Fun with Pie Charts and Healthcare Sticker Shock

[Ed B]

My Megacorp rolled out three new HDHPs that are HSA eligible for 2018 enrollment. Starting in 2018 retiree healthcare plans will be the same plans in a different risk pool consisting of pre-65 retirees, and of course, a much higher premium. They held info sessions and published charts showing the premiums for retirees, deductibles and max OOP costs. With an ER target of late 2018 this lets me plug in the numbers and see what it does to my retirement budget.

The result is that until I turn 65, assuming we hit OOP max each year, our healthcare costs will be about $27k per year. That is hard to swallow, but from what I read from this community about the high cost of premiums and deductibles and what I hear about from several friends, even among active working people, $27k total may not be so bad for a family of 3 (DW, DGS, and me). Ok, its still pretty bad, but maybe it isn't as rare as I would have presumed.

Here is the chart of expenses by percentage. I rolled up discrete expenses into categories such as transportation (gasoline, car insurance, registration, etc.)

I am curious to know how many others who are either pre-65 retired or plan to be, have this high a percentage of their budget going to healthcare costs. The green slice is total healthcare for a year -- 32.7% of budget.

 

[Backpacker]

Not retired yet, and things of course may change, but we project 15%+/- for health care premium and OOP expenses. DW will soon be a retired teacher in state of Michigan. State union is fighting to get some$ back that the state took for retiree health insurance. If union is successful I predict an increase in premium of a magnitude we've never seen.

http://www.detroitnews.com/story/ne...hears-appeal-teacher-health-payouts/107461930
Perhaps then we'll be at the 30% point.

 

[audreyh1]

You should also look at it just in terms of the premiums. It's unlikely you would reach max OOP for each if you in a given year, isn't it? Obviously that's a worse case scenario. Take a look at the budget for what you think you might actually spend.

I know that I have X dollars in reserve that can cover out of pocket expenses if needed. So I don't budget for more than a "typical" year. It's kind of like not expecting to replace your roof, your car, your air conditioner, and remodel your kitchen all the same year - people usually budget large expenses like that over several years. Now if someone has chronic ongoing health issues that mean they are going to hit the limit each year, that's another story.

And my insurance has no max OOP for out-of-network provider so I have no way to budget for that scenario!

 

[Ed B]

You should also look at it just in terms of the premiums. It's unlikely you would reach max OOP for each if you in a given year, isn't it? Obviously that's a worse case scenario. Take a look at the budget for what you think you might actually spend.

Thanks for the suggestion. This percentage does represent the worst possible year. The premium for this plan with a $6500 family deductible is ~$14500/year. If we don't reach the deductible in a given year, then the percentage of the budget goes way down.

That said, my wife is disabled and has recurring prescription drug and equipment costs that will get us pretty close to the deductible most years. So in good years we might be at $14500+$6500 = ~$21k instead of $27k. The chance to save is the reason I plan to go with the highest deductible plan. The lowest deductible plan - $3200 family deductible - is $1680/mo or $20160 before the first prescription is filled. It pretty much guarantees we will hit the $27k mark every year. So we will go with the higher deductible and fund the HSA for some potential savings year to year.

But still, I am budgeting for the worst case while hoping for good years

 

[Ed B]

Not retired yet, and things of course may change, but we project 15%+/- for health care premium and OOP expenses. DW will soon be a retired teacher in state of Michigan. State union is fighting to get some$ back that the state took for retiree health insurance. If union is successful I predict an increase in premium of a magnitude we've never seen.

Snyder attorney: State to eventually pay back teachers
Perhaps then we'll be at the 30% point.

How strange that the teacher's union is fighting the state to take money back that will, in effect, take away from teacher's retiree healthcare. But I assume/hope there are details that make this seem more reasonable. But still, I hope for your sake the Union is unsuccessful.

 

[SteveNU]

My numbers are very similar to yours. Only the wife and I though. My wife has a chronic illness and we always hit the max OOP for her. Luckily I get an HRA from megacorp that covers about half of the expenses.

Last year I had back surgery and we maxed out our family out of pocket. So I budget for the worst case.