One of the chief concerns for those considering leaving a job is the prospect of health insurance costs. I’ve met many climbers who choose to not insure, and many other concerned corporate employees who are convinced that insurance in the private marketplace will cost tens of thousands of dollars per year. As of this month, I’m pleased to announce that we are officially getting paid to have health insurance.
No joke! Let’s examine the wild and crazy ride of our health insurance budgeting. Strap in.
Would you like to listen instead? Check out the podcast below!
Thinking About Health Insurance Costs Is Scary
When we worked in Corporate America, we enjoyed access to great and affordable healthcare plans. To make matters even better, we never felt like we were even paying! Our (minimal) healthcare costs were subtracted from each paycheck, and the rest was paid by our employer*.
As the clouds on the horizon parted and we began to see the faint and approaching light of the dawn of financial independence, we were forced to begin considering how we would provide for health insurance costs if we chose to leave our jobs.
*But we still paid a good bit. And our employers paid a lot more. Mrs. CC’s health insurance plan cost in excess of $10,000 per year (mostly paid by the company) for what amounted to a regular doctor checkup and two dental cleanings.
Here are the options we considered:
1. Rely on our healthy net worth and self-insure. Any and all healthcare costs would be covered 100% out-of-pocket.
2. Consider other healthcare cost-sharing ministries.
3. Buy a plan on the health exchanges built from the Affordable Care Act, colloquially known among haters and lovers alike as “Obamacare.”
$2,607 per day
The average daily cost of a hospital stay in the US, from debt.org
Option 1: Self-Insure
In short, I probably wouldn’t self-insure no matter how much money I have. The day I decide I don’t need insurance is the day I get T-boned by a 17-year-old drunk on life and Smirnoff Ice.
I can eat broccoli and hummus and do 10,000 push-ups, but we can’t control everything the universe throws at us. Especially not Smirnoff Ice.
The average American hospital stay is over $2,600 per day. I’m not risk-averse, but that’s not worth the risk. To conclude, no thanks.
Option 2: Health Care Sharing Ministries
Health care sharing ministries are often a popular alternative to unsubsidized healthcare on the ACA plans. Let’s spend just a second discussing them in some hurried detail.
The following is from healthinsurance.org:
Health care sharing ministries are non-insurance entities in which members “share a common set of ethical or religious beliefs and share medical expenses among members in accordance with those beliefs.”
It’s Not Insurance
First things first, health care sharing ministries are NOT insurance providers. As such, these providers are not bound to laws that protect the insured under the Affordable Care Act. So, while many folks are anecdotally happy with health care sharing ministries, there are technically no legal ramifications if these ministries decided to pull the plug on coverage for a major event.
Likely? Maybe not.
Possible? Yes.
There Are Often Religious Affiliation Requirements
Now is not the time to discuss the meaning of life or the existence of God. Let’s do that offline, shall we?
However, due to the religious affiliations of these ministries, there is also an expectation of certain behaviors and lifestyle, which includes the expectation to “attend a Christian church regularly.”
If that’s the case, approximately 60% of Americans would be excluded. Don’t shoot the messenger.
Other Exclusions
It’s also worth noting that these plans are rather unforgiving of pre-existing conditions and lifestyle choices deemed “hazardous.” As rock climbing meets the threshold of hazardous by at least one ministry (Liberty Healthshare), it’s obviously a no-go for us.
In short, we found these plans neither cheaper or worth what we deemed a higher risk of reduced or eliminated coverage.
I’d be remiss not to thank interviewee Chris Mamula at CanIRetireYet.com for writing an incredibly comprehensive review and explanation of health care sharing ministries here: Are Health Care Sharing Ministries a Viable Alternative to Health Insurance for Early Retirement?
Option 3: Healthcare Exchanges under the Affordable Care Act
I’m not going to spend a lot of time here. I’ve written a couple of posts on the basics of ACA healthcare plans and the incentives provided by the federal subsidies, linked below.
Is Healthcare Insurance About to Get a Lot More Expensive?!
