Self Insuring for Healthcare

[ripper1]

My health premiums from a public employee job have gone through the roof. 2016 is the last year for Chicago to pay a subsidized portion of a retirees healthcare. Premiums for myself and wife is 1600 a month. This is outrageous. I am wondering if it is just better for me to self insure. Knowing this is dangerous because one of us could get cancer or some life threatening disease which could bankrupt us. I was thinking instead to bank up to or close to the 1600 monthly and just pay the penalty. Isn't it true that Obamacare has to take anybody regardless of their current condition? I understand that their would be a 90 day delay though and in the meantime would have to pick up those current expenses. My pension and her social security is plenty for us to live on and I have a mid six figure amount in taxable and 457 accounts. Is this rolling the dice or am I on to something here. We are 4 and 5 years away from medicare and would be saving almost 20,000 in a year where we would use limited medical. Any thoughts?

 

[aaronc879]

Obamacare has open enrollment for only about 1 month per year. If you don't sign up at that time then you can't get it unless you have a life changing event like job loss. If you get into a car accident in February, it's not like you can wait until December to sign up for Obamacare and then get care. Without insurance you could be on the hook for $100K+. Since you have money they would come after you for that money. Since you have a pension and Approx. half a mil in savings i'd pay the premium and be glad you have good health insurance that you can afford.

 

[travelover]

No way could I afford to self insure for medical and I consider myself well off.

 

[meierlde]

Unfortunately one side effect of the ACA was to do away with the catastrophic only policy with say a 50k deductible. Before the ACA there was at least one such policy with 1/6 the annual premium.

 

[Bestwifeever]

Your costs through ACA (not your employer's policy, which is what I think you are saying would be $1600/month) might be more affordable. DH 's company let retirees stay on the group policy but subsidized 0 percent of it so not surprising that municipalities are following suit.

 

[nun]

My health premiums from a public employee job have gone through the roof. 2016 is the last year for Chicago to pay a subsidized portion of a retirees healthcare. Premiums for myself and wife is 1600 a month. This is outrageous. I am wondering if it is just better for me to self insure. Knowing this is dangerous because one of us could get cancer or some life threatening disease which could bankrupt us. I was thinking instead to bank up to or close to the 1600 monthly and just pay the penalty. Isn't it true that Obamacare has to take anybody regardless of their current condition? I understand that their would be a 90 day delay though and in the meantime would have to pick up those current expenses. My pension and her social security is plenty for us to live on and I have a mid six figure amount in taxable and 457 accounts. Is this rolling the dice or am I on to something here. We are 4 and 5 years away from medicare and would be saving almost 20,000 in a year where we would use limited medical. Any thoughts?

Look at ACA plans. You would do better to get a plan with an HSA.
Also contact state authorities and see if they will pay for some of your retiree premiums. I pay full premium ($505/month) for my retiree health insurance, but because I qualify for Medicaid my state pays $430 of that premium for me.

 

[FatCyclist]

Large employers can self-insure because they spread the risk across a large number of employees. Even so, they all buy reinsurance to protect them from the catastrophic loss, because the catastrophic loss will happen eventually. Not if, when.

Individuals can't self insure--they simply take on 100% of the risk. 2 problems with this. First, most insurance policies have a $3-5M cap before the coverage runs out and you have to flip to Medicaid (once your assets are depleted). In order to "self insure" you would have to set aside $3-5MM in reserves to protect against this risk. But let's assume that you think this risk is minimal and you're willing to take it on with a much smaller reserve. You still face the problem of paying full retail for your care instead of the reduced rates negotiated by insurers. An individual has zero negotiating power with the providers.

 

[Rosie]

I was in a bike crash ~6 years ago and the cost for my helicopter ambulance ride, 2 days in the ICU, 2 more days in the regular hospital ward, and about 3 months of follow up care -- spine doc, PT, ophthalmologist and such -- amounted to over $250K.

It was a solo crash, so there was no-one else I could hit up for the costs. Very fortunately for me, at that time I had excellent insurance coverage thru my employer and I ended up paying only about $8K out of pocket, the rest was covered.

After that experience, there is no way in creation I would ever go without health insurance.

I currently have an HDHP (High Deductible Health Plan) in which I pay most of my costs out of pocket up to the deductible (and, my expenses have been minimal *knock on wood*). But I'm covered for potentially enormous costs if the sh*t ever hit the fan again. It's HSA-eligible so I make the max contribution to my HSA every year (and get the tax deduction, woo woo).

