Health Insurance and ERE

[TopHatFox]

From what I've read and somewhat experienced, uninsured health expenses can be astronomical in America, enough to bankrupt even an extreme saver.

I'm curious how ya'll chose your insurance, what it generally covers, how much it costs, and how you found it. Does your insurance cover dental & vision as well?

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I think the best way to buy insurance is the high deductible way, to prevent catastrophic expense but avoid high recurring expenses. I'm not sure if this strategy would work in the early accumulation stage, though. Paying a high deductible when you don't have much saved to begin might lead to debt if high medical expenses occur, or depletion of early savings.

I think I'd like to have a high deductible health insurance accounted for in my saving strategy. For example, if my deductible is 5k a year, I think I'd like 5k a year of passive income that I don't use. If I break something and need to pay 5k for a few years, fine. If I don't, the 5k would compound and give me more money down the line. I think that's acceptable peace of mind for the likely few extra years required to save an additional $125,000 past annual expenses. It also seems like Medicaid can be had if annual income is low enough, could be useful using post retirement income.

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Also, why does health insurance exist? Wouldn't it be easier to just make the procedures affordable to begin with--why the middle company?

[Chris]

Also, why does health insurance exist?

Because if a type of insurance can exist, it will (-:

IIRC, health insurance became a popular employee benefit during WWII. The government instituted controls on wage increases, so employers began offering health insurance as a benefit (since it didn't count as compensation). After the war, the workforce swelled, and you had a large percentage of the population no longer paying for heath care out-of-pocket. And in that environment, people's attitudes toward healthcare consumption changed.

[startbyserving]

From what I've read and somewhat experienced, uninsured health expenses can be astronomical in America, enough to bankrupt even an extreme saver.

Just to clarify that these issues being limited to uninsured individuals is a myth.

http://www.cnbc.com/id/100840148#.
http://www.investopedia.com/slide-show/ ... -bankrupt/

#1 cause of BK - Medical Bills:
"A study done at Harvard University indicates that this is the biggest cause of bankruptcy, representing 62% of all personal bankruptcies. One of the interesting caveats of this study shows that 78% of filers had some form of health insurance, thus bucking the myth that medical bills affect only the uninsured. "

78% Had Health insurance!

Sorry, I don't have any solutions not already mentioned on this board. http://www.investopedia.com/articles/pf ... l-debt.asp mentions some weak (too little too late) points. I.e. Don't put medical bills on credit cards or take out home equity loans to cover them. In other words "Don't pay them if you can't afford to"

You can purchase disability insurance, but this only covers you while you are working. Aflac's most well know coverage to minimize deductibles is a possible solution.

Medical Expenses are a big reason behind my move to reduce sugar consumption and try to eat more vegetables. - I initially began reducing sugar after reading some articles about persons that completely eliminated sugar from their diets. They even listed "Improved mental health" among the list of experienced benefits.

Simple Math shows how much better a situation an extreme saver can be in. Situation: $20,000 in Co-pays / Co-insurance and 3 months off work.

Individual 1: $110K Net income. $100K annual Expenses. 5K Emergency Fund. (Checking) No investments. ($5K Net Liquid Worth)

Individual 2: $15K Net Income $5K annual Expenses. 5K Emergency Fund. $200,000 in investments. ($205K Net Liquid Worth)


Individual 1 outcome: 5K - ($100K/4) - 20K = -$40K Net Liquid Worth

Individual 2 outcome: 205K - (5K/4) - 20K = $183750 Net Liquid Worth

Of course this comparison obviously "isn't fair" since individual 2 has more money to begin with. (I don't remember mentioning life being "fair")

Note that I didn't calculate any passive income for individual 2. It's very likely their Net Worth could have risen while temporarily disabled! There are a ton of variables like multiple incomes, change in expenses while unemployed, Etc. Also note that the individuals income does NOT have any bearing on the calculation! Because the individual is not working, the only numbers changing the Net Worth are Expenses! (And any passive income, which I didn't include in my example.)

Medical bills are scary because the magnitude is unpredictable. At the end of the day a large portion can be categorized as "Foreseeable Unexpected Expenses" You can try your best to beat the odds, but if you ever end up with a hospital bill should you really be THAT surprised? (Like shouting: "I changed my oil on time, but my car broke down! This is an Unexpected expense I can't afford!") Again there's little you can do about the extreme outliers other than have good coverage and hope for the best. Still like all other expenses, many medical bills can be anticipated. - As far as the things in the 100k's I think a number of people here would be refusing treatment or looking at other alternatives.

- I'm still new here, so anyone feel free to correct me or provide more relevant examples.

