I am titling this post “Part 1” as I am expecting the challenge of organizing our health care coverage for 2017 to be a multi-part personal finance adventure. I explained how we were approaching health insurance in early retirement this past spring, but it seems that all of the cards are up in the air again and we are likely looking at a 33%-50% increase in our bill next year.
Many states are struggling with the affordability of the individual payer market (as opposed to corporate or Medicare) as the highest cost, highest risk individuals have been pushed off the previous government program and into this relatively small pool of insurees. In Minnesota, there are only 250,000 people with individual policies and they are being hugely impacted by the cost increases.
The Minneapolis Star Tribune notes that Minnesota once had a nation-leading program for helping the uninsurable, but “Obamacare eliminated the successful program that helped Minnesotans with pre-existing conditions.” For early retirees that leverage individual insurance, the system “has been brought to the brink of collapse” and our Governor – long a proponent of the ACA – has now commented that “the Affordable Care Act is no longer affordable.”
OUR SITUATION:
A quick bit of background: There are three of us in our family. All of us are fortunately in great health. My wife and I will be 50 at the start of next year and our son will be 19. We are currently covered under a $6.5K deductible individual plan with a cost of $11.4K for the year. Nothing in our family situation or medical history has changed in the last year.
The estimate I received from our current insurer is $3.6K more than what we paid this year (33% more) with a similar deductible ($6.7K). Unfortunately, the coverage now has a significantly smaller network and it doesn’t include our preferred clinic and long-time doctors. Additionally, in-network coverage only covers clinics in our metro area – if we are traveling, we are out of network. That is a big change to us as we travel more. Lastly, prescriptions are now 20% of the actual cost after the deductible instead of a $20 copay (I imagine that has to be hundreds of dollars more a year).
In another strange twist, the State of MN is allowing insurers to ‘cap’ the enrollment in the plans. This means that you better enroll quickly (starting on 11/1) or you won’t be able to get in the best plans. It’s an ‘exploding offer’ – if you wait, you’ll end up in a much higher cost plan. How much more no one knows. That only gives me this week to figure everything out. One company offered to send me materials in the mail, but I probably don’t have time to wait for snail mail.
NEXT STEPS
As a result of the massive potential price hike, I’ve started to look at some other plans and size them up. Ideally, we could find a plan that allows us to stay at our own clinic. Unfortunately, those seem to come at a much higher price. Instead of a 33% increase, we are probably looking at a 55% premium increase ($6K). I’ve seen some comparable plans in the state exchange that run even 75% higher ($9K)!
These more expensive plans might still even have a significantly higher deductible. I’ve looked at plans where the deductibles run as high as $13K and still result in a 33% premium increase.
We have a few options more to investigate (including buying through the MegaCorp I retired from), but I’m guessing when all is said and done, we are going to pay somewhere between $3.5K-$6.0K more for health care coverage next year. I would note that we are not eligible for any state subsidies for ACA coverage. We will be paying full freight for our coverage which means under the ACA we are being called upon to subsidize our less-healthy fellow citizens. You could call it ‘forced charitable giving’ of sorts. Or, something nasty could happen to us health-wise and others will be subsidizing us next year.
CONCLUSION
That’s all for ‘part one’ of this topic. I’ll let you know how things develop over the next couple weeks. While the health insurance market is very dynamic right now, one of the best things happening for early retirees is that everyone is guaranteed coverage (at some price) under the ACA. Without that, many would be forced to work for risk of not having any coverage at all, until they reached corporate retirement or Medicare age.
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MrFireStation 
Holy cow! I’ve been seeing news stories about large rate hikes this year, but haven’t looked at the details since we’re currently covered through work. That definitely blows our ACA spending assumptions out of the water if they do increase that much.
Maybe the “one more year (or two)” will be a forced option just to be able to afford our health care down the road.
It will be interesting reading how Part Two and more play out for you guys. Thanks for the insight and good luck!
