🏥 Beating Healthcare: Saving Money and Pushing Back

Today is one one of those newsletters you bookmark because I’m sure you want to reference it later. Take it from me… before 2021 I had an infrequent relationship with the healthcare system. Since then, I've experienced shingles, a broken foot, and we had our second child. That was enough to make me pay attention. For many of you, it's open enrollment season, so healthcare is top of mind. And a big thanks to Marshall Allen (🎧 Ep34) who wrote the book Never Pay the First Bill: and Other Ways to Fight the Health Care System and Win, which inspired this email and is an operating system to help you save money while getting better care.

Also, while I'd love to tell you which insurance plan to choose (trust me, I asked Marshall the same question), picking the right plan is too dependent on your circumstances (location, employer, health level, risk tolerance). Instead, this post will complement your insurance plan and also offer some thoughts on the tax-advantaged accounts your employer might offer.

💲 Tax-advantaged accounts 

Two great ways to save on out-of-pocket expenses: Flexible Spending Accounts and Health Savings Accounts. Look into them if you haven't already since they both let you pay your out-of-pocket costs with pre-tax money. 

• Flexible Savings Accounts. These are employer sponsored-plans where you can designate a set amount of your pre-tax income into a separate account to pay for qualified medical expenses. It's like a dedicated checking account for medical expenses. Unfortunately, it's a "use it or lose it" type of account, so you forgo anything you don't spend that year. Typically, there is a 2 1/2 month grace period through next year. And some employer plans even allow for a carry forward of up to $610 (for 2023). Your employers may contribute as well, which could be a nice little bonus (and it is excluded from your gross income). For more details on contribution limits and rules, read this. 

• Health Savings Accounts. These work the same way as FSAs but have much more firepower. You can carry forward any unspent dollars forever. Since they are individual plans, HSAs are portable (i.e., you keep them when you leave your job). It’s like a dedicated 401(k) account for medical expenses. Contributions can earn interest or be invested with a tripled tax advantage:

  • Contributions are 100% tax deductible.

  • Gains on investments are not taxable.

  • Withdrawals for qualified medical expenses are not taxable.

To contribute in a given year, the HSA must be paired with an HSA-eligible (high-deductible) health insurance plan. Please ensure your plan is eligible before trying to open or fund it. For more details on contribution limits and rules, read this.

💡 Ways to use your FSA/HSA

There are a few non-obvious ways we’ve used our FSA/HSA funds that I thought might be worth sharing:

• Biomarker/Genetic Testing (like Insider Tracker, which is 20% off here)

• Baby Monitors (our favorite is the Nanit)

• Eye Surgery like Lasik (if it’s more than your total FSA budget, you can do it at the end of the year and ask if you can split the payments across years)

Also, while you can't typically pay for insurance premiums with an FSA or HSA, there are certain exceptions for HSAs (I don’t normally use the IRS publications for light reading, but I found the content on this topic clearer than others): 

• Long-term care insurance (subject to some limits).

• Healthcare continuation coverage (such as coverage under COBRA).

• Health care coverage while receiving unemployment compensation under federal or state law.

• Medicare and other health care coverage if you were 65 or older.

Two last tips:

• You can donate your FSA if you cannot use it. Don't let your FSA go to waste. Call a local shelter to see if they need any medical products and purchase them with your FSA money before it expires. 

• HSA reimbursements do not have a time limit. As I mentioned, HSAs can carry forward year after year so that you can withdraw your claims anytime. You can strategically let your investments compound and take withdrawals years later. For example, in 2022, you had $1,200 in out-of-pocket costs. You could choose to submit the reimbursement in 2022 or wait 10 years. At 8% per year, the $1,200 turns into $2,600. You can take the $1,200 reimbursement and still have $1,400 in the account tax-free. However, keep your receipts…. no receipt, no reimbursement.

💵 Always Push Back

If your employer plan offers such small copays, it may not feel worth fighting back on the bill's charges. But there is an argument to do so, even if it's tiny, because there is a misconception to think that your employer is paying for most of your healthcare. While much of our focus is on increasing wages, employers must consider whether they can afford the entire compensation pool. Wages are just one part: retirement, healthcare, and time off are others. If your employer is forced to pay higher medical bills, there is less in the budget for wage growth. Rising healthcare costs are eating into the compensation pool, so pushing back on those big bills may be a significant benefit.

Here are eight principles to complement your health insurance plan

💸 Saving before you get the bill

Principle #1: There are substantial price variations in all services. The same procedure five miles away could cost you $15,000 more. Doing some research can help you deal with these wild price variations. Most care is not an emergency, so you have time to research and find valuable options. Up until 2021, it took a lot of work to find cost data. In the US, A federal rule requires hospitals to provide clear, accessible online pricing information to patients (including cash prices, Medicare prices, and insurance-negotiated prices).

Since Marshall's research suggests care is virtually the same regardless of the price, finding the lowest price is in your best interest. Here are some ways to do so:

• Visit the website of your local hospital.

• Call the hospital or ambulatory surgical center (ask for the variations in pricing: cash, Medicare, and insurance negotiated).

• Take advantage of startups that aggregate nationwide prices (Turquoise Health and Health Cost Labs).

• Find out what non-local hospitals charge (Surgery Center of Oklahoma).

Principle #2: Everything is negotiable. Medical pricing is pretty opaque. If prices are negotiable across insurance companies, they are negotiable to you. I've witnessed bills decrease by $4,000 simply by refreshing the page. Knowing "the charges are not the charges, and the price is not the price" should give you the confidence to negotiate a better deal. 

Principle #3: Stop assuming pricing makes sense. Don't expect a logical rationale for the high prices. In most cases, facilities and insurance companies are for-profit organizations, so their prices are not necessarily aligned with the patient. 

🧾 Ensuring charges are accurate

Principle #4: Take an active role in reviewing your bills. According to Marshall's reports and interviews with experts (who review health bills regularly), most bills contain errors or overcharges. These errors compound, causing more medical debt (1 out of 3 Americans suffer from medical debt) and leading to debt collection (1 out of 5 Americans suffer from debt collection). To ensure that you are being charged the correct amount, follow these steps:

• Request an itemized bill to see all of the individual charges.

• Ensure the CPT (Current Procedural Terminology) code descriptions align with your services.

Don't let anything stay that shouldn't.

Principle #5: Ensure the bill is submitted to the insurance company and adjudicated properly before sending any money. The service provider may have sent you a bill before you submitted a claim. Instead of paying the bill, wait until you receive your insurance company's Explanation of Benefits (EOB), which explains how claims are processed. It includes:

• Service description - the services you received.

• Provider charges - the amount your provider bills for your services.

• Allowed amount - the amount your provider will be paid.

• Insurance processed or paid amount - the amount your health plan will pay the provider.

• Owed amount - the amount you owe to the provider (after everything).

Before giving them anything, run them through Principles #4 and #5. 

👊 Overpriced bills, erroneous charges and denials

Having to deal with any of these can be frustrating, annoying, and time-consuming. Unfortunately it’s a part of the process, but it is getting easier to navigate (with law changes and legal precedents that benefit the consumer). As I’ll mention in a bit, you can even go as far as taking them to small claims court, which exists to protect consumers from unfair transactions. Still it’s not perfect. In line with principle #6, here is an action plan to effectively push back to your insurance company or provider. 

Principle #6: Argue with evidence, not emotion. 

• Step 1: Gather data to provide evidence-based data to support your claim 

  • If you suspect overpricing, find evidence of price and quality differences for the service or device.

  • In the event of erroneous charges, please review your EOB, and the services received.

  • In the case of insurance denial, review your insurance summary plan document (it outlines the contractual obligations between you and the insurance company).**

• Step 2: Negotiate a better price on the bill (politely, yet authoritatively)

  • Request a better price from the provider's billing department (they may ignore your request).

