When asked, “What’s your most important financial asset?” how would you answer?  Some of the more common responses are, “my house, my car, my retirement account” or any combination of physical “things” we identify with that have significant (relatively speaking) value.

At least initially, very few people would answer the question with these words – “My cash flow.”  As abstract as it might appear, cash flow – for most people – is the most important financial asset we have. This begs us to explore how cash flow generates potential for risk.

Generally, there are four circumstances that can negatively affect your cash flow:

1. Retirement – Loss of a regular paycheck
   
2. Loss of job
   
3. Disability – creating the inability for you to work as you did previously
   
4. Death
   

While we typically protect the assets that we perceive to be the most important to us (homeowners insurance, auto insurance, etc.), the one that is actually the most valuable typically goes without too much concern from an insurance point of view. There are several ways to protect your assets.  The first step is to understand how each product works to assist in your strategy. While life insurance protects your estate and other assets and pays expenses at the time of death, there are other ways to consider protecting your income, especially while you’re still living!

A disability insurance policy is designed to protect your cash flow. For those earning a decent salary/income, or for a person who possesses a unique skillset without which he would see a significant decline in income (e.g. surgeon, attorney, etc.), a disability policy is paramount.

When analyzing cash flow, especially when you are younger, a life changing disability can not only change your quality of life physically, it can put you on a financial vector far off course from your original plans and dreams. Many employers include a standard disability income policy for their employees (if not, they should) – that is one step in the right direction. However, most employer-sponsored policies limit benefits to a maximum of 60 percent of the current earnings up to a maximum dollar amount.  And, unless the premiums are paid with after-tax dollars by the employee, those benefits are taxed when received. Therefore, the actual cash received will be much lower than 60 percent of your current earnings.

To soften the blow, there are supplemental disability products available. Typically secured by higher paid professionals, a supplemental policy can help bridge the gap between what the standard policy payout delivers and getting you closer to what you currently earn. Most disability products will fall short of 100 percent of your salary, as there needs to be the incentive to become well again and get back to work. Most high-quality disability carriers possess a professional staff to assist you in coordinating care for back-to-work purposes.

Just for reference, following is a list of some of the top causes for a disability:

1. Cancer
   
2. Back problems
   
3. Injuries (most often, outside of work)
   
4. Behavioral health
   
5. Circulatory disorders
   

As you can see in the list, you likely have experienced or know of at least one person suffering from one of these conditions at any time in your/their lives. And, as you’ve seen in a previous Slice, the odds of a person becoming disabled and needing coverage are approximately 1 out of 3.  Following are some more facts regarding the risk of a disability:

• The Social Security Administration estimates that slightly more than 25 percent of 20 year olds will be disabled before age 67
  
• Only 31 percent of Americans are protected by Disability Insurance –
  
  • Half of those believe they need more coverage
    
• Only 9 percent of long-term disabilities are the results of accidents considered “serious”
  
• 65 percent of applicants for government benefits are turned down
  
• 90 percent of disabilities are non-work related; therefore they are not covered by workers compensation
  

Now that you have a bit more perspective, while you’re reviewing your homeowners and auto coverage, perhaps it’s time to analyze the coverage for your most important financial asset – your paycheck! Luckily, there are several solutions and the younger you are, the lower the cost.

With the holidays upon us, I thought I’d borrow some wisdom from the “Who’s” down in Whoville and quote Dr. Seuss’s “How the Grinch Stole Christmas.” Here are some tips to keep your holiday from turning into a “Grinch-mas!” 
​
1. “Give me that! Don't you know you're not suppose to take things that don't belong to you?”Secure your homes this season by locking your doors and windows, turning on your security systems and keeping your belongings out of site. Although the economy is improving, there are still some people desperate to see what you’re hiding under the tree this year. 

2. “Burn baby… BURN!!!” 
Be sure your electrical connections and cords are in order. If you’re lighting a real tree, ensure that it is clear of hazards, make sure there’s enough water in the basin below the tree to keep it hydrated and consider LED bulbs to reduce heat.

3. “Don’t worry about that now Max, we’ll get that later. Of course when I say we, I mean you!” 
Like the Grinch, take advantage of helpers. If you have someone willing to assist you with carrying heavy loads, cooking or cleaning, allow them to do so. Many minor, yet hindering injuries happen as a result of people trying to do too much on their own.

