Health Insurance Deductible

What Is a Health Insurance Deductible?

A health insurance deductible is the amount of money you pay out of pocket for healthcare services covered under your insurance plan before your plan begins to pay benefits for eligible expenses. The amount you pay for a health insurance deductible is determined by the type of health insurance plan you have and your coverage benefits.

As a general rule, the higher your premium, the lower your deductible is likely to be. Similarly, a higher deductible can result in a lower monthly premium. Your monthly premium is the fee you pay on a recurring basis to your health insurance company to provide you with coverage.

How Health Insurance Deductibles Work

When you buy health insurance, you pay a monthly premium for your coverage. However, that isn't the only expense you'll have. Health plans usually include a deductible that you must pay before your insurance plan will start to cover your eligible healthcare expenses.

If your health insurance plan has a deductible of $3,000, for example, you will have to pay all of your eligible medical expenses until you have met that $3,000 deductible. At that point, your insurance will start paying for the services you use (although the amount it pays may not entirely cover the cost of care).

If you have individual coverage, you may pay one deductible for eligible healthcare expenses and another toward prescription drugs. If you have family coverage, you may pay individual deductibles for each person who's covered, as well as a family deductible for the policy. Sometimes an insurance plan will pay for certain covered services, such as preventive care, without requiring you to pay anything toward them to meet your deductible.

Health insurance deductibles are a way for insurance companies to reduce risk, says Larry Medcalf, an Indiana-based health insurance agent. "It's less money they have to pay out of their pockets," he says. Insurance companies also charge deductibles as a cost-saving measure. The logic is that anyone who is insured and has to pay out of pocket will think twice before using an emergency room or medical services if they don't need them.

Co-payments and coinsurance

When assessing health insurance coverage, it's also important to understand what the deductible does and doesn't cover. "Any approved medical charges that you pay out of pocket will usually go towards your plan's deductible for the year," Medcalf says. Co-payments are typically considered exceptions to this rule. Your co-pay is a set dollar amount that you pay for doctor visits, prescription drugs, or visits to an urgent care facility. These amounts may not count toward your deductible for the year.

Co-payments are not to be confused with coinsurance, which is the amount you pay for medical services once you've met your deductible and your plan begins to pay. The amount you pay for your deductible, co-payments, and coinsurance all count toward your annual out of pocket maximum, which is the maximum amount you'll pay before your insurance plan begins paying 100%.

Average Deductibles and High Deductible Health Plans In 2018, the average health insurance deductible for Americans covered by an employer's healthcare plan was $1,350. That applies to single-person coverage and is the minimum threshold for a high deductible health plan (HDHP). These plans carry higher deductibles, but they offer a trade-off in the form a health savings account (HSA) that can be used to save for future health care expenses on a tax-advantaged basis.

The key benefits of an HSA linked to a high deductible health plan include tax-deductible contributions, tax-deferred growth, and tax-free distributions for qualified medical expenses. To qualify as a high deductible health plan, the minimum deductible for single coverage must be $1,350 or higher for 2019, or $2,700 or higher for family coverage.

Comparing Health Insurance Deductibles

When comparing health insurance plans, it's helpful to weigh the amount of the deductible, what your plan covers, and how often you need medical care. If you don't see the doctor that often, it's possible that you may not meet your plan's deductible for the year based on what you spend out of pocket for health care. In that scenario, you'd have to consider whether it would make more sense to opt for a plan with a higher premium to get a lower deductible or vice versa.

Also, if you're married, compare the deductible for your spouse's health insurance coverage and how that deductible might change if you decide to add yourself to their insurance on a family plan. Depending on how their plan is structured, it may be more or less affordable to go from single to family coverage.

Health Insurance Deductibles and Marketplace Plans

If you're getting health insurance through the federal marketplace, compare the different tiers to determine which one is best. The four tiers available are Bronze, Silver, Gold, and Platinum. (There's also a Catastrophic plan that has a very high deductible $7,900 in 2019 for people under age 30 or those who have a hardship or affordability exemption.) At the Bronze level, you would typically have the lowest monthly premium, but you'd likely pay the most for deductibles among the four plans. At the other end of the spectrum, a Platinum plan would offer the most coverage for healthcare plus the lowest deductible.

