Early Retirees & Health Insurance, pt. 1

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Folks, I wish I had a nice article to publish but unfortunately this one is unpleasant.  It’s at the very top of everyone’s list of concerns.  Frankly, I could retire right now if this wasn’t a lingering concern of mine.  I’ll explain ACA (affordable care act?  What a joke!) and hopefully I can clear some things up you probably didn’t know.  However, I cannot offer a single solution.  Folks, when it comes to affordable health insurance for retirees too young to quality for Medicare in the USA, there is no remedy.  We’re screwed and we’re all in this one together…..

BASICS: No one can be denied coverage and pre-existing conditions do not pay more in premium.  From the start this is unaffordable.  Thank about it, for everyone that is healthy, the premiums will be enormous, because the heathy ones subsidize the unhealthy ones, with pre-existing conditions.  Is this fair? (keep in mind that I myself have a pre-existing condition, Type-1 Diabetes)

Policies are standardized in name and level of coverage: Bronze, Silver, Gold, Platinum.  The only difference is how much you pay for health services versus how much the insurance company pays.  The metal levels are not based on quality of coverage.  (click link). The  difference is what percentage you pay for health services versus how much the insurance provider pays.  For instance, bronze is a 60/40 plan, silver is a 70/30 plan, gold is 80/20 (like most employer-sponsored health plans) and platinum is 90/10.  Premiums increase thru each metal level.  Also, annual deductibles are a consideration and this is the most challenging part.  What good is a health plan that requires a $12,000 deductible to be affordable on a monthly basis?

How much will I pay?  This is complicated!  First of all you have to purchase through your state’s (state of residence and where you file your income tax return) insurance marketplace.  Premiums  vary from state-to-state.  Besides that, the premiums one pays is based on their annual income in relation to the Federal Poverty Level.

The 2018 federal poverty level (FPL) income numbers below are used to calculate eligibility for Medicaid.  (this is all taken from healthcare.gov website and is factual):

  • $12,140 for individuals
  • $16,460 for a family of 2
  • $20,780 for a family of 3
  • $25,100 for a family of 4
  • $29,420 for a family of 5
  • $33,740 for a family of 6
  • $38,060 for a family of 7
  • $42,380 for a family of 8

    How federal poverty levels are used to determine eligibility for reduced-cost health coverage

    • Income between 100% and 400% FPL: If your income is in this range, in all states you qualify for premium tax credits that lower your monthly premium for a Marketplace health insurance plan.
    • Income below 138% FPL: If your income is below 138% FPL and your state has expanded Medicaid coverage, you qualify for Medicaid based only on your income.
    • Income below 100% FPL: If your income falls below 100% FPL and your state hasn’t expanded Medicaid coverage, you won’t qualify for either income-based Medicaid or savings on a Marketplace health insurance plan. You may still qualify for Medicaid under your state’s current rules.

If your retirement income is below 250% of FPL you qualify for subsidies.  So….. this means that one would need to maintain an income of less than $40,000. for family of 2 in order to qualify for subsidies.  That can be challenging.  My answer to that; eliminate all debt, keep your passive (and side hustle), as well as your capital gain and dividend income below $40,000.  No living “high-on-the-hog” if you want to exploit subsidies to lower your monthly premiums.  Definition of modified adjustable gross income.  This is the time to consider investing in an HSA (health savings account).  

From here, it’s up to my dear readers to perform the calculations based on their state, their sources of income, etc.  I’m sure they’ll find it’s not pleasant.  Unfortunately, there is no “bridge insurance” to bridge us between early retirement and qualifying for Medicare at age 65.  Basically folks, we in the F.I.R.E. (financially independent & retired early) community are being penalized for our success, for our frugality.  It’s sucks, but it is what it is…..

(I’ll be back soon with part II of this article, once I can stomach putting my research into words for this blog.  It ain’t pretty!)

 

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2 thoughts on “Early Retirees & Health Insurance, pt. 1

  1. I’m actually pretty thrilled that for $1,300 per month I can bridge my wife and me all the way to Medicare age. That’s really pretty cheap thanks to the risk sharing provided by the insurance pool and doesn’t cost much more than the COBRA coverage I was getting from my company’s provider until that expired. I do have a high deductible but so what? Insurance is not there to cut my typical cost of living, it is only there to cover catastrophic costs that would otherwise wreck my finances. Routine health care up to the deductible is something I just put in the budget and cash flow like the rest of my costs. I do not see any problem with paying what it costs for my medical care. Seems fair.

    1. Steve, I’m in a different t situation as my prescription meds are expensive. A box of five Insulin pens is $380. In addition to that I’m on a few other prescriptions. I’m very healthy but still need the scripts due to my Diabetes (from childhood). Better health through chemistry, LOL.
      I’m pleased for you that your expense is $1300.
      For my wife and I to be on a plan similar to the work I get through my employer would cost me $1800. today. The problem for you and I is that these premiums are on the rise. $1300 today might be $2000 in 3 years time.
      This is a huge mess and unless the US moves to Universal Insurance (like Canada and Europe) we’re screwed.
      I’m not into socialism but something has to charge with healthcare.

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