White Coat Investor Podcast Episode #409: Tail Coverage, Whole Life, and Other Insurance Questions

Release Date: March 6, 2025

Dr. Jim Dahle and Dr. Michelle Lee delve deep into various insurance-related topics in this episode, providing invaluable insights for high-income professionals, particularly those in the medical field. The discussion covers everything from understanding tail coverage and the pitfalls of whole life insurance to navigating the complexities of mortgage escrow accounts. A special guest, Dr. Bashir Mushir, offers a unique perspective from the insurance industry's side, enriching the conversation with his professional experiences.

1. Guest Interview: Dr. Bashir Mushir on Insurance Companies' Perspective

Career Journey and Transition to Health Plans

• 00:00 - 01:24: Dr. Jim Dahle introduces the episode and the overarching theme focused on insurance questions relevant to medical professionals.

• 07:00 - 07:48: Dr. Bashir Mushir shares his extensive experience, starting with 25 years in a primary care practice in suburban Milwaukee. His transition to the role of Chief Medical Officer (CMO) for a local health plan was gradual, influenced by his involvement in hospital administrative work from 2016 to 2021.

  "I think once you start to realize that, hey, there's probably some benefit to having docs at the table where decisions are made that can influence how practices and care is delivered, it's probably important to have our voice in the room."
  — Dr. Bashir Mushir [07:48]

Understanding Insurance Denials and Guidelines

• 11:37 - 17:25: The conversation shifts to the intricacies of insurance denials. Dr. Mushir explains that insurance companies utilize comprehensive guidelines, such as those from Milliman Care Guidelines (MCG), to determine the appropriateness of medical procedures and treatments. These guidelines are evidence-based and designed to standardize care.

  "They're using what the literature says that we've published as physicians... and that same approach being taken for a number of different evidence summaries."
  — Dr. Bashir Mushir [11:54]

• 16:39 - 17:37: Addressing the common frustration among physicians regarding denials, Dr. Mushir clarifies that while initial denials can be disheartening, the appeal process often involves peer-to-peer discussions with specialists in the relevant field.

  "I have my own opinions on that... But that entire process involves a third-party outside reviewer."
  — Dr. Bashir Mushir [16:39]

Prior Authorizations and Compensation for Doctors

• 13:42 - 15:19: The hosts raise concerns about the administrative burden on doctors due to prior authorizations. Dr. Mushir acknowledges these challenges and discusses potential compensations for physicians handling these tasks, emphasizing the need for systemic changes to alleviate administrative pressures.

  "We have to attack it in terms of can we remove it altogether by using some automation tools."
  — Dr. Bashir Mushir [14:39]

Review Process and Insurance Company Challenges

• 21:28 - 27:58: Delving deeper, Dr. Mushir addresses the efficiency of the review process. He reveals that insurance companies continuously assess the necessity of prior authorizations based on approval rates. For instance, echocardiograms with a 95% approval rate were deemed unnecessary to require prior authorizations, leading to policy adjustments.

  "If we were approving this in a certain percentage, usually above 90%, does it make sense for us to do that? Let's just remove the authorization requirement altogether."
  — Dr. Bashir Mushir [25:47]

Profit Margins and Regulatory Constraints

• 27:50 - 28:15: A critical insight from Dr. Mushir highlights that health plans are bound by governmental regulations under the Affordable Care Act (ACA), mandating that a significant portion of revenue (typically 85-90%) be allocated to medical care. This dispels the misconception that insurance companies are reaping exorbitant profits.

  "The margins that some of the smaller health plans... are somewhat limited by a lot of governmental regulation that exists as well, which I think is a good thing."
  — Dr. Bashir Mushir [27:50]

2. Listener Questions and Expert Insights

A. Tail Coverage Explained

• 30:11 - 35:23: Dr. Dahle and Dr. Lee address questions about tail coverage, a crucial aspect of malpractice insurance. They differentiate between occurrence and claims-made policies, emphasizing the importance of tail coverage for professionals transitioning out of practice or changing jobs.

  "Tail coverage is at the end, the tail, the end part of your coverage, you know, the end."
  — Dr. Jim Dahle [32:05]

  Key Recommendations:

  • Negotiate tail coverage: Ensure that either you or your former employer covers the cost.
  • Consider new employer policies: Some may offer tail coverage as part of new insurance packages.