[workathome]

Last year was expensive for us - 2 unexpected surgeries. We had a "Bronze" plan and ended up paying over 10k out of pocket. I decided to switch to the Silver plan this year "just in case". Then low-and-behold this month was insane. We had 3x emergency room visits, 1 ambulance ride, and 1 hospital stay. We maxed out the deductible on our Obamacare Silver plan. IMO it's pretty affordable if you're near the max subsidy.

For example: If my family of 3 earns $28k/year, our silver plan would only cost $82/mo ($984/year or $328/year per person).

With that we have a $2,800/year deductible and a $12,000 max out of pocket, but hopefully it almost always comes in significantly below that - even with a couple emergencies. Right now, we're looking at $4,500 ($2,800 deductible + co-pay) out of pocket (so far?) this year, plus our premium payments.

So yeah, hopefully we have no more bad years, eh?

[Peanut]

I hope that everything is ok now, workathome!

We had a high-deductible plan for a year or so during self-employment period (before ACA). It sucked. Following Murphy's law you always end up with high out-of-pocket expenses and the insurance company screwing you for preexisting conditions (like pregnancy!).

I have an aunt and uncle who used to go uninsured because they had megabucks. Somehow she was highly skilled at negotiating costs down. They paid for crazy things like yearly full-body scans that normally run 10k. Whenever I've tried negotiating I didn't get anywhere.

[FRx]

A high deductible plan is the way to go. I recall that they are being curbed quite a bit with the Affordable Care Act. So you perhaps won't be able to just get a catastrophic insurance. However, at least in America, you would almost never go bankrupt from health care expenses because the public hospitals and clinics will do many of the procedures that the private ones offer for either free or a significantly reduced cost. If you have no insurance and let's say you fall down the stairs and break a hip, you can call 911, be taken to a county hospital, get state of the art care and you won't be paying anything until after you are discharged. It's then up to you to negotiate and haggle the price down. Most county hospitals will expect you to pay what you can but almost never the actual cost of the entire stay/procedures.

As for why insurance exists. I think the other person said it best, if something can be insured, then it will. In America people use hospitals and clinics to such an excessive amount that it's obviously not sustainable. The ER's are overrun by people with cold and flu symptoms and the really sick are having to wait hours for care. We MRI and CT everything because of fear of getting sued by the patient or by the family in case of wrongful death. So as physicians we certainly contribute partially to rise in healthcare cost but it's mostly fear driven and not evidence based.

The average person can VERY easily get through their entire life never obtaining health insurance. You can negotiate most things with hospitals and clinics. Surgeries can be had for less than $!0,000. Medications can be purchased for very cheap when you forgo the "new" medications that are all the rave and stick with the ones that have worked well and doctors are actually familiar with. You can get an xray at an imaging center for sometimes $30 while your healthplan will charge you $250. CT's for $150 while they are billed at $600. MRI's for $300 while they are billed at $1,500. But as mentioned, imaging is overutilized in this country just any new technology in any field is.

The only truly expensive things in this country still for out of pocket payers is cancer treatment and HIV/Hepatitis B/C care. However, there are many organizations that thankfully exist to help out with the infectious disease ones. As for cancer that can get very pricey depending on what you chose to do.

[workathome]

@Peanut - Thanks, everyone is fine now!

[Sclass]

Good info FRx. Thanks.

I'm on Obamacare bronze. Before I had a $7500 deductible plan. I don't mind paying a few grand to save myself. I guess I want to insure against a catastrophe like chemo.

Getting hospitalized is a growing fear as we age. I had a half million dollar heart surgery a few years ago paid for by employee insurance. It was priceless though considering I was a walking dead guy at the time.

I don't have much to contribute on this but I struggle to live without fear of bankruptcy. My solution so far is to just have enough money to pay what my high deductible insurance won't.

This thing puts a real damper on early retirement. But retiring with Medicare benefits is a crap compromise because I'd waste the next 25 yrs in bondage. Roll the dice.

That being said my life has been influenced by healthcare cost anxiety. I've dumped a bunch of toys (mountain bike, skis, motorcycles, rollerblades) in anticipation for a move and I've justified not replacing them to reduce the risk of getting injured. Silly I know but one slip on the dirtbike can mean $5k out of pocket. Maybe more since my insurers don't always pay for all services.

Hopefully I'll be healthy till I'm 99 then just keel over and die.

