Health insurance is a touchy subject. This post is not meant to be taken in a political way. Instead I’m writing about my family’s experience with traditional health insurance and how it has affected OUR finances. Any comments that I deem political will not be approved, but I do welcome your honest feedback and comments regarding your situation, whether good or bad. Also please realize everyone’s perspective and situation will be different.
Let’s start at the beginning:
Health insurance wasn’t always so stressful for me and my husband and to begin our story I need to go back a few years. In October 2003, I left a career as a department store buyer with a nice paycheck, paid vacation days, 401k match, profit sharing, and health benefits, to pursue a life of self employment with my husband where all of those things are up to us. I can’t believe it’s been that long. It some ways 2003 seems like yesterday, and it other ways it seems like a lifetime ago.
When I resigned from my corporate job, my boss asked me what my husband and I were going to do about health insurance. A lifelong corporate man himself, he just couldn’t wrap his brain around what our options would be regarding the topic. And honestly, at that time, I didn’t exactly know what to expect either.
Health insurance prior to October 2003 for me and my husband was pretty standard for that time. We had a policy through my employer and a portion was taken out of my paycheck. I received an insurance card, paid a copay, and that was that. I had no idea how easy health care was for us until I left that corporate job.
Upon leaving, I switched to COBRA to cover us until we sorted through our options. COBRA (an acronym for Consolidated Omnibus Budget Reconciliation Act of 1985) is a law that was passed during the Reagan administration that allows employees to continue their health coverage after leaving employment, but the employee must pay for it. With COBRA, I realized my company was paying about 60% of my health care premiums with 40% coming out of my paycheck.
Looking back, we were grateful for COBRA, even though it was pricey, because it gave us some time to research our possibilities while still insured. We quickly learned that everything changes when you leave the group health insurance market and enter the individual market.
For example, at that time, maternity was not included in any individual plan. Instead it was an additional rider and it was extremely expensive. If I remember correctly, we had to pay for it for 10 months before we could become pregnant. In 2004 when we were researching policies, we weren’t parents yet, but fully intended on having children. We opted out of the maternity rider and decided on a non-traditional option that I frankly won’t get into in this post. It really deserves a whole separate post and if today’s insurance environment was the same as 2004 I might explain further, but it’s not, so I’ll move on.
We eventually found an individual plan through an insurance broker. I remember being flabbergasted by the rates of individual policies back then, because I was so used to what had been coming out of my corporate paycheck which was about $100. Also, I never had a deductible when on a group plan. To be honest, I don’t think deductibles were very common in corporate plans back then.
However, we entered the high deductible health plan market once we became self-employed. It kept our monthly costs low and we came to terms that we would have an out of pocket expense until we met the deductible. We did take advantage of one benefit of a high deductible health plan: a Health Savings Account.
A Health Savings Account (HSA) is for individuals who are covered under high-deductible health plans (HDHPs) to save for medical expenses that HDHPs do not cover. There is a maximum amount the individual can contribute each year and distributions out of the account must be for qualified medical expenses and includes dental, vision and over-the-counter drugs. There are three major tax savings: the money contributed into the account is tax deductible, it grows tax free, and certain withdrawals are tax free if they are for qualified medical expenses.
Most years we contributed the maximum allowable amount to the HSA, except for a few years when we needed to put funds elsewhere. We used this account to pay for all of our qualified medical expenses, including things that we didn’t have health coverage for like dental, vision, maternity, and more recently, orthodontics….because babies become tweens.
Over the years our premiums slowly inched up as you can see in the graphic below. To combat the premium increases, we would increase our deductibles. Once we hit a $7500 a year deductible, we realized that health insurance for us is simply catastrophic insurance to prevent us from complete bankruptcy.
Looking back there was only one year that we hit our deductible and that was from a surgery I had to remove a melanoma on my shoulder. After that deductible was met, our medical expenses were paid at 100% that year.
Shopping the individual market to compare prices and find a cheaper policy wasn’t an option for us, because we had developed pre-existing conditions during those early years. We would not have been insurable, so we were grateful to have coverage and thankful we didn’t have the problems in the beginning.
On a side note, I’m proud to say I have been cleared for 7 years now.
We had no idea how we were going to be affected when the Affordable Care Act was passed in 2012. We had health insurance, so we naively weren’t worried that it would affect us at all.
However in 2014, we were hit with a large premium increase, so we once again raised our deductible to make the premium somewhat affordable. Had we not increased our deductible to $10,000, we would have faced a monthly premium of more than $1000.
