2019 FIRE-Proof Individual Health Insurance
The time is short for choosing which health care plan to choose for 2019. ACA (Affordable Care Act) open enrollment runs from November 1 – December 15, 2018, for individual health insurance in 2019.
Continue to Share the Journey
A big thank you to all of you who attended our very first shared roundtable last week focused on choosing an individual health insurance plan for you and your family while in early retirement! We were blown away by the number who took time out of their busy Saturday to attend!! Thank you!
As promised, we’re posting the research discussed at the webinar roundtable for your use in making your early retirement health insurance selections for 2019.
The choices for individual health insurance vary so much by your location and individual circumstances that there’s no one right answer. You must understand the limits and the tradeoffs. The devil is in the details.
Thanks again for joining us and participating. We are all shoppers looking for the best fit for our families. Sharing your research, knowledge and past experiences helps all of us make the best choices for 2019! See Early-Retirement Health Odds, Good or Bad? for the story of our shopping journey.
Early Retirement Health Insurance Options
MAGI Income Matters
|Federal Poverty Level (FPL)
100%-138% FPLDepending upon your state
(138%, so-called Medicaid Expansion was up to State’s to fund in part.)
MAGI Iowa couple
|Public Medicaid for Healthcare. That also implies who is not our customer. If you should be covered by Medicaid? We’re not for you. You don’t have income or assets to protect by buying insurance for risk management. Don’t waste your scarce income or time.
· Income Test. Medicaid thresholds for each State – ACA allows Medicaid for everyone <100% Federal Poverty Level (FPL) and some states <138% FPL. As of October 2018 for the lower 48 states FPL for is:
o $12,140 single person
o $16,460 two-person household.
Income eligibility is calculated using Modified Adjusted Gross Income (MAGI) from your federal tax return. Medicaid is a tax-financed, public safety net for low-income families.
No Asset Test. There are asset tests for some Medicaid benefits like long-term care, but not for healthcare.
>$22,710 — <$41,150
MAGI Iowa couple
|ACA Marketplace Subsidized Individual Health Insurance
Subsidies for both Premium and Out-of-Pocket Expenses
Maximum Premium Subsidy at $22,720 MAGI of $3,369 per mo.
Premium Subsidy at $41,150 MAGI of $3,147 per mo.
Cost-Sharing Reductions (CSR) or Out-of-Pocket Expense subsidies require selection of a Silver Plan
For Plan Year 2019 there are two Silver Plan choices (shouldn’t pick anything else in this income bracket).
Medica Silver = $91.88/mo subsidized (list is $3,239.17/mo) w/ $7,500 deductible and $11,700 max out of pocket.
Wellmark BCBS Silver = $286.68/mo subsidized (list is $3,434.17/mo) w/ $12,600 deductible and $12,600 max out of pocket.
|>$41,150 — <$65,840
MAGI for Iowa couple
|ACA Marketplace Subsidized Individual Health Insurance
Taxpayers subsidize premiums but not out-of-pocket expenses
$41,160 MAGI = $3,147/mo subsidy
$65,840 MAGI = $2,893/mo subsidy
@ $65,840 MAGI, 5 of 9 plans require zero premium (mostly Bronze plans). For consistency of comparison, we’ll compare the Silver plans.
Medica Silver = $346.19/mo subsidized (list $3,239.37/mo) for $11,100 deductible and $15,200 max out of pocket.
Wellmark BCBS Silver = $540.99/mo subsidized (list $3,434.17/mo) for $15,800 deductible and $15,800 max out of pocket.
The premiums are arguably affordable. But the deductibles are a challenge for most middle-income families.
MAGI for Iowa couple
|No subsidies, you pay the full premium.
This is the edge of the cliff
You go from $2,893/mo or $34,716/year premium subsidy to $0, zip, nada.
Complicated enough for you?
What’s included in Modified Adjusted Gross Income (MAGI) and how is it different than Adjusted Gross Income (AGI)?
MAGI = AGI + any otherwise tax-exempt interest income (e.g., municipal bonds).
This difference is important. You may not pay income tax on tax-exempt interest income, but it counts against ACA subsidies. Retirees structuring income to avoid income taxes can still get hit with this rule. Note the difference that $10 of added MAGI income has at the cliff. Make $65,840 MAGI with $10 of tax-exempt interest income? You lose $34,716 per year in ACA premium subsidies. Ouch.
