Avoiding the $20,000 mistake

In addition to your other duties, suppose you had just under a month to make several potential financial life or death decisions concerning your family’s health and well-being, the very real possibility of going bankrupt next year if you make the wrong choice. Or of upping the odds if, like most people, you do nothing. You punt.

Hint: Most people punt, which is the worst option. Doing nothing is something, but it leaves you totally without control. Experts say that at least 20% of you are in the wrong plan, paying too much in premiums for what you get back in benefits and coverage. In fact, you can even stay in the same health plan family and get a better deal. But some effort is required. And if past is prolog, most people will again do nothing. They will stay in the same health plan without even considering if they would benefit by changing.

Unfortunately, that’s the worst-case, but a very real scenario for many federal workers and even more retirees during the health insurance open season, which kicked off last week and runs through December 14. During the open season, feds and retirees in the Washington D.C. metro area have the same good-news-bad-news option: They have the choice of between 30 and 40 plans and options offering wide array of benefits, coverage and doctors, and an equally wide array of premiums. Feds outside the D.C. area have at least 20 plans and options to choose from. The good news is that all of the plans are good-to-excellent. They offer good coverage (some better than others), and a wide variety of options (some better than others). All are good. Some better for you than others. Also the government will pay the lion’s share of the premium — 70-to-75%. And you can’t be turned down by any plan for any reason.

The downside is that while all the plans are good, some cost too much considering what you get back. Most feds are in Blue Cross-Blue Shield, which has a number of choices and options. Walton Francis, author of the Consumers Checkbook Guide to Health Plans, says both are good, but he recommends people in the BC-BS standard plan check out its basic option. Lower premiums and you must use network physicians. But, as he says, many are in that network and it could save you a bundle. The difference in premiums is $1,000 to $2,000 per year for singles and couples. Worth putting on your list of plans to consider.

Some of the most popular health plans are not good buys simply because most popular means that many of them are top-heavy with older people. In the insurance industry they are called “heavy users” because they see doctors more often, require more treatments and have higher prescription drug needs. A healthy young couple in a plan full of older workers and retirees is probably going to pay too much in premiums for what they get back in coverage.

Francis says the most important consideration — by a long shot — in picking a health plan based on its catastrophic coverage. This so-called limit-to-you is the amount you will pay out of pocket if you have a year where you or a family member have a serious illness or accident. The catastrophic coverage (total amount you will pay) can range from as little as a few thousand dollars to close to $30,000. Think what that would do to your bank account. Your TSP balance. Financial experts say that most Americans couldn’t handle a surprise $800 bill in one year. And that was before the pandemic and millions lost their jobs and health coverage.

Feds also have the option of picking high deductible (HD) health plans that offer them cash they can save to pay medical bills and or invest. Some people have accounts worth $20,000 or more, some invested in things like the S&P 500 or other accounts. Francis calls them Roth IRAs on steroids because taxes don’t touch them. We’ll have more about that in upcoming columns and on our Your Turn radio show. This Wednesday our guest was Walt Francis. He explained how you can smart shop during the open season. You can use the Checkbook guide (which readers of this column can get at a 20% discount if you use the promo code FEDERALNEWS) or the excellent website developed by the Office of Personnel Management. And its free. Also Checkbook has signed on with many federal agencies so you can search online, for free. You can check out the Checkbook website here.

Bottom line: Do something. Don’t let this be another year when inertia rules. When you are baffled by the premiums, benefits and changes. Francis says around 20% of all feds are in the wrong plan. Each year only about 6% make a change.

Nearly Useless Factoid

By Alazar Moges

The Gateway Arch in St. Louis, at 630 feet, is the tallest national monument in the country. The Arch is 75 feet taller than the Washington Monument and over twice as tall as the Statue of Liberty. The popular tourist destination commemorates the nation’s westward expansion.

Source: National Park Service

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Sep 16, 2021 Close Change YTD*
L Income 23.2492 -0.0094 4.43%
L 2025 12.0658 -0.0087 8.33%
L 2030 42.7474 -0.0399 10.54%
L 2035 12.8596 -0.0131 11.50%
L 2040 48.7414 -0.0535 12.46%
L 2045 13.3719 -0.0155 13.28%
L 2050 29.3347 -0.0357 14.12%
L 2055 14.4724 -0.019 17.18%
L 2060 14.4724 -0.0191 17.18%
L 2065 14.4725 -0.019 17.18%
G Fund 16.6638 0.0007 0.88%
F Fund 21.0964 -0.0376 -0.55%
C Fund 67.2804 -0.102 21.56%
S Fund 85.1655 0.1991 16.31%
I Fund 39.7475 -0.1041 11.70%
Closing price updated at approx 6pm ET each business day. More at tsp.gov
* YTD data is updated on the last day of the month.