I am one of many whose insurance in 2014 is canceled because of the Affordable Care Act (ObamaCare). Naturally I was angry. I have been responsible, buying insurance for the last 10 years for myself and family. I was not in love with my plan, but it worked.
To find a new plan, I learned quickly to avoid the Exchange. I finally found a plan that lets me use my current doctor. At the bronze level, that plan is $680/month with a $12,600 deductible. My current plan is a bit higher per month (because of pre-existing condition) but a $2,500 deductible. The proper way to compare plans is yearly premium + deductible. Based on that, the ACA plan is much more expensive than my current plan.
Now that I know more, I have reached a new conclusion. I should not buy insurance at all. Under ACA, all insurance is “Guaranteed Issue”, meaning you can apply and receive insurance whenever you wish. Not buying insurance has two penalties. 1) All care is out of pocket 2) The IRS will tax you.
The IRS will charge you the higher of $95/per person or 1% of household income, not to exceed annual cost of a bronze plan. This could get a bit expensive, but back to out of pocket….
The premium for the quoted bronze plan is $8,160/year. I have to pay for out of pocket costs of the first $12,600. So the insurance plan covers a free wellness visit (not tests though) and anything that exceeds $12,600 (Perhaps $6,300 on individual bases, but my quote is a bit vague on this). None the less, I pay out of pocket for my care even with insurance. I probably spend about $2,400 on healthcare each year. So my options are:
| Option 1: Buy Insurance | |
| Premium | $8,160 |
| Out of Pocket | $2,400 |
| Net annual Cost | $10,560 |
| Option 2: Take Penalty | |
| Tax Penalty | $1,800 |
| Out of Pocket | $2,400 |
| Net Annual | $4,200 |
| Delta Savings | $6,360 |
So, If I don’t buy any insurance, I save $6,360. The risk is, something big happens. But if that does, then I can immediately buy insurance to cover it. The new insurance won’t start the deductible process until I purchase it. Which basically means if my wife or I get really sick, buy the insurance before costs exceed something between $0 and $6,360. This is sort of our personal actuarial process. But each year, we save the money so that break even point will change. To be fair, the penalty goes up to 2% in 2015, so the savings will be $4,560 then. Given the actuarial nature of ACA, premiums are likely to go up because ACA mandates a reduction of the deductible. On the cost side, some doctors will charge less for cash payment, so my $2,400 may go down. If you are on certain drugs, you may lose some negotiated discounts available with various plans. What this all means is the “Don’t buy insurance” plan works fine for the next few years but maybe not forever.
There are some issues around open enrollment. Different states have different laws as to if you can buy insurance only during open enrollment (A short window each year). If your state has a rigid open enrollment period, this strategy may not work. Alternatively, you could buy a very high deductible non compliant plan just for the worst case scenario. That type of plan is still likely much cheaper. Though, I am having trouble in all the current noise, finding non compliant plans.
If you do show up in the Hospital in an emergency, the law says they must treat you. Given that a small fraction of uninsured ever end up paying for their visit, you may be able to negotiate a cheaper price to settle the emergency. Your risk is financial, not health.
If you have an HSA as we do, you may have some additional buffer. We have saved about 20K in our HSA so we have some additional room in our calculus. The net conclusion though, throughout all of this debacle, is I should not buy insurance. So the President was right in the end, my healthcare will be much more affordable in 2014.
