Your medical insurance choices will depend greatly on whether you are young and a long way from retirement, an "early" retiree and a few years away from Medicare eligibility, or 65 or older and eligible for Medicare. In this article, I discuss the medical insurance options that younger people and "early retirees" may consider. In the next, I will focus on Medicare specifically.
Medicare will factor into every retiree's plans at some point. But what if you're an "early retiree" – either by choice or of necessity – and not yet eligible for Medicare? Or perhaps you are younger and in need of insurance. You need to know your options, especially if you don't have coverage via an employer-sponsored plan.
Is it Biblical?
Generally, the Bible is neutral about insurance. (I don't think it was around in biblical times.) So, we have to look at biblical principles for guidance.
The Bible does not promise Christians perfect health or that God will provide all the money they need for medical treatments if they do get sick. God does promise to care for us, but not always in the way we expect or would prefer (Matthew 6:31-33). Medical insurance, including Medicare, could be viewed as one of the ways God through his common grace provides for us and a way that we can provide for our families (1 Timothy 5:8). It could also be seen as a way to set aside a little money (that is pooled with others') for a time when a lot may be needed, which is good stewardship as biblically defined (Genesis 41).
Whether these provisions are absolutely necessary and, if so, whether medical insurance is the best way to do it, is a matter between individuals or families and God (James 1:5). (If you find that you are opposed to traditional medical insurance or Medicare, you can check out the non-traditional options I discuss later in this article.)
Do we all need it?
Health care has been very much in the news over the last few years mainly due to the implementation of the Affordable Care Act (ACA), aka "Obamacare." The politicians repeatedly tell us that medical care costs a lot and that we need to plan for it, especially if we're older. The ACA is their way of helping us do that.
Surprisingly, although coming from politicians, the statement is actually very true, no matter what your age. The rate of inflation for medical costs significantly exceeds the CPI-U (Consumer Price Index for Urban consumers). In large part, this is because of new (and expensive) medications and treatment options, and life-prolonging successes. This all makes health insurance all the more necessary for the vast majority of people.
I am of the opinion that medical insurance is a good thing unless your conscience dictates otherwise. So, as a general rule, you probably don't want to go without it – especially when you're older.
If you don't have it, you will have to figure out a way to pay for your healthcare expenses. And similar to home and auto insurance, the whole idea is to take prudent steps to protect yourself from the financial effects of a catastrophic accident or illness. Another problem is that hospitals generally charge non-insured patients prices that are significantly (sometimes outrageously) above the prices that they charge insurance companies and Medicare. This situation has improved somewhat in recent years but remains a big concern.
If you need health insurance and have not yet reached age 65 when you'll be eligible for Medicare, you essentially have three choices:
- Shop inside the Health Care Exchange Marketplace (Obamacare).
- Shop outside of the Health Care Exchange Marketplace (conventional insurance).
- Shop for a "non-traditional" provider.
Option One: Obamacare
Politics aside, the main goals of the ACA are to make medical insurance more available and affordable to more people. I'm not going to get into all the details of it here (you can go to healthcare.com and find about everything you need to know) except to say that one of the potentially beneficial things about it is that it creates a new tax credit for certain taxpayers who buy health insurance via one of the Exchanges. The goal of the credit is to subsidize the cost of health insurance for people who might not otherwise be able to afford it.
To be eligible for the credit, your "household income" must be between 100% and 400% of the federal poverty level. For example, in 2016, 400% of the federal poverty level would be $47,520 for a family of one, or $64,068 for a family of two, and so on. I suspect that makes a LOT of folks eligible for at least a partial subsidy. That said, I personally found the premium costs on the Exchange to be very high, so even with a subsidy, the cost may still be prohibitive for you.
There has been some confusion about what is meant by "household income." According to the IRS Code and Medicaid Regulations, it is your modified adjusted gross income (MAGI) plus the MAGI of anybody else included in your household (i.e., your spouse and dependents).
The definition of MAGI can also be confusing to many people. For the purpose of calculating the ACA subsidy credit, the codes and regulations state that MAGI is calculated as:
- Adjusted gross income (that is, the bottom line of the first page of your Form 1040), plus
- Any foreign earned income that was excluded from AGI, plus
- Any tax-exempt interest, plus
- Any Social Security benefits that were excluded from AGI.
A very important point to emphasize is that the credit is calculated on a monthly basis. In other words, you do not have to qualify for the entire year in order to be eligible for the credit. So, if you meet the requirements for 6 months you will be eligible for 6 months' worth of the credit.
The bottom line then is this: If you are an "early