Health Care Sharing Plans – Part 2

To help you decide if a health care sharing plan is right for you and your family, we are going to look at things to think about and questions to ask.

Several plans have restrictions on the doctors available to you. If you live in a large metropolitan area, this may not be a problem, but if you are in a small town or rural area, you may not have much choice in doctors. Be sure you understand which doctors are included or excluded from any plan you consider buying.

Some of the sharing plans will negotiate lower costs with the doctors and other plans require you to do the negotiating. Are you comfortable negotiating lower costs with your doctor? Most medical providers are so happy to not deal with insurance companies and their claims process that large discounts are often available for cash-pay customers who are willing to ask.

There are several health care sharing plans which include a savings card for dental, vision, and prescriptions. And others don’t have that option. If those services are important to you, ask before buying.

One of the plans requires you to send your monthly payment directly to another member instead of to a clearing house. This may appeal to you as it gives you the chance to tell someone you are praying for them or maybe you like connecting with people in different areas. Other people prefer to send payments to a clearing house to avoid the personal connection. Which is right for you?

The terms around pre-existing conditions and how pre-existing conditions are defined vary with each program. In general, there is some time limit applied, and sharing around subsequent events related to a pre-existing condition are either not shared, or shared at a lower level. If you have any pre-existing conditions, be sure to understand exactly what is and is not covered. None of the programs we investigated decline membership due to pre-existing conditions. 

Even though some of the programs will actually help pay for adoption costs, the adopted children are subject to the same eligibility requirements as other new members, which means adopted children who have pre-existing conditions will be subject to the pre-existing conditions clause. This limitation on adopted children seems to be in conflict with the family friendly mindset of these plans.

People who use tobacco, drugs, or alcohol may be excluded. Any medical expenses related to these can result in otherwise eligible expenses being rejected for sharing. Tobacco use is prohibited across the board in all health care sharing programs. In addition, recreational marijuana use (even in legalized states) would not be consistent with program guidelines. 

People who participate in hazardous activities need to be cautious. Each program is different about what exactly constitutes “hazardous.” It might be riding motorcycles or hobbies that require you to wear a helmet such as three-wheel ATVs, off-road vehicles, rock/cliff climbing, spelunking, skydiving, deep sea diving or bungee jumping. 

Each health care sharing program has at least some caveats with respect to being a secondary payment source for those also eligible for federal or state assistance. If you receive federal or state assistance be sure to understand the limits of the sharing plan. 

The sharing programs have their own prescription drug policies, but generally prescriptions are only shared related to a specific medical need, and only for a short duration.  Such prescriptions would generally fall under the same per-incident limits or personal responsibility. 

There are some restrictions as to how long medication is covered. This means that someone who developed a condition like Type I Diabetes after becoming a Member would only have insulin considered a shareable expense for a very short duration. Maintenance prescriptions are not eligible for sharing at all.  Members are encouraged to participate in prescription discount programs such as NeedyMeds, GoodRx, OneRX, and LowestMed.

While all of the health care sharing programs have strong histories of success, there is no guarantee of payment because these are voluntary programs and not an actual contract for health insurance benefits. 

In fact, each group makes it abundantly clear they are not insurance and membership is not a contract. 

Typical disclaimers read …

  • Whether anyone chooses to assist you with your medical bills will be completely voluntary because participants are not compelled by law to contribute toward your medical bills. 
  • Therefore, participation in the ministry or a subscription to any of its documents should not be considered to be insurance. 
  • Regardless of whether you receive any payment for medical expenses or whether this ministry continues to operate, you are always personally responsible for the payment of your own medical bills.

Ultimately, members are placing a great amount of faith in these programs, which do not receive the state regulatory oversight and protection afforded to traditional insurance. 

With that being said, they have shared billions of dollars of eligible medical expenses over their history. 

The success of health care sharing depends on upholding and dutifully administering the member guidelines – on the whole, they seem to have done this so far.

There are plenty of positives about health care sharing and at the same time, there are lots of things to be cautious about to avoid surprises if you don’t have a complete understanding of the program guidelines. 

Retiring? What Will You do With Your 401K?

When you are preparing for retirement there are a ton of financial implications. The biggest one is the amount of money you have available each month to cover your living expenses. Do you need money from savings to supplement that income, and if so, how long will your savings last?

