Projecting health insurance premiums

[slowsaver]

How do very-early retirees budget for health insurance premium increases before reaching medicare age?

I checked on coveredca.com, and assumed no subsidy. The plan I would buy at age 41 in 2016 costs $373/mo. The same plan at age 42 in 2017 costs $427.33/mo (14% more).

So how would I project my payments from ages 45 to 65? I'm hoping not to just add 14% per year.

I've been a very healthy person so far, so I don't use my insurance much. Also, I am not not entitled to any post-retirement health coverage from my employer.

 

[ziggy29]

Sad to say, I don't think we can project them with much confidence. Logic tells me that trees don't grow to the sky so there has to be *some* limit to how much health care costs continue to rise above incomes and general inflation, but I'm not prepared to suggest when that will happen.

My projections assume cost increases of 4% above general inflation for the next 15 years. But my guess is no better than anyone else's.

 

[Dawg52]

I've been retired almost 10 years and I have experienced increases of 10.5% a year on average. If I could eliminate the last 3 years, the average would be much less.

 

[mamadogmamacat]

Although I do have retiree coverage, the group consists of those from 55 and up, both healthy and not so healthy, and has been with the same insurer for many years. So, presumably then the profits are acceptable, and the pool is large enough so that our increases have averaged 4% for the past ten years (4.5% in 2017 vs 2016). So, if we could ever get plans for all, not just retirees (and spouses) from mega corp, with a similar cross section of policy holders, then that would be what you would be looking at. Perhaps even less since you are asking about age 45 to 65. I would assume then maybe 2% above inflation, 3% if you want some pad. (assume inflation 2.5%) The current situation is not sustainable with ins companies dropping out and doctors also. So the 14% will not be for much longer IMHO.

 

[slowsaver]

Let me ask the question from a different angle, using FIREcalc ...

I have been tracking my expenses for 4 years, and I spend $60k/yr (or less). This spending doesn't include health insurance because I get it for free from my employer.

If I had bought health insurance this year, then my spending would have been just under $66k this year.

So I plug $66k expenses into FireCalc, and I get 100% success rate for retiring at 45 and living until 100.

But is it sane to trust this, given the health insurance market?

 

[kimcdougc]

I am in the ACA plans. From 2016 to 2017. Insurance went up 30%. I always keep an extra $500 in the budget just for health insurance or medical bills. Thank goodness.

I did go from a gold plan with a $1,000 deductible to a silver plan with a $2,500 deductible plan. So my monthly bill went down some, not much.

Will see how much I get back from the government when I file taxes. We are currently in the poverty level of earning funds. We get a small pension. (Of course when we retired we did take out enough money with an NUA to last us till we turn 65 and can get Medicare.)

 

[Live And Learn]

I am ultraconservative, so my budget is based upon both DH and I being age 63 (in fact we are 58 and 54) and assumes no subsidy. I assume that once we hit 70 that medical expenses will be $15k / year / person. If I spend less on healthcare then I will use that money for something else. This year we used it to buy a boat. Not a bad problem to have and I feel I've "planned for the worst".

 

[Fermion]

If medical expenses rise to the point that a couple at age 70 has to pay $30,000 a year, the country is doomed.

I doubt 80% of current retirees that age could pay that amount.

Might as well plan for the end of the world

 

[Katsmeow]

I assume that once we hit 70 that medical expenses will be $15k / year / person. If I spend less on healthcare then I will use that money for something else. This year we used it to buy a boat. Not a bad problem to have and I feel I've "planned for the worst".

FWIW, unless someone needs long term care I think that currently for someone on medicare with a supplement the costs are less. DH is 69 and his Medicare and supplement premiums are about $300 a month. He takes no regular prescriptions and usually those are his total medical costs in a year. He has plan F so not out of pocket other than premiums. The past couple of years he did have a couple of prescriptions.

He does wear glasses and every few years he needs new glasses. But, really that is it.

Now, my mother is much older (in her 90s), and has many chronic medical conditions (diabetes, kidney failure, etc.). Her supplement plan does call for a deductible and some payment up to a point. She also takes a flotilla of medications but does have a prescription drug plan. Even with all her prescriptions and what she pays that isn't covered by the supplement she is nowhere close to $15k a year.

