Is catastrophic coverage a good alternative to a more costly bronze policy?

[NW-Bound]

The high-deductible pre-ACA policy we have had for 6-7 years is an HSA plan. The premium is currently $533 for two of us, both of age 57. It pays nothing until the $10K deductible limit is met, then it pays 100%. There's no copay or anything like that, and that keeps it simple.

I am surprised to learn that one needs "permission" to buy the same now!

[Malcolm2]

Quote:

Originally Posted by MooreBonds The reason is that no one wants to say "we want ______ (insert group of people) to pay more for _______ (insert beneficiary group of people)'s benefit", because it sounds too much like a negative statement that can be thrown back in their face at election time. No one wants to have to defend arguing for someone to have to pay more. Rather, by trying to argue that "this healthplan is inferior", it indirectly gives them a reason for wanting to abolish the plan, as though they are somehow looking out for and saving you, and making you better off (even though it involves you paying substantially more money). It's more palatable to voters to live in lala land where no one has to pay more for anything, and everyone is better off and gets something in return. .

+1
Of course this is true. The truth should be told, otherwise is is deception plain and simple. These constant changes in this law, I think 12 at last count, are likely to be found unconstitutional. I think they are unprecedented.
Not only that but it is chaos for the insurance companies which is not creating a better system for any of us.

If my policy is not extended , that will be enough of a hardship for an exception. Clearly a huge policy change.

[pb4uski]

I prepared our application for an exemption today so we can buy a catastrophic policy. All set to mail.

But now I'm having second thoughts. While the cat policy will save us ~$3,000 a year in premiums, it will also preclude us from doing HSA contributions.

At first, I didn't think the loss of HSA contributions would be a big deal since it is just transferring money from a taxable pocket to a tax-free pocket. But I now realize that in addition to allowing us to transfer funds between taxable accounts and tax-free accounts the deduction also allows us to make additional Roth conversions equal to the HSA contributions $8,450 a year inflated for the next 7 years) and those additional Roth conversions help to keep us out of the 25% bracket once RMDs and SS start at age 70.

My model (which is getting near to being unwieldy) indicates my age 100 NW is ~5% higher by buying a bronze plan, making max HSA contributions and getting the benefit of additional Roth conversions compared to buying the catastrophic plan, saving on premiums but foregoing the HSA contributions and higher Roth conversions.

So I'm leaning to the bronze plan now but may mail the app tomorrow anyway to keep my options open. Any thoughts? (I concede that I may be overthinking this and in analysis paralysis, but it was a slow day today ).

[MichaelB]

Quote:

Originally Posted by pb4uski My model (which is getting near to being unwieldy) indicates my age 100 NW is ~5% higher by buying a bronze plan, making max HSA contributions and getting the benefit of additional Roth conversions compared to buying the catastrophic plan, saving on premiums but foregoing the HSA contributions and higher Roth conversions. So I'm leaning to the bronze plan now but may mail the app tomorrow anyway to keep my options open. Any thoughts? (I concede that I may be overthinking this and in analysis paralysis, but it was a slow day today ).

Slow indeed. Does your model tell you how likely it is that you'll even make it to age 100?

If you are going to compare Catastrophic vs Bronze you have to assume there are healthcare expenses which are reimbursed differently. Seems to me that is a critical factor in the decision.

May be a bit late for the mail. I'd use online if at all possible, especially if you choose a plain bronze plan.

[pb4uski]

Interesting thought. I'm ahead by small amount with the cat plan until I'm 85, at which point the bronze plan with HSA pulls ahead - the power of tax-free compounding I suppose. Dad lived to 75, Mom is 83 and still going strong despite some bad habits and maternal Gram lived to 98 - so who knows.

In our case the benefit difference between cat and bronze are slight. From my post # 34:

Quote:

For us, there isn't much difference between the HDHI plan we currently have and a bronze plan and a catastrophic plan since we are not eligible for subsidy. Carrier and networks are identical. HDHI/Bronze/Catastrophic Individual Deductible $5,950/$5,000/$6,350 Family Deductible $11,900/$10,000/$12,700 Individual MOOP $5,950/$6,250/$6,350 Family MOOP $11,900/$12,500/$12,700 Annual premium $7,548/$8,187/$5,128 "Expected" cost $7,848/$8,487/$5,128 Max cost $19,448/$20,687/$17,828

Mail will work ok as our state has extended existing 2013 coverages to 3/31/2014 since the system was so screwed up.

[pb4uski]

UPDATE - Well, it has been a long odyssey, but I heard today that our bronze plan was converted to a catastrophic plan as of July 1.

We were qualified to buy a cat plan even though we were over 30 because our 2013 plan was cancelled (and also because the bronze level premium would be over 8% of our 2014 projected O-MAGI).

Our state exchange kept insisting that we needed an exemption certificate before we could purchase catastrophic coverage, I believe in part because the feds were telling them that was required. However, other states, notably NY, have a process where one could buy a catastrophic "presumptively" and simultaneously apply for an exemption - you just had to provide a cancellation letter. However, the rub was that the feds were not processing exemptions applications, even thought they issued an application form back in December. This stalemate held things up until just now.

