How to Kick Health Insurance in the A$$
In the United States, health insurance is seen as this life-sucking black hole of an expense.
It's often something that keeps people working at jobs they can't stand years longer than they want.
I can safely say that since I've left my job one of the questions I've been asked most is, "What are you going to do about health insurance?"
Well, I took on this beast of an expense a few months back. And you know what? I found out it's pretty easy, and can even be cheap. Let me show you how.
Free Health Insurance
My first line of health care is completely free. Actually my first line of health care is available to and completely free for every member of the United States.
It's called healthy living.
By eating well, exercising regularly, engaging in fun social activities, etc. I become less likely to need the help of a doctor or specialist.
Last year I went to the doctor just three times. Each time was for an ear ache I got from not wearing my ear plugs while surfing. Solution? Wear my ear plugs.
In theory, if I could keep myself 100% healthy than I'd never even need to use my health insurance.
But as you and I both know, life is a hell of a lot different than "in theory."
Sometimes, even when I hedge my bets by living healthy, things can go South. For those times, I should need the best of all health insurance plans right? Well, not really.
Learn the Health Insurance Lingo
The first thing I need to figure out in this black hole of a world was the language. Here are the key terms and their meanings.
A Premium is the amount you pay each month.
A Deductible is the amount you have to pay till your insurance kicks in.
Coinsurance happens after you pass your deductible—you and the insurance company start to share the bill. The coinsurance percentage you see is the percent of the bill you have to pay.
Max Out Of Pocket is the total money you pay for both your deductible and coinsurance.
When you hit your max out of pocket, your insurance kicks in 100%.
Max Coverage is the maximum amount of money your policy will cover in a given year.
Deductible = $2,000
Coinsurance = 20%.
Max Out of Pocket = $3,000
Total insurance bill = $8,000
In this case, you pay $2,000 to your deductible up front. You then pay 20% of the remaining $6,000. But you only pay until that your portion hits $1,000, which is where your out of pocket maximum reaches $3,000. So you actually only pay 20% of the remaining $5,000, or $1,000. Then insurance kicks at 100% to cover the remaining $1,000 of the bill.
Vet Your Health Needs
After I learned the health insurance lingo, I needed to understand what I needed out of an insurance plan.
As Todd Tressider says on Financial Mentor, "Insure the risk you're not willing to take." What is the risk I'm willing to take?
I thought back to my last 3 or so years.
- How often did I visit a doctor?
- Can I remember what the costs may be?
- How likely are these events to occur again?
In summary I don't head to the doctor much. Probably once a year. Those cost end up being around $300 for the visit.
I am active though, so there is a chance I'll get hurt. I need to have a plan that covers a massive injury or catastrophic event. This hasn't happened in years, but better safe than sorry.
I also have a fair 7+ years of spending saved up on the off chance I need to use them for a deductible payment.
In summary, because I don't often go to the doctor I want something with a low premium. And because there's still a chance I get massively hurt, I want my plan to be able to cover me in case of a catastrophic event. Something with a 100% coverage after the deductible.
What I want is called a high deductible health plan (HDHP), which comes with a lower premium.
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Shopping for a Health Insurance Plan
There are two times that you can buy a new health insurance plan:
1. A Qualifying Event: Marriage, having a baby, losing health coverage
2. Open Enrollment: Nov 1, 2016 - Jan 31, 2017 (Now!)
For me, I had a qualifying event: a loss of my employer's health insurance. Due to regulations, I had to get my new insurance plan within 30 days from leaving my job.
So I went off to the primo place to shop for health insurance online is ehealthinsurance.com.
Don't Get Scammed By Fake Health Insurance Companies
Through my initial searches I found a few HDHP plans with premiums around $200/mo.
(I live in California. A similar plan in another state may be more or less.)
With frugality as my tool, I also found a super enticing $85/mo plan with $5,000 deductible on a website outside of ehealthinsurance.com.
When I saw it I had to step back. The sentiment, "Too good to be true?," entered my mind.
I Googled the insurance companies name with the keyword "scam." I found countless claims of customers who needed coverage, while the insurance agency stated their claim didn't qualify which left them hanging.
The whole reason for health insurance is to insure me when things go wrong. Because of the hundreds of reviews saying that wasn't true, I dusted my hands of the situation and picked a plan from ehealthinsurance.com.
The Health Insurance Plan I Have
After a few searches, I settled on an Anthem Blue Cross HDHP plan with a premium of $175/mo, deductible of $7,150, coinsurance of 0% and out of pocket maximum $7,150. It also comes with free preventative care coverage and 100% coverage for primary care visits.
From the assessments I made above about how often I have gone to the doctor in the past, the reasons for why I went and the funds I have available if a catastrophic event happened, I felt this plan was right for me.
Why No Health Savings Account?
If you're a master of the financial independence lifestyle, you're probably asking, "Why no Health Savings Account (HSA)?
The quick answer, I blew it and forgot. hah Look this journey ain't perfect. Life goes on, and I'll get it next time.
As for the HSA, it is the mother of all retirement accounts in that the money you put in is not tax and the money you take out is not taxed.
The money you put in an HSA is to be used to cover medical expenses, but there's a trick that allows you grow your tax free funds in index funds and then access the tax free money for other reasons.
I'm Already Changing My Health Care
It's true. I'm already trying to switch from my current plan. Here's my thought process.
When I got my current plan (which since has jumped to $208/mo, as did millions of other people's premiums in the new year) my 2016 earned income was too high to qualify for any subsidies or discounts from the Affordable Care Act.
But since I quit my job, this year I will likely have a much lower earned income. I am reviewing my plan to see if I qualify for a lower premium/similar plan right now.
If you're curious, I'm doing this through Covered California, the marketplace where Californian's can get federal assistance for private health care under the Affordable Care Act.
I'll update this article in a few weeks, once I hear back how it goes!
Update: I was able to save $2,400 this year on my health insurance, get a lower deductible plan with an HSA(!) and get dental insurance.
I was able to do this because my estimated earned income this year will be lower than $30,000. My monthly premium for health insurance is now $1/mo and my dental is $8.50/mo. If you want to see if you can improve your health insurance plan read the article above. Make sure you take action before January 31, 2017! That is the last day you'll be able to change your plan for the whole year.
Hope this helps you, a friend or a loved one make educated decisions around healthcare now or in the future! Feel free to leave any thoughts in the comments below.
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