  "I would talk to the new employer, the new insurance carrier that's going to be covering you afterward into giving you tail coverage."
  — Dr. Jim Dahle [35:23]

B. Whole Life Insurance Concerns

• 37:11 - 51:50: A physician seeks advice on purchasing whole life insurance as a tax-saving strategy. The hosts strongly advise against it, highlighting the high costs, poor returns, and the primary intent of whole life policies being death benefits rather than investment vehicles.

  "Most likely it's a bad idea for you because it almost always is a bad idea to buy whole life insurance."
  — Dr. Jim Dahle [37:22]

  Critical Points:

  • High Premiums: Example given where a $100,000 annual premium yields minimal returns.
  • Poor Investment Returns: Dr. Lee shares a personal experience with a -33% return over seven years.
  • Sales Conflicts of Interest: High commissions for sellers create conflicts, steering professionals toward unsuitable products.

  "They get paid big commissions... that's a serious conflict of interest."
  — Dr. Jim Dahle [46:27]

  Alternatives Suggested:

  • Tax-Efficient Investments: Utilize taxable accounts, Roth IRAs, 401(k)s, etc., for better returns.
  • Consult Fee-Based Financial Advisors: Seek unbiased advice to avoid product-pushing sales tactics.

C. Annuities Discussed

• 52:03 - 56:05: Dr. Lakshmi Khonapu inquires about a specific fixed indexed annuity recommended by her CPA. The hosts caution against such products, emphasizing the difference between sales pitches and genuine financial advice.

  "You have mistaken a salesperson for a financial advisor... this is someone who is selling you a product."
  — Dr. Michelle Lee [53:04]

  Recommendations:

  • Seek Certified Financial Planners (CFPs): Opt for advisors who provide fee-based, unbiased recommendations.
  • Avoid Indexed Annuities: Generally deemed unsuitable for most financial strategies.

D. Mortgage Escrow Accounts

• 57:29 - 60:46: A homebuyer asks about the benefits of escrowing home insurance and property taxes. The hosts explain that lenders typically require escrow accounts to protect their investment, ensuring that insurance and taxes are paid even if the borrower fails to do so.

  "They want to force you to buy home insurance... because their investment is in this home."
  — Dr. Jim Dahle [57:55]

  Insights:

  • Escrow Necessity: Most lenders mandate escrow until the mortgage is paid off.
  • Financial Management: While escrow provides convenience, managing payments independently post-mortgage offers greater control.

3. Conclusion and Key Takeaways

• Financial Literacy is Crucial: Understanding the nuances of insurance products and financial strategies is essential for making informed decisions.

• Avoid Unnecessary Insurance Products: Whole life insurance and certain annuities often do not align with the financial goals of high-income professionals.

• Prioritize Tail Coverage in Malpractice Insurance: Essential for safeguarding against long-term liabilities.

• Seek Professional, Unbiased Financial Advice: Engage with certified financial planners who prioritize your financial well-being over product sales.

• Manage Escrow Accounts Effectively: Recognize the lender's role in mandating escrow accounts and plan your finances accordingly.

Notable Quotes

• Tail Coverage Importance
  "The last thing you want to do is retire, have some claim come up that you don't have coverage for, and all of a sudden now you're out the couple million dollars you were planning to live on in retirement."
  — Dr. Jim Dahle [32:30]

• Whole Life Insurance Pitfalls
  "Whole life insurance is a lifelong insurance policy. So no matter when you die, whether you die at 35 or 65 or 95, it's going to pay that death benefit to your heirs."
  — Dr. Jim Dahle [38:03]

• Annuities vs. Index Funds
  "Believe me, you have a better use for your money than dumping 30, 40, 50, $100,000 a year into whole life insurance."
  — Dr. Jim Dahle [49:04]

Final Thoughts

This episode underscores the importance of financial literacy and cautious decision-making, especially regarding insurance products that may seem beneficial on the surface but carry hidden drawbacks. By engaging with experts like Dr. Bashir Mushir and sharing real-life experiences, Dr. Dahle and Dr. Lee equip medical professionals with the knowledge to navigate their financial landscapes effectively.

For more insights and resources, visit White Coat Investor.