Let’s say you have a high health expense year and must dig into savings to use your ACA health insurance. With a max out of pocket of $15,200, that’s what we’ll withdraw from savings. Be sure to use previously taxed income, not tax-deferred income. Withdraw it from a traditional IRA and you have $15,200 in taxable income that will cost you $34,716. Withdraw it from a Roth account or traditional savings account and you’re okay.
For us, we plan to keep realized income below $65,000/yr (approximately $5,416/mo). Actually, we’re not changing our lifestyle, so really closer to $45,000/yr or $4,200/mo. We are converting some of our traditional IRAs to Roth (and paying tax now, while we’re working) to assure we have savings we can use to cover emergencies without realizing taxable income that would put us over the $65,840 MAGI premium subsidiy cliff.
Choose Your Income. With the DIY retirement of IRAs, 401ks, 403bs, and other defined contribution plans, we have a lot of control to define our annual income, provided we’re willing to adjust our lifestyle accordingly.
Changes for 2019: Early Retirement Health Insurance Options
- ACA’s income tax penalty removed for not having health insurance. For anyone with assets to protect, health insurance should still be part of your financial defenses. Major healthcare costs are still a driving cause of consumer bankruptcies at 26% of all bankruptcies. https://www.thebalance.com/medical-bankruptcy-statistics-4154729
- Continuity of Coverage still matters. Don’t allow any time gap between one coverage source and the next. Be prepared with all the information you need to enroll in replacement coverage. Here’s a checklist from the federal Center for Medicare and Medicaid Services (CMS) that oversees ACA rules. https://marketplace.cms.gov/outreach-and-education/marketplace-application-checklist.pdf
- Temporary Health Insurance Policies extended to 3-years. Previously short-term or temporary individual health insurance policies were limited to a year or less (depending on the state) and were essentially very short-term bridge policies. Now can last up to 3-years, matching the gap between claiming early Social Security retirement benefits at 62 and Medicare-eligibility at 65. But their use isn’t limited to those 62-65. Others can use this as well. These are limited-benefit plans, not ACA-compliant. Not a good substitute if you’re used to employer-sponsored insurance
- Association Plans. Association plans arguably have the power of group purchasing behind them. Revisions to regulations encourage Associations to offer plans to self-employed individuals but exempt the plans from some of the normal requirements of ACA individual health insurance, including allowing more restrictive benefits and allowing higher premiums for health conditions. ACA compliant plans are age and geographic location rated (premiums can vary by age and location), but not health rated (e.g., pre-existing conditions). By Contrast, an illustration of health issues that associations may consider is contained in this Iowa Farm Bureau checklist. It’s a return to pre-ACA medical underwriting. If you’re already got symptoms your coverage may not be what you expect. And it opens the door to post-claims underwriting where the insurer goes back to your medical record when a serious claim arises and says, nope this was pre-existing. You pay more. That unpredictability reduces the value of insurance. But it also reduces the upfront premium.
DISCLOSURE OF ANY MEDICAL CONDITION WITHIN THE PAST FIVE YEARS
The new association plan exception is illustrated by a program offered by Iowa Farum Bureau. “Each application will require disclosure of any conditions for which you have been diagnosed, been treated or recommended treatment within the past 5 years. Categories of conditions include the following:
- Ear, nose or throat
- Brain or nervous system
- Lung or respiratory
- Bone or skeletal
- Liver or pancreas
- Urinary system
- Digestive or stomach
- Blood artery
- Heart or coronary
If you answer yes to any condition, you will need to provide additional information, such as:
|Condition beginning date||Doctor’s name|
|Duration||Medications for the condition|
|Present state of condition||A detailed explanation of treatments and tests|
|Date of recovery||Surgery|
For certain conditions, you will be asked for specific additional detail. For example, if you have elevated blood pressure, you will be asked to provide your most recent BP readings. If you have diabetes, you will be asked to provide your most recent blood sugar readings.
The Hill describes the newly available ACA-exempt association plans in this article referencing the Farm Bureau plan. https://thehill.com/policy/healthcare/409956-iowa-to-begin-selling-health-plans-that-can-discriminate-on-applicants-pre
These are likely to be more restrictive on provider access rules and feature high cost-sharing or copayments. Expect benefits better than temporary insurance but less comprehensive than ACA-compliant plans from your former employer, the Marketplace Exchange, or ACA-compliant individual health insurance plans.
Individual Early Retirement Health Insurance and Healthcare Costs Problem Areas
Expensive and rising.
- Premiums – some evidence of leveling out, but largely because low-risk individuals are the new uninsured, priced out of insurance.
