For those in the US who are self employed, work in small business, or FIREd, this is a big week as open enrollment in the ACA (Affordable Care Act, also known as Obamacare) starts on Wednesday. A couple of days ago the 2018 details were released, so we can start perusing options now in order to sign up. We fully anticipate the ACA website to experience high-load crashes the closer we get to the December 15th deadline, therefore it is in our best interests to investigate the options and sign up sooner rather than later.
In this post i’ll talk through some of our options and the minefield that is healthcare in the US. Let me start out though by saying that although this isn’t a political forum, in the current climate it is almost impossible to discuss healthcare without some sort of political slant so I feel it is important to put my cards on the table.
In general I believe that the ACA is a positive step as it makes it easy for the general populace to shop for healthcare and it also provides appropriate protections for people with pre-existing conditions. Without it, people with minor medical issues may not have been able to get health insurance. I will also say that I don’t think it is unreasonable to require everyone to have some sort of health coverage, after all we require everyone to have car and house insurance so why not health? However I am cognizant that this has raised premiums for some people and some people are clearly paying more than they were before; however, on balance, I think the pros (more people insured and greater plan visibility) outweigh the cons (some people paying more).
Are there issues such as rising premiums? Absolutely, and I would much rather the government be focused on fixing the current law than throwing out the whole legislation. As a final aside I should point out that, as a European by birth, I am firmly in the camp that healthcare is a basic human right and that eventually the US has to move to some sort of single payer/universal healthcare system. Maybe a hybrid where people can buy into medicare is the answer.
Putting that to the side, on January 1st 2018 our expectation is that we will be moving to an ACA marketplace plan. When you leave your job in the US you have the ability to carry on with your employee insurance plan for a period of up to 18 months; this is called COBRA. However it is very expensive! When employed, we spent around $200 a month on health, dental and vision insurance. On COBRA, exactly the same insurance skyrocketed to $1,600 a month. While the insurance itself is very good, we are unable to continue it beyond the 18 month period, so in January we will need to consider something different.
For FIREd families like us there are 2 options, both of which are ACA approved, on-market and off-market. On market means we purchase through the government marketplace, while an off-marketplace option is purchased directly from the insurer.
So let’s look at our options on the govt marketplace. For our zipcode in Portland, our health options (dental is covered separately) include 31 different types of plan, spread among Bronze, Silver and Gold tiers. The quality of healthcare is the same on all three plans however the Bronze plans are cheaper because they typically have higher deductibles and other out of pocket expenses.
With these 31 plans the monthly premium ranges from $930 a month to almost $2000. So lets dive into these plans. Here in Portland we have access to 5 different providers, so to make it simple lets just pick one (obviously when we go through this for real we wont be so arbitrary) but in this case I have picked Kaiser.
I am now down to 9 plans, these range from a $935 a month premium with $13,100 deductible for the family and $13,100 out of pocket expenses, to $1,479 a month with no deductible at all and $14,100 out of pocket expenses.
So on these 2 plans the annual premium would be either $11,220 or $17,748 with the other 7 plans falling in between. So assuming the actual coverage is identical (i haven’t checked yet but it shouldn’t be too dissimilar) than essentially we would be paying $6500 for our family of 4 to have no deductible. So logically unless we think we are likely to spend more than $6500 next year on medical expenses then the lower cost but high deductible plan is a better option.
By going with a lower cost but higher deductible we are to all intents and purposes saying we are comfortable paying for our routine doctor visits in full and our insurance only really kicks in if we need hospital treatment. Plus also of course the simple fact that we actually have insurance means we get a lower rate. As a family who is relatively healthy and typically only has a few doctors visits each year we are probably OK with that. But just to be sure lets look at the middle of the 9 plans.
The 5th of the 9 Kaiser plans is $1,312 a month with a $5,000 family deductible and $14,700 in out of pocket expenses. So annually that is a premium of $15,744 so we would be paying $4,500 to drop our deductible from $13,100 to $5,000. Again, i’m not sure that’s worth it with our family’s current medical profile.
So based on that analysis we would probably err towards one of the Bronze plans; high deductible but lower cost. Of course we have to do more due diligence of the actual plans; what is actually covered and at what rate, how wide or narrow is the network and are our current doctors included. Of course we would also look at the other providers too.
So in theory that should more or less cover our planning however there is a major benefit that is very advantageous for a FIRE family and that is the premium tax credit (PTC)
I will discuss how these affect our costs next time as well as off-market plans.