 

[Lakewood90712]

Not sure of the coverage on the CA exchange plans you have priced for 2016 and 2017.

For what its worth, during the second half of 2014, I was on cobra ( blue shield ppo) at about $700 a mo.

IMO, the state exchange premiums were too low to be profitable , so this is why we are seeing 15% and higher year to year increases. I think the increases will slow a bit going forward.

My non scientific opinion is that real medical cost inflation is about 8% a year as is with many professional / technical services that can't be further outsourced/ off-shored. ( auto repair, plumber, appliance repair, roofer etc.).

Hospitals , the Medicare system, Pharma, and Insurance companies continue locked in a battle with each other trying to get the better hand . I don't see this changing anytime soon.

 

[MBSC]

Let me ask the question from a different angle, using FIREcalc ...

I have been tracking my expenses for 4 years, and I spend $60k/yr (or less). This spending doesn't include health insurance because I get it for free from my employer.

If I had bought health insurance this year, then my spending would have been just under $66k this year. So I plug $66k expenses into FireCalc, and I get 100% success rate for retiring at 45 and living until 100. But is it sane to trust this, given the health insurance market?

I assume the $60k spending includes meeting a portion of the annual deductible/OOP since you may become less healthy in the future. I assume it also includes amortization of infrequent purchases (car, roof, HVAC).

Plans purchased on the individual market are age-rated in most states. While FireCalc includes an inflation adjustment it does not automatically include premium adjustments for becoming older. As another poster mentioned above, I also use age 63 premiums as the baseline to be conservative. Since I'm in my 40's, I also assume I will be paying these age 63 premiums beyond age 65 in some form.

 

[eta2020]

I protect it by having European Union passport and plan B to relocate to EU country where high quality health care costs usually in range 40-300 USD a month (when not working) a there are no deductibles.

If you absolutly must remain in US you will have no idea about future healthcare costs . In such case Good Luck!

 

[easysurfer]

My strategy ...

 

[Live And Learn]

I am ultraconservative, so my budget is based upon both DH and I being age 63 (in fact we are 58 and 54) and assumes no subsidy. I assume that once we hit 70 that medical expenses will be $15k / year / person. If I spend less on healthcare then I will use that money for something else. This year we used it to buy a boat. Not a bad problem to have and I feel I've "planned for the worst".

Oh - and I forgot to mention that I also plan for both of us to hit the OOP maximum. My HC budget is therefore $40k / year until we are 70 when it drops to $30k

FWIW, unless someone needs long term care I think that currently for someone on medicare with a supplement the costs are less. DH is 69 and his Medicare and supplement premiums are about $300 a month. He takes no regular prescriptions and usually those are his total medical costs in a year. He has plan F so not out of pocket other than premiums. The past couple of years he did have a couple of prescriptions.

He does wear glasses and every few years he needs new glasses. But, really that is it.

Now, my mother is much older (in her 90s), and has many chronic medical conditions (diabetes, kidney failure, etc.). Her supplement plan does call for a deductible and some payment up to a point. She also takes a flotilla of medications but does have a prescription drug plan. Even with all her prescriptions and what she pays that isn't covered by the supplement she is nowhere close to $15k a year.

Thanks ! That's good to know. It looks like my budget has more fluff in it than I thought. Whatever I don't spend will go for travel, but since I'm so conservative knowing that I can spend some ridiculous amount on HC is reassuring to me.

 

[FIREmenow]

Thanks ! That's good to know. It looks like my budget has more fluff in it than I thought. Whatever I don't spend will go for travel, but since I'm so conservative knowing that I can spend some ridiculous amount on HC is reassuring to me.

Time for a bigger boat!

 

[nun]

Given the enormous uncertainty surrounding health care insurance for people not getting it from an employer or through Medicare or Medicaid (and even those situations are uncertain) I think the best you can do is budget for something like the average annual premium increase over the last 10 years for someone of your age. Then feed that into your budget calculations.

Some people on here are getting retiree health insurance from mega-corps, military or government/state employers and that makes things a lot easier.