An up to date, active budget that you use on a regular basis is the best tool to help you figure out the answer to these questions. If you don’t have a budget then you need to build one fast. Download your bank statements for the past 3 months and put each expense into a category (food, clothing, housing, auto, entertainment, etc.) Then do the same thing with your credit card statements—download the information and put those expenses into a category. Once you have information from 3 months of spending you can calculate your monthly and yearly living expenses.

While not perfect, this will give you the basics of a budget. However, it is missing any cash spending you did, and cash spending can be the leaking faucet for any budget. Not tracking cash spending means you will never be able to balance your budget so, be sure to include cash spending as you develop your budget.

Analyze your spending to eliminate expenses that stop after you retire, such as the cost of commuting to work, plus tolls and parking fees. Your wardrobe choices may also change and you can eliminate those large dry cleaning bills. Or maybe the amount you spend on lunch decreases.

On the flip side, add expenses that will be new in retirement.  For example, you may want to travel when you retire. How much money do you want to allocate to travel each month or over the course of a year? Or your health care costs may increase when you can no longer access an employer-sponsored health care plan.

Once you know what your expenses will be, you have to know where the money is coming from to fund those expenses. Will your income be derived from a 401K, Social Security, IRA, pension, savings or a combination of these?

For example, the expenses in your monthly budget total $3,700. Income from Social Security is $2,700. This means you need an additional $1,000 each month to make ends meet. The $1,000 can come from any source—IRA, 401K, pension or savings and investments.

Hopefully, you have enough money saved to meet your budget shortfall. In the above example, if your savings total of $36,000, you have three years of an additional $1,000 per month income. Then what happens? You will need to find another source of income or cut your budget in order to make ends meet.

The Employee Benefit Research Institute (EBRI), is a research group that focuses on health, savings, and retirement. In an online poll, they found that 81% of those surveyed said that their 401K would be used as income during retirement, which is exactly why you have a 401K.

Of those surveyed, 30% of them have no idea what they’ll do with the money in their 401(k) plan when they retire. Another 25% plan to keep the money in their 401(k). Another 30% plan to roll their 401K into an IRA.

The people who were going to move money out of their 401K could be facing a risky and expensive situation.

Money held in a 401(k) is protected by the Employee Retirement Income Security Act or ERISA. This is a federal law that requires the individuals who manage the plan to act as fiduciaries. A fiduciary must operate in the best interest of the person they are serving. So, they must have your best interests in mind when presenting you with options and helping you make decisions. Further, ERISA protects your 401(k) savings from seizure by creditors.

You don’t have these same protections in IRAs. There is no requirement that investment advisors act as a fiduciary when handling your retirement savings. That means the advisors who roll over your 401K may or may not be working in your best interest.  They may recommend investments that are inappropriate for your circumstances or influence you to buy products that are costly or ones that gave them a higher commission.

Additionally, once you withdraw your money from your 401(k), the extent to which your IRA is protected from creditors will vary based on the state in which you reside. And depending on where you move it, there may be tax implications.

If you are thinking about moving your 401K to an IRA, you will probably have access to a broader array of investments in an IRA. Keeping your retirement funds in a 401K means you are limited in your investment choices, based on what your employer offers.

Finally, expenses are worth considering as you decide what to do with your 401K.  Typically, financial planners charge approximately 1% to manage your rollover assets, but some small retirement plans have fees as high as 1.19% to 1.95%, which could add up to a lot of money out of your pocket.

As you approach retirement, start analyzing your options well in advance of your retirement date. There are pros and cons to leaving your retirement money in your employer’s plan and also to move it to an IRA.

In preparation for retirement, pay off your debt, including credit cards, consumer loans, car loans, student loans and your mortgage. And have a complete understanding of each and every expense and how they will change in retirement. Knowing how much you spend each month and how much money you have coming in is the only way to survive financially in your “golden years.” Whatever you do, don’t cash out your 401K to take the trip of a lifetime or buy a car. Your 401K should only be used for long-term living expenses.

Planning ahead, calculating income vs expenses and developing a budget will help you be financially stable in retirement.

“Which of you wishing to construct a tower does not first sit down and calculate the cost to see if there is enough for its completion? Otherwise, after laying the foundation and finding himself unable to finish the work the onlookers should laugh at him and say, ‘This one began to build but did not have the resources to finish.’” Luke 14:28-30

The Compass Catholic podcast has more on what to do with your 401K in retirement.

Thinking About Investing? Start Here!

Proverbs 21:20 tells us, “Precious treasure remains in the house of the wise, but the fool consumes it.”

