Health Insurance contrarian tendencies – expat looking for feedback on Self-insurance

[A Gold One]

Hi everyone,

I am 61 and my wife is 50 and thankfully we are both fit, active and in good health. I Fire’d at 55 after long career in Mega-Corps and an updated fire calc still shows 100% success rate for the next 40 years. Assets are invested conservatively in low cost funds and fixed income with some income producing real estate. Asset mix is roughly 40/40/20 and our annual withdrawal rate averages less than 1.4%.

While working, we lived outside the US for the 10 years prior to retirement and are currently enjoying our lives as expats living in Asia. Our standard of living is quite high, and we travel where and when we want (or did at least before the current troubles…). Our children are adults living independently near us and most of our community and social relationships are local as well. We do not foresee ever returning to settle in the states.

Historically while employed, we paid roughly $320,000 in health insurance premiums over 30 years, and for the same period had actual gross medical expenses of under 150K. For obvious reasons I know this is not a realistic basis for future predictions, but It did plant the seed in my mind that maybe there is another way of approaching managing the financial risk of health care.

Where we live, health care costs are generally about 20-30% of the cost in the states including all diagnostic tests, hospitalizations, doctors’ visits and medications. Quality of health care here is ok, but variable and with the best and most modern hospitals providing decent care. We are generally well informed medically and can go to Singapore or Bangkok for more advanced procedures or hospitalization if needed for a higher cost. I do know that a medical emergency would likely mean being treated locally. The risk of living in a country where the standard of health care may not match the west is something we feel we can accept.

Since retiring, we have not had health insurance and our costs thus far been have less than $2,000 per year for both of us. Expat health policies we have looked at are roughly $10K a year all-in (including deductibles) and will increase as we age. They also come with a risk of the policy being cancelled when the economics no longer work for the insurance company. To mitigate the financial risk of not having health insurance, I set aside $100,000 when I retired (and excluded it from retirement calculations) and add $10,000 to this fund each year. Average return on this fund is 4%. Our actual out of pocket medical expenses are paid for from of our regular expense budget.

Based on the above and our particular situation, I am still leaning to self-insuring for now, but I do have a nagging feeling that I am missing something important and given how significant and potentially impact-full this is, I would really like to hear other views from this community. Thank you!

[njhowie]

Quote:

Originally Posted by A Gold One I Fire’d at 55 after long career in Mega-Corps and an updated fire calc still shows 100% success rate for the next 40 years.

I don't use Firecalc, but does it include potantial liability of self insuring on healthcare versus having full coverage with a policy? Maybe it does, but I doubt it. This is one thing which may be missing from your calculations.

If you're comfortable with your decision, and prepared to live with the ramifications/consequences, whatever they may be, that's all that matters.

Just understand that if at some later point you decide that you want to get health insurance it will likely be more difficult after having self insured. If either of you do contract some disease or have an accident while self insured which requires an extended hospital stay or expensive treatment, it could wipe you out financially. At that point there's no way I can see that you'd be able to get "fully" insured ever again. I can confidently say that even not knowing any of your financial details other than you have $100,000 + $10k/year set aside for self-insurance purposes. What if one of you needed an expensive drug regimen for the rest of your life that cost $100,000/year or more?

Even at 20% to 30% of US healthcare costs, not knowing the future of where healthcare costs may go, depending on what may happen, you could still be wiped out financially. Sure, it's a risk, possibly a very low one in your situation. But are you prepared to risk a lifetime of savings?

It's a dangerous game you're playing in my view. If you're financially secure, why roll the dice with a lifetime of hard work and savings?

I would suggest that you at least investigate getting some sort of catastrophic insurance policies for the both of you. They are less expensive and might cover nothing as far as the small stuff, possibly with $15,000 or $20,000 a year deductible, but they will kick in for those things which could wipe you out financially. That might be a good middle ground. You would be self insuring for the routine stuff, but have the catastrophic plan as a backstop. If you do go this route, it is very important to understand exactly what the catastrophic plan would cover and any exclusions.

