Health Insurance Dysfunction

rogernusbaum

From the time I started blogging, I've chronicled the health insurance ups and downs my wife have gone through being self employed. I was covered for a couple of years when I had my side gig with AdvisorShares but the rest of the time since 2003 we've been on our own for health insurance. Our costs had been going up faster than the rate of inflation before the Affordable Care Act came along. The premium increases were meaningful back then but manageable.

The Affordable Care Act came along and blew it all up for people like me; self employed and not eligible for subsidies. Back in 2004 we were paying $289/mo with a pretty low deductible. Fast forward to today and for our ages, an ACA plan would be about $1500/mo. A friend on the fire department with me who is 62 said he pays about $2000/mo. I've said that ACA broke it and the current administration has no idea how to fix it. It's not clear to me that the current administration has actually been working on it. Please don't read between the lines about my political beliefs, I don't like any of them.

These premium costs are like mortgage payments, $1500 is more than my mortgage by a little bit. Someone who bought a house ten years ago factoring $500/mo for health insurance to determine how much house they could afford might be in real trouble today having to pay $1500 or $2000 every month for health insurance. If you make $8000/mo and a quarter of your gross goes to health insurance, well there's no way to spin that positively and again, I don't think anything's being done about it. As the election season wears on, I imagine both candidates will tell us that they will fix it, they will be light on details and then...well I am skeptical that the winner will actually fix it (that comment gives them the benefit of the doubt that they will actually try).

This seems like an example of extreme government dysfunction and the result is that it is up to us to figure out how to minimize the consequences of that dysfunction. Take consequences to mean anything relevant to you. One consequence that a lot of self-employed people have in common is $18,000-$24,000 a year spent on insurance. How much do you use that insurance? That is an uncomfortable question about health. If you're in good health, then you need your insurance a little less or a lot less than people not as healthy. Pretty much our only interaction with the health system is annual checkups. We've been in part lucky but we also work hard on the inputs that can lead to that outcome (we exercise a lot and are smart about diet). In that context we would be paying $18,000/yr to save 70% on our $400 annual physicals.

Diet and exercise have given us the optionality of getting temporary insurance which is dramatically cheaper than ACA plans. We've been using temporary insurance since last fall. We just reupped for the last six months of 2020 at about $200/mo. This is a little less than the first six months of the year because we did not add extra hospital coverage. The way it shakes out, the hospitalization coverage looked like it would provide a tiny amount of the expense should we need to go into the hospital and the basic coverage provides some hospital coverage.

All in, we'll spend about $3000 this year plus whatever we'll owe for our annual physicals. To be clear, we realize this coverage overall is lousy. We realize we are taking a gamble. The risk feels calculated enough in that we have no health issues and no prescriptions. Being able to do this is a form of the optionality I write about all the time. If we weren't healthy enough to take this risk we wouldn't. For anyone new, in March 2017 I was told I was pre-diabetic despite exercising all the time. That was the catalyst for me to learn about diet, I cut carbs and three months later I was no longer pre-diabetic. If you have any chronic maladies, take the time to learn whether cutting sugar consumption could solve the problem. Low carb has been researched for just about every illness, the results for your ailment may or may not be compelling but the research has absolutely been done.

There is a three year limit on reupping temporary insurance. The way I understand it, after three years we'd need to pay up for an ACA plan for a year and then repeat the three year cycle of temporary insurance again. We'd just repeat this until we each become eligible for Medicare 2031 for me and 2037 for my wife. Of course we'd need to be flexible enough to adapt to whatever changes come to health insurance. The above plan is fine for as far as it goes and we can always stick with regular ACA coverage if one of us gets sick but it is a good bet that something will change.

We see articles all the time about people not having enough for retirement, not being able to meet a $1000 emergency, being forced to retire earlier than they expected (or forced to scramble to find work that pays them less than they were making) and so on. Saving $10,000-$15,000 per year on health insurance even just for a couple of years could be a huge difference maker for people on the edge or confronted with some sort of adverse financial situation.

Cutting sugar consumption may not solve every chronic health problem (metabolic syndrome which by some estimates is as high as 40% of the population) but for many people it can be that simple. I am fond of saying it is up to us to prevent/solve our own problems because no one will care more about our outcomes more than us. Nowhere more so than with our health.