When you invest in order to take care of your future needs you are keeping precious treasure in your house, which is a good thing. BUT investing with the simple goal of accumulating more and more wealth in a never-ending quest to have more and more is not a godly goal.

The best place to start investing is with an employer-sponsored retirement account, if one is available to you. Most employers offer some sort of matching money up to a certain limit, so take advantage of any contribution matches up to the limit as soon as you are qualified to contribute.

For example, if your employer offers a fifty percent match on the money you contribute to your IRA, and you contribute $1,500, your employer will deposit an additional $750 in tax-free money into your retirement account. Employers offer different options, which may include a cap on the amount they’ll contribute, the percentage they’ll match or any combination of those, so be sure to read the details about your options.

Employer-sponsored retirement plans usually have a default option for the type of investment. Review your options and choose the option that makes the most sense for your future needs—you can afford more risk early in your career, moving to less risky options as you near retirement,

In addition to an employer-sponsored plan, fund a Roth IRA up to the maximum contribution limits available to you. The maximum contribution to a Roth IRA varies based on your salary, and the total income for married couples filing jointly. The maximum contribution increases when you are older than a certain age.  Be sure to check the current tax year rules.

After you are totally debt free (including the mortgage), AND you have your retirement savings maxed out AND you have two years of income in a liquid savings account, you can think about investing in more sophisticated products such as brokerage accounts, direct stock purchase plans, real estate, and other opportunities.

First, consider your tolerance for risk. Scripture warns against risky investments, yet how many times have you heard about people losing their life savings through some sort of scam? Be aware of your appetite for risk. If an investment opportunity sounds too good to be true, it probably is!

To avoid risk, diversify your funds across several types of investments— stocks, bonds, mutual funds, real estate, etc. “Make seven or eight portions; you know not what misfortune may come upon the earth” (Ecclesiastes 11:2.)

Once you understand your tolerance for risk, you can begin investigating the types of assets you want to own. The fastest way to make your money grow is through productive assets and the three most common types are stocks, bonds and real estate. Each one has different pros and cons, tax situations and legal implications, which may vary by state.

Usually, when people talk about investing in stocks, they mean buying stock in a specific business. Basically, when you own stock you have a share in the profits or losses generated by that business. There are two types of businesses you can invest in—privately held and publicly traded. Privately held businesses may be a business you start alone or with a partner.

You come up with an idea, establish and run the business so your expenses are less than your revenues, and over time the business grows and profits increase. Starting a business is not easy, but a well-run business can put food on your table, send your children to college, afford you a few nice things and allow you to retire in comfort.

There are also publically held businesses, which sell shares of stock. When you buy a share of stock, you are actually purchasing a small part of the business. Publicly traded businesses include everything from large corporations which have proven growth and stability to start-up businesses which offer their initial stock sale opportunity.

When buying stock, consider the type of business that interests you. You don’t want to buy stock in businesses which are contrary to your values. This may include businesses which derive their profit from tobacco, alcohol, abortion or other activities that you do not choose to support. You may want to buy stock in businesses that promote the environment, sustainable resources or support causes which are close to your heart.

The second type of productive investment is a bond. When you buy a bond, you are really lending money to the bond issuer in exchange for interest income. There are many types of bonds, from corporate bonds, tax-free municipal bonds, to U.S. savings bonds.

Real estate is the third type of productive investment. Typically investing in real estate comes in two forms. Either developing something and selling it for a profit, which can be as simple as buying a house, fixing it up and selling it for a profit, or something as complicated as buying a parcel of land and developing a shopping center on it.

For a lot of investors, real estate has been a path to wealth because it is easy to buy real estate using leverage (getting a mortgage on the property). Buying property using a mortgage can be bad if the investment turns out to be a poor one, or good if it’s the right investment, at the right price, on the right terms, at the right time.

As your investments grow over time, and your net worth increases, keep in mind this verse from 1 Timothy: 16-19 which gives us good advice about our attitude toward gathering riches: “Tell the rich in the present age not to be proud and not to rely on so uncertain a thing as wealth but rather on God, who richly provides us with all things for our enjoyment. Tell them to do good, to be rich in good works, to be generous, ready to share, thus accumulating as treasure a good foundation for the future, so as to win the life that is true life.”

Join us on the Compass Catholic podcast to get started with an investment strategy that will help you have a secure financial future.