Personally, I would not want to be put in a position, or have my wife put in a position, where we needed to decide to pay for expensive, life saving medical expenses and possibly give up much of our savings, well in excess of what had been set aside for self insurance, or go without and possibly cut my life short. I say "my life" in that I would never, ever consider it an option for my wife.

Additionally, I would suggest good life insurance policies for both of you. In the event that one of you does come down with something which does require expending a lot of money, if you/her do pass away, the life insurance would "replenish" some amount of the medical expenses you paid. Generally, folks who become financially secure can drop life insurance at some point as they no longer have financial obligations which could wipe out a family. However, in your case, deciding to self insure for healthcare, I definitely see a benefit in continuing life insurance for protecting both of you against the possibility that one has expensive medical costs ultimately leading to end of life. When you offset the annual life insurance costs against the amount saved by self insuring, I'd guess that the net savings would diminish significantly - especially for yourself initiating a life insurance policy at age 60+.

Bottom line, if you are financially secure, I would say don't be penny wise pound foolish for this.

That's just me. You were looking for opinions, and that's mine.

Good luck on whatever you may decide.

[Dd852]

I think the problem is that nearly everyone can be humbled by health. Humbled not just physically but emotionally. And it isn’t just you it is a spouse! I hope for you the moment never comes, but imagine your spouse being in pain and miserable and the best hospital requires either an insurance card or $100,000 in cash immediately as a deposit before admittance. Could you get liquid and to hand quickly enough ? I’d advise looking at emergency airlift insurance as it doesn’t sound like you’re living in a major center, and catastrophic insurance as a backstop - maybe something with a $10,000 annual deductible. But I wouldn’t try to self insure with health; the stakes are too high.

[pb4uski]

Quote:

Originally Posted by A Gold One .... Since retiring, we have not had health insurance and our costs thus far been have less than $2,000 per year for both of us. Expat health policies we have looked at are roughly $10K a year all-in (including deductibles) and will increase as we age. They also come with a risk of the policy being cancelled when the economics no longer work for the insurance company. To mitigate the financial risk of not having health insurance, I set aside $100,000 when I retired (and excluded it from retirement calculations) and add $10,000 to this fund each year. Average return on this fund is 4%. Our actual out of pocket medical expenses are paid for from of our regular expense budget. ...

Unless your deductible is around the $2,000 per year that you currently spend, I would not include the entire deductible in your estimate of cost... it overstates the $10k... I would include premiums plus $2,000... recognizing that it could be worse. How much are just the premiums?

I'm not sure is $10k is all that unreasonable. In my state, a health insurance policy with a $3k deductible would be about $1,200/month for a couple or $14,400/year.... by law, no less than 80% of premium can be for claims... so let's say that $11,520 of the $14,400 was for claims. If health care is 30% of the US that would be $3,456/year for claims... adding in the $2,880 for overhead, taxes and profit that would be $6,336 for premiums.... that plus the deductible probably isn't that far off of what you would be paying for premiums.

What you're talking about is akin to what one may have seen in the US in the 1950s.... I remember that our family didn't have health insurance (that I know of) and just paid the doctor his reasonable fee after each visit (and some of those visits were house calls).

I'd be uncomfortable without health insurance, but that is probably biased by my living in the US.

[Bryan Barnfellow]

I think accidents would be a major concern in your case. How good and fast is ER transport and treatment? Another would be stroke...would you be treated within the "golden hour"?

Last, if at a later point you decided you did need insurance would you be up against an upper age limit for initiating certain kinds of coverage?

-BB

[Dtail]

There are many folks who start having health issues in their 60's.
Have you checked into the cost of potential heart issue and cancer type treatments?
I would feel safer getting an insurance policy.

[Aerides]

I forget who said it, but someone here. No matter how healthy you are in your 30's, 40's, maybe 50's, your 60's is when the check-engine light will come on.

The old "past performance is no predictor of future results" is never more relevant than with health.