Some Fantastic News on Healthcare Costs
In short, one of the prime benefits of being an early retiree, part-time worker, or otherwise low-income earner is the incredible (tiered) subsidies provided by the Affordable Care Act.
Are you worried the subsidies will be eliminated? Sure, we all are. But here’s the skinny:
People like the ACA.
The Affordable Care Act and the associated subsidies hold broad public popularity. Here are five charts about public opinion of the ACA.
The ACA lasted through the Trump administration.
The ACA and associated subsidies lasted through the Trump presidency with a conservative Supreme Court majority. I’m not taking any political stances here, but Trump and many Republican politicians made promises to undo the ACA. All the elements were in place and it didn’t happen.
We decided to go with the ACA for several reasons:
It was the most affordable option
The plans are widely accepted
It was the most affordable option
When we decided to enroll in late 2020 (expecting a very low income for 2021), we selected a silver plan for $255.77 in monthly premiums. This premium was based on our expectation of $40,000 in income.
The reason we selected a silver instead of a Bronze plan is not because I picked up smoking or decided to break an arm this year. I have a mild autoimmune dysfunction that is super annoying and gives me blisters on the pads of my fingers when conditions are prime in the winter. Anyway, I expected more healthcare needs as I established myself with new specialist doctors in a new town (I told you we moved, right?), so I thought we would save by being on a Silver plan.
Well, I instantly regretted that decision and wished we’d just purchased a Bronze plan instead for less than $150 per month. Alas, open enrollment had passed.
Important Changes to the Affordable Healthcare Act
Then I became aware of some fantastic news on health insurance costs.
With the passage of the American Rescue Plan (ARPA) earlier this year, open enrollment was reopened and, most importantly, the subsidy structure was changed to increase affordability.
To explain it to your grandmother:
Grandma, I can now pick a Bronze plan and it’s cheaper! Thank you for loving me!
So, we did. We switched to a Bronze plan and logged an increase in income (expected $60,000, which allow for more Roth Conversions, etc). Our new plan cost $141.36 in monthly premiums.
But we were confused.
By using this subsidy calculator, we were expecting a far lower premium:
Well, you know how things go with the government. You have to be patient, my friend.
Suddenly we received an email in the last couple of weeks stating that our new premium is…
Wait for it…
Yes, suspense is building just like I planned…
$9.36 per month for two people on a Bronze plan.
That’s less than I paid for a (highly subsidized) high deductible plan from my previous employer! Cheers to that! More than $0, but not much.
Incentive Plans: Save Money on Health Insurance Costs with Healthy Habits
One cool thing about our Selecthealth plan is that our provider, like many other insurance providers, incentivizes healthy habits.
For our plan, by logging our steps and walking at least 7,000 steps for at least 20 days of each month—which is tracked automatically on our iPhone—we receive an Amazon gift card* of $20 per month, per person. That’s $40 in gift cards per month for doing what I’d do anyway! You know how I feel about a good walk.
So, here’s the breakdown:
Monthly Insurance Premium: $9.36
(Minus)
Monthly Gift Card Incentive: $40.00
Total monthly health insurance costs: -$30.64
What else can I say? We’re now getting paid to have health insurance. We originally budgeted over $3,000 a year in premiums alone, so this is a large reduction in our total spending.
*Many other gift card options are available.
What else can I say? We’re now getting paid to have health insurance.
Here’s What Else You Need to Know Today (on health insurance costs)
I’m not Michael Barbaro, but I’m having fun.
Keeping Health Insurance Costs In Check: Insure Minimally
You should understand that we have chosen to insure minimally. Because I do eat broccoli and hummus and shake out the occasional push-up, I agree that our best insurance policy is our lifestyle choices. Why pay a big monthly premium for something I rarely need?
However, as I stated above, there are many unforeseen (and extremely costly) healthcare needs that have zero to do with our lifestyle choices. We’re insuring for a worst-case scenario.