That could be good if you have higher costs for things like routine care, specialists, or prescription drugs. The trade-off is that Platinum plans will be most expensive with regard to premiums. Also, determine whether you qualify for any cost-sharing discounts. You must enroll at the Silver level or higher, but if a cost-sharing reduction is available, this can discount the amount you pay for your deductible, co-payments, and coinsurance.

If you don't think you'll meet the plan's deductible for the year, it's possible to negotiate lower rates for care if you decide to self-pay instead of using your insurance coverage. Doctors, hospitals, and other healthcare providers may be willing to offer services at a reduced rate if you'd prefer to pay out of pocket. It's just a very big risk to take if you end up having a health emergency.

Command Economy Definition

What is a Command Economy?

A command economy is a system where the government, rather than the free market, determines what goods should be produced, how much should be produced, and the price at which the goods are offered for sale. It also determines investments and incomes. The command economy is a key feature of any communist society. Cuba, North Korea, and the former Soviet Union are examples of countries that have command economies, while China maintained a command economy for decades before transitioning to a mixed economy that features both communistic and capitalistic elements.

Understanding Command Economy

Also known as a planned economy, command economies have as their central tenet that government central planners own or control the means of production within a society. Private ownership or land, labor, and capital is either nonexistent or sharply limited to use in support of the central economic plan. In contrast with free market economies, in which the prices of goods and services are set by supply and demand, central plans in a command economy set prices, control production, and limit or entirely prohibit competition within the private sector. In a pure command economy, there is no competition, as the central government owns or controls all business.

Other Characteristics of a Command Economy

In a command economy, government officials set national economic priorities, including how and when to generate economic growth, how to allocate resources to production, and how to distribute the resulting output. Often this takes the form of multi-year plans that span the entire economy.

The government that runs a command economy operates monopoly businesses, or entities that are considered necessary in order to meet the goals of the national economy. In these cases, there is no domestic competition in those industries. Examples include financial institutions, utility companies, and the manufacturing sector.

Finally, all the laws, regulations and other directives are set by the government according to the central plan. All businesses follow that plan and its targets, and cannot respond to any free market forces or influence.

Drawbacks of Command Economies

With economic power consolidated in the hands of government planners and in the near or total absence of markets to communicate prices and coordinate economic activity, command economies face two major problems in efficiently planning the economy. First is the incentive problem, and second is the economic calculation or knowledge problem.

The incentive problem works in a few ways. For one, central planners and other policy makers in a command economy are all too human. Public Choice economists starting with James Buchanan have described the many ways in which state officials making decisions in their own interest can impose social costs and deadweight losses, which are clearly harmful to the national interest. Political interest groups and the power struggles between them over resources will tend to dominate policy making in a command economy even more so than in mixed or mostly capitalist economies because they are not constrained by market-based forms of discipline such as sovereign credit ratings or capital flight, so these harmful effects can be greatly increased.

Problems with incentives in a command economy also extend well beyond the central planners themselves. Because pay and wages are also centrally planned, and profits are attenuated or eliminated entirely from any role in driving economic decisions, the managers and workers of state-run enterprises have little or no incentive to drive efficiency, control costs, or contribute effort beyond the minimum required to avoid official sanction and secure their own place in the centrally planned hierarchy. Essentially, the command economy can dramatically expand principle-agent problems among workers, managers, producers, and consumers. As a result, getting ahead in a command economy means pleasing the party bosses and having the right connections, rather than maximizing shareholder value or meeting consumer demands, so corruption tends to be pervasive.

The incentive problems faced by a command economy also include the well known issue of the tragedy of the commons, but at a larger scale then in capitalist societies. Because all or most productive capital and infrastructure is commonly owned or state owned in a command economy and not owned by specific individuals, they are effectively unowned resources from the users' perspective. So all users have an incentive to extract as much use value as quickly as they can from the tools, physical plants, and infrastructure they use and little or no incentive to invest in preserving them. Things such as housing developments, factories and machinery, and transportation equipment will tend to wear out, break down, and fall apart rapidly in a command economy and not receive the kind of maintenance and reinvestment they require to remain useful.

