Our Income Is Changing, Here's How We're Preparing

Strap in folks. This post has been a long time coming, and for that reason, it’s going to get long. I seriously even debated splitting it into two posts, but then decided against that because I would rather have all the information in one spot. Ready? Here we go….

Back in September, hubs’ company sent out a letter stating that they would be switching their health care offerings at the beginning of 2017. The letter stated that the switch would be in alignment with what their parent company offers, so that if any employee was transferring within the parent company, the health coverage would be the same across the board. Nice….

Things were very vague up until open enrollment in November. Even after that, there were still uncertainties on how it would affect our finances. Hubs is one of the few managers in his company that’s paid weekly, so the informational letter we got in December stating how our monthly paycheck would change was completely useless to us. Even at the beginning of January we didn’t get many answers because of how the pay period and paychecks are offset. It wasn’t until the end of January things had finally settled and we knew what our income was going to be like.

Now I want to make it absolutely clear that I am completely aware how lucky we are to have company offered coverage. I know that it could always be, and has been, worse. I am grateful we have health insurance in general, and the opportunity to participate in company offered coverage.

That said, here’s a breakdown of what our previous coverage was and what changed. Then I’ll talk about what we’re doing to try to minimize the hit to our finances.

Our Past Coverage

Medical

For medical, we had a $400 family deductible, and all preventative visits were covered in full. Once we met our deductible, we had a 20% coinsurance on all care. That it included emergency room visits and specialist visits. The only expense we put towards having our medical coverage is a $15 pretax deduction each week from Hubs’ paycheck, for enrollment purposes.

If you’re unfamiliar with coinsurance, it’s not as complex as it sounds. After we visit the doctor, the office bills the insurance company, and then the company comes up with an allowable amount that they’ll pay based on the reason for the visit. The allowable amount is split between the insurance company and I; I pay 20% and they pay the remaining 80%. This means that the office can be, and has been, responsible for a large portion of what they billed.

So for example, if I take the kids to their pediatrician for a sick visit, their office charges our insurance $110 for the visit. If lab work had to be done or medication administered, the cost increases. Our insurance company usually determines the allowable amount for a typical sick visit to be $78, making the office responsible for $32. The insurance and I then split the $78, where they pay 80% {$62.40 in this example}, and I pay the pediatrician’s office the remaining 20% {$15.60 in this example}.

Personally, I didn’t think this is bad at all, and when you combine it with us having a relatively small deductible, it’s fantastic! This coinsurance applies to all medical visits, including UrgiCenter and Emergency Room visits. As a matter of fact, we didn’t finish hitting our $400 family deductible for 2016 until I had to go to my local UrgiCenter for my asthmatic stasis in the middle of September. $90 of the bill I paid went to the remainder of our family deductible for the year.

Dental and Vision

Our vision and dental coverage are currently through two separate companies, and it will remain this way but the companies will change.

Up until this 2016, we didn’t have vision coverage at all. We would end up paying 100% out of pocket for everything. Most of our annual savings account, around $1,200, was for vision expenses.

Our dental coverage was a $75 family deductible, and then all preventative care is covered. Fillings are very rare, and the insurance covered a portion. I’m honestly not even sure what portion; that’s how infrequently we need something other than preventative care.

What Is Changing

Our Paycheck Contribution Changes

In order to enroll in the new medical coverage, our pretax deduction had to increase. We also have a deduction for dental coverage. Our monthly pretax deductions is now $68 just for enrollment.

We’ll Have A Higher Deducible

With the new medical coverage plan, they are offering three different options. We opted to go with the coverage that is the closest to what we had, and the one that would cost us less in the long run. Our new coverage should still have preventative office visits covered.

But our family deductible is now $1,000. We could have opted for one of the other two options, but honestly a $3,000 and $6,000 family deductible didn’t sound appealing.

Co-Pays

After we meet the new deductible, the reason for the visit determines what we’ll pay. For starters, sick visits under the new coverage mean a $35 copay. Nurse visits, even for preventative care, are $15. Emergency Room visits will cost me a minimum of $250. Compare this to $15.60 coinsurance for sick visits under our prior coverage, and the last emergency room visit we had cost us about $70, we’re going to be paying a lot more each time we have to get medical care.

Dental and Vision

Our dental plan remains very similar, although our deductible increases as well. Only it’s a small increase, maybe by $50 or $100 for the family. Honestly, this isn’t something I honed in on and paid attention to because it wasn’t a major increase in expenses for us.