Our Plan Details
I’m posting below all the details of our Bronze plan from Selecthealth. As you can see, most coverage begins after we’ve exceeded our deductible, which is $6,900/$13,800 per person/family, respectively. We are required to pay out of pocket for almost any healthcare needs other than preventative care. However, should something terrible occur, we are only on the hook for $13,800 (each calendar year). We are good with that.
Finding Doctors and Prescription Medicine Costs
To date, I haven’t even been to a doctor. That said, we had no trouble finding a good doctor in St. George that accepted our insurance. My first appointment is next month. No issue there.
I’ve also had no issue purchasing medication needed for my autoimmune condition. I pay the same $12 that I paid on my previous employer-sponsored plan.
It’s worth noting that state exchanges only cover emergency services if out-of-state. Again, we’re ok with that for now. We get our basic healthcare work done when we’re home, and we keep the backflips to a minimum when we travel.
Gaming Out Health Insurance Costs
After years of worrying about health insurance costs in a post-W2 job world, I’m pleased to report that we are now getting paid to have coverage. Is the plan completely awesome? I mean, for us it is. We’ve chosen to insure minimally, but we don’t believe in no insurance at all. There are too many unforeseen risks of choosing to forego insurance.
To date, we’ve had no issue finding doctors who accept our plans, nor have we faced any increases in prescription drug coverage.
That said, we aren’t heavily reliant on the healthcare system. Someone in need of more medical care will perhaps want to consider a Silver or higher plan. This will come at a higher monthly, but perhaps lower overall, cost.
Certainly, someone incurring a higher income will also need to pay higher monthly premiums. It’s worth reiterating for early retirees or those otherwise living entirely on investment income: only capital gains—and not cost basis—are considered yearly income for ACA subsidies. Roth conversions, an arguably critical element of life-long tax optimization, are considered normal income.
One can live rather lavishly off the fruits of good saving and investing strategies while still enjoying very reasonable health insurance costs. More on how income is considered for healthcare coverage here.
Bottom Line for Optimizing Health Insurance Costs
Step 1: Decide on a plan level suitable for you: Medicaid (income restricted), Bronze, Silver, Gold, or Platinum. Each successive plan has a lower overall deductible and out-of-pocket max, but carries a higher monthly premium. Decide on a risk vs reward profile that is suited to your psychology and your healthcare needs. A Bronze plan covers our (expected) minimal needs.
Step 2: Consider income. ACA subsidies and premiums are decided by your modified adjusted gross income (MAGI). Learn how to calculate your MAGI here. Most folks will not pay full sticker price. Our Bronze plan costs $9.36/month.
Step 3: Get paid for healthy habits. Many plans have incentive structures for walking or gym exercise. Use these programs to receive gift cards and other perks, potentially offsetting or negating the cost of monthly premiums. We receive $40/month for walking at least 7,000 steps for 20 days/month.
Step 4: Live well. Do what is possible to eat well, exercise, reduce stress, and sleep better. While we can’t prevent all the universe throws our way, controlling the factors mentioned above can go a long way towards reducing lifetime healthcare needs.
What do you think about healthcare coverage for early retirees, gig workers, or those otherwise not covered by employer-sponsored plans? Let me know in the comments below.
Nice – we had the same thing with an plan from Oscar Insurance. $1/month premium, then $100 Amazon credit per year when you log your steps. Easy $88 dollars!
Excellent! Charging a dollar feels almost insulting! 😂
Enjoyed the audio format and having the ability to scroll through the details on your post.
I was on an ACA plan for about 9 months one year and it worked well for basics. My income did go up that year and I paid the subsidy difference during taxes the next year.
Glad to hear that you were able to make the subsidies work for your situation. FWIW, I was always really happy with the health care in St George, lots of good medical professionals out there.
Thanks for the audio endorsement and the comments on how the difference is made up at tax time. It was never made clear to us how the difference is handled on actual vs expected.
And as far as healthcare in St. George, somebody has to take care of all these traditional retirees!
I listened to the podcast on the bike ride into work today. I’m a fan of the audio format. I hope you keep it up.