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You could look up your own potential costs online. I’m sure what state you live in (and even what zip code) makes a big difference, too.
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It would probably be beneficial just to see how much it has changed from last year to this year and how that would affect our numbers. It seems at the least, that it’s fairly unpredictable moving forward though which is the frustrating part.
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I am hoping we are at the low point now – that the government will get some things straightened out in the next 12 months.
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We’ve been digging around on the ACA website trying to estimate coverage costs. We can get some numbers out, but still we have to be aware that this is a rapidly changing game. What’s true today probably won’t be true by the time we pull the plug in 2018.
Upside, as you say- no one will be left without coverage. Downside, no real idea what to budget for it
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Yes – having insurance is one thing, having insurance at ANY cost is another.
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I had not even considered if it was feasible to buying through my company. The retirement planning projection software states I can’t have coverage unless I hang around until 55. Ain’t happening. I guess each company policy on healthcare coverage provides opportunities that are at least worth exploring. Not sure how I am going to do this without setting alarm bells off in certain quarters! But I am going to mull on it a bit more and gently dig a little…..
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I have early retiree status at the MegaCorp I left several years ago. I worked there for 24 years. If I were you, I would just search around the company intranet site for benefits.
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We’ve done a number of calculations over time on our ACA options, and we’re eager to see where the 2017 numbers net out in our state — that will be our best guess about the costs we’re looking at when we pull the plug, though of course it’s all likely to keep going up. It’s a good reminder of why we want to keep our income low, because those subsidies are valuable not just as subsidies, but as some level of guarantee against prices going up too much! That’s worth a lot in my book.
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If you can keep your income low, then I think you will avoid most of the big impact. We are in a situation where we have stock options we have to sell, which means that we are in the highest income bracket. High quality problems for sure.
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Bummer. I’ll be keeping an eye on how this evolves. If I’m retired by 45, which appears likely, I’ll have more than 20 years to bridge the gap to Medicare. I’m fine with a catastrophic / HDHP and should have some money saved up in an HSA, but I could burn through that pretty quickly.
The healthcare wildcard is one of several reasons I’m putting in several “one more years” after hitting the 25x FI number.
I hope you find a decent solution for your family’s healthcare. And soon!
-PoF
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I think banking away some cushion is the right idea. I have a friend who has some health issues in his family and he has to consider both the rising premium AND the full deductible each year. That may be a good way to pressure test your FIRE plan.
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I’ll be watching your “part II” updates too! I have health care coverage through my husband’s employer (he’s retired) until I’m 56 (6+ years from now). I’ll have to figure something out after that! He is 8+ years older than me – so we have gaps to fill for sure.
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Ouch – I have been seeing the headlines in MN specifically and wondered how big of an impact this will have on the early retiree crowd.
Hope you can track something down that doesn’t sting to bad
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Apparently, MN premiums were lower than the average in the USA. This makes them higher than average, so it has been a bit of a double jump. It will sting, but we’ll pay anyway.
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I have open enrollment period coming up with my employer on November and I was very disappointed to hear that they’ll be raising the rates on health insurance.. They didn’t say by how much just a “small” increase. What’s small to them is definitely not small to me, I hope it isn’t that much significant!
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In MN, they say it is only the individual market that is impacted. Corporate & Medicare/Gap premiums haven’t changed much.
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As a suggestion, have you tried looking at an individual plan outside the ACA exchange? While I am covered through work, I saw this as a suggestion to deal with the steep increases for non-subsidized participants, as companies may offer plans outside an exchange that do not qualify for some reason. (for example, if you don’t have any existing conditions)
Also, your son may be able to get a group plan through his college. (although, of course, he is probably lowering the average cost for you!)
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Yes – we are covered through an individual plan (outside of ACA now). These plans are in the same ‘pool’ of participants in our state. I did check the college for our son, but would rather have him helping toward our sky high deductible.
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