Our lifetime max for orthodontic coverage increases a little as well, but there is a year waiting period after enrollment before we start receiving coverage. This is irritating news since Bookworm is close to starting Phase 2 of his treatment. The good news is that our account for Phase 1 has been paid in full. I only have to push this back to when our orthodontic coverage starts. We’ll see how well this goes over with his dentist and orthodontist next month.

I File With The Companies

For some reason, our new coverage requires me to be the middle man on some claims. Our doctor’s office submits claims, and they receive payments. Our dentist submits claims, but I get sent the check. From there, I have to determine what the remaining amount due is, and pay that. For other coverages, I pay the full amount and then wait to be reimbursed from our insurance. This is the first time we’ve had coverage where we’re the middle men, and personally it sounds like a paperwork nightmare.

What We’re Doing About It

Determine Past Medical Expenses

Before we enrolled in the new coverage, I went through our previous medical records and calculated what we spent between 2014 and 2016. I wanted to make sure that in order to offset any major costs, we were making the right step. {Side note: prior to 2014, I don’t have any records of what we paid, but I’m confident it is on par with 2014 and 2015, and in some years it was more. In 2010 Monkey had numerous ENT visits, and even had surgery to put tubes in; they were then removed in 2013. For each specialist visit between 2010 and 2013 we owed a minimum of $30 coinsurance. And in early 2012, I had Lady Bug. We met our family deductible real fast that year.}

As you can see, our medical costs have been low the last few years, and I am very grateful for that. Years where costs are higher, I know exactly what caused it.

For example, our vision expenses were expensive because until 2016 because it was the first year we had any coverage. 2014’s prescriptions are high due to purchasing an Epi-Pen for Bookworm to prevent any major allergic reactions until he could get into an allergist {of which it turns out he as asthma like me}, and 2016’s are high because I had to purchase Flovent; both prescriptions were cost me over $200. 2014’s medical expenses are higher because Lady Bug had an EKG done to categorize what exact heart murmurs she had, and in 2015 she had some major lab work done to make sure all systems are functioning {she’s tiny for her age}. In both instances, my out of pocket expense was around $200 – $250, where $200 of it was a portion of the deductible.

Started an FSA

Since our annual medical expenses were no where near close to what our new deductible is, we made the decision to start a Flexible Spending Account (FSA). We have always had an opportunity to start a FSA to help offset medical expenses, but since our costs were so low, I didn’t see the point to it. Once we were able to get a handle on our expenses, it was very easy to save up what would be needed to cover costs.

But with this new coverage, it’s very different, so we set up a $1,500 FSA. The main reason I did this is because I don’t know what will happen medically. Between specialist visits, labs, and so on, you never know. I may have a bill that comes in at some point this year where the majority of our family deductible is due all at once. {You should have seen what was billed to our insurance company for Lady Bug’s well exam this year! If I had to pay that we would have met our deductible with that one visit.}

In the event that we don’t use our entire FSA on our medical deductible, we can also use it towards other expenses like dental care or any vision costs we have. If by the fall we haven’t used the entire amount, I can also use the remainder towards updating the lenses in Hubs and my glasses {we’re both contact wearers 99% of the time}. Rest assured, the FSA won’t go to waste.

Recalculating Our Budget

One of the things we need to do is prepare for a whole new budget. Like I mentioned earlier, of the letters we received said that our paychecks would be reduced by $125 per month, but Hubs is still paid weekly. After we received the first paycheck for the year, we found out that our deduction is based on a 28 week nonstandard deduction {most of the people they employ are seasonal, and are hired for 7 months of the year.}

This means that until July, our income is reduced by $285.12 each month compared to December’s income.

Recalculate Our Debt

With the reduced income, I also had to recalculate our debt snowball and repayment. I want to aim for another $23,000 paid this year, but with wanting to continue to cash flow the kids’ activities as well as a family vacation and a trip with Hubs, I’m fairly certain our $23,000 goal will be hit.

Keeping Grace In Mind

I need to constantly remind myself that there will be an adjustment period, not only for our monthly budget while we adjust to the income changes, but also to our debt repayment and financial goals for the year. While we may not get as far ahead as we would like to this year, any progress we make towards paying down our total debt is still progress. And getting out of debt, no matter the pace, is the name of the game.