- Cost-sharing – deductibles, copayments, and maximum out-of-pocket maximums (collectively cost-sharing) are up dramatically after the ACA. Employers are shifting a larger share of healthcare costs to consumers. Insurers are doing the same. ACA-compliant policies provide no-cost preventive screening, but the first many thousand dollars of healthcare (the deductible) is out of the family budget, in addition to any premium paid out-of-pocket.
Unknown price. Consumers don’t know their true cost until after purchasing healthcare. Surprise! These surprises are bad.
Uncompetitive, concentrated insurance markets. Many markets, especially rural areas have only one company offering any coverage on the Marketplace Exchange. Many states have insurers that control more than 60% of the market.
Government Cost-Shifting. Government gets to dictate what it pays providers for Medicare and Medicaid. Often below true cost. Private payors pick up the difference.
Monopolistic healthcare systems. Local healthcare providers like doctors and hospitals are merging or consolidating, reducing competition and choice. (Provider Consolidation). The monopolies offer a deal that insurers can’t refuse, just like The Godfather.
Big claims in a Small Market. A small number of very high-cost claims spread over the small numbers of the individual insurance market. The large group employer market doesn’t pay for guaranteed issue in the same way. The bulk of large employers covered lives are healthy enough to work.
ACA Marketplace Exchange
The Patient Protection and Affordable Care Care (ACA or Obamacare) created marketplace exchanges to compare individual health insurance policies from competing companies. There is a federally run exchange and several states operate their own exchanges. Uniquely, taxpayers subsidize the cost of health insurance premiums and cost-sharing if you are income-eligible, but only within the Marketplace Exchange. If you buy outside of the Marketplace Exchange for your state, there’s no taxpayer subsidy. With this source, if your income is between 100%-400% of the Federal Poverty Level (FPL) you don’t pay full list price with your own dollars. As with Medicaid, the income test uses Modified Adjusted Gross Income (MAGI) from your most recent tax return. But if you have a qualifying event like the loss of a job or retirement, you can use expected income upon application, subject to adjustment when you file your tax return for the new coverage year. Don’t go over the income cliff and make too much income as the costs change dramatically if you lose the subsidy. The subsidy structure is essentially all or nothing.
Marketplace Exchange. The marketplace is also called an exchange in many places. To be clear and simple we use both words, Marketplace Exchange.
- Federal Health Insurance Marketplace Exchange. https://www.healthcare.gov/ Plan Year 2019 rates are now available for preview. Open enrollment begins November 1 and runs through December 15, 2018, for Plan Year 2019.
- Eleven states and D.C. operate their own Marketplace Exchanges. The link below provides links to each of the relevant states. Everyone else goes through the Federal Health Insurance Marketplace Exchange (above).
|Colorado||District of Columbia||Maryland||Minnesota||Rhode Island||Washington|
- The application is straight-forward but can be time-consuming. Come prepared to the task with the information detailed in this checklist. Don’t wait until the last day of open enrollment (December 15) to apply. It’s government and the holiday season is in between you and new health insurance to start January 1. Don’t tempt fate if there’s follow-up paperwork required in your case. Apply early. https://marketplace.cms.gov/outreach-and-education/marketplace-application-checklist.pdf
- Standard Plans. Plans on the Marketplace Exchange are standardized to allow easier comparison. The plans are grouped like credit cards by Bronze, Silver, Gold, Platinum. The primary difference is the level of cost-sharing. In general, higher cost-sharing (deductibles, co-payments, and out-of-pocket expenses) reduces the required premium. Subsidies are based on the price of the lowest cost Silver Plan in your region. Approximately:
- Bronze = 60% coverage and 40% paid by the insured, up to the out-of-pocket maximum.
- Silver = 70% plan coverage and 30% paid by the insured, up to the out-of-pocket maximum. Subsidies use the lowest cost Silver Plan in your region.
- Gold = 80% plan coverage and 20% paid by the insured, up to the out-of-pocket maximum. This is the closest coverage level to what most employees of a large group employer plan would receive under a so-called 80/20 plan such as those typically offered by Blue Cross and Blue Shield (BCBS), CIGNA, or others.
- Platinum = 90% plan coverage and 10% paid by the insured, up to the out-of-pocket maximum.
- Types of Insurance. Plan offerings also vary based upon their plan structure. There are traditional indemnity plans (you choose the provider), preferred provider organizations (PPOs) with a limited panel of doctors who agree to discounts in exchange for volume of business from an insurer, and Health Maintenance Organizations (HMOs) with very restrictive managed care procedures but often generous benefits. The range of managed care is more a continuum from easy to strict, but the market average is trending to more management and less patient choice or provider practice freedom. When someone else is paying, someone must care about the cost, the quality, and the efficacy. That someone is a managed care organization.
