Health insurance

I need health insurance. COBRA running out at end of year. Wife and I are <50, retired, two kids <13. I’ve explored Healthsherpa, took a look at eInsurance.

Budget is fine, just looking for how to best select right-sized coverage. I am usually an informed, frugal, consumer but struggling on this topic.

Any suggestions on where to start or what to expect (higher deductibles)? Are the advisors at these places helpful are simply trying to separate a fool (maybe me) from their (my) money?

I should add, I won’t qualify for any subsidies due to income level.

The first thing to do is estimate your past usage (roughly). So you had 1 doctor visit, wife had 2, kids had 4, whatever. And look at about what each costed, in total, using the "allowed" cost (not the fictional price, but instead what the secret price between the provider and the insurance company was). Also, not what you saw on your credit card, since that could have been reduced with copay/co-insurance. Add in any prescription costs. Again, the cost not to you, but the total cost that was paid to the provider. Use these totals to get what your expected next year medical spend will be. Obviously it's just a guess, but it's the best you can do.

Now, when you shop for insurance, you add the grand total of the premiums (12 times your monthly payment to the insurance company) plus whatever the estimate, from above. So this is your expected outlay for premiums plus medical goods and services, priced using the advantageous pricing the insurance company has negotiated, but without your insurance "kicking in".

Now, for each policy you're evaluating, apply the rules of the policy to see how much they will kick-in. For instance, if you get a high deductible policy, and you don't have too much utilization of medical goods and services, then the total they kick-in will be zero. But if you evaluate a super-duper policy where you see the doctor for $50 max, and a specialist for $75 or something like that, subtract from the total whatever those kickbacks will be.

So if you pick a cheap, high deductible policy, the premiums would be cheaper, but you'd get no kickbacks for services. These policies work, financially, for people who don't have routine medical stuff. If you pay big bucks in premiums for a policy that gives you more kickbacks for when you utilize medical services, and then don't use medical services after all, you end up paying for stuff you don't use.

So that's the gist of it, from my perspective, but there's one more thing to consider. If you're on the fence between a high deductible policy, you DO get a tax break for having a high deductible policy; you're able to lower your income (not pay tax on it) by a certain amount (on the order of $7000), so if you're in the 28% bracket, that can be worth a couple of grand.

Good luck in your shopping. They don't make it easy.

WhenIsItTime said:

I need health insurance. COBRA running out at end of year. Wife and I are <50, retired, two kids <13. I’ve explored Healthsherpa, took a look at eInsurance.

Budget is fine, just looking for how to best select right-sized coverage. I am usually an informed, frugal, consumer but struggling on this topic.

Any suggestions on where to start or what to expect (higher deductibles)? Are the advisors at these places helpful are simply trying to separate a fool (maybe me) from their (my) money?

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Health insurance is complex, designed to make choosing a policy difficult. If you want comprehensive coverage the ACA makes it easier, as all ACA compliant policies provide basically the same coverage. The differences between them are mostly in two areas. First, the provider network. Bigger broader networks cost more and aren’t available everywhere. Smaller local provider networks and HMOs are more restrictive but cost less.

Second is the cost sharing (copayment, deductible, total out of pocket) One policy might have 8 different cost sharing options, making it look like 8 different policies, when it really is just one, with the same coverage and network, and just different combinations of how much you pay. As a rule, the more risk you take by paying a greater share of the first health care costs, the lower the premium. Here’s a spreadsheet prepared by one of our community members where you can plug in different combinations of cost share and health care expenses, and see the total out of pocket cost to you. https://www.early-retirement.org/fo...nd-coinsurance-copay-68965-3.html#post1374536

The choice of plans and providers varies widely, from state to state, and even county to county. So "what to expect" is tricky.

In my area, I have choices of about 30 or so plans, but I have a bronze one I like with a high deductible, HSA eligible, from Florida Blue, which I've stuck with for 3 years and will keep - I hope - until Medicare.

Sengsational gave great advice. I would add:

Go to www.healthcare.gov and see what's available. Even if you don't qualify for subsidies, it will give you a good idea on costs and the different insurance levels.

Also, is there any way to manipulate your expenses to lower your income? For instance, on paper holding a mortgage at 3% is a good idea since historically a balanced portfolio will provide a better return. But if you pay off the mortgage and eliminate the monthly mortgage payment, you've just lowered your income by that amount.

Health insurance is such a wildcard for anyone who retires prior to age 65 and has to buy insurance on the exchange or open market. I certainly envy you being able to retire prior to age 50, but I don't envy you having to buy health insurance for a family of four!

Good luck and let us know what you come up with.

Maybe call a health insurance agent. They are free of charge. A good source might be your home/auto insurance agent.

golfnut said:

Maybe call a health insurance agent. They are free of charge. A good source might be your home/auto insurance agent.

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I agree with this. Maybe get two or three agents to work on your profile to ensure the results are competitive. They work on commissions from the insurance providers, so why not get consultation that someone else pays for?

Great advice from all of you. Thank you for the info.

I can’t lower my income for the next few years (blessing!?!), so definitely without subsidy. I’ll take it as that is and be grateful it reduces 1 variable. I’ll use the spreadsheet suggested and also try the agent approach.

Absolutely compare the physician networks you'll be able to use with each plan. The ACA plans in my state each have very limited networks with not much overlap between them. I based a lot of my decision on which doctor I could keep.

I like an HSA plan, which will let you deduct contributions. I have found that the high deductible HSA eligible plans cost roughly the same as small deductible plans if you add the deductibles to the premium cost. So if you don't run through the deductible an HSA plan may save you money directly. Plus tax-free growth on HSA contributions.