How Early Retirees Manage Rising and Unpredictable Healthcare Costs: A FIRE Healthcare Roundup

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Financial Independence. Retire Early: F.I.R.E or FI/RE Community

There is a global movement of people who choose to escape mass consumerism and invest wisely so they can “retire early”, which could mean working less, spending more time at home with their family, traveling the world, or using their increased free time to pursue passion projects.

The single biggest  challenge to many American F.I.R.E folks is the daunting cost of healthcare. Premiums are expensive, deductibles continue to rise, and the cost of healthcare services can seem unpredictable.

The Healthcare Hustlers encourage all Americans to understand how their healthcare plans work, how to make the most of their health insurance, how to be a savvy healthcare consumer, and how to take advantage of innovative companies that make care more convenient and less expensive.

This week’s post features a roundup of F.I.R.E bloggers who describe their F.I.R.E healthcare strategy. Check out the summaries and tips, and feel free to comment with your own!

Our Next Life

Suggested health status: auto-immune disease, requires out-of-state care, requires prescription drugs

Takeaways:

  • ACA Marketplace Exchange plans will be available for purchase at least until 2021

  • Your Out-of-Pocket Maximum is more important than the cost of monthly premiums

    • The total amount you should budget for the year = out-of-pocket maximum + monthly premiums + a few thousand dollar buffer

    • The out-of-pocket maximum description in the Summary of Benefits will clarify if it includes premiums and/or copays and coinsurance

  • All deductibles are not created equal

    • On some plans (especially bronze plans or high deductible health plans), every service is subject to the deductible. On other plans, many services are subject to just a copay. For example, an ER visit may apply to your deductible on a bronze plan, while an ER visit on a different plan may only cost a $350 copay.

  • Plan around your circumstances and expected medical usage.

    • If receiving care out-of-state is important to you, make sure you buy a plan that offers out-of-state coverage. If you need physical therapy or acupuncture, make sure you buy a plan that offers those services.

  • When planning your future finances, assume healthcare costs will rise faster than inflation and budget for more than just premiums.

Mr. Money Mustache

Suggested health status: healthy, family with one child

Takeaways:

  • Healthcare costs continue to rise

  • Premiums are not an accurate representation of his risk, and insurance is generally a bad deal

    • While huge, uncovered medical bills are inconvenient, they are rare

  • Other options than the ACA marketplace plan:

    • Full self-funded insurance, meaning you don't have actual insurance and you save what you used to pay in premiums

    • Medical tourism, including traveling to other countries for cheaper medical procedures, or considering moving to other states for lower healthcare costs. For example, California, Utah, and New Mexico have lower on average healthcare costs than Colorado and New York.

    • Health Sharing Ministries, such as Liberty Healthshare. These are exempt from ACA rules, so they can drop you for having a pre-existing condition, and you must state alignment with their value system.

    • Expat insurance, for those who travel full time

    • Reduced income to qualify for ACA subsidies

Accidental Fire

Via a guest post from Michael Dinich at Your Money Geek

Suggested health status: not stated

Takeaways:

  • Follow these four steps:

    • Structure your finances in a way that minimizes your modified adjusted gross income (MAGI), which determines the amount of your Premium Tax Credit.

    • Max out your Health Savings Account (HSA) as it reduces your taxable income and is a growing investment.

    • Model some price and political instability into your FIRE calculations.

    • Live a healthy lifestyle to reduce your healthcare costs.

  • Traveling abroad for care or using health cost sharing ministries do not provide the same protection as traditional insurance.

  • Purchasing insurance on the ACA is the most popular form of health insurance for FIRE folks.

    • Learn how to "hack the ACA"  here.

  • The ACA is likely going to be around for at least a few more years. If it does change, you may need to look into a partially self-funded health insurance plan if you have a side hustle or other business income.

Can I Retire Yet?

Suggested health status: not stated, but has a family of 3

Takeaways:

  • Estimating healthcare costs is particularly challenging because we cannot predict the political environment, the rate of ongoing health cost inflation, or our personal health status in the future.

  • Options

    • Buy insurance with ACA subsidies

      • Can I Retire Yet recommends Root of Good's post about understanding and navigating the different ACA subsidies

    • Join a Health Care Sharing Ministry

      • Pros: simplicity of simply "paying our share" instead of manipulating income to receive subsidies

      • Cons: these plans are not bound to ACA rules about pre-existing conditions, they offer little legal protection, they are some level of exclusivity (ex. Requiring Christian affiliation) and they cap the benefits an individual can receive, which increases risk.

    • Health Insurance Insurance

      • Maintain current work licenses and skills to allow for reentry into the workforce, and therefore access to an employer sponsored health plan.

Root of Good

Suggested health status: not stated, but has family of 4

Takeaways:

  • Sign up for ACA marketplace plan within 60 days of losing employer coverage

  • If you don't like the initial assessment of eligibility for subsidies, call the customer service number and talk to someone to review the application again.

  • Children may qualify for Medicaid for Kids, depending on your state and income. Go to your state's Department of Health and Human Services portal to see what is available.

  • COBRA coverage is available for two months after the employer provided coverage expires and it is retroactive, so they can wait to see if they have expensive medical needs and apply if needed.

The Motley Fool

Suggested health status: not stated

Takeaways:

  • If you are a low-income individual, take advantage of ACA subsidies.

  • If you don't want traditional insurance, there are Health Share Ministries - but be wary.

    • Health share ministries are not insurance - they do not have a contract with hospital and doctors. They may step in to help you pay or negotiate.

  • Budget for healthcare expenses.

Whether you are on a F.I.R.E path or not, check out these additional articles below to save more money on healthcare.

Note: The opinions expressed above are summaries of some FIRE blogger’s approaches to healthcare. They are not necessarily shared or endorsed by The Healthcare Hustlers.