Thanks for that vote of confidence! I can’t imagine biking to my own voice, but I’m glad you are enjoying the podcast.
Great read on how the ACA option is working for you. I’m liking this option more and more when I finally quit my W-2 job.
Unlike Frugal, I don’t listen to podcasts but I do read transcripts, if those are available.
Thanks so much Phillip! I’ll look into automated transcript options. As you can imagine, doing a manual transcript would be very time-intensive (and mind-numbing). My hope is to continue to do both, but that may be unsustainable for my previous weekly posting schedule. I’m probably the only one who cares! 😂
Look into a VA (not too expensive, I read) for taking notes or transcribing.
Also, I am doing this now (great timing!) but it looks like it will not go into effect until October. Any idea what to use for coverage for just one month until this comes through?
Great timing on this! Thank you SO much!
Sylvia
Thanks Sylvia! If I understand, you have signed up for an ACA plan but coverage doesn’t start until October? Do you have Cobra coverage available from a previous employer? There are short-term plans available as well (outside of ACA), but I’m not an expert on that. We ended up paying the full premium for an ACA plan for the last two months of 2020, because our income was too high to qualify for subsidies that year. If I understand, you are just waiting for coverage to kick in. Yeah, I’d perhaps look into Cobra or other short-term plans, knowing that the cost will probably be high for that month.
Update: Called ACA and they were able to have coverage start tomorrow.
Thanks! 🙂
Excellent! Squeaky wheel gets the grease! 😉
Mr. CC loved the post and the inner working details. It is fascinating how FIRE can be used to beat health insurance in the US. Still, I do wonder about the ethics of receiving subsidies when those in the community have amassed significant savings. Do you have any feelings on it, positive or negative, regarding being paid to obtain health insurance despite having a large best egg?
Great point, and I’m glad you brought it up! I actually discussed this in the associated podcast episode. Frankly, because the US lags behind most developed nations when it comes to cost/care ratio, I have zero qualms working with this system as it’s designed. We’re not hiring big-time accountants or lawyers to find loopholes. I personally would have trouble accepting Medicaid, though. I’d be onboard with paying higher taxes for something approaching universal healthcare, but high taxes ala Europe, etc are political suicide in this country. It’s frankly silly to imagine folks paying upwards of $20k yearly on healthcare PREMIUMS! We could talk for hours on the role of government and the cost/benefit of it all!
I’ll also add for clarification: We are technically still paying for insurance. We are only “getting paid” due to the healthy habits incentive structures provided by the plan providers. Plan Cost – Healthy Habit Benefits = Getting Paid
I guess I should have listened to the podcast first! Btw, the episodes I have listened to so far have been great.
Personally, I do not find issue with the ethics either but I have gone back and forth on this in my head. To me, it is unsustainable for healthcare to continue down its current iteration in the US, as it is too expensive. I hope for some form of basic government provided healthcare in return for tax increases, as the private system has not brought the promise of lower prices due to “free market competition.” It is crazy in a country where life, liberty and the pursuit of happiness are preached from the streets that we find ourselves in this mess, as none of these promises are possible without good health! Alas, politics aside, keep up the thought provoking writing!
Thanks, Mr. CC!
Beautifully stated. And thanks for your feedback and excellent thoughts and comments!
OK, I learned a ton from this article.
Excellent, glad to hear!
$9 per month is great! Where we live the cheapest plan we can get with a $60,000 income is $65 per month. But the network is small and the hospitals aren’t the best in the area. And the deductible/out of pocket max is $17,100! To get some of the better hospitals we’d have to pay closer to $150 per month. And the cheapest plan with an HSA is $172 per month.
That has been my challenge with the ACA plans in our area. The networks are small and most of our doctors and specilists are not in the plans. After retiring at the end of 2019, I went on Cobra for 2020 so I could keep my doctors. We are in a state where a husband and wife can get small business insurance without an additional employee. So we established an LLC and have been on a BCBS small business plan for 2021. We don’t get any subsidies unfortunately, but we have a nationwide PPO plan with all of our doctors in network.
