If you’ve followed this blog for very long, you will know that we haven’t had traditional health insurance for the past few years but have been using a Christian medical expense sharing program called Medi-Share. The reason was simple: It was far cheaper for our then two-member household at our income level while still meeting the health insurance mandate that came as part of the ACA (Affordable Care Act or Obamacare). However, with the addition of a third person to our home and the loss of one income, the numbers changed for us where it is now cheaper for us to get a health insurance plan through the ACA marketplace.
So while I’m going to share the thinking process we went through as well as some of our pros and cons, I know this is a topic wrapped up in no small political controversy. Please know that I’m not here to make any political statement or endorsement of any individual, ideology, or party! (Be nice in the comments too if you choose to say something.)
Nixing the Pre-Existing Condition
When I was an idealistic, seemingly indestructible young man, I thought that health insurance was unnecessary until I got old. That was until I got struck with a severe, life-threatening illness in my mid-twenties. If I wasn’t covered under my parents’ health insurance plan at the time, I’ll probably be paying those hospital bills for the rest of my life! Not only do I think that some level of health insurance is certainly important for everyone, but this story also underlies one of the benefits of the ACA.
Because I had been so sick at one time in my life, I was forever labeled as having a “pre-existing condition.” I’ve been declined coverage and even my Medi-Share plan had the fine print stating that costs associated to this “pre-existing condition” wouldn’t be covered. The ACA has removed that obstacle, where now I will no longer be denied due to my previous illness. So now I actually qualify for health insurance. That’s a good thing.
The other thing that I appreciate about the ACA is that now all health insurance plans cover preventative care 100%. This includes annual check-ups, and even birth control—even for the lowest costing plans. (Not interested in a surprise pregnancy while dealing with a new baby, you can understand why we’re happy about that!)
The Dance of Premiums and Deductibles
However, as we did our dutiful shopping for health insurance plans on the marketplace, we discovered a sad truth. Even though we now qualify for the government subsidies toward our health plan, the plans were still not entirely “affordable”!
You see, we had shopped for ACA plans last year to compare prices with Medi-Share and so we had some data to compare with when we did our shopping this year. While we saw plans at the approximate same price points as the year before, what the plans themselves offered were a bit different. As an example, in 2014 we looked at a Silver plan that offered a nationwide network of providers and a $7000 in-network family deductible with no coinsurance. Then in 2015, for the same price, the plan switched to a local network of providers, meaning only providers in a few select cities—not even statewide—would be covered. Being that we do a fair bit of traveling (and also recalling that my big health scare occurred when I was on the road), this was a significant problem for us—and a tremendous decrease in value. The plan we looked at a year earlier didn’t exist anymore and to step up to a wider national network involved much higher premiums, deductibles, coinsurance, out-of-pocket maximums, or some combination of them.
Apparently, I’m not alone in this discovery. Reports state that while premiums for ACA health insurance are technically rising in cost at a slower rate, customers are still getting shortchanged with plans that reduce actual coverage (smaller networks of providers) and/or increases in their out-of-pocket expenses in the form of higher deductibles, coinsurance, and out-of-pocket limits. Of course, there’s also the looming penalty that we would have to pay if we opted out of health insurance entirely. So looking ahead, I anticipate that this shift of risk to the consumer is going to be a growing dilemma, especially for any Crumb Saver trying to save on health insurance.
What We Did
So what did we do given this situation? We surveyed the options and also forecasted the future a little bit, and came up with some major points for evaluation:
- We do not plan on having another baby this year, and given our current state of health we don’t anticipate any major medical needs. So we primarily need catastrophic coverage.
- It is important to us to have a robust, nationwide network of providers because of our travels.
- All ACA health insurance plans (even the cheapest Bronze plans) cover preventative care and birth control 100%.
- The trend that we’ve seen in the past several years of the ACA’s existence is increasing out-of-pocket costs for the customer. That means instead of putting more of our money towards paying higher and higher premiums to maintain the same deductible, it would be better for us to put that money into our savings now in order to cover for higher deductibles that are likely to come later.
- Related to the last point is that if our income increases, our subsidy will decrease which will increase our premiums even more. So all the more reason to save up as much as possible to self-insure for a higher deductible.
- We currently have an emergency fund that covers over 6 months of expenses that can help meet a deductible in the case of a catastrophe.
With these thoughts in mind, we opted for one of the cheapest Bronze plans on the ACA marketplace that has a nationwide provider network. With an $180/month premium (after subsidy), our plan has an in-network $5200/person and $10,400/family deductible plus a 50% coinsurance up to our in-network out-of-pocket limit of $6400/person and $12,800/family.
You would be right to think that these are some incredibly huge numbers. My eyes watered a bit thinking about having to fork out such large chunks of cash in the event of a medical emergency. Here are a few reasons why we went this route:
- We are in good health so the only health benefits we would be tapping into it for would be the preventative care (100% covered anyway) and emergencies that happen.
- To get a decently low deductible plus a good nationwide provider network would mean stepping up our monthly premiums by several times—and as stated in #1, we probably wouldn’t meet the deductible anyway. For example, even if we paid double the premium each month, our deductible will still be several thousand dollars and since we hardly have any medical needs, we would STILL not use it up.
- The only way that a lower deductible would be helpful to us would be if we had a major unexpected medical expense—always a possibility, but also something we can mitigate against with adequate savings as a cushion against such potential.
- This is the biggie—this is a HDHP (high-deductible health plan), which qualifies us for an HSA (health savings account).
The HSA Secret
Lest you think there is no reason to my madness, there’s actually a giant secret to how such a high deductible plan can actually help us manage our health care costs over the long-term. And, as you may have picked up by now, it has everything to do with making sure to have a sizeable emergency fund to cover for the high deductible.
As it turns out, there is a special incentivized type of savings account to help us do just this: The HSA or Health Savings Account. An HSA is a tax-advantaged account that permits you to save money pre-tax then to use it tax-free for qualified medical expenses. It is the only type of account that I know of that permits a completely legal and fully tax-free use of your money. Moreover, you qualify to open an HSA ONLY if you have a high-deductible health plan—not sure why they don’t open it up for everyone else, but perhaps that’s why many people aren’t aware of them. That’s not all there is to know about the HSA (believe me, there’s more), but you’ll have to wait until a future post to get the rest of the story.
Pay the Price or Pay the Price
So since January 1 of this year, we are back to having real health insurance through the ACA marketplace. If you’re still undecided on whether to get health insurance, remember that you have until January 31 to enroll without getting penalized on your taxes next year. It’s a hefty fine of $625 per adult or 2.5% of your income, whichever is higher. Also know that I’m just sharing our personal decision-making process and am by no means recommending it for everyone. Your situation will most certainly vary, as nothing is more complicated than health insurance. I hope it gave you some food for thought, and perhaps some questions to ask yourself. In the end, the goal is to protect your family while doing so at the greatest value.
So what do you do to save on health insurance? Any tips you can pass on to the rest of us? Please share with us in the comments below!