- Indemnity (now rare, the old standard). No managed care. Patients free to choose provider of choice. Providers free to do and charge whatever.
- PPO – Preferred Provider Organization. Patients pay less to use participating providers but may go outside the PPO or “out-of-network” if they’re willing to pay the difference.
- POS – Point-of-Service. Essentially a PPO with the added feature of a primary care provider that acts as a gatekeeper for specialty referrals.
- HMOs – Health Maintenance Organization. The physicians and other providers are employees of the HMO and not independent practices. HMO coverage requires the use of HMO No or very restrictive out-of-network care (other than out-of-area emergencies). Like a POS, generally, have a primary care physician to manage total care and make specialty referrals.
- EPOs – Exclusive Provider Organization. A PPO or POS that does not allow care outside the network (other than out-of-area emergencies). Participating physicians may not be employees like an HMO but it functionally looks like an HMO to the consumer/patient. Bigger differences from the providers’ viewpoint.
- Premiums are Community Rated. ACA-compliant rating rules allow higher premiums based on age (older pays more) and community (geographic region), but not pre-existing health conditions or gender. Ratings are by classes not by individuals. All 60-year-olds in the same region pay the same premium for the same policy from the Marketplace Exchange. Except, a surcharge or penalty for smoking tobacco is allowed. Most other health choices or behaviors are not allowed as premium rating considerations.
- Affordable if you need it, very expensive if you don’t. The problem with the ACA? It’s a great reform if you have a pre-existing condition and you really need coverage. You can still get insurance. It’s great if you don’t make too much income (MAGI) and therefore qualify for taxpayer-funded subsidies. If you’re already sick and need coverage? Even high premiums can seem cheap. If you’re healthy and make a little too much income? ACA Marketplace Exchange sourced individual health insurance is very expensive and you don’t need it as much or as immediately.
- ACA Marketplace Exchange Individual Health Insurance “Fit”
- Income-based subsidies exclusively available through the Marketplace Exchange. Great if you are income-eligible. ACA-compliant including guaranteed issue, no exclusions for pre-existing conditions, no co-pay preventive care, and comprehensive benefits. Make less than about $65,000 MAGI? Look here first. You won’t pay the list price. You will benefit from the premium subsidies
- Almost exclusively for those receiving income-based subsidies. Adverse selection of the risk pool makes it very expensive for those earning more than about $65,000. Annual deductibles are much higher than pre-ACA norms. High deductibles can make coverage unusable. Be realistic about what your emergency or rainy-day fund can cover. The new uninsured are those that can’t afford to use their health insurance because of high deductibles. The required minimum benefits may include coverage for things you would or will never use. The trend is towards more restrictive provider panels and exclusion of some expensive drugs. Your experience may vary as there are wide variations state-to-state. Very DIY.
- Most Appropriate For. Middle-income early retirees or self-employed workers, earning more than Federal Poverty Level (FPL) but less than about $65,000 in Modified Adjusted Gross Income (MAGI). High-income earners will find more affordable rates elsewhere. But remember, if you’re an early retiree living off retirement savings or investments, you can control your realized income. You must be willing to live a lifestyle below the MAGI cap.
Off-Marketplace Exchange ACA-Compliant Individual Health Insurance (from Insurance Agents & Brokers)
You can still buy individual health insurance from brokers and agents outside of the ACA Marketplace Exchange. These policies meet the minimum requirements of the ACA, such as guaranteed issue, standardized benefits including no-copay preventive care. They are generally very similar to policies offered within the exchange, except:
- No income-based premium or cost-sharing subsidies are available.
- Average premiums are lower than similar policies on the Marketplace Exchange.
So why would you buy from off the Marketplace Exchange? Or a better question, why would insurers offer policies outside the Marketplace Exchange that are therefore ineligible for income-qualified premium subsidies?
- Adverse Selection. Combine free health insurance with lower income and what do you get? Inside the Marketplace Exchange insureds are on average older, sicker, poorer, and more expensive to insure. Therefore, the unsubsidized premium required to cover the risk? Very expensive. The technical name for this is adverse selection. Participants are not random. Riskier insureds, on average, select the Marketplace Exchange, driving up the premiums in the exchange. In some states, the Marketplace Exchange premium rates are in a so-called premium death spiral, driving unsubsidized insureds away, leaving only the sickest in the insured pool.