 

[scrabbler1]

In my long-term ER budget spreadsheet, I enter annual increases of 10% for medical expenses and 3% for non-medical expenses. In the 8 years I have been retired, my medical expenses have been by far the most volatile. I had big premium increases in my first 2 years (2010 and 2011) although in 2011 I downsized to a bare-bones HI policy while I waited for the ACA exchanges to arrive in 214. I paid little from mid-2011 through 2013 but I was also underinsured.


I had a spike in 2015 due to my hospital stay so my expenses have fallen a lot in 2016 even though I had two small, unforeseen expenses totaling $1,500. So, I'm not sure what my normal "baseline" is. Perhaps my 2016 expenses plus only some of the $1,500, then tack on +10% annual change for HI increases? At that pace 'll be paying $2,000 per month by the time I turn 65 in jus over 11 years.

 

[dvalley]

So those of us who are retiring with a smaller nest egg should probably consider retiring to Canada or South America etc.

BTW, slowsaver, congrats and good to see you active again. I remember you posting when you crossed the $1MM milestone in 2014.

 

[broadway]

At that pace 'll be paying $2,000 per month by the time I turn 65 in jus over 11 years.

The unsubsidized premium for my Silver Horizon Blue Cross Blue Shield of NJ premium went up by 11.77% to $758.68 for 2017.

At that rate, I will be paying $1,833.74 in 2029 when I am eligible for Medicare.
But now it looks like I may not be able to count on Medicare either.
Quite scary.

 

[eta2020]

The unsubsidized premium for my Silver Horizon Blue Cross Blue Shield of NJ premium went up by 11.77% to $758.68 for 2017.

At that rate, I will be paying $1,833.74 in 2029 when I am eligible for Medicare.
But now it looks like I may not be able to count on Medicare either.
Quite scary.

Hmm my calculation is telling me you will pay about 3k a month by 2029 if annual increases are 11.77%.

Rule of 72 ... 72/11.77 tells me your premium will double in 6.1 years That is you will pay 1800 bucks in more like 7 years.

 

[broadway]

Hmm my calculation is telling me you will pay about 3k a month by 2029 if annual increases are 11.77%.

Rule of 72 ... 72/11.77 tells me your premium will double in 6.1 years That is you will pay 1800 bucks in more like 7 years.

Hmmm. I don't remember which online calculator I was using, but you are right. According to Simple Savings Calculator - Savings Interest & Investment Growth Calculator, $758 at 11.8 grows to $3105.
Even more scary.

 

[rodi]

Some of the increase in insurance prices are due to getting older, not just inflation. No way to avoid that... and still have need of insurance. I noticed big jumps at age 50, 55, and 60.

 

[nun]

So those of us who are retiring with a smaller nest egg should probably consider retiring to Canada or South America etc.

Canada won't be an option unless you have family, Canada has strict immigration rules and to them Americans are just foreigners. Some South American countries have retirement visas, but remember if you retire outside the US you'll still have to pay Medicare to avoid a 10% premium increase for every year that you don't pay the premiums if you ever want to return to the US. Also many countries are doing similar things to the US and severely restricting access to medical benefits for immigrants.

 

[DEC-1982]

So those of us who are retiring with a smaller nest egg should probably consider retiring to Canada or South America etc.

Of all the countries ex-US, Mexico has one of the largest number of US expats, so don't forget to consider that country. I understand many doctors are US-trained, and many hospitals are affiliated/owned by US ones (but without the same US costs to you).

 

[nun]

Of all the countries ex-US, Mexico has one of the largest number of US expats, so don't forget to consider that country. I understand many doctors are US-trained, and many hospitals are affiliated/owned by US ones (but without the same US costs to you).

Yes, but will you still be paying for Medicare just incase you want to return to the US? Many US expats will use local doctors for minor illnesses, but keep paying Medicare so they can return to the US if they need chronic or acute care for serious things........so they don't save much on health insurance.

For non-US citizens looking to retire to the US, maybe to be with US citizen children, health insurance is a big barrier. People can't get Medicare until 5 years after they become resident and then they must pay the entire premium and there's no way to transfer credits they might have in another system.