4. “Dinner with me? I can’t cancel that again!” 
This time of year can be hectic with work, holiday parties and other commitments. Remember to plan your time accordingly so you aren’t overbooked or overwhelmed and can set aside time to relax.

5. “Am I just eating because I’m bored?” 
Stay disciplined with your routine and avoid eating that third piece of pie. You’ll appreciate it after the New Year arrives when you still feel comfortable in your clothes!

6. “One man’s toxic sludge is another man’s potpourri!”
The pre-holiday season is a great time to give back! Go into your closets and storage areas and get rid of some things you have been hoarding for a while. Many charities will help the less fortunate by reusing some of your older belongings. 

As the Grinch realized, it's important to take time to appreciate what the holidays are all about. Reflect on the year past and look forward to the year ahead. Enjoy the time with family and friends and have a safe and happy holiday season! 
“What if Christmas, he thought, doesn't come from a store. What if Christmas... perhaps… means a little bit more!”

Lately, insurance companies have been taking the brunt of the negative press regarding escalating health care costs.  While some of the blame certainly relates to the way that insurance companies negotiate rates and corresponding discounts with hospitals and doctors, there are many other factors contributing to the problem.  Following is a list of only some of the most significant issues contributing to the cost conundrum. 1  

• Aging Population – The number of people in America over the age of 60 is projected to grow to as many as 110 million, or 27.4 percent of the total population by 2050.  Older people consume greater percentages of health care than younger people.  According to the Congressional Budget Office (CBO), by 2025 public healthcare spending (Medicare, Medicaid, CHIP, and marketplace subsidies) will near $1.9 trillion, approximately half of the entire government spending projection of $3.89 trillion.
• Pharmaceutical Costs – In 2014, prescription drug spending increased 13.1 percent over the previous year and accounted for 12.2% of total healthcare spending.  Factors leading to increased costs are higher utilization, newer, higher priced drugs, fewer manufacturers and manufacturer price increases for existing drugs.
• New Technologies – Biotechnology products and drugs have been created and are considered the new promise to prolonging and improving the quality of life.  Although expensive to produce and develop, there have been several success stories in this space regarding treatment for diseases such as diabetes, cancer and hepatitis C.  Medical technology implementation accounts for between 38% and 65% of current healthcare spending increases. 2
• Behavioral and Lifestyle Choices – Behavior is the most significant determinant of health status.  As much as 70% of healthcare costs can be attributable to behaviors such as smoking, alcohol abuse, and obesity.  Although we are becoming more cognizant of our waistlines lately, approximately 80 million Americans (34.9%) are obese. As of 2014, over 42 million Americans smoked creating an additional cost to employers approximately $5,128 a year in health care costs and lost productivity for those employed. 3

There are other issues contributing to higher costs.  Tort reform in some states like Texas has actually contributed to a decline in the cost of health care. Without reasonable parameters controlling one’s ability to sue, providers will continue to conduct redundant tests and treatment for common issues simply to protect themselves from a lawsuit.  For example, if someone is diagnosed with a problem requiring an image, the doctor would typically order an x-ray to initially diagnose the problem.  However, in many circumstances, the doctor will subsequently order a cat scan to thoroughly cover him/her from any uncertainty that might be brought up by a plaintiff’s attorney, despite the fact that the x-ray was conclusive.  The additional test could add hundreds and sometimes thousands of dollars to the bill.  All ordered to assist in exonerating the physician from the plaintiff attorney’s question; did he/she do everything he/she could to correctly diagnose and treat the illness?  Duplication of procedures and overuse of expensive and unnecessary procedures and prescription drugs contributes to the high cost of health care.  Medical malpractice insurance and defensive medicine adds $55 - $200 billion annually and accounts for roughly 7.2 – 12.7 percent of the increase in health care costs.  Capping the award for punitive damages and altering the liabilities laws could save as much as $11 billion annually. 4

More than $6 billion was spent between 2010 and 2015 to update provider’s systems to comply with ICD-10 coding.  To date, there has been very little to show for this expensive reboot to the medical records database.  While the intentions are good and the electronic records can be very beneficial, the investment is enormous and there are many inoperability issues hampering progress.  

