Early Retirees and Health Insurance, pt. 2

In part I  I vented about the state of our healthcare system and the bleakness when it comes to options for early retirees, living domestically in the USA.  In a nutshell, it stinks to high Heaven!  Insurance was never what I consider “affordable” but most middle-classers could manage. All of sudden March of 2010 arrived.  It took one presidential administration to destroy everything.  To force this “UACA” (as in Unaffordable Care Act) down everyone’s throat.  That’s all I am going to say about politics.  In this installment I will make an attempt to provide a means in which we can “hack” the current health plan, inappropriately referred to as A.C.A. (affordable my Ass!).

We in the FIRE community are making sacrifices by reducing our spending and increasing our savings in an effort to display our middle finger to our bosses and retire early.  For many of us healthcare costs are not only our biggest concern, these costs impede our ability to retire early.  It’s like we’re being penalized during the interim period before qualifying for Medicare.  It’s like our beloved government says to us, “you have enough wealth to retire early, too bad!  You’re paying $20k per year for health insurance from now until you’re 65!”  

Look, to be fair, the original intent of Obamacare was to make healthcare affordable for many families. Exchanges were set up where individuals and families could compare eligible plans, costs (including annual deductibles) and benefits (such as prescriptions).  What has resulted from all of this are that not enough young people enrolled (originally it was thought that young, healthy folks would enroll, and this would subsidize the older, sick enrollees, it backfired!).  Also, insurance companies have abandoned the exchanges, which eliminated competition and this drove premiums higher.  Now it seems no one can afford this.  Brilliant, simply brilliant!

So how does one save money under this plan?  I have a few suggestions.  First of all, please RE-READ this article.  It details how your income in relation to the Federal Poverty Level (FPL) affects the premiums you’ll pay for insurance, as well as any Premium Tax Credits (subsidies) you may be eligible for.  Basically, if your Modified Adjusted Gross Income (MAGI) is below 250% of the FPL, you are eligible for subsidies that reduce your cost for the Silver Plan.  I go into the details in the aforementioned article.  (Be sure and speak to a bona fide tax preparer on ways to reduce your MAGI).  Also, go to this link to learn about the little known Savers Credit. 

For those preparing for early retirement, investing in a Health Savings Account (HSA) can prove invaluable.  I admit to not having done this yet but I am looking into this NOW.  As a type 1 Diabetic (a pre-existing condition) on prescription medications, I need to maximize this savings account/loophole.

Health Sharing Ministries: I’ve recently been reading FIRE-related articles about the merits and cost savings of simply joining a health savings ministry.  The feedback so far has been rather positive, however there are caveats to this and in lieu of writing a separate article, I encourage everyone to research this option thoroughly as this IS NOT MEDICAL INSURANCE.  Here is a great article written by millennial money man that provides a basic assessment of these plans.

The bottom line is you must be prepared.  While you’re still gainfully employed and have access to an employer-sponsored medical plan; start planning now for early retirement.  Don’t leave any stone uncovered.  Reduce spending, increase savings including maxing out available workplace retirement plans and/or IRA’s.  Invest in an HCA immediately.  Lastly, set up an appointment for a tax preparer, be fully transparent with your plans and allow them to help you in early tax preparation and early retirement planning.  Your tax preparer will probably bring up many items you never considered before.  Don’t be in for a shock!  Prepare now.  The health system is broken and unfortunately we’re all in this together, regardless of our demographic. We’re screwed.

 

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