You Could Soon Determine Health Insurance Costs

Ray’s Take A generation ago, corporations pushed the responsibility for retirement planning onto employees by dropping pensions in favor of 401(k)s. While the jury is still out on how this is working, it looks like the next frontier may be health care.

At this point, some company health insurance plans require employees who smoke to pay more for their coverage. Next could very well be higher premiums or co-pays for excess weight or other conditions and habits deemed non-healthy.

Keep in mind this is not the government telling us what to do. It is driven more by global competition. Lost productivity due to health-related issues is a huge factor in this country. In addition, both legal and illegal drug use drag down domestic productivity. There are a lot of potential employees in the world willing to work harder for less. Also of importance, corporate-provided heath insurance is usually not a factor as so many countries have socialized medicine.

Right now, the U.S. has the highest per capita health care expenditure of any country, and that cost is growing at over two percent each year. Companies carry a lot of that expense burden by completely or partially underwriting their health insurance programs and their costs have risen 29 percent since 2009.

No wonder 32 percent have or will soon introduce financial incentives to improve wellness, with another 30 percent seriously looking at that option. But the big news is that 45 percent are considering introducing or increasing penalties for employees who do not make lifestyle changes for healthier lives. For generations we have been largely insulated from the financial consequences of most of our health choices. The time is coming when we’re going to have to start taking more responsibility for them.

Dana’s Take Ray has increased the deductibles on our health insurance to reduce the premiums. Going to the doctor now costs us more “out of pocket” and each prescription costs us more.

Staying healthy puts money in our pockets. If one of us becomes ill, the money we plan to spend on a vacation could go to our family deductible. We would all rather lie on the beach than lie in a bed in the ICU.

So what can we do about it? Ray and I can walk every day for 30 minutes to an hour. Our family can buy more fruits and vegetables and fewer Cokes and French fries. We can play tennis instead of Xbox. Each choice can save us on medical expenses. The side bonus is that we improve our chances of feeling better and living longer.

Daily habits can make us healthy and wealthy. Or not.

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Consider Buying Your First Home

Ray’s Take I’ve long believed the economic benefits of home ownership are overrated and renting is under-appreciated. However, for some first-time homebuyers the math has started to turn and they may find it less expensive to buy a home than rent!

The Housing Affordability Index is at its highest level since recordkeeping began in 1970. This means home ownership is more affordable than it has been in more than 40 years. Why?

Mortgage rates continue to be exceptionally low. Home prices have plunged. Existing homes are languishing on the market, plus there’s an exceptional quantity of foreclosed homes available at bargain prices.

Added to this is a “shadow inventory” of homes that are either bank-owned or going through foreclosure. These homes are being kept off the market in hopes that home prices will soon rise. That’s a lot of downward pressure on home prices.

Lending standards have started to loosen up, making it somewhat easier to qualify for a mortgage. The “zero down” deals are gone, thank goodness, so expect to have a good down payment.

When you do the math, it may be cheaper to “rent” money from a bank to purchase a home than to rent a home. Since so many foreclosed families are returning to rentals and others are hesitant or unable to buy, rental rates are on the rise. If you lock into a fixed interest rate mortgage, you won’t be facing those increases.

We haven’t even talked about the special incentives in place for first-time buyers like property tax deductions, mortgage interest deduction, and equity building. But don’t expect to rapidly build equity with rapid appreciation in home prices as with prior cycles. A lot of other important factors should be factored in, the probability of staying put for a while chief among them. However, for lucky first-time buyers, the tide is turning.

Dana’s Take Buying your first home is both exciting and scary. Two ways to decrease the scare factor is to have your Realtor include two requirements in any home offer you make.

Insist your contract becomes valid only if the home passes a professional home inspection. Be sure to attend the home inspection and ask questions. You’ll learn a lot about your home and find out about any hidden flaws. If there are important problems, this gives you an opportunity to either negotiate for a better price or have the present owner make needed repairs.

Secondly, ask the home seller to pay for one year of home warranty insurance. Since you typically have a lot of expenses associated with moving, this gives you a financial cushion in case something does go wrong with the home in your first year of ownership.

These safeguards help lessen the worries of unwelcome surprises so you can focus on the exciting aspects of owning your own home.

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