Off-Marketplace Exchange policies – even with the exact same benefits, from the exact same insurers — tend to insure a younger, wealthier, healthier, better-educated group of insureds that collectively cost less to cover the risk. The premiums are therefore lower. This matters to consumers buying with their own dollars without a taxpayer subsidy.
- Brokers and Agents. Brokers and Agents perform a marketplace function. Brokers essentially shop for you. Agents help you with the application process. The ACA Marketplace Exchange attempts to replace traditional insurance brokers and agents with the automated exchange. Lawmakers saw the sales commissions earned by agents on an insurance policy sold as an unnecessary expense. Consumers, on the other hand, often like having a trusted, expert advisor for advice and to do the hard paperwork. Depends upon whether you see insurance companies and their agents as inherently adversarial to the interests of consumers. The ACA authorized so-called navigators to help consumers, but navigators vary widely in quality and often are just as conflicted as brokers and agents with providers substituting for insurers. It’s remarkably hard to eliminate the so-called “middleman” when these market match makers perform a useful service.
- ACA-Compliant Individual Health Insurance from Brokers or Agents Off-Marketplace Exchange “Fit”
- Guaranteed issue. Full ACA-compliant and comprehensive benefits. If you’re paying for the premium with your own dollars, you’re sharing risk with people more like you. That means high income. High-income, better-educated individuals are on average healthier at every age. That means a lower premium for similar benefits than from On-Marketplace Exchange options. Other options like COBRA and Temporary Insurance are shorter-term answers. Broker or agent sourced individual insurance works even if you retire ten years before age-65 and Medicare-eligibility.
- Conflicts. The biggest conflict is that a commission-based salesperson will show you what they sell. The choice can be constrained by the companies they represent. Why (or even how) can they show policy choices from other companies or other channels (like the Marketplace Exchange). You’re simply not getting a full menu of choices. I do know many good agents that will help for free because of other business with a consumer.
- Most Appropriate For. Higher income early retirees or self-employed workers that exceed the 4xFPL income-based test for premium subsidies on the Marketplace Exchange.
Temporary or Short-Term Insurance
Temporary insurance isn’t quite as short-term anymore. Until this year, temporary health insurance was intended to cover a short-term gap in coverage and was limited to six-months to twelve-months of coverage, at most. A new executive order allows year-long temporary policies that can be renewed for up to 36-months. This longer period is more like COBRA in length of coverage. The newly expanded temporary insurance policies are now widely available for 2019. Temporary insurance is not ACA-compliant but must adhere to your state’s insurance regulations. It is expected to be more affordable as benefits are not as comprehensive. It is not guaranteed-issue and may have restrictive benefits or premium rating terms, including health factors and health behavior or choice factors not allowed for ACA-compliant options. The high-pressure telemarketing pushing these plans is not a good sign. High-pressure sales rarely correlate with satisfied customers. https://www.healthinsurance.org/so-long-to-limits-on-short-term-plans/
- The regulatory changes for 2019 are something like wildcards. The wildcards?
- No Income Tax-Penalty for Foregoing Coverage. The original and unpopular ACA income tax-penalty for failing to buy health insurance is eliminated for 2019. Will people still buy health insurance without the threat of an income tax-penalty? The high-cost of ACA-insurance premiums and cost-sharing was creating a new class of uninsured Americans. What good is guaranteed-issue insurance if you can’t afford the premium or to use the insurance because of much higher deductibles? Will people continue to buy health insurance because it’s the financially responsible thing to plan ahead and manage risk?
- New choices that reduce or restrict benefits to lower average premiums. Temporary Insurance and newly authorized Association Plans do not have to be ACA-compliant. Will people flock to the lower premiums or balk at the limits on coverage? States vary widely in supporting these changes, from cooperative encouragement to wildly opposed. Insurance is still state-regulated. It’s a confusing morass.
This year, 2019, is an experiment. No one knows how these wildcards will affect how consumers sort themselves out among the newly expanded choices. Expect some winners and losers and some unintended consequences of good intentions.
- Temporary or Short-Term Health Insurance “Fit”
- Lower premium costs. Fast application processing.
- Non-ACA-compliant, lesser benefits. These are much more bare-bones policies compared to the comprehensive benefits of ACA-compliant plans. The get what you pay for rule may apply. Early indications are for narrow provider panels and heavy telemarketing pressure. Our mobile phones are ringing almost hourly with unauthorized telemarketing calls from spoofed telephone numbers pushing temporary health insurance. There’s a confusing mixture of state rules regulating temporary or short-term health insurance plans. Offerings and restrictions will vary widely state-to-state. Dan is a former state insurance regulator. The hair on the back of his neck is up. Time will tell.