[FRx]

These days needing hospitalization is a lot less common though many clinics/hospitals will of course push it on you since the insurer will pay much more for hospitalizing a patient than treating them outpatient. Many ER docs are "encouraged" by their CEO's to hospitalize certain group of patients. This isn't a conspiracy theory, it's the nature of medicine. Not only does it sometimes pay more to the medical group it's also safer for a doc to just put you in the hospital. They know you will take the meds you are supposed to, they can draw blood every day to make sure nothing bad is happening. But then we expose you to all sorts of inpatient bugs.
I don't know your medical history Sclass but gosh don't be so pessimistic or fearful of needing to go to the hospital or doing something really bad to yourself. It won't serve you well. Be active, stay healthy, and before you take on an activity know your risks. Nothing wrong with picking safer activities. A 20 yo can crank their knee pretty good without injuring it, someone my age 35 would be ok but likely will tear a ligament with a bad enough torque and someone older may do even worse and break something.
A great healthcare provider will give you many options as to what you can do and will help keep you out of the hospital. And I don't know if I fully grasped your comments about medicare. Just wanted to mention that thankfully medicare in this country is one of the better payers and no matter how much heat it gets it's taken my most providers and pays well which means you will get pretty good care. The issues with medicare is the complexity of it, that it's wasteful and that it gets abused a lot by shady health groups. But for an individual medicare is fantastic.

[DSKla]

I signed up for the cheapestplan through work, which was only $9/month for my part (good plans were around $54/month). I did it because at the time, I had not been to a doctor for any reason in almost 8 years, and when I had gone, it was super minor visits.

Naturally, as soon as I got on that plan, I ended up needing two surgeries to repair four hernias, and maxed my out of pocket expenses at $4000. For me, needing healthcare has been a black swan. I almost never have medical problems, but when I did, I was caught underprepared.

Now I am deciding whether to up my coverage and lower my out of pocket during the next open enrollment period in November. It's still very borderline. I could easily reopen a hernia and need to spend the full amount, or I could go years without seeing a doctor again. The longer I go, the more I have from employer contributions to my HSA, and therefore the lower my out of pocket. Last time, I was able to reimburse myself for $950, bringing my cost closer to $3k. If I have another issue soon, the HSA is dry. If I can wait, it'll slowly replenish.

Right now, my instinct is to keep the super cheap HSA plan since my maximum downside is about $4k, but I am saving roughly $500/year on this plan versus one that would keep my total out of pocket costs in the triple digits. My total medical expenses for the past decade or so have been a net of $3k, but all of that was in one fell swoop.

[Peanut]

That being said my life has been influenced by healthcare cost anxiety. I've dumped a bunch of toys (mountain bike, skis, motorcycles, rollerblades) in anticipation for a move and I've justified not replacing them to reduce the risk of getting injured. Silly I know but one slip on the dirtbike can mean $5k out of pocket. Maybe more since my insurers don't always pay for all services.

This seems like a sad way to live. If you still enjoy all those sports it seems a shame to curtail them before you have to. Presumably you're proficient on all of them and could therefore dial it down a bit but still enjoy the activity?

Re: medicare--isn't anyone eligible after 65. Is it dependent on work history?

[Peanut]

I signed up for the cheapestplan through work, which was only $9/month for my part (good plans were around $54/month). I did it because at the time, I had not been to a doctor for any reason in almost 8 years, and when I had gone, it was super minor visits.

Naturally, as soon as I got on that plan, I ended up needing two surgeries to repair four hernias, and maxed my out of pocket expenses at $4000. For me, needing healthcare has been a black swan. I almost never have medical problems, but when I did, I was caught underprepared.

Now I am deciding whether to up my coverage and lower my out of pocket during the next open enrollment period in November. It's still very borderline. I could easily reopen a hernia and need to spend the full amount, or I could go years without seeing a doctor again. The longer I go, the more I have from employer contributions to my HSA, and therefore the lower my out of pocket. Last time, I was able to reimburse myself for $950, bringing my cost closer to $3k. If I have another issue soon, the HSA is dry. If I can wait, it'll slowly replenish.

Right now, my instinct is to keep the super cheap HSA plan since my maximum downside is about $4k, but I am saving roughly $500/year on this plan versus one that would keep my total out of pocket costs in the triple digits. My total medical expenses for the past decade or so have been a net of $3k, but all of that was in one fell swoop.

Sorry to hear about your surprise surgeries.
Save $500, pay $4000, or pay $500, pay ? Does sound like it's a close call. Depends on your age, I'd say, and how well you feel now.

$500 is a significant sum (to me), but if worry about something causes you stress, that's something worth paying for right there.

[workathome]

So I ran the math for my family of 3, assuming a subsidy at a $28k salary. YMMV.

IF total billed to insurance < $5,000 THEN get the BRONZE plan.
IF total billed to insurance > $5,000 AND < $25,000 THEN get the SILVER plan.
IF total billed to insurance > $25,000 THEN get the GOLD plan.

My yearly insurance premiums were:
Bronze = $340
Silver = $2,480
Gold = $4,990
Platinum = $8,330

My "Total Max Out-of-Pocket" (premium + Out-of-Pocket max) for a worst possible case scenario was:

Bronze = $12,340
Silver = $14,480
Gold = $9,990
Platinum = $10,330

So if I expect to continue having "worst case scenarios" every single year, I'd go for the Gold with a total cap of ~$10k. If it happens to you, I think it may be necessary to aim for a MMM-level budget and retirement asset base (around 400k per adult). Though I haven't looked into medicaid, etc.

