Sunday, March 17, 2013

Health Insurance Strategy

Update 3/16/2014: I'm no longer using the strategy discussed in the post below, but am keeping it here for reference. I think it was a good idea until the 'Affordable Health Care Act' kicked in. Here's my latest health insurance strategy.


Since health insurance costs are becoming one of the more significant monthly expenditures these days, I thought it was necessary to spend quite a bit of time figuring out how to optimize it for myself. The ultimate goal is to have freedom to spend my time in a way I think is valuable, but that costs a certain amount per month (with Food and Health Care costs being a primary factor).

Even with a high deductible health insurance plan, when I was working at a corporate job, my company was paying $350 per month (for a service I was essentially not even using). Prior to offering high deductible plans, my company was paying over $600 per month which is a staggering sum (and much higher for families). Since I have stepped out on my own this year and have a limited amount of time to reach critical mass (ie: income > expenses), getting health-related costs under control has been a top priority.

Until recently, I had thought many common health calamities were random, but now strongly suspect our food choices directly effect our health (although it may take 3 months to 3 yrs to notice the effects). I spent quite a bit of time optimizing my food strategy to setup what I think is a high probability plan for eliminating chronic health expenditures (described these strategies in my 'Health' Topic blog posts). The financial intent of all of this is to setup my insurance for catastrophic coverage ONLY. In other words, high deductible insurance policies.

I've bought a $10,000 yearly deductible insurance policy from my state Blue Cross, Blue Shield insurance provider. There is an additional $7,000 yearly deductible for a percentage additional costs. It's essentially a $17,000 yearly deductible for $71 per month. Now, $17,000 is a huge expense, and it is intended to cover only acute trauma situations. Needless to say, I hope I never need to use it. Considering that, $71 per month is a hefty fee, but it's what I thought was responsible to do in case my health strategy doesn't work as expected, or in case of disaster. Please do let me know if you are aware of potentially better options!

Essentially, all medical costs are out of pocket.A slight upside: I have found though that if you offer to pay for expenses in cash, many medical offices will offer a discount (one was 30% off!). Sounds like medical offices incur major costs of time and expense dealing with insurance companies too.

So back to my scenario: that's a difference of $529 per month (normal health care cost: $600 vs high deductible: $71).  Running the numbers, I'm essentially betting that I can go for 32 months (about 3 years) saving the difference between premium costs of normal vs high deductible policies and come out ahead. That is, I have the money at the end of that time period instead of the insurance company or medical providers.

So here's the summary of my health insurance strategy:
  • Increase my odds that I will not need chronic health care costs. 
  • Buy a High Deductible health insurance plan to cover acute trauma 
    • (which I hope I never need to use)

For my monthly budget, I've combined food costs and health insurance as my overall monthly 'Health' expenses. In my opinion, I've decided it's a prudent investment to spend a portion of that $529 insurance price difference buying specific higher quality foods and pocketing the rest.

I think of financial freedom as a net win of offence (income) vs defense (expenditures). Playing offense is one thing, but the idea here is that you don't have to score as many points if your defense can keep costs to a minimum. I've extended this idea to all other fixed expenses as well, but I've focused on health insurance for this post since it has such a low return on investment (in my opinion). Finding a reasonable way to drastically reduce that $600 a month for health insurance was a huge step to bolster my financial defense strategy. This process has been a key step to setup my attempt at financial freedom. It's all about optimizing resources and probabilities.

I'm just a random person describing my strategy, but I hope this info about what I'm trying helps you see what possibilities might be available for you!


  1. “Prevention is better than cure” is one way to look at it. By eating healthy, your body remains healthy and in not much need for insurance coverage for common health calamities. I say dropping other insurance plans and looking for a high deductible plan that covers acute trauma is a good strategy. Thanks for sharing, Laura!

  2. Yeah, exactly - that's a great way to put it. Thanks! It seems to me like the optimal long term strategy.

  3. “It's all about optimizing resources and probabilities.”—This passage speaks volumes, Laura. Learning how to customize your resources is really a good thing. It can keep you from having problems when it comes to financial matters.