A 10k deductible is completely insane, but over the years, we had become numb to the concept of a high deductible health plan. We felt it was our only option.
I should have known at that point that the writing was on the wall for our insurance carrier. How many folks can afford premiums of over $1000 a month? That was such a dramatic price increase so we were not surprised when we received a letter from our carrier (for over 10 years) that they would be closing at the end of 2015. We would need to find another policy for 1/1/16.
We were completely out of the loop regarding insurance companies, policies, the ACA, and the health exchange, so we started researching and schooling ourselves in modern day Health Insurance 101.
Our first stop was Facebook, of course. We sought out recommendations from our self-employed friends in the same situation. There were many. We received several names of insurance brokers and met with at least 3. Their best recommendation for us was to venture onto the Health Exchange. So we did.
What We Found on the Health Exchange
In the fall of 2015, we acquainted ourselves with healthcare.gov and compared the options available to us. We fall above the salary threshold for any type of subsidy, but we honestly thought we’d find plans similar to what we were used to. In reality though, that was not the case.
On the exchange, the policy with the lowest monthly increase of $200 was an HMO and our primary doctors were non-participating. The minimum premium increase if we were to stay with our current doctors was $400 a month. The benefit of that policy was it was a PPO, which we find to be far more flexible than an HMO.
After much thought, we decided on the cheaper plan and subscribed to an Aetna HMO for 2016. We wanted to keep our monthly increase to just $200 versus $400. We felt we could squeeze the $200 from our budget and yes, it would be a hassle to find new doctors for all four of us, but it would be worth not paying an additional $400 each month.
In reality, the HMO aspect turned out fine for us. Yes, there was a slight hassle of finding a new doctor, especially since we had been with the original primary practice for over 10 years. But I went back to Facebook to ask local friends for recommendations and found a participating family practice for all four of us. It took several months into 2016 before the new practice could see us all for an initial visit, but they did assure us that there wasn’t a wait time for existing patients once we were on board.
By May, we had all seen our new doctor and really liked her. We are a fairly healthy family who rarely sees a doctor for illnesses. We typically only go to the doctor for required physicals. Personally, I simplified after we decided 2 children was just right for us and started seeing my primary doctor for all of my female appointments, like a yearly pap smear. I like having just one doctor, it keeps all of my records in one place.
In the summer of 2016, it was announced on the news that Aetna would be leaving the health exchange for 2017. It was also announced that year that premium rates on the exchange could increase around 25%. As expected in the fall, we received the letter from Aetna confirming that they were exiting the exchange. On November 1 when the exchange opened up with 2017 rates, we immediately started researching new policies.
And this is when the junk hit the fan.
Now remember, we are just above the subsidy threshold. We knew this going onto the exchange on November 1, but nothing could have prepared us for what we were about to find. The cheapest option had a premium of $1700 a month, well above the predicted 25% increase we heard about in the news. The plan also had a $12k family deductible and it was NOT compatible with a health savings account,
If you are a follower of FBS, you know that we live a very frugal lifestyle due to many reasons. We’re self-employed and income varies from month to month and year to year. We also do not have an employer pension or retirement plan to fall back on, so our retirement will be financed 100% by us. And as you can see in the above spreadsheet, we had high health insurance expenses.
$1700 a month is not affordable to anyone, and certainly is is not affordable for us.
Since Aetna left the exchange, I checked their website to review their individual plans available directly through them. Their direct plan was $1360 a month, with a $12150 deductible, and also NOT compatible with a health savings account.
I checked another insurance carrier in my region and their non- exchange plan is $1634 a month, with a $14000 deductible, also not compatible with a health savings account.
A startling discovery as we researched options for 2017 was that many high deductible health plans are no longer compatible with a Health Savings Account. As you can see from my spreadsheet, the premiums and deductibles combined are outrageous and this one financial benefit is being taken away.
At this point, we had a few sleepless nights. What were we going to do for health insurance? How would we afford the have health insurance? Should we take the IRS penalty and not have insurance at all? We had a deadline of 12/15/16 to make a decision if we wanted coverage by 1/1/17 or we could face the tax penalty, or worse.
What did we decide to do? Stay tuned for Part 2
Health insurance is a touchy subject. This post is not meant to be taken in a political way. Instead I’m writing about my family’s experience with health insurance and how it has affected our finances. Any comments that I deem political will not be approved, but I do welcome your honest feedback and comments regarding your situation, whether good or bad. Also please realize everyone’s perspective and situation will be different.