Yeah, you could cross your fingers and roll the dice, but a freak accident -- maybe something as simple as a fall down the stairs where you hit your head, damage your spine, sever a nerve -- and your looking at a ginormous initial bill and loads of follow-on care. Is that worth the risk?

 

[MichaelB]

One of the reasons people need insurance is that hospitals, physicians, labs and other service providers charge much lower prices for policyholders. Without insurance a hospital might charge 10 times more for the same care or procedure. The risk of financial catastrophe is not limited to life-threatening disease, a visit to the local emergency room for an accident or broken arm might end up costing more than the entire cost of premiums for two people for a year or two.

For the Chicago area lower cost policies are available. Check health sherpa https://www.healthsherpa.com/insurance_plans?zip_code=60614#c17031/ppl62,62/cspremium/hhs2

 

[utrecht]

My employers retiree coverage would cost about $1250 / month for 3 of us. A plan on the open market with better coverage is about $625 per month. To the OP, look at Healthsherpa.com and I bet you will find a more affordable plan. Still expensive IMHO, but better than most employer retiree plans....which makes no sense if you think about it.

 

[FreeBear]

DW and I are on ACA Bronze and pay almost $800/month. The deductible is $ 5K per person, so we're essentially self-insured for the first $ 5K per person per year.

You probably can find cheaper insurance, but you may be spoiled by low cost, the nice benefits and low deductible on your old plan, at least when it was largely subsidized by Megacorp or Big Gov'mint.

So yes, leaving Megacorp subsidized health insurance was a rude awakening, but we couldn't afford to go without HI. In my view, health insurance protects against catastrophic costs, not insure that health care is reasonably priced or even effective! It's an ugly business....

 

[W2R]

I agree with all the above posts. Also, you said,

My pension and her social security is plenty for us to live on and I have a mid six figure amount in taxable and 457 accounts.

So, if your pension + SS is plenty to live on, what's the problem with taking $19,200/year from your taxable account for five years? Dividends alone on your portfolio would probably cover half of that. If, as others suggest, you can get a lower cost through ACA then your position is even better.

We GET that you are upset at how much you have to spend on health insurance. We truly do. But honestly, you can afford it without even making the slightest dent in your lifestyle. It is not worth risking your life over the principle of it all or to prove a point.

 

[FreeBear]

I was in a bike crash ~6 years ago and the cost for my helicopter ambulance ride, 2 days in the ICU, 2 more days in the regular hospital ward, and about 3 months of follow up care -- spine doc, PT, ophthalmologist and such -- amounted to over $250K.

It was a solo crash, so there was no-one else I could hit up for the costs. Very fortunately for me, at that time I had excellent insurance coverage thru my employer and I ended up paying only about $8K out of pocket, the rest was covered.

After that experience, there is no way in creation I would ever go without health insurance.

I currently have an HDHP (High Deductible Health Plan) in which I pay most of my costs out of pocket up to the deductible (and, my expenses have been minimal *knock on wood*). But I'm covered for potentially enormous costs if the sh*t ever hit the fan again. It's HSA-eligible so I make the max contribution to my HSA every year (and get the tax deduction, woo woo).

Yeah, you could cross your fingers and roll the dice, but a freak accident -- maybe something as simple as a fall down the stairs where you hit your head, damage your spine, sever a nerve -- and your looking at a ginormous initial bill and loads of follow-on care. Is that worth the risk?

Ouch Rosie!

DW and I are cyclists too. Very sobering story. I hope you've made a full recovery.

If you care to share, I'm curious as to how the crash happened. Any lessons learned?

 

[ripper1]

OK.....I get it. That is not going to work. So now just to change the topic a bit. I've heard most people are better off with the Bronze plan because out of pocket is virtually the same across all colors. So pay the lower premiums and bank the out of pocket. How often are you going to get to that max. I guess you could use HSA's and roll it over from year to year also. Just feeling out the alternatives here. I guess I could find a lower rate in their somewhere.

 

[MichaelB]

Here's an excel spreadsheet Animorph built that lets you compare the total cost of premiums plus all cost sharing among different policies. http://www.early-retirement.org/for...nd-coinsurance-copay-68965-3.html#post1374536

Generally speaking, the lower premium policies with higher cost sharing tend to have lower total cost.

 

[ripper1]

Can anybody expound on the differences in the Bronze to the Platinum and what is the best alternative. Like I said it looks like the max out of pocket are virtually the same across all colors.