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TL;DR If you have a really healthy family, get a Bronze plan for cheap after tax subsidy.

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*Edit:* The above is actually incorrect and only accounts for the tax-credit subsidy. There is a very significant "cost sharing subsidy" available at low incomes and only on silver plans. So, for my family of 3 at 140% poverty level, the silver plan would be effectively upgraded to a "platinum" plan.

So the monthly insurance premiums would stay the same ($2,480), but our total "Worst Case Scenario" (Premium + Out-of-Pocket max) would be reduced to $4,480. This is certainly a lot nicer than the above scenario, with a base expense ratio of $200/month, assuming no additional health expenses, with the "worst case scenario" only costing $4,480/year (or $370/month) - that's half of what I was estimating above with only a tax subsidy!

(Note: ~28k for a family of 3 is the optimal point for maximizing subsidies. You want to be above 138% to qualify for ACA and avoid expanded medicaid, but below 150% to maximize your tax and cost sharing subsidy. For an individual, the ideal income range would be between $16k and 23k.)

Edit 2: I edited this post too much.

[vexed87]

Thank goodness for the UK's National Health Service, though we pay for it in taxes. At least it's always there, whether we are working or not. A boon for ERE'ers in the UK.

[Sclass]

. Presumably you're proficient on all of them and could therefore dial it down a bit but still enjoy the ?

Re: medicare--isn't anyone eligible after 65. Is it dependent on work history?

To clarify What I mean about Medicare (fine system FRx) is I retired at 43 with no insurance. I wasn't about to wait till my 60s to retire just because I needed free healthcare. Same is true for social security benefit checks. I had a ton of coworkers who just counted off the days till they'd be eligible for this stuff and I just couldn't even stand the thought of waiting around doing something I didn't like for another 20 yrs like them. Not how I want to spend my finite life...hence why I hang out here with like minded people. I kind of said it in an odd way above.

When I left my last post my CEO used health insurance as a lever on me. He used that as a bargaining chip to make me stay. Money was off the table so that was all he had. He warned me that I could no longer get insured on my own after open heart surgery. At the time I was angry and stubborn and just left. But trying to insure myself before Obamacare (2012) was a nightmare.

As for activities, all those things I gave up waste a lot of space and money. I did enough of that mindless stuff in the last thirty years. My needs have changed. I don't need to be dragged up a hill in some expensive place to feel good. Nor do I have to blast through the woods on a dirtbike at some blinding speed. Safety is just another reason to quit...in addition to money, conservationism, and my upcoming move. This is for another post.

[workathome]

Updated my post above. I didn't realize there were two subsidies available - tax and cost sharing.

[Tyler9000]

Updated my post above. I didn't realize there were two subsidies available - tax and cost sharing.

Yep. Under the present system, a silver plan is likely always the best deal for people who qualify for cost sharing.

Our ACA premium for the two of us (with an engineered $22k income for ACA optimization purposes) is less than $80/month with a $150 deductible and a $2k out of pocket max. That's a much better deal than my previous employer-provided insurance.

Then again, there's a good chance that subsidies will change over time (perhaps as early as June when the Supreme Court rules on the most recent challenge) and I realize that. Every year, I plan to evaluate all of my options and make the best decision on insurance I can. Planning for flexibility, rather than demanding permanent perfection up front, is a pretty good mindset in a lot of things.

[workathome]

Do IRA contributions get added back into ACA MAGI calculations? I'm getting mixed information.

These pages state that you can't lower income with traditional IRA contributions: https://turbotax.intuit.com/tax-tools/t ... 22699.html and http://fairmark.com/retirement/roth-acc ... ss-income/ - but elsewhere people are assuming they can reduce MAGI with IRA contributions.

Additionally, if your income is too low, it looks like Roth IRA conversions *do not* count towards MAGI, so one couldn't try to generate a higher income that way for ACA subsidy purposes.

It looks like the main levers for adjusting MAGI would be modifying investment strategies - such as seeking or not taking Interest/Dividends/Capital Gains.

[George the original one]

Additionally, if your income is too low, it looks like Roth IRA conversions *do not* count towards MAGI, so one couldn't try to generate a higher income that way for ACA subsidy purposes.

That's counter to everything I've understood. Do you have a source we can check?

[George the original one]

Ah, maybe it is confusion between the different MAGIs? Roth IRA conversions do not towards the MAGI for the purposes of determining maximum Roth IRA contributions (otherwise you'd try to do a large conversion and discover you exceeded your income limit for contributions). I believe that's different from the MAGI used to calculate the ACA subsidy.