Health Insurance and Retiring Early

The cost of health insurance is one of the biggest reasons why people choose to continue to work even when they are ready to retire early. Premiums have skyrocketed over the last few years and options for coverage have started to dwindle with many insurance companies exiting the exchanges.

Allow me to rant for a moment on the healthcare industry itself and then we will discuss what health insurance options are available when you want to retire early.

I’ve always looked at health insurance as like a 4-ring circus. In one ring are the doctors and the hospitals. In the 2nd ring, you have the pharmaceutical companies and in the 3rd ring, you have the lawyers. In the 4th ring, you have insurance companies and the government.

The doctors and the hospitals are at the mercy of the insurance companies and the government (Medicaid) on how much they can get reimbursed for the services they perform. On the other hand, pharmaceutical and biotech companies are driving up the costs of their products. The lawyers are helping increase the costs because they file lawsuits, which in many cases are justified, but plenty of times frivolous. This drives up the cost of malpractice insurance for doctors and hospitals. These costs are passed on to us, the consumer, through higher costs for medical care.

In order to bring down the costs of health insurance, you just can’t say “If my doctor charged me less” or “Those damn drug companies are charging way too much” or “Screw all the lawyers” or “The insurance companies are all evil.”   Because in this 4-ring circus, every area has contributed to the rising healthcare costs.

I worked at a bank for fifteen years and about once a year I’d get a comment from someone that was annoyed with the bank “You banks have all the money.” I’d have to correct them “No, it’s the insurance companies that have all of the money.” Insurance companies are in the business to be for-profit.

In North Carolina, Blue Cross and Blue Shield of NC recently announced that they lost $38 million from plans offered under the Affordable Care Act (ObamaCare) in 2017. However, don’t feel bad for them because they netted $185 million last year in total profit. BCBS of NC has seven executives making over $1 million in compensation a year. That’s only in NC so how about the other 49 states?

Why is it that we can pay $500 for a month supply of a prescribed drug here in the United States but we can go to Canada and Mexico and buy the same drug for $150? We are being marked up to death here. It seems everyone at every step of the process of getting prescription drugs is getting a piece of the profit. Obviously, the pharmaceutical and biotech companies are getting their slice of the profit which they deserve as they developed the drug. However, also in the mix are the sales people that represent the drug and go out to sell it to the doctors. They are getting a cut. Doctors are getting kickbacks from pharmaceutical companies to prescribe certain drugs. Even pharmacies and some pharmacists are getting kickbacks from filling certain prescriptions. At the end of the day, there are a lot of people to pay... so we as consumers are paying that tab.

What are our health insurance options when we want to retire early?

1) The Affordable Care Act (ObamaCare)

Can we just drop the “Affordable” in the title and call it the Health Care Act because affordable it is not? In 2017, the ACA went through a lot of changes due to insurance companies dropping out of the exchanges and the bill as a whole being under attack to be repealed. In 2018, unless your insurance was subsidized by the government, you experienced a double digit increase in your health insurance cost through the exchanges. If you have a low to moderate income, you might be able to qualify for a subsidy, but most folks will find themselves ineligible to receive them. According to ehealth.com, the average individual health premium through Obamacare has increased 99% since 2013. The ACA works for some but doesn’t work for most.

I’m all for universal healthcare if done properly and at a reasonable price but to continue to play the profit game for the 4-ring circus is not something I’m interested in. 

2) Private Insurance

In 2017, according to ehealth, the average cost of health insurance for an individual with a private plan was $393 and $536 for a group health plan through an employer. (Your employer might be paying some or all of this for you.). For a family, the average cost for a private plan was $1,021 and $1,511 for a group or employer based plan. Keep in mind, that these are averages and the cost of a private plan for you will vary.

If you go the private plan route, what is the best way to go? My suggestion would be to compare the features and benefits of your options. If you are healthy, I like the idea of getting a high deductible plan or catastrophic plan so that you can keep the premiums lower. Then fund yourself a Health Savings Account (HSA) in order to set aside money for health care costs in the future. A HSA is a medical savings account that has some tax benefits. It can only be setup if you have a high-deductible health insurance plan.

A HSA contribution limit for 2018 is $3,450 for an individual and $6,900 for a family. Unused HSA balances can be rolled over each year unlike flex spending accounts that some employers offer. Flex spending accounts cannot be rolled over yearly. Your HSA account can cover deductibles, co-insurance payments or any medical costs that your private insurance plan does not cover.

Earnings on your HSA balance is not taxed. Whether you choose to setup your HSA with a bank at a fixed rate or set it up as a brokerage account and investment the money is up to you. Distributions to pay for qualifying medical costs are tax-free. Also, your contributions to your HSA is tax-deductible. Some employers offer to contribute to HSA’s for you and some might even have a payroll deduction for you to be able to contribute directly from your paycheck. I’d highly suggest you check into a Health Savings Plan if you have not already.