The problem of economic calculation in a command economy was first described by Austrian economists Ludwig von Mises and F. A. Hayek. Setting aside any problematic incentives, the practical question of the who, what, where, when, and how of economic organization is a monumental task. Central planners must somehow calculate how much of each good and service in the economy to produce and deliver; by who and to whom; where and when to do so; and which technologies, methods, and combinations of specific types of productive factors (land, labor, and capital) to use. Markets solve this problem in a decentralized manner through the interaction of supply and demand based on consumer preferences and the relative scarcity of various goods and productive factors.

In a command economy, without secure property rights or free exchange of economic goods and productive factors, supply and demand can not operate. Central planners are left with no rational method to align the production and distribution of goods and productive factors with consumer preferences and the real scarcity of resources. Shortages and surpluses for consumer goods, as well as productive resources up and down the supply chain, are the common hallmark of this problem. Tragic and paradoxical situations tend to crop up, such as bakery shelves standing empty and people going hungry while grain spoils in warehouses because of plan-mandated regional storage quotas, or vast numbers of trucks being built and then standing idle to rust because not enough trailers are available at the time.

Over time, the incentive and economic calculation problems of a command economy mean that enormous amounts of resources and capital goods are wasted, impoverishing the society.

Arguments in Favor of Command Economies

Command economies retain their supporters. Those who favor this system argue that command economies allocate resources to maximize social welfare, while in free-market economies, this goal is secondary to maximizing private profit. Additionally, proponents allege that command economies have better control of employment levels than free-market economies, as they can create jobs to put people to work when necessary, even in the absence of a legitimate need for such work. Lastly, command economies are widely believed to be superior for taking decisive, coordinated action in the face of national emergencies and crises such as wars and natural disasters. Even mostly market-based societies will often curtail property rights and greatly expand emergency powers of their central governments during such events at least temporarily.

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3 Ways Traders Are Gaining Exposure to Rapid Changes in Technology

Innovative technologies are reshaping the way that we as humans live and work. Companies that specialize in the types of products that are changing the global economy are the focus of long-term investors and active traders alike. As you'll see in the charts below, now could be an ideal time to increase exposure to this in-demand market segment.

SPDR Kensho New Economies Composite ETF (KOMP)

Investors who are most interested in adding exposure to innovative companies are often prudent to examine the top holdings of exchange-traded products such as the SPDR Kensho New Economies Composite ETF (KOMP). For those unaware, the fund's managers seek to utilize artificial intelligence and quantitative weighting to track an index of companies that leverage exponential processing power, robotics, AI, and automation.

As you can see below, the price of the fund has recently surpassed the combined resistance of the 200-day moving average and influential trendlines. These levels will most likely be used by followers of technical analysis as guides for placing buy and stop orders. More specifically, at current levels, the momentum is in clear control of the bulls, and most traders will likely protect against a sudden shift in sentiment by placing stop-loss orders below $33.79.

iRhythm Technologies, Inc. (IRTC)

One method for finding innovative companies that could be leveraged by traders is to explore the top holdings of ETFs such as KOMP. For example, taking a look at the chart of iRhythm Technologies, Inc. (IRTC), you can see that the price of the stock has been trading within a period of consolidation over most of the past 12 months.

However, as of 2020, you can see that the price has started to make a move higher. The upward shift of the moving averages, which was initiated by a bullish crossover in January, is a sign to many traders that a long-term uptrend is in the early stages. From a risk management perspective, stop-loss orders will most likely be placed below $109.91 or $84.08, depending on risk tolerance and investment horizon.

Masimo Corporation (MASI)

For followers of technical analysis, another innovative medical device company and top holding of the KOMP ETF that could be worth a closer look is Masimo Corporation (MASI). As you can see from the chart, the bulls have been in clear control of the momentum since last summer.

Active traders will likely want to note how the selloff in March sent the price toward the long-term support of the 200-day moving average and how it was quickly met by increased buying pressure. The impressive bounce from the long-term support levels was enough confirmation for the bulls to reaffirm the strength of the underlying uptrend. Based on this pattern, bullish traders will most likely look to add to their positions on any short-term retracements such as the recent move toward the support of the 50-day moving average.