- Most Appropriate For. The three-year time limit is a perfect fit with retirees electing early Social Security at age-62. It covers the three-year gap to age-65 and Medicare-eligibility. Two caveats. Spouses are often younger and need more than three-years of coverage. And those electing Social Security at age-62 tend to be in worse health than those who wait until full retirement age or 70 to collect. Is this another invitation to adverse selection? You could string together multiple short-term plans to cover a longer than a three-year But the coverage is still very limited.
Association Plans like Iowa Farm Bureau Federation’s Wellmark Blue Cross/Blue Shield
When is insurance, not insurance? When the state says so.
- Iowa’s, and many other small rural states’, Marketplace Exchange offerings are limited, expensive, and fast-rising in cost. Iowa has only one insurer left in the Exchange. That’s not a real choice. The answer, encouraged by state and federal officials, is the creation of an association insurance plan that is exempt from insurance regulations. It is still much more like an ACA-compliant plan than the Temporary Insurance plans, being far more comprehensive in benefits. But access rules are extremely restrictive and copays high. And it’s not guaranteed-issue. Underwriting for health status and health behavior is included. Farm Bureau membership is required, but the annual membership fee is a low $35 per year. Most people will treat this as just part of the premium if the price for the benefits makes sense. Like the Temporary Insurance expansion, the new Association Plans may have unintended consequences. Again, time will tell.
We are already Farm Bureau members. Our home and cars are insured by Farm Bureau. We’ll price out this option, but we don’t love the high copays and strict provider access restrictions.
- Association Plan “Fit”
- More affordable premiums for coverage limits, similar to ACA-compliant plans. If you qualify. Better coverage than Temporary Insurance.
- Must wait to know whether you’ll be insured and at what price. It’s not guaranteed issue. Premiums are more individually tailored. If it’s not insurance, you can’t appeal to the State Insurance Commissioner for help in a dispute with the non-insurer insurer.
- Most Appropriate For. Higher-income insureds that don’t qualify for premium-subsidies on the Marketplace Exchange. Think farmers and other self-employed small business owners. Also appropriate for individuals disillusioned by the lack of insurer-choice or inadequate provider-networks on the Marketplace Exchange. The Farm Bureau plan is administered by the state’s largest and dominant insurer and has the most comprehensive provider network. But caveat. You can’t go out-of-network (except for out-of-territory emergencies). And the Emergency Room Copay is very high at $900. Compare that to the $200 for Medi-Share health-share option. Affordable premiums are relative and come at a cost.
Health-Share Accounts like Medi-Share
AKA Healthcare Sharing Ministries (HCSM)
Affordable. Health-Share Accounts like Medi-Share are the affordable alternative to Obamacare or ACA-compliant plans. In many ways, Medi-Share feels like common-sense insurance, though technically it isn’t insurance. Prices feel more like ten years ago and your health choices can influence your rates. But like ten years ago your health history – pre-existing conditions – can also influence the amount shared (coverage in the equivalent insurance lingo).
- Religious-exemption from ACA. Health-share accounts are a unique, affordable option. They function like insurance for risk-management but are technically not regulated as insurance or subject to ACA-minimum benefit standards. You must sign a statement of agreement with the organization’s statement of faith. Religious freedom is the Constitutional foundation of the ACA exemption. Health-Share accounts are also called Healthcare Sharing Ministries (HCSM). “Ministries” drive home the faith-based aspect, and these are also non-profit organizations.
- Medi-Share. There are approximately 100 such health-share offerors or HCSMs. We’ll use one of the leading, larger, older health-share offerings as a concrete example, Medi-Share. medishare.com Size of the group “sharing health costs” matters for the risk-bearing stability of large numbers. Time-in-operation matters for experience, predictability, and as some evidence of participant satisfaction. We have a close friend, a retired pharmacist, who uses and likes Medi-Share. For all these reasons it’s a good example and our preferred HCSM. Think of health-sharing as crowd-funding of healthcare expenses, part of the emerging “sharing economy,” like Uber or Kickstarter.
- Source of Savings?
