Thanks to the Affordable Care Act aka Obamacare, the health insurance options available to us are standardized. It definitely makes it easier to compare and contrast.
And thanks to a series of somewhat dated yet excellent blog posts (e.g. Obamacare Optimization in Early Retirement and Obamacare Optimization vs Tax Minimization) I have a clear understanding of how to balance costs and benefits.
Unfortunately, that balance seems to require either a cheap plan with insanely high deductibles (just pay the first $13,000 of medical needs out of pocket, good times) or an OK plan with decent benefits but restrictive income challenges.
So which did I choose? Both.
The Obamacare Tick-Tock
Bronze insurance plans for a family of 4 in our zip code cost ~$1,300/month, unsubsidized. Deductibles are about $13,000 and insurance pays absolutely nothing for anything until we first pay that $13,000 deductible. Very “affordable.”
Silver plans cost about $1,650/month, unsubsidized. For the extra $350 we get a lower deductible ($1,600) and a Dr visit costs $15.
Any subsidy will be applied equally to either plan. So… which is better?
The answer seems simple – that which costs the least for the amount of medical care we actually use.
Alas – by definition that is unknowable… In the 4 months that we have been in the United States, 1 of us has been to the doctor twice – I paid $159 for a varicella vaccine and $220 for a visit to an urgent care center (plus $29.99 for a round of amoxicillin.) (And now the urgent care center is asking for another $38 for… reasons?)
By my math that costs less than the $29,000/year Bronze plan.
But $29,000 is less than appendicitis or being hit by a bus. Probably.
It isn’t completely fair to look solely at the unsubsidized cost of insurance. Unless of course you are ineligible for subsidies, as we are in 2021.
But what to do going forward? According to this fancy calculator, as a low-income household (~200% FPL) in 2022 we should get a free Bronze plan or a nearly free Silver (subsidies of $1,300-$1,600+/month.)
This presumes no Roth conversions, no capital gain harvesting, and no unexpected income. Which could be a tall order – these are the core tenets of lifetime tax minimization. After 8+ years of major tax hacking it would be a bummer to just stop.
So what I have decided to do is to alternate between the two.
Since 2022 is our first year on an Affordable Care Act health plan and we have no recent experience with US healthcare, we have signed up for a nice Silver plan with aggressing cost sharing. This should keep expenses at a minimum.
With a projected income of about $52,000/year / 200% FPL this should be around $100/month all up.
I plan to hit our deductible and then some – namely from some physical therapy on an old shoulder injury and some recent sciatica issues. Perhaps some acupuncture and medically necessary massage would be called for, who knows. There are also a few things from my most recent physical in Taiwan that I would like to explore further.
With all of that sorted, in 2023 we could switch to a Bronze plan.
With income up to ~$87k/year / 300% FPL this would cost about $0. Ideally Doctor visits would be limited to an annual preventive exam. Anything needing follow-up could potentially be pushed into 2024 (within reason.)
With that extra $35k of income potential to play with, this would be the year to realize some capital gains, do an end-of-year Roth conversion, beef up the HSA, pay off any debt incurred the prior year, etc…
Silver – Bronze – Silver – Bronze – Tick – Tock
Gotchas / Risks
This all works if health care needs are predictable and driven by “wants” vs needs. Accidents or illnesses could throw things askew… but worst case we are protected from financial doom by a Bronze plan deductible.
If things go awry during a Silver year (unexpected income?) then worst case advance premiums would need to be repaid (but with limits below 400% FPL.)
The best health insurance solution is the one that costs the least for the amount of medical care you actually use. There is little point in paying for a high-end health plan if the odds of using it are low.
By alternating between years with low-income/high-end health plan/high usage healthcare and high-income/low-end plan/low usage healthcare years, there is potential to minimize overall healthcare expenditures.
There are risks, but they are limited. And perhaps it will all work perfectly, like… clockwork.
- ACA Premium Calculator
- Obamacare Optimization in Early Retirement
- Obamacare Optimization vs Tax Minimization
- Obamacare Advanced Premium Tax Credit Repayment Limitation
Have you Tick Tock’d health insurance?