Now, that's not to say you'll have any major expense, but little things. That slip in the shower that resulted in a sore knee for a week when you were 40 is now a torn meniscus. That running-induced stress fracture you rested for a month at 32 now requires 3 months of PT. Your annual PCP visit shows a bit of a flutter so now you have 3 follow ups with a cardiologist - you're fine but he wants to see you every 6 months to monitor...

Fun stuff. And it all can add up.

[MichaelB]

Self-insure is not the same as don’t insure. Self insure requires a realistic risk assessment and estimate of cost, both likely cost and potential cost, together with the assets to cover the expense. That is missing here, and it is really quite difficult to calculate.

Because there is really no limit or ceiling to potential future cost, there needs to be some strategy in place to limit fat tail outcomes which may be low probability but have severe financial consequence. A catastrophic coverage option would help.

If the OP can still get comprehensive coverage after getting sick or receiving a bad diagnosis, it’s easier to manage the risk. In that case perhaps a policy covering accidents and emergencies would help. If access to comprehensive insurance is not available once a diagnosis has been given, this needs to be considered in the risk assessment.

[Alan]

+1 on the over 60 comments.

I always stated that the bodywork may be crumbling but the engine was in great shape. I had several surgeries on joint issues over the years but through work “executive” physicals I had undergone multiple cardiovascular checkups including stress tests that I sailed through.

6 weeks after my 60th birthday I ended up in the ER on a Sunday night with a heart issue. Electrophysiologist stuff as it was AFib. An electrical engineer with electrical heart issues

My wife’s sister and her husband were extremely fit, avid hikers and swimmers. At 65 the husband started feeling a bit “off”, went in for checkup, resulting in blood tests, referral and more tests revealing stage 4 pancreatic cancer. He was dead 6 months later following lots of chemotherapy. 18 months later his widow volunteered to have a scan done on a new type of body scanner and was found to have a split in the inner wall of the aorta coming out of the heart. That was this year, she is age 65, and recovering from open heart surgery having had several inches of aorta and the aortic valve replaced.

I would not consider completely self insuring for healthcare.

[sengsational]

I would not have the courage to self insure, even in a place with reasonably priced health services. But one thing in favor that's sometimes lost in these discussions is the possibility of moving back to the US if the future appears to have long expensive treatments. It seems like you could get an ACA policy, even with pre-existing conditions, pay the max out of pocket and the premium, and get world class care. Even if moving isn't a legit enrollment trigger, you'd pay out of pocket in the reasonably priced county until January 1.

[REWahoo]

...

https://www.youtube.com/watch?v=u9hESWMykp0]

[Scrapr]

I was in pretty decent shape until age 55. Then 3 ER visits, a week in the hospital with no clear Dx. 2 surgeries in 2 years & a chronic condition treated daily. My wife caught the cancer at 57. Lots of chemo, radiation & surgeries. She was gone by 59. Hard to say what the bill was on her treatments

[CRLLS]

I've been relatively health most all of my life. One emergency prostrate surgery 6 years ago at age 62 and so far this year I needed my gallbladder removed and now I'm dealing with sciatica/stenosios (not sure which just yet. Having an MRI later this week) DW has her medical issues too.

There is also a big difference between having to pay a huge deductible and paying "book rate" without insurance.

I would have a difficult time choosing to self insure without having, say, $20M in the bank. That being said, I reside in the USA, not some foreign country like the OP is living in.

I cannot relate much to foreign healthcare prices or quality. I do know that ~15 years ago, a colleague of mine had a kidney stone attack while in China. It required a midnight Doctor call to the hotel along with 2 nurses/ assistants. The total cost of the house call and the meds were < <$20 USD. In the morning he went to the hospital and there was a similar ridiculously low charge there too.

[OldShooter]

At the bottom, buying insurance is simply a decision to pay someone else to take a risk that the insured doesn't want to retain.

From the OP, @A Gold One's financial situation and health history allows him to be comfortable retaining quite a bit of health care cost risk. But all of it? That is the real question in the OP, the "something important." Maybe some kind of catastrophic insurance/high deductible would be adequate to get someone else to take the really big risks.