Believe it or not, mistakes also contribute to the problem.  As many as 400,000 people die each year as a result of preventable medical errors.  It’s estimated that these errors cost the Americans approximately $1 trillion each year.  Tragically, it affects the cost of providing health care to everyone.  Many hospitals and providers are proactively working toward a team approach whereby physicians, nurses and other practitioners are encouraged to speak up and be on alert for human errors.  Despite that effort, it will take many years to change the bureaucratic system within many of our hospitals to reduce that cost to $0.

The PPACA (Patient Protection and Affordable Care Act) has been anything but affordable for society.  Many burdens on employers have discouraged small employers from participating in providing health care as a benefit.  For individuals and small employers, narrow rating bands, limits on composite rating and expanded levels of minimum coverage have resulted in higher costs.  Larger employers (>50 full-time equivalent employees) have become overwhelmed with the reporting requirements and affiliated government mandates.  The law has also affected state governments as expansion of Medicaid will soon start to create increased costs to states that are not budgeted to handle the increased burden.

So before you get too angry with your insurance company, keep in mind they are only responsible for assisting you in paying for your health care.  If you don’t question and challenge the issues surrounding the costs associated with providing the healthcare, the vicious circle of higher costs will continue to haunt!
 
1 Source: Healthcare Cost Drivers White Paper June 2015 - National Association of Health Underwriters 
2 Source: Robert Wood Johnson Foundation.
3 Source: National Center for Health Statistics.
4 As concluded by a Congressional Budget Office Study

Prescription drugs (Rx) have become a necessity for most Americans, and many people who are employed and covered by a group health plan have a prescription drug card (Rx Card) to assist with the high cost of meds.  The Rx Card allows for a co-pay level that is tiered based upon the type of drug prescribed.  Lower cost generic drugs typically have low co-pays, while more complex brand name drugs have a higher co-pay amount.  Very expensive meds, including injectable formulations, fall into the highest tier and frequently come with co-pay amounts that compute to a % of the drug cost. Those drugs are frequently very complex and expensive.

Today, more people are covered by a High Deductible Health Plan (HDHP) coupled with a Health Savings Account (HSA), whereby a Rx Card is not customary.  While there are tax benefits connected to the HSA, one of the sacrifices is that you share more in the initial cost of treatment until you have satisfied the Out of Pocket (OOP) maximum amount.  In most HSA plans, this includes prescription drug costs.

Recently, prescription drugs have become a targeted item by consumers.  Many insurance companies have dropped certain popular and expensive brand name drugs from their formulary.  The National Blue Cross and Blue Shield Association completed a 7 year analysis of Rx utilization, price changes and costs.  That study concluded that, since 2010, spending on prescription drugs has increased 73%, or roughly 10% per year.  This is despite the rise in generic Rx use during that same time period.  The increase is predominantly due to a smaller fraction of emerging drugs and larger year-over-year price increases that are more than offsetting the growth in lower cost generic Rx use.  

It’s easy to blame the pharmaceutical companies for high prices; however, one must dig deeper to understand the complexities involved and dollars invested to bring a Rx solution to market.  Based on the FDA and affiliated governmental requirements surrounding testing and trials prior to approving a drug, don’t hold your breath for a quick decline in the costs of bringing the solutions to market.
There are some practical tips for you to follow in order to better manage your Rx costs.  

• Always ask your doctor if there is a generic equivalent for your prescribed drug.  For most common Rx needs, you will typically find a generic solution and save money.  A generic equivalent has the same chemical composition as the brand name drug, thus you are receiving the same treatment.
• When a generic equivalent is not available, ask your doctor if there is a generic alternative for your prescribed drug.  In this case, you are not receiving the identical chemical composition of the original drug; however, many times an alternate drug will effectively mitigate the problem at hand.
• When generic alternatives are not available and there are no competing brand names at lower costs, you can seek discounts that are offered by pharmacies and pharmaceutical companies.  These discounts are seldom advertised and frequently overlooked.
• Use the mail order option to receive your maintenance Rx meds.  You can typically save by utilizing the insurance companies recommended mail order vendor by receiving a 90-day supply of the meds at a discounted price.

While the Health Care scene continues to tremble, costs don’t appear to be declining.  At least there are some techniques that you can employ to assist in lowering the incredibly high costs affiliated with modern day medicine.