The Bottom Line

Innovative companies are reshaping the world that we live in, as shown by the strong performance of funds such as the SPDR Kensho New Economies Composite ETF. It is interesting to note how medical device companies have recently started to move their way into the top holdings, and as shown on the charts discussed above, it appears as though we could be in the early stages of a major move higher.

At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.

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4 problems with Biden’s plan to cancel student debt

If you paid off a student loan recently, maybe you should have waited since incoming President Joe Biden may cancel billions of dollars in outstanding student debt.

After the coronavirus outbreak last April, Biden, then the apparent Democratic presidential nominee, announced a new plan to cancel at least $10,000 in student debt for borrowers below a certain income threshold. That was a nod to liberal Democrats such as Bernie Sanders and Elizabeth Warren, who favor more generous student debt forgiveness. Now that Biden has won the White House, education groups and consumer advocates are pressing Biden to honor his promise and up the ante, by canceling up to $50,000 in student debt soon after he becomes president next year.

About 45 million Americans hold a student loan, with student debt in the United States totaling $1.5 trillion. The average loan per student is more than $30,000. Some of those loans are private deals between borrowers and banks, which the government can’t easily change. But nearly 90% of all debt is federally authorized, and some legal experts think the president can cancel those loans by executive order, with no legislation required.

The rationale for canceling student debt is to help struggling borrowers who can’t get ahead because their debt burdens are too high especially those who took out loans but never finished college and don’t have the degree that’s supposed to help them earn more money. Some advocates favor income caps that would exclude borrowers from wealthier families and target the aid to those who need it most.

But student debt forgiveness is controversial, and pushback is forming now that Biden will finally be in a position to cancel some loans. Here are 4 problems with the idea:

It’s expensive. Biden wouldn’t cancel the entire $1.5 trillion in student debt, but if he forgave just one-fifth of that, the total would be $300 billion, which is a big number in federal budget terms. Biden says he’d reverse a tax cut in the CARES Act, passed last March, to help pay for it, but getting Congress to pass a de facto tax hike is likely to be very difficult, especially since Biden’s Democrats will either be the minority party in the Senate or hold a one-seat majority. Passing a tax hike might be easier once the coronavirus recession is long past, but it seems very unlikely within the next year or two. The Biden administration would probably just borrow to cover the cost, pushing up the national debt.

It barely helps the economy. This might be counterintuitive, since an individual freed from $10,000 of debt might experience welcome and newfound financial freedom. But forgiving debt does a lot less for the economy than putting money directly in people’s pockets, since it doesn’t provide new money to spend and the savings typically come over a long period of time. The Committee for a Responsible Federal Budget estimates that forgiving all $1.5 trillion in debt would only provide a stimulus effect to the economy of $360 billion, at best.

Other forms of stimulus, such as enhanced unemployment benefits or direct aid to cities and states, would have three to four times that effect on the economy, in terms of stimulating new output. Many economists agree that canceling student debt provides poor bang for the buck, including prominent Democrats such as Jason Furman, who served as President Obama’s chief economist.

There’s a fairness problem. Biden would probably couch student aid forgiveness as an emergency response to the coronavirus recession, meant to help people who might otherwise be doing okay if businesses weren’t forced to close or stop hiring. But there’s still an inequity between people with lucky timing who, say, just graduated and would have most or all of their debt forgiven, and others who have paid off some or all of their loans and would benefit less. Biden could try to formulate a plan with some sort of proportionality, but caveats would complicate the program and make it less effective.

The what-next issue. Would Biden forgive a fixed amount of debt at a single point in time and then leave it at that? He could. But forgiving student debt once would create a precedent to do it again, and some advocates, such as Bernie Sanders, want the government to cover the total cost of college for some or most students, forever. If so, all these problems would persist and some future borrowers might take out loans they can’t afford hoping the government will cancel them.

Despite these drawbacks, it seems likely Biden will pursue at least some student debt relief. Democrats can plausibly argue that if Republicans can cut taxes for the wealthy as they did in 2017 then surely it’s fair to give students and young workers a break, as well. It could also be good politics for Biden, since many student borrowers struggling the most are lower-income minorities Democrats want by their side in the 2022 midterm elections and future races beyond that.