In situations like this, Taleb's turkey always comes to mind for me: https://www.businessinsider.com/nass...turkey-2014-11

[A Gold One]

Quote:

Originally Posted by njhowie I don't use Firecalc, but does it include potantial liability of self insuring on healthcare versus having full coverage with a policy? Maybe it does, but I doubt it. This is one thing which may be missing from your calculations. If you're comfortable with your decision, and prepared to live with the ramifications/consequences, whatever they may be, that's all that matters. Just understand that if at some later point you decide that you want to get health insurance it will likely be more difficult after having self insured. If either of you do contract some disease or have an accident while self insured which requires an extended hospital stay or expensive treatment, it could wipe you out financially. At that point there's no way I can see that you'd be able to get "fully" insured ever again. I can confidently say that even not knowing any of your financial details other than you have $100,000 + $10k/year set aside for self-insurance purposes. What if one of you needed an expensive drug regimen for the rest of your life that cost $100,000/year or more? Even at 20% to 30% of US healthcare costs, not knowing the future of where healthcare costs may go, depending on what may happen, you could still be wiped out financially. Sure, it's a risk, possibly a very low one in your situation. But are you prepared to risk a lifetime of savings? It's a dangerous game you're playing in my view. If you're financially secure, why roll the dice with a lifetime of hard work and savings? I would suggest that you at least investigate getting some sort of catastrophic insurance policies for the both of you. They are less expensive and might cover nothing as far as the small stuff, possibly with $15,000 or $20,000 a year deductible, but they will kick in for those things which could wipe you out financially. That might be a good middle ground. You would be self insuring for the routine stuff, but have the catastrophic plan as a backstop. If you do go this route, it is very important to understand exactly what the catastrophic plan would cover and any exclusions. Personally, I would not want to be put in a position, or have my wife put in a position, where we needed to decide to pay for expensive, life saving medical expenses and possibly give up much of our savings, well in excess of what had been set aside for self insurance, or go without and possibly cut my life short. I say "my life" in that I would never, ever consider it an option for my wife. Additionally, I would suggest good life insurance policies for both of you. In the event that one of you does come down with something which does require expending a lot of money, if you/her do pass away, the life insurance would "replenish" some amount of the medical expenses you paid. Generally, folks who become financially secure can drop life insurance at some point as they no longer have financial obligations which could wipe out a family. However, in your case, deciding to self insure for healthcare, I definitely see a benefit in continuing life insurance for protecting both of you against the possibility that one has expensive medical costs ultimately leading to end of life. When you offset the annual life insurance costs against the amount saved by self insuring, I'd guess that the net savings would diminish significantly - especially for yourself initiating a life insurance policy at age 60+. Bottom line, if you are financially secure, I would say don't be penny wise pound foolish for this. That's just me. You were looking for opinions, and that's mine. Good luck on whatever you may decide.

Thank you njhowie,

Much respect for your thoughtful response.That is exactly the kind of sensible feedback, reality check and advice I was looking for!

[A Gold One]

Your feedback is sobering and filled with great suggestions. It is eye opening to hear the experiences of those who have lived through health life events in the post-60 years.

Catastrophic insurance is definitely something I will definitely look into to reduce our overall financial risk and will also research evacuation insurance and consider again regular insurance.

The idea to consider moving to the US for coverage in the event of a catastrophic health situation was a surprising one I had not considered and seems reasonable.

As someone said - penny wise and pound foolish is probably an apt description of our approach!

[Navigator]

I’d like to add one more cautionary tale. I thought I was in excellent health when I was in my 50s. I ate well, exercised and had regular checkups. One day I felt a slight numbness in my feet. I didn’t think much of it, but when I went to see a neurologist, the diagnosis was completely unexpected and devastating. Even with good health insurance, I have easily spent multiple tens of thousands of dollars on health care since then. The US is really the only place I can get the most advanced treatments. Without insurance, the quality of life I have would be far worse. This is something you do not want to take a chance on.