If you are self-employed, another option is a one person group health insurance plan. These plans are perfect for the individual working for themselves who has no other employees. Often times there can be some savings on these plans compared to individual plans but do check and see if they are available in your state. If you go this route, check with your accountant to see if you can write-off the cost of health insurance on your business tax return.

3) Faith Based Sharing Plans

Faith based medical sharing plans are quickly gaining popularity with people who are sick and tired of paying high premiums to insurance companies. Plans through companies like Liberty Health share or Medi-Share are not issued by insurance companies. Rather, these companies are setup as non-profit 501(c)3 faith based plans. The members of these plans are of the same religious beliefs and share in the health care costs.

There are some restrictions regarding pre-existing conditions and most will not allow members to be tobacco users. Some require you to attend church on a regular basis. I’ve heard that a few will require your minister to attest that you need medical attention. Be sure to read the fine print with these plans.

Normally these companies will offer several different packages that range in medical coverage for individuals and families. The Affordable Care Act penalty for not having health insurance is due to go away in 2019. These faith based plans do qualify as having medical coverage which allows you to avoid the penalty for 2018. These plans can be quite a bit less expensive than going to the marketplace and finding health insurance.

These types of plans certainly give you another option to think about. Please do your homework because, depending on the company, these plans and what they cover can vary dramatically.

4) A la Carte Plans

With the penalty for not having health insurance going away in 2019, you might be able to create your own type of health coverage. For example, you’ll probably still need a catastrophic type plan in case you have a major accident or illness. However, your basic needs might be covered by going to a pharmacy that has a walk-in clinic. Urgent care clinics tend not to be too overboard in pricing. Telemedicine is quickly gaining traction among early retirees who are traveling because they can call in, speak with a doctor and have a prescription called in for them. Many local hospitals and larger doctor offices are setting up telemedicine options. There are also some national companies offering it now at a very reasonable cost. Companies like Aflac sell policies to protect you against specific conditions such as cancer. It will be more and more possible to pull from a few of these to customize your own insurance coverage in the future.

5) Medical care in a foreign country.  

I know this won’t be for everyone but it is an option. At some point in the next few years, I plan on moving somewhere in Central or South America. If you have a resident visa, in most countries you’re able to sign up for either private insurance or a national plan giving you coverage. The prices will vary but it can be anywhere from less than $100 a month to $250 a month.

Before you start jumping on me and asking why you would leave the US in order to go anywhere to get medical coverage because the US has the best medical coverage in the world. Check this chart out.  https://www.numbeo.com/health-care/rankings_by_country.jsp

The US ranks 30th on the Heath Care Index for 2018 just below Mexico at 29.

Several months ago I had a conversation with an ex-pat in Thailand. He recently had knee replacement surgery in Thailand and he paid $15,000 to have the procedure done. He mentioned that he got a quote from an American doctor and the bill was going to be well over $100,000.

Often times you can find doctors in foreign countries that went through medical school in the US. I think most people mistakenly think that they can only get the best medical coverage in the US, and for certain procedures, I’m sure that is correct. However, there are hundreds and thousands of people that are crossing the borders or hopping on a plane to fly to another country to have procedures done and are saving a large amount by doing it.

Help is on the way

What does the future hold here in the United States regarding health insurance coverage and cost?  During the process of writing the book, "Retire Early. What are you waiting for?" which is coming out in a few months, I reached out to a local US Congressman to sit down and get his thoughts on the matter. I got routed through multiple staff members and the last one never responded to me. I reached out again and didn’t get a response. (I was not surprised) They don’t even know how to handle the situation. Our government spends more time finding someone to blame rather than find a solution.

Help is on the way. Earlier this year, Amazon, Berkshire Hathaway (Warren Buffett) and JPMorgan Chase announced a partnership in order to help reduce healthcare costs for their employees. Folks this is a game changer. These three companies, especially Amazon, has the ability to turn the whole health insurance industry upside down and fix many of the issues. There have been talks of Amazon getting in the business of filling prescriptions which should go a long ways in bringing prices down. Anytime Amazon gets involved, it’s going to force change. With their purchase of Whole Foods, they are going to change the whole grocery industry. CVS recently purchased Aetna insurance. Help is on the way but it won’t be immediate.

There is no silver bullet right now when it comes to health insurance costs. The landscaping is shifting and change is coming. It’s all about getting the 4-ring circus under control. In the meantime, explore your options and feel free to send me a message for my input. I'm here to help. 

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