Apps are a Great Tool for Beginning Investors

When you are just beginning to think about financial planning for your future self, apps are a great way to start investing. This type of investment strategy is targeted to the small investor who does not need a typical hands-on personal financial advisor. Investing at an early age is ideal because when you start early, your investments have more time to increase in value.

But before you start investing, some financial basics need to be in place.

Before you even thinking about investing, get a handle on your monthly expenses, by developing a basic budget, a strategy for paying student loans and a plan to pay off high-interest credit card debt.

If you are just starting your adult financial life, save for an emergency fund of $500, then build it to $1,000. You eventually want to get to the point where you have 12 months of income saved. An emergency fund needs to be in a liquid account such as a savings account or a CD so you can get to it immediately and it is not subject to the stock market dips.

Money you are saving for a long-term goal (10+ years) is where you want to target your investments. Your gains will be higher than with a simple savings account and since you don’t need the money immediately, the up and down fluctuations of the market will be less painful.

Retirement is a long-term goal, so start your investments with a 401(k) if your employer offers one, especially if your employer matches any part of your contribution.

After those basics, you can start investing on your own. The apps we reviewed have four basic functions, and some apps are a combination of these functions.

The first function is micro savings—saving very small amounts of money based on regular financial transactions. An example is the round-ups. If you use your debit or credit card, micro savings will round up your transaction to the nearest whole dollar and put the differences between what you paid for your purchase and the next highest whole dollar amount into your savings.

For example, you buy something for $10.29. Micro-savings rounds up your purchase to $11.00 and puts $0.71 into your savings account. It’s the electronic version of saving your pocket change. Micro-savings accounts typically have no minimum initial deposit or funding requirements and there are often no, or incredibly low, account fees.

The second function is a robo-advisor, which serves as professional investment manager for new and small investors. The methodology is based on unique algorithms designed by each robo-advisor and it’s based on a questionnaire you complete, including age, goals, risk tolerance, amount you initially invest and what you plan to contribute regularly.

From that info, a unique portfolio is created for you. Robo-advisors usually have very low minimum initial deposit requirements and sometimes none at all. Fees are based on a percentage of your account balance and can run between 0.15% and 0.50% per year, which is well below the 1.00% or higher that are typically charged by traditional investment advisory firms.

The third function is online trading. They allow regular people to make their own stock market trades for a fraction of the usual cost. In addition to facilitating stock purchases, this type of app can compare fees, offer investing suggestions, analyze mutual funds, aggregate net worth and even track cash flow.

Anyone with Wi-Fi and a bank account can start playing the stock market from the comfort of their phone, which could be very dangerous if you don’t know what you’re doing. Even if you understand theoretically how the stock market works, seeing your money disappear in a falling market can be traumatic. 

The fourth function is apps that deal with information about investing. This category includes Yahoo! Finance, CNBC, Bloomberg, Sound Mind Investing, etc. These apps provide the ability for users to sync portfolios and quotes across multiple devices, tracking stocks, currencies, commodities and more.

In looking at these different functions, there are two apps that stand out for beginning investors. The most appealing one is STASH. The minimum investment is $5 (with a $5 promo for joining). The first month is free, then the fee is $1/month up to $5,000 invested and 0.25% over $5,000. The STASH website has a ton of articles and videos that are simple and easy to understand. It is a good resource to explain both personal and global finances. STASH also has several simple but very effective tools such as a sliding scale to show how much your investment is worth in 5, 10 and 20 years at 5% interest based on how much you invest weekly.

The second recommended app is Acorns. Your money is in a diversified portfolio of index funds chosen by Nobel Prize-winning economist Harry Markowitz. The first month is free then it’s $1/month up to $5,000 and 0.25% over $5,000. It is always free as long as you are under 24 years old and in college. The automatic roundups at Acorns make saving and investing easy, and most investors will be surprised by how quickly those pennies accumulate.

Do some personal research to pick the app that’s right for you. Be sure you understand the fee structure and find out about required minimum contributions or initial deposits. The costs listed above may change by the time you are ready to get started. Once you make the initial investment is there a minimum balance you have to maintain? What happens if you fall below the minimum?

Become familiar with how to withdraw your funds. Is there a waiting period? How do you request the money? Do they send you a check or transfer the funds to your bank?

Check out the options available to help you learn and become a more knowledgeable investor. Another huge consideration is ease of use. Some platforms may be too sophisticated for newbies and others may be too simple for you.

Be realistic. Investing is a long-term goal and you won’t make a killing in the short term so be prepared to invest for the long term. “The plans of the diligent are sure of profit, but all rash haste leads certainly to poverty.” (Proverbs 21:5) The earlier you start and the more you learn, the more you’ll build serious finance skills you can use in other areas of your life.

Join us on the Compass Catholic podcast to get started with an investment strategy that will help you have a secure financial future.

What is Your Stock Market Mentality?

I was recently reading an article by Dr. Jim Denison about the volatility of the stock market, especially as it has fluctuated this spring. January started at 25,369.13; by the end of January it reached a high of 26,149.39 and a few days into February market lost 3,000 points.

Do these wild fluctuations bother you? Do you have trouble sleeping at night when you think about the stock market?

If you are worried about losing or gaining money on a daily, weekly or monthly basis . . . I would ask you — where is your focus? Are you focused on your finances or are you at peace with whatever comes your way knowing God will provide for you in all situations?

In Matthew 6:31-33 Jesus advises, “Do not worry and say, ‘What are we to eat?’ or ‘What are we to drink?’ or ‘What are we to wear?’ All these things the pagans seek. Your heavenly Father knows that you need them all. But seek first the kingdom [of God] and his righteousness, and all these things will be given you besides.”

Our culture is focused on wealth and the prestige that money and beautiful materials goods bring to us as individuals. We think our next purchase will elevate our personal esteem in the eyes of the people around us. We look to material goods to determine our level of happiness.

Remember the Parable of the Rich Young Man? Jesus told him to sell everything he owned, and give his money to the poor, then he could follow Jesus. This rich young man went away sad because his money and material possessions provided him with a sense of self-worth and he was unwilling to give them up.

Jesus does not deny the reality of human needs (see Matthew 6:32), but forbids making them the object of anxious care and, in effect, becoming their slave. Jesus is saying that, yes, we need to have our material needs met, but if we are only focused on our material needs and not on Him, we are focused on the wrong thing.

In Matthew 6:24 Jesus tells us, “No one can serve two masters. He will either hate one and love the other, or be devoted to one and despise the other. You cannot serve God and mammon.”

Our job is to remember who our master is—it is God. Money should be our servant! It should be a tool in our bag.

Let’s take a look at how you can establish a plan for your finances based on the principals that God has shown us in the Scriptures.

The first question is where do you want to end up? You have to start with the end in mind, as it says in the book Seven Habits of Highly Effective People. We don’t start a trip without first figuring out where we are going and plugging the destination into our GPS. Without a defined destination, we can go anywhere, even in circles, and we will have accomplished our goal.

Creating a plan for your finances should be done in just the same way. Go to the Compass Catholic website, and under the resources link you’ll find “The Money Map.” The Money Map has seven destinations and each destination has several steps.  Go the earliest destination that is incomplete and complete the steps in order under each destination until you reach the end—True Financial Freedom.

If you have a plan, you know how much you need to save in order to achieve financial freedom and you have an estimated completion date. That plan helps you put the market fluctuations into perspective. It helps you detach form this world and focus on the next.

The failure to view our present lives through the lens of eternity is one of the biggest hindrances to seeing our lives and our finances in their true light. Yet the Church teaches that the reality of our eternal future should determine the character of our present lives and the use of our time, talent and treasure. 

We are aliens, strangers, and pilgrims on earth. Peter wrote, “I urge you as strangers and sojourners to keep away from worldly desires that wage war against the soul” (1 Peter 2:11). 

We are only pilgrims here on earth. Pilgrims are unattached. They are aware that that excessive accumulation of things can be a distraction. Material things are valuable to pilgrims, but only as they facilitate their journey. We must never become too much at home in this world, or we will become ineffective in serving the cause of the kingdom we are here to represent.

Things can entrench us in the present world, acting as chains around our legs that keep us from moving in response to God. When our eyes are too focused on the visible, they will be drawn away from the invisible. “For we fix our attention, not on things that are seen, but on things that are unseen. What can be seen lasts only for a time, but what cannot be seen lasts forever” (2 Corinthians 4:18, GNT). 

Pilgrims of faith look to the next world. They see earthly possessions as tools which are only useful for kingdom purposes.

Leo Trese, author of The Faith Explained, says it this way, ”Wiser people know that worldly well-being is a deceptive source of happiness . . . [they] have discovered that there is no happiness so deep and so abiding as that which grows out of a living faith in God, and an active, fruitful love for God.” 

Don’t let the stock market determine your happiness. Look to God instead.