  • Call the insurance company to complain about the discounts (they may say "the bill is the bill").

• Step 3: Escalate the reduction (this is where most people don't want to do it)

  • Demand a price reduction from the billing department (always ask for a supervisor as high as possible).

  • Make a formal complaint.

• Step 4: Issue a warning for small claims court 

  • Draft a letter for a 30-day warning (or take the sample letter in Marshall's book) to articulate that "If you don't correct this within 30 days, I am planning to sue you as is my right in my state for overbilling/price gouging." (There is a legal precedent as a consumer if they don't give you the price upfront, that it must be fair and set in good faith - open price term).

  • Send the letter. The letter should demonstrate that you have tried everything possible to reduce it fairly.

• Step 5: File a claim 

  • There is a good chance the 30-day letter will shake them enough to give them a chance, and if not, then file a claim with small claims (which will only take a few minutes and $30-$40).

You have now created a problem for the provider. They may have to hire an attorney, which could cost them more than your claim is worth. They now have the incentive to negotiate with you. If not, bring them to court (and use the evidence you collected along the way).

**In case of insurance denial: Check the contract for the clause indicating that your doctor's medical decision-making is respected. It means the insurance company isn't in charge of the decision. It may be possible to argue from your summary plan document that your doctor determined you needed this test. This is because it was medically necessary if your doctor ordered and recommended it. It will help strengthen your appeal if you combine it with studies showing the test/procedure you want to do is credible.

💊 Prescription deals & finding the best/right care

In many cases, generic medication has the same chemical composition as branded medication but is often far less expensive (but you should ask your pharmacist). Here are a few tips for saving money at the pharmacy.

• Look up GoodRx. It's a coupon system that shows prices at different pharmacies and has been proven to offer some of the lowest prices. If you are getting multiple prescriptions from other areas, you must have at least one professional who knows everything you are taking. 

• Use membership plans. They are available through some providers (like GoodShepRx), where you can order a generic drug per month and deliver it to you. 

• Check the prices at different pharmacies. There can be price variation in your community, so call around.

Principle #7: Ignore the facility's credibility and look at the doctor's credibility. Since there was no publicly reliable data to benchmark credibility, Marshall and a team of investigative reporters took it upon themselves to conduct an analysis (ProPublica Surgeon Scorecard) to identify common complications from common elective operations. They published risk-adjusted complication rates for about 15,000 surgeons all over the country in a searchable format (the data is old, so please rely on it sparingly for current info). As a result of the study, they found to focus on the doctor. And more specifically, focus on a doctor's volume as the critical quality indicator. You should seek a doctor or clinician who has performed the same type of service many times before. It would help if you asked them these questions: 

• Have you performed this exact procedure before?

• Did your patients suffer from infection, injuries, or bleeding afterward?

Ideally, you want to find answers that you feel comfortable with. However, many doctors cannot provide specific information about outcomes, so finding a doctor who tracks any outcome is a plus. Continue researching if you aren't getting the answers you seek.

🟢 The easiest thing you can do

Principle #8: Avoid care you don't need. Marshall points out that up to 25% of healthcare is not required (whether medicine, imaging, or procedures). Although every procedure has a low risk, it's still a risk. Pushing back is not all about confrontation - if you need more information, you should ask. 

• If we wait, what will happen? 

• Get a second opinion if it's invasive or expensive. 

Open enrollment is an excellent time to fund FSAs and open HSAs, but healthcare preparation, proactiveness, and pushing back are worthwhile all year long. Simply taking the time to plan can save you thousands of dollars a year. Please bookmark or save this page because you'll likely reference it again later.

The content on this page is accurate as of the posting date; however, some of our partner offers may have expired.

Editor’s Note: Today, I’m grateful for the support of our partners Goodr, Fabric, Masterworks, Inside Tracker, ButcherBox, DeleteMe, Pacaso and Rocket Money. Opinions expressed here are the author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.