- Health-share is not subject to the guaranteed-issue rules of ACA-compliant insurance. Health-share ministries may use health-status and behavioral questions to rate, limit, or exclude coverage that ACA-compliant insurance may no longer use. Examples? Smoking, drug, and alcohol use questions. And there’s statistical evidence that faith-inspired individuals live longer, on average so there’s some inherent favorable risk-selection in the target affinity group. (The opposite of adverse selection.) There’s also an explicit 20% discount available for members meeting key health metrics including acceptable blood pressure (with medication) and healthy Body Mass Index (BMI). https://mychristiancare.org/medi-share/what-is-medishare/health-and-wellness/health-incentive/
- Care Exclusions. Medi-Share and other health-share ministries don’t share in (cover) some things to which members religiously object. These exclusions are hot-button political issues. We’re not arguing right or wrong here. As a buyer, you just need to know. You can pick according to your priorities. Gender reassignment surgery, abortion, and similar procedures are excluded. But also excluded are routine no-copay preventive care required to be covered under ACA-compliant insurance. You’re expected to cover the routine through your Annual Household Portion (like an annual deductible). So, you don’t pay the cost of all those ACA minimum benefits, but neither do you enjoy all the ACA protections. You can always change your mind during the next open enrollment. Limitations are still more like traditional health insurance than is temporary health insurance.
- Preferred Provider Organization (PPO). Medi-Share uses the Private Healthcare Systems (PHCS) PPO network, which offers 700,000 providers nationwide. https://www.medishare.com/medi-share/what-is-medishare/how-medi-share-works/find-a-provider/ or https://www.multiplan.com/webcenter/portal/ProviderSearch Your preferred provider may not be in-network. Check in advance if you have strong preferences. Out-of-Network provider bills are eligible for sharing are limited to the usual and customary (U&C) charge for that service based on independent norms. Charges above that amount are the Member’s responsibility. Medi-Share will negotiate with out-of-network providers to accept the U&C rate, but providers are not obligated to agree.
- Added Benefits. Medi-share, for example, adds some atypical benefits compared to traditional insurance plans:
- Prescription Discounts. The prescription discount card can save up to 45% over retail pharmacy list price. But you have to submit prescriptions for reimbursement or sharing within a limited timeframe.
- Dental Discounts. Dental care is an important part of healthy aging and ironically not in Medicare.
- Vision Discounts. Vision care is also a part of aging and retirement planning.
- Disability Sharing. In addition to healthcare cost sharing, you can also elect similar risk-sharing for disability-related
- Final Expense Sharing. Up to $4,600 of final-expense (funeral) related expenses eligible for sharing (payment).
- Free Telehealth Consulting. Speak to a board-certified physician via phone or video chat at no extra cost. This can be a valuable benefit to decide when to see a local provider.
- Provider Negotiation. Insurers often pre-negotiate discounts with healthcare providers. Medi-Share does as well. But Medi-Share will additionally negotiate on your behalf for bill-adjustments or discounts after the fact, especially with out-of-network providers.
- Medi-Share Terms. Medi-Share vs. Traditional Insurance terms:
- Monthly Share Amount (MSA) = Premium. Your Monthly Share Amount pays for other members’ care. And their Monthly Share Amount pays for your shareable (covered) healthcare expenses. Monthly Share Amount is age-rated, as are ACA-compliant individual insurance policies. You pay more the older you are, and the more members in the household.
- Reasonable Co-pays. Copays make you think twice before wastefully spending on medical care. Medi-Share’s are reasonable and affordable.
- $35 Office Visit
- $200 ER Visit
- Cost-Sharing = Paid-By-Insurer. 100% after Annual Household Portion. In Medi-Share, these are your healthcare costs paid by (shared by) other members. Your MSA pays for costs incurred by other members.
- Annual Household Portion (AHP) = Deductible. A range of options. Think of this as the deductible to be satisfied before coverage kicks in. For most claims, coverage after the AHP is 100%. (There are limitations on shareable expenses for pre-existing conditions.) The illustrated MSA amounts are for us, a 2-couple household ages 60 and 57. Yours will vary, but it gives you a sense of magnitude. Other AHP levels are offered. Medi-Share’s pricing tool here. https://mychristiancare.org/weblead/pricingcalculator
For us, an Iowa couple age 60 and 58 as of January 1, 2019, monthly share (e.g., rates) would be at various levels of Annual Household Portion (e.g., deductible):
Choose a program
|ANNUAL HOUSEHOLD PORTION||STANDARD MONTHLY SHARE||HEALTHY MONTHLY SHARE|
You can see that the required Monthly Share Amount (MSA or premium) is lower the higher the Annual Household Portion (AHP).
The “Healthy Monthly Share” reflects the 20% discount for meeting certain health status metrics like BMI and blood pressure, it’s not guaranteed or available to everyone.
- No Lifetime Maximum. This parallels ACA-compliant standards but is not required or universal among competing health-share plans.
- Pre-existing Conditions. Medi-Share limits the amount shareable for pre-existing conditions but won’t decline membership. You basically must apply to see the likely net effect in your circumstances.
- Medi-Share “Fit”
- Low “premium” cost. Providers submit bills directly to Medi-Share so no added administrative burden or claims processing by consumers. Except, consumers must submit prescriptions for reimbursement, though there is an upfront discount program with participating pharmacies. There are added benefits like discounts for dental and vision and free telehealth consultations. Benefit restrictions are the trade-off for lower cost or annual Share Amount or “premium” in insurance lingo. The social support of fellow members, and part of the ministry aspect is a real benefit according to many members. The religious affinity is a pro if you are in religious alignment.
- Requires religious agreement, so not a universal solution. Not ACA-compliant. Doctor or PPO panel may not include your preferred provider. Coverage for pre-existing conditions may be limited. Coverage may be different from prior insurance. Not eligible to be matched with a Health Savings Account (HSA) because it’s not an eligible high-deductible insurance plan. You can’t complain to your insurance commissioner because it’s not insurance.
- Most Appropriate for. Early retirees or late-career self-employed in relatively good health seeking risk management against a catastrophic claim that might arise between now and Medicare-eligibility at age-65. Especially if your income is likely to be greater than ACA subsidy limits where you pay the full cost of coverage. Medi-Share’s affordability is the best. The more concerns you have about your pre-existing conditions the less predictable is the impact of coverage limitations. (What you get for the price.) Here are the details for sharing caps, with the good news that high blood pressure controlled through medication is not penalized. https://mychristiancare.org/medi-share/what-is-medishare/how-medi-share-works/medi-share-guidelines/#VI.F.Pre-ExistingMedicalConditionsorRelatedConditions
- Comparison Chart. Here’s Medi-Share’s comparison chart tool. https://cdn2.hubspot.net/hubfs/2154169/Medishare%20Blog%20Assets/Questions%20to%20Ask%20about%20Health%20Care%20Sharing.pdf?t=1540491490596
- COBRA Election. COBRA election is time-limited. If you don’t choose within the allotted 60-days, you can’t go back and ask to extend your prior group insurance under COBRA. The 60-days runs from the earlier of when you receive notice of COBRA benefits from your employer (typical) or the end of your group coverage.
Paperwork is often handled on something other than the last day of coverage. For instance, my resignation is effective 12/31. That’s a weekend or holiday. My employer is likely to start the clock with an exit meeting and paperwork before campus closes down for the Christmas/New Year’s Holiday. Say, 12/22. Therefore, I’d have to make a COBRA election on or before 2/20/2019.
Department of Labor’s (DoL’s) COBRA Benefits Brochure. https://www.dol.gov/sites/dolgov/files/legacy-files/ebsa/about-ebsa/our-activities/resource-center/publications/an-employees-guide-to-health-benefits-under-cobra.pdf
Employers don’t love messing with former employees so they are sticklers for the COBRA deadlines and paperwork. You really need to know earlier rather than later whether you want COBRA.
- COBRA Cost. COBRA is generally relatively very expensive but can make sense for high-income individuals above the premium-subsidy income caps for ACA individual health insurance on the Marketplace Exchange.
- COBRA “Fit”
- No change in provider network or coverage. ACA-compliant minimum benefits. Avoids the hassles of using a qualifying event (change in employment) to qualify for ACA-compliant guaranteed issue mid-year.
- No more employer subsidy. That formerly rich benefits package is now all paid for by you, so it’s high cost. Time-limited. Former employees can get coverage for up to 18-mos. That won’t get you all the way to age-65 and Medicare if you’re younger than 63 and 6 months. Spouses of employees can extend for up to 36-mos. See the time limit calculation in the DoL COBRA Benefits Brochure.
- Most appropriate for. COBRA is an easy answer to get from a mid-year termination date to the end of the year where you can use the open-enrollment period to start new coverage on January 1 of the year following leaving your employer. It is also “fits” if you are 63 and ½, within 18-months of Medicare-eligibility. Other gap-filling options include temporary or short-term health insurance.
Early Retirement Health Insurance Options
Good luck with planning for or living in early-retirement and the search for affordable health insurance before Medicare. This includes those of us self-employed in our encore venture. We can’t afford to spend our entire income on health care. You can’t either. There are other priorities in life too like food, shelter, and fun. We want Aging With Freedom™ and to the freedom to choose some fun and happiness.