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Financial Planning,Health Insurance

Winning the Health Insurance Game

Your health is certainly not a game.  But health insurance certainly can be.  For those not covered by an employer-sponsored plan, the options for coverage have changed dramatically over the past several years.  Is Obamacare a viable or good option?  How about a Christian health-share option instead of traditional insurance?  Health insurance is becoming a larger and larger portion of our budgets, but if you know what you’re doing, you can lower your costs dramatically.

The Options

Employer-Sponsored Insurance

Employer-sponsored health insurance is just that, insurance that is offered through your employer.  If you are eligible for this, it is often your best option because your employer is usually covering some or all of the cost.

Within these plans, there are usually several options between high deductible plans, PPOs, HMOs, etc.  There are also options for contributing to Flexible Spending Accounts, Health Savings Accounts (for high-deductible plans), and others.  I won’t cover all of those here, but if you are electing employer-sponsored insurance, you should factor in:

  • How much you typically visit the doctor
  • How many well visits, sick visits, and emergency visits you think you’ll have
  • How much risk you want to take on – high-deductible plans usually offer the best chance to save money, but you could be out of pocket several thousand dollars early in the year if something major occurs
  • How much your employer is subsidizing for each plan.  There is a trend for employers to subsidize more for High Deductible plans, since the employee shares more of the risk compared to the alternatives.

The options, costs, and subsidies vary wildly from one employer to the next.  And even if you have this coverage, it’s not always the best option.  A couple of years ago while at another firm, I declined the employer-sponsored coverage because the cost was ballooning and there were cheaper alternatives.  But that’s the exception, not the norm.

Private Insurance (e.g. Obamacare)

If you need to get private insurance, you should do what you can to qualify for an Obamacare (Affordable Care Act) subsidy.  These subsidies are based on your Modified Adjusted Gross Income (MAGI; this is usually the number at the bottom of the first page of your 1040).  In general, the lower your MAGI, the more of a subsidy you’ll qualify for.

For example, a 63-year-old in Charlotte earning $120,000 per year applying for a BCBS BlueValue SilverEnhanced 600 policy for he and his spouse will pay $3,156/mo in premiums.  However, this same couple with a MAGI of $25,000 will only pay $165/mo for the same coverage due to government subsidies!

There is, however, there is one major caveat to having a lower taxable income.  If your MAGI is too low (below 100% of the Federal Poverty Line), you won’t qualify for any subsidy at all as the government will deem you eligible for Medicaid.  Unfortunately, most early retirees who won’t qualify for a subsidy because their income is too low also won’t qualify for Medicaid because they have too many assets.

Fortunately, there is an easy fix for this.  Just make sure your income is high enough (usually around $17,000 depending on age and number of dependents) through taxable retirement distributions or Roth conversions.  Roth conversions can serve here as a double-win as they can help you qualify for low-cost health insurance while converting part of your retirement assets to grow tax-free for the rest of your life.

If your income is too high and you don’t qualify for much or any of a subsidy, private health insurance may still be your best bet.  This may be because you are uncomfortable with the alternatives or if you have significant pre-existing conditions which may not be covered otherwise.  While there are some political and moral things I dislike about Obamacare, it is nice to know that everyone is eligible for some sort of insurance, even if it is exorbitantly priced.

Christian Health-Share

Christian Health-share ministries are becoming a more prevalent option for those seeking alternatives to traditional insurance.  The major players here are Medi-Share, Christian Healthcare Ministries, Samaritan Ministries, and Liberty HealthShare.  Each is slightly different in terms of the cost, what they cover or exclude, and how the coverage actually works.  Some are set up to look more like traditional insurance, and some operate more like self-insurance where members help each other out.

One facet of these ministries that many Christians find attractive is that there are certain procedures and medications that may not be covered, such as abortions and pregnancies conceived out of wedlock.  Some of these companies require an affirmation of faith, a prohibition against drug use or drunkenness or other provisions.  In some cases these are for faith reasons and in others they help keep members cost lower.

These ministries are not considered insurance for tax purposes and are not eligible for things like health savings accounts.  They do, however, meet the qualifications for qualified health care coverage under the Affordable Care Act, so the government will consider you insured even if they won’t give you a tax break for it.

Our family has used Medi-Share in the past and we had a great experience.  I’ve had clients and friends use others with generally positive experiences as well.  There are pros and cons to each of these companies and you should evaluate the best one for your family based on the same factors as listed above for private insurance.

This is a very high-level look at these programs.  If you are considering making a switch to one of these, I highly recommend an in-depth comparison.  Michael Kitces has an excellent write-up of the ins and outs of these, as well as a thorough comparison of the four major providers.

The Bigger Picture

Regardless of which option you choose, I think there are a few main points of consideration:

Stewardship – When it comes to our finances, Jesus encouraged us to be “shrewd as serpents”.  You may find yourself with two substantially similar options with one costing half the amount as the other.  Wise stewardship often would encourage us to choose the less expensive option so that we can use God’s resources for other purposes.

You may also find yourself with two similarly-priced options, but one supports large insurance companies while the other is supporting other believers.  Stewardship in this case might mean opting for non-traditional coverage.

Providing for your family – 1 Tim 5:8 instructs us that “if anyone does not provide for his own, and especially for those of his household, he has denied the faith and is worse than an unbeliever.”  In addition to providing income and basic needs, this should also include access to doctors and health care when needed.  So make sure that you have a plan in place whatever it is.

Acting in Faith – If we knew exactly what illnesses and injuries we would go through, this process would be much easier to navigate.  If we knew what was going to happen to Obamacare or our retirement accounts, we could have a lot more certainty.

Thankfulness – I often forget that most of the world doesn’t have health insurance.  In fact, according to the World Bank and WHO, half of the world still lacks access to essential health services and 100 million are still pushed into extreme poverty because of health expenses.  We are blessed beyond measure to have all of these choices to navigate.

If you’d like to discuss any of these options in more detail, which might be the right choice for your family, or how to qualify for certain subsidies, please give us a call and we’d be happy to walk you through the process.