Biden will need heads of the Treasury and Education departments willing to implement these plans. Treasury is important because the IRS, part of Treasury, normally treats forgiven debt as income. That would be counterproductive, so student-debt cancellation would have to come with a special provision directing the IRS to waive taxes on the benefit.

Former Federal Reserve Chair Janet Yellen Biden’s nominee for Treasury Secretary hasn’t taken a stance on student debt forgiveness. But in a 2014 speech as Fed chair, she did highlight the surge in student debt during the prior decade, and the disproportionate burden the rising cost of college puts on lower-income families. Like Biden, she too may come around to the idea of forgiving student loans.

Bitcoin at $100,000 in 2021? Outrageous to some, a no-brainer for backers

NEW YORK (Reuters) - Bitcoin investors, which include top hedge funds and money managers, are betting the virtual currency could more than quintuple to as high as $100,000 in a year.

It's a wager that has drawn eye-rolls from skeptics who believe the volatile cryptocurrency is a speculative asset rather than a store of value like gold.

Since January, bitcoin has gained 160%, bolstered by strong institutional demand as well as scarcity as payment companies such as Square and Paypal buy it on behalf of customers.

Bitcoin is within sight of its all-time peak of just under $20,000 hit in December 2017. It debuted in 2011 at zero and was last trading at $18,415.

Going from $18,000 to $100,000 in one year is not a stretch, Brian Estes, chief investment officer at hedge fund Off the Chain Capital, said.

"I have seen bitcoin go up 10X, 20X, 30X in a year. So going up 5X is not a big deal."

Estes predicts bitcoin could hit between $100,000 and $288,000 by end-2021, based on a model that utilizes the stock-to-flow ratio measuring the scarcity of commodities like gold. That model, he said, has a 94% correlation with the price of bitcoin.

Citi technical analyst Tom Fitzpatrick said in a note last week that bitcoin could climb as high as $318,000 by the end of next year, citing its limited supply, ease of movement across borders, and opaque ownership.

Those numbers though are a head-scratcher for Toronto-based Kevin Muir, an independent proprietary trader.

"Any hedge fund model on bitcoin is rubbish. You can't model a mania," Muir said. "Is it plausible? For sure. It's a mania. But does anyone actually have a clue? Not a chance."

For a graphic on Bitcoin's 2020 rally:



Bitcoin relies on so-called "mining" computers that validate blocks of transactions by competing to solve mathematical puzzles every 10 minutes. The first to solve the puzzle and clear the transaction is rewarded new bitcoins.

Its technology was designed to cut the reward for miners in half every four years, a move meant to curb inflation. In May, bitcoin went through a third "halving," which reduced the rate at which new coins are created, restricting supply.

That halving has kickstarted bitcoin's renewed ascent.

Square's Cash App and PayPal, which recently launched a crypto service to its more than 300 million users, have been scooping up all new bitcoins, hedge fund Pantera Capital said in its letter to investors on Friday. That has caused a bitcoin shortage and has driven the rally in the last few weeks.

For a graphic on Bitcoin: a volatile history:



The so-called whale index, which counts addresses or wallets holding at least 1,000 bitcoins, is at an all-time high, said Phil Bonello, research director at digital asset manager Grayscale. Bonello said more than 2,200 addresses were linked to large bitcoin holders, up 37% from 1,600 in 2018, suggesting that institutional money has stormed in.

Investors like Stanley Druckenmiller, founder of hedge fund Duquesne Capital, and Rick Rieder, BlackRock Inc's chief investment officer of global fixed income, have recently touted bitcoin.

Retail investors though are still mostly sidelined due to the pandemic's effect on the economy. But with the entry of Square and PayPal, Lennard Neo, head of research at crypto index fund provider Stack Funds, expects a deluge of retail demand more intense than in 2017.

Neo forecasts bitcoin to reach $60,000-$80,000 by the end of 2021.

Tempus Inc currency trader Juan Perez was unimpressed, even shocked, with all the lofty forecasts and said a bet on bitcoin at $100,000 next year would be a bet on the collapse of the global financial system.

"Governments around the world won't let that happen. They will not let fiat currencies collapse just like that," Perez said.

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