Cheat Sheet Q&A:

Today’s question is a response to my plan to alter the use of medical insurance to encourage greater consumer interaction with the cost of health care at medical facilities:
Brian, I understand part of what you are pointing out with your analogy comparing health to auto insurance but disagree with you.  It’s a bad and inaccurate analogy, and takes a dangerous path.

Do you really want to give a free pass to insurance companies, who are 100% totally driven only by profit and not your health concerns (except with a PR interest), to start picking which health issues they will cover?  We both know that if they could get away with it they would all take your monthly premium while denying all claims, since all they really want is higher profits.

Bottom Line: I think we actually may be more on the same page than your reply would suggest. To quickly recap my plan…

  • We would alter the existing insurance model for traditional health insurance to more closely resemble the auto or home insurance model
  • That would force us to price compare services across like medical providers
  • It would force medical providers to provide transparency in pricing of healthcare services
  • The market forces of our price comparisons would dramatically aid in reducing the actual cost of healthcare

In short I’m for more transparency and it’s my view that until we get away from the current model in which we’re expected to sign a sheet of paper that indicates that we’ll pay whatever an insurance company doesn’t, for whatever may take place while we’re there, we’re not going to have price transparency. For that reason I’ve advocated for an insurance model that would cover major medical events but would put the impetus on us for the everyday medical needs. That’s not to say that you couldn’t buy supplemental coverage to cover more if you were so inclined.

You can walk into any auto shop or dealer and get the price of an oil change or cost of tires for your car. Try going into your average hospital and getting the price of an x-ray or physical.

Price transparency is what’s needed to allow us to become better consumers of healthcare and dramatically bring prices down. The existing insurance model is the obstacle to that objective.

As an aside. Profit is a good thing as long as it’s honestly obtained. I don’t blame insurance companies for the current mess we’re in. It’s the model the Government created and has since exacerbated. Health insurance companies have simply taken advantage of the playing field that was created around them. That being said they’ll make much less money in the model I’ve outlined

Audio Report:


Comparing MyRA to an IRA over 25 years:

Bottom Line: Last week I broke down the finer points of the MyRA program. In short it’s better than not saving but the best purpose for that type of program would actually be using it for Social Security. Anyway I decided to compare the rate of return over 25 years in a typical IRA over 25 years.

First the MyRA:

  • The previous 25 year average of the variable rate Treasury that will be used for the MyRA has been 4.2% (actually better than I would have thought), though it has been under 2% in recent years
  • If you invested $5500 per year in the MyRA over 25 years at the average 4.2% rate of return you’d have $243,400 today

Now the IRA:

  • I used the 25 year average of the S&P 500 which has been 9.5%
  • If you invested $5500 per year at the 9.5% rate of return you’d have$566,000 today

So you can see the difference is dramatic (and it also demonstrates the power of compound interest). That’s to say that it still makes sense to make use of traditional investment options prior to using the MyRA once it’s made available. But again – using the MyRA is far better than not saving.

Audio Report:

How the Yahoo email issue happened, what it means & what you need to do next:

Bottom Line:
So Yahoo’s major email compromise late last week apparently wasn’t a hack attack directly on Yahoo itself. A third party processor appears to have been hacked and the Yahoo info was stolen. So let’s look at what you need to know:

  • Yahoo has mandated password changes for users – so you’ll need to choose a new password if you have a Yahoo account
  • Hackers are using the information to identify personal information for people in the contact lists of Yahoo email users
  • Hackers may pose as others in email based on the contact info stolen (so be wary of emails with instructions even from trusted friends and email address)
  • Hackers are using the usernames and passwords collected from many of the recent breaches to compromise non-email accounts

So that leads to the final point. You likely need to change passwords at other accounts of yours that had the same password as your email account.

Audio Report:


How low can she go? The latest stock market value update:

Bottom Line: Over than past two years the stock market has traded at a value that’s been 20-30% above its historic level at any given time. The good news is that through earnings growth that’s been reported so far (up 7% year over year) and the stock market having it’s worst January since 2009, the stock market is the most reasonably valued it’s been in over two years.

Here’s the breakdown:

  • Historic S&P 500 mean: 15.51
  • S&P 500 PE currently: 18.89

In other words stocks are trading at a 15-17% premium to the historic average. That could provide you with an idea of how far stocks could fall in a worst case scenario. Just last summer stocks were trading at a 30% premium to historic averages. We’ve cut that in half. It’s worth noting that as long as the Federal Reserve is still encouraging stock market investment it’s unlikely that the market would trade down to it’s historic averages.

Audio Report:


AT&T still cutting prices to try to keep & win new biz:

Bottom Line: Now that 4th quarter reports have come in from the major mobile service providers a new theme has emerged. AT&T is losing significant ground. During the fourth quarter:

  • Verizon gained a net 1.6 million new customers
  • T-Mobile gained a net 869,000 new customers
  • AT&T fell to third adding 566,000 new customers

So AT&T decided they better cut prices. Over the weekend AT&T announced a new family plan:

  • Up to four devices on unlimited talk and texting along with 10GB of data for $160 per month

According to my research that should save the average family that currently uses four devices about $100 per month. So if you’re an existing customer I’d get in touch with them to see if you can save significantly.

Audio Report: