the same as those governing OpenCoopt today.

Two years ago I started putting my plans for a technical cooperative into practice. I put up a site at coopercate.org, and I started cold-calling charter schools who I thought would be interested in a community of education technologists and the associated IT services we would provide. I got a few paying customers, but not enough traction to become self-funding, and my opportunities with Centeva and, then Alfresco, took me away from the endeavor. However, before moving on I summarized my ideas, experiences, and lessons-learned in a presentation I gave at the Utah Open Source Conference in 2009. You can see that presentation here.

In retrospect, I think their were two big problems that made it hard to bootstrap Coopercate:

• The first big problem was me. I’m at a stage of life where I have a lot of opportunities, a lot of mouths to feed, and little time or patience for long bootstraps. Every hour I spend on a side project is an hour I am not spending with one of my kids at this precious stage in their lives. I want to do good but I won’t trade what is best, so I need to be careful in how I prioritize. There will come a time in life when I have more flexibility to work on experimental visions.
• The second big problem was market size. Choosing Utah Charter Schools as my target market was a good way to focus on a market where I had a lot of expertise, but it is a very limited pool of customers who were very risk-averse and cash-strapped. It only took me a few months to reach out to every potential cooperative member and pitch my idea. In five months I had combed the pool in some detail, had one paying customer, three interested potential customers, and an empty pipeline. The only way to grow at that point was to change opinions in my limited pool, or expand the pool. Option one would take time, and option two would add risk and complexity to an already precarious initiative.

However, I came away convinced that the ideas behind an open source technical cooperative are sound, and the challenges were details of execution. I am pleased to say these ideas are being successfully put into practice by the dedicated group at OpenCoopt. OpenCoopt avoided both of these problems:

• The founding team, lead by Blair Preston, is able to provide a focus and dedication that I did not.
• The customer pool is bigger, as they are focusing on all non-profits, and are mostly located on the East Coast where the customer density is bigger than in the Mountain West.

I was pleased when Blair reached out to me and encouraged me to participate in the OpenCoopt community. I was still nurturing Coopercate, and it was clear that everyone would be better served by influencing my small community to join with theirs (maybe one day we will start a special interest group for educators under the OpenCoopt umbrella). I can’t say that I have made much of a contribution yet, but it is a pleasure to participate and see their organization grow. It is gradual and organic, but they are helping real customers solve real problems with open source tools.

Why don’t you join the community and participate with us?

Summary: I give here a number of reasons why employers should not be providing health benefits, and why individuals need better direct access to insurance. I then suggest two solutions that should be a part of a comprehensive reform.

I can’t take it anymore; I can’t keep my opinions to myself. I have to write my representatives, and my senators, and other representatives I think might listen, _and_ post to my blog. Perhaps my one reader will see it. Unfortunately, I should be working on a contract proposal right now, so I’ll have to make this quick.

A better reasoned post making the same argument is available at the Economix blog at NYTimes.com. I want to note that I wrote this letter to my congressional representatives before finding that blog post.

I’m a young professional living in Pleasant Grove, Utah. I have been self employed for the past year. It was a challenge to get coverage for my wife and three kids. We currently have an HSA and are pretty happy with it. However, a fourth baby is due in February and will cost us over $7000 for delivery. My mother-in-law lives with us and has been uninsured for the past year.

I have watched the health care debate with much interest. As a missionary in Europe, I saw how the government can be part of a comprehensive solution to health care. The American system is fundamentally broken, and I hope that we can find a solution that provides the type of safety-net that is standard in a first world country.

I am disappointed that no one appears to be discussing a major problem with the American system. Every solution appears to suggests that more businesses should be encouraged to provide health benefits to their employees.

Why should employers be in the health-care business?

I give here a number of reasons why employers should not be providing health benefits, and why individuals need better direct access to insurance. I then suggest two solutions that should be a part of a comprehensive reform.

As an employee, I found that losing my health benefits was one of the big sticks used to discourage me looking for better work. Giving up company provided health insurance was the biggest concern with starting my own business. A limited range of health benefits is a big reason why small companies have a hard time competing for top talent.

A government mandate to have health insurance, without better options to receive individual coverage, would only drive more people to large companies and put small companies out of business.

My experience is that few, if any, employers want to be dealing with their employees’ health insurance. Every employee has different needs, yet the company has to provide a single set of plans for all of them. Most individuals would be better served by having a direct relationship with their health insurer, just like house, car, and life insurance.