I patiently tried to work things out through the state exchange, but finally gave up and got my state rep, the Governor's office, and our U.S. Senator's office involved. I have no idea what worked, only that my policy was converted effective July 1. I didn't get an exemption certificate so perhaps they got tired of my incessant complaining. Funny, I had pretty much given up on the whole idea for this year and then it actually happened.

Deductibles would have carried over (same carrier) but we haven't had any medical costs so far this year so it is a moot issue.

Bad part is that we will only be eligible for half of our normal contribution for our HSA since we will have had HSA-eligible coverage for only a half-year. Good news is we'll save over $1,500 in premiums the rest of the year.

Coverage is similar. Deductible is $2,700 higher but max OOP is only $200 higher. Will reassess when open enrollment re-opens in the fall.

[Mulligan]

Congrats for being vigilant PB. When the dust settles on what my premium will be if I get cancelled this fall, I may go your route. I will have to wait on the final tally on premium cost differential between the two. As of now I get back about $1000 in taxes through my HSA. This will have to be thrown into the computations to decide if I should go that way.


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[Lancelot]

Quote:

Originally Posted by NW-Bound The high-deductible pre-ACA policy we have had for 6-7 years is an HSA plan. The premium is currently $533 for two of us, both of age 57. It pays nothing until the $10K deductible limit is met, then it pays 100%. There's no copay or anything like that, and that keeps it simple. I am surprised to learn that one needs "permission" to buy the same now!

Procedures almost never seem to become more simple, do they?

[pb4uski]

Quote:

Originally Posted by NW-Bound The high-deductible pre-ACA policy we have had for 6-7 years is an HSA plan. The premium is currently $533 for two of us, both of age 57. It pays nothing until the $10K deductible limit is met, then it pays 100%. There's no copay or anything like that, and that keeps it simple. I am surprised to learn that one needs "permission" to buy the same now!

+1. An unfortunate consequence of the government "protecting" us and accommodating the lowest common denominator.

[sengsational]

Last year it appeared that the process for getting catastrophic coverage was more than a little haphazard. I wondered if it's been cleaned-up now, if there are any reports of getting a hardship letter without a lot of fuss.

The whole catastrophic option last year seemed in too much in flux, so I ignored it completely. So I hope these are not 'dumb questions'! For my family of 3, the non-subsidy price of the least expensive bronze plan is $11,134/yr. Does that mean that the 3 of us would simply have to earn less than $139K? THAT shouldn't be too hard! I must be missing something.

Is the first step to fill-out the fed's form, selecting #14? What documentation is required? Do I need to wait until open enrollment to start?

[pb4uski]

You got it right - if the premiums for the lowest cost bronze plan exceeds 8% of your income then you are entitled to purchase catastrophic coverage.

I had a bronze plan for the first six months of 2014 because between the state and feds they had their heads up their butts on what the process should be. After a lot of complaining, including to my state and congressional representatives, my bronze plan was converted to a catastrophic plan beginning in July. The cost is about 60% of the cost of a bronze plan in my case.

In my state the process was supposed to be that you applied to the feds for a hardship exemption certificate and once you received it you could then provide that as part of applying for a cat plan. The problem was, even though the feds issued the exemption application form in December 2013, they are not processing exemption applications that they have received.

In my case, my 2013 plan was cancelled, so I used that as the reason that i could buy a cat plan.

I would start with your state exchange or healthcare.gov if your state does not have an exchange. Good luck.

One other thing. The cat plans in our state have an aggregate deductible rather than a stacked deductible but the premiums for a couple are twice the premium for a single, so were have two cat policies (one for me and one for DW) as it is a better value since the insurance kicks in earlier than if we had a policy for a couple.

[sengsational]

Quote:

Originally Posted by pb4uski You got it right - if the premiums for the lowest cost bronze plan exceeds 8% of your income then you are entitled to purchase catastrophic coverage. ...

Thanks for the rundown.

No state exchange here, so I guess I'd start with healthcare.gov. I'll probably just call and ask to see what they say I should do.

Good point about having separate policies issued in order to avoid the deal where they ignore the individual deductible when more than one person is on the plan.

Same here on saving around 40% on premiums going to catastrophic. And the limits compared to bronze HSA plan are similar. No HSA tax advantage with cat plans, though. I read this whole thread, so saw your report of your analysis. My plan is to spend after tax money for just a few more years. When I run out and need to pull from the tax sheltered stuff (start showing income), I'll be yanked out of subsidy land, and so a new strategy will need to go into effect.

Something just occurred to me...does this only count if you don't qualify (or don't get much) subsidy? In other words, the $11K/yr premium for the cheapest bronze is the rack rate. If my income stays around 250% FPL, I'd only end-up spending $2K/yr in premiums, which would be less than 8% of my O-MAGI.

[pb4uski]

I found the deductibles of the cat plan just a bit worse than the bronze plan too but the 40% in premiums savings sealed the deal because our health care costs in the last 3 years has been a fraction of our deductible so the only real advantage of health insurance to us is access to providers at negotiated rates and protection against the cost of a major health event.

The 8% is the unsubsidized lowest cost bronze plan in relation to your O-MAGI income.

However, if you chose a cat plan you are not eligible for subsidies and as you note, cannot contribute to a HSA.