 

[aaronc879]

OK.....I get it. That is not going to work. So now just to change the topic a bit. I've heard most people are better off with the Bronze plan because out of pocket is virtually the same across all colors. So pay the lower premiums and bank the out of pocket. How often are you going to get to that max. I guess you could use HSA's and roll it over from year to year also. Just feeling out the alternatives here. I guess I could find a lower rate in their somewhere.

Most people are better off with a Silver plan because most people qualify for a subsidy and subsidies are only available on Silver plans. If you're married and have under $96K/yr in income then you should be able to get at least a little subsidy. If you're wealthy and have an income in the 6-figures then Bronze could be better in your case.

 

[ripper1]

Here's an excel spreadsheet Animorph built that lets you compare the total cost of premiums plus all cost sharing among different policies. http://www.early-retirement.org/for...nd-coinsurance-copay-68965-3.html#post1374536

Generally speaking, the lower premium policies with higher cost sharing tend to have lower total cost.

Yeah, I think the Bronze overall is probably what may work for me. The thing that is galling to me is that wealthy people pay the same as someone making 62000. I think this thing would be fairer if it was priced progressively.

 

[utrecht]

Since we are on this topic, can anyone explain this to me?

Ive had lots of back and neck issues and will most likely need more care next year when I need to change plans. I may need additional surgery.

Im looking at the details of a bronze plan. It has a $6300 deductible with $6300 max out of pocket. Under "surgery" it says:

Facility fee....$250 co-pay
Surgeon fee...0% co-insurance

Lets say I have paid $1000 towards my deductible this year and need surgery. The surgery costs $20,000. How much do I pay?

 

[Animorph]

Yeah, I think the Bronze overall is probably what may work for me. The thing that is galling to me is that wealthy people pay the same as someone making 62000. I think this thing would be fairer if it was priced progressively.

You may qualify for a subsidy. ACA is effectively priced progressively. Sign in and find out. You should do much better than $1600/month.

 

[pb4uski]

One nuance of Obamacare is that if your income is too high for a subsidy and the lowest cost silver plan exceeds 8% of your income (O-MAGI) then you can buy catastrophic coverage even if you are over 30.

We have that situation and luckily, where we live health insurance is not age rated so the cost of a catastrophic policy is 35-40% lower than the cost of a bronze plan. That might be an angle to explore. It has saved us a bunch.

Also, you might consider moving to someplace where health insurance is more affordable.

 

[MBSC]

Individuals can't self insure--they simply take on 100% of the risk. 2 problems with this. First, most insurance policies have a $3-5M cap before the coverage runs out and you have to flip to Medicaid (once your assets are depleted). In order to "self insure" you would have to set aside $3-5MM in reserves to protect against this risk.

ACA compliant plans do not have annual or lifetime caps.
Reference: Lifetime & Annual Limits | HHS.gov/healthcare

Most people are better off with a Silver plan because most people qualify for a subsidy and subsidies are only available on Silver plans. If you're married and have under $96K/yr in income then you should be able to get at least a little subsidy. If you're wealthy and have an income in the 6-figures then Bronze could be better in your case.

The premium subsidy can be applied to any metal plan including Bronze. It is the cost sharing subsidy that is limited to Silver plans.

 

[MichaelB]

Lets say I have paid $1000 towards my deductible this year and need surgery. The surgery costs $20,000. How much do I pay?

You will pay deductible, co-pay, co-insurance and all other cost sharing until you reach the total out of pocket maximum, then you pay no more that year for covered services. In your example, that's $6300.

 

[imoldernu]

What W2R said +1.
Five years known cost vs. playing the odds.

We faced a similar question @ age 49, and decided to pay the current equivalent of about $16K/yr, when I left corporate life, and went into my own business. At age 53, cancer... total cost about $80K... then at age 55, DW wih carotid surgery... about $95K.

Medicare was a blessing when we got there. Before and since, no major problems.

About the odds... 18 years ago, DS who is now 57, was struck down by CIDP (similar to Gullian Barre) and spent 7 months in Loyola hospital... including 35 pharesis treatments... total cost unknown, but likely well over a million dollars in all. Insurance didn't begin to cover these costs, so medicaid or hospital loss. The point is that the odds against this, are about 150,000 to 1.

It's a tough decision... and one that I wouldn't want to make again... In effect, for DW and I, the costs would likely have delayed our retirement by 3 to 5 years. (early 1990's).

 

[ripper1]

You may qualify for a subsidy. ACA is effectively priced progressively. Sign in and find out. You should do much better than $1600/month.

The thing is we are used to PPO's and most of what I see is HMO. I would say that PPO's are much higher.