I appreciate your thoughts on the health sharing ministries. Since I have pre-existing conditions, it always bothered me that they were excluded from these plans. How can they ask for people to follow Christian beliefs, but then exclude pre-existing conditions? Isn’t that exclusion kind of the opposite of living the lifestyle they want?
Dragon Guy
Interesting, thanks for sharing that. Well, Utah doesn’t impress me on all fronts, but I’m so far pleased with the insurance plans. I’m sorry you aren’t able to find something more affordable. Do you mind sharing your state for others?
And as for the ministries, I also have to agree!
Can someone check my math to make sure I understand this correctly ?
2 people FPL = $17,420
17,420 * 4 = $69,680 AGI
Do you also get to add the $25,100 standard deduction
$69,680 + $25,100 = $94,780 a couple could make and still qualify for these subsidies ?
Hey Christopher, unfortunately the standard deduction does not apply to the AGI. Here is a useful calculator: https://money.cnn.com/tmp/networth2.html
I think I listened and read this article at least 5 times now, fascinating to me.
Follow up question I couldn’t find the answer to.
If 2021 someone wouldn’t qualify for subsidies, but in 2022 they were retiring, expecting much less income, expecting to qualify for subsidies……I see plans that say something like this. $107.40 /month after $1197.00 tax credit for example.
Question is do you pay the full $1304.40 per month and then get a credit at tax time, or Do you somehow true up at tax time since exact income will nearly always be different than estimated income?
Hey Chris, thanks for the kind note and great question. When you apply, you’ll make your best guess at income. The premium will be based on expected 2022 income. You will pay the subsidized amount (not the full amount) each month.
My understanding is that actual vs expected is settled at tax time, but we haven’t been through the process yet. Our 2021 premiums were based on an educated guess of $60k income (which includes Roth conversions, etc).
Also note that as of the passage of the ARPA, the subsidy cliff is gone at least through 2022. More here: https://clippingchains.com/2021/03/15/health-insurance-arpa/
Hope that makes sense!
That is awesome! I took two long and hard looks at switching to the ACA, but decided to stay on Cobra until it runs out. My biggest mistake when negotiating my exit was not negotiating for full paid Cobra coverage.
Our biggest issue with the ACA plans was finding one that worked with all of the doctors we already go to. With kids, this ends up being rather complicated, even for healthy individuals.
The other battle we have for 2021 is due to the capital gains we’ve taken, our income was higher than the initial cliff, and now may accidentally go higher than any subsidies.
Anyways, love this breakdown and I hope that I can get solid and inexpensive coverage for 2022!
Thanks for this! I understand the need for consistency with previous doctors. Luckily for us, our plans seem to cover any doctor we’d consider, so far at least. This seems quite variable from state to state, a flaw with the plan.
How are you calculating MAGI? You aren’t including cost basis, correct?
Wow! You really found a winning plan there. I am dreading looking into my options for 2022 but this gave me something to look for, exercise incentives! My previous employer sponsored plan had something similar in which we got $200 for not smoking and completing preventative health checks. Even so, it was a HDHP without and HSA option. My current ACA plan is also a HDHP with HSA but the deductible is less than my employers (I’m part time and loss benefits). I took a partial subsidy not knowing exactly how much my income would be this year.
For those out there, the income subsidy was actually adjusted twice in 2021. You have to basically reapply to get the lower rate but if you didn’t, you’ll see a nice chunk of money with your tax returns.
I am a fellow climber as well and stay as healthy as I can. That being said, I never know what will happen to this aging body so I am afraid to only get catastrophic coverage. I guess I start looking at my options for 2022 and keep the healthily incentive programs in sight.
Thanks for the tips and good luck with the autoimmune condition this winter.
Thanks for this note Jenni!
One comment: I wouldn’t say our plan is a catastrophic plan, just a HDHP. It’s a bronze plan, and far from the highest deductible we could have chosen.
Certainly, even a bronze plan won’t make everyone feel comfy with that kind of deductible.