Statics show that people are more likely to need health care after losing a job—when our health system removes their insurance.

One of the reason health care costs are so difficult to control is because the consumer is removed from the process of payment by three levels: the provider, the insurer, and the employer. Since I took control of my own insurance, I am much more aware of how much we spend and whether the care we receive is really the care we need. My insurer can work with me directly to provide lower rates for a healthy lifestyle and preventative care.

We need to make it easier for individuals to get their own health insurance. We need to make it easier for individuals to manage their own health care without their employer’s interference. We need to free employers from the burden of providing health insurance to their staff.

Widening the HSA program is a good way to address these problems.

A government funded catastrophic insurance plan open to individual enrollment can also be a part of the solution.

I would enjoy discussing this issue with you or your staff.

Richard Esplin

This study suggests that providing health coverage hurts industry as a whole.

We need to make it easier for individuals to get their own health insurance. We need to make it easier for individuals to manage their own health care without their employer’s interference. We need to free employers from the burden of providing health insurance to their staff.

Widening the HSA program is a good way to address these problems.

A government funded catastrophic insurance plan open to individual enrollment can also be a part of the solution.

Update 2009-09-04: It’s been two full weeks, and I haven’t had any response. I guess I haven’t donated enough money to anyone’s PAC.

Update 2009-09-05: I got a letter from Orrin Hatch today. It is no secret that I see Senator Hatch as a major obstacle to progress in our state and in the United States Senate. He always seems to take the side of corporate interests, especially regarding intellectual property. I never miss an opportunity to vote against him.

That said, I find it interesting that so far he is the only representative to respond to my letters. Last time I sent him an email, I got an impersonal response that had nothing to do with the ideas I presented. I’m rather impressed that this time I got a letter on official letter-head signed with a real pen (not a stamped or printed signature). He even references my major concern in a way that shows a passing familiarity with my letter, though it is clear that he didn’t take the time to address the substance.

In the interest of fairness, here is the text of his letter:

Dear Mr. Esplin:

Thank you for sharing your thoughts with me. I appreciate it very much. Health care reform is one of the most important challenges facing our nation and I am working hard to ensure access to quality and affordable care for the families in Utah.

I appreciate your suggestions and learning your views. I agree that we need to make it easier for individuals to manage their health care. There are several areas of consensus that can form the basis for a sustainable, fiscally responsible and bipartisan reform. I am working with my colleagues on both sides of the aisle to come up with a responsible and sustainable proposal based on these shared principles. These include:

• Reforming the health insurance market for every American by making sure that no American is denied coverage simply based on a pre-existing condidion.
• Protecting coverage for the nearly 85 percent of Americans who already have coverage they like by making it more affordable — this means reducing costs by rewarding quality and coordinated care, giving families more information on the cost and choices of their coverage and treatment options, discouraging frivolous lawsuits, and promoting prevention and wellness measures.
• Giving states flexibility to design unique approaches to reduce the uninsured. As we move forward, it is important to recognize that every state has its own unique mix of demographics and each state has developed its own institutions to address its challenges.
• Empowering small businesses and self-employed entrepreneurs — the job-creating engines and lifeblood of our economy — to buy affordable coverage by allowing them to band together and buy insurance just like large corporations.

Unfortunately, the path some are taking in Washington right now is to simple spend another trillion dollars of taxpayer money to further expand the role of federal government.

As Congress works to address the vital issue of health care reform in the 111th Congress, I believe that it is important that we address this national challenge in a bipartisan and fiscally responsible manner. Ensuring access to quality, affordable and portable care is not a Republican or Democrat issue — it is an American issue. I will continue to work with my colleagues to find real solutions based on areas of consensus that we can achieve this year.

Again, thank you for writing.

Sincerely,

Orrin G. Hatch
United States Senator

The summary is that he thinks businesses should keep providing health insurance, and the federal government should stay out of it. His plan is to let states struggle along much as they have for the past fifty years. He also implies that there should be no mandate to carry health insurance, but he doesn’t address how insurers can stay in business without denying risky individuals if the healthy can opt-out. As usual, his policies do more to protect the corporate status-quo than they do to help my family, my business, or the American industries who can’t compete against the modern health care models used around the world.

Conclusion: Orrin Hatch is a dinosaur, and I still fail to understand why my Utah neighbors vote for him.

The problem of affordable health care has been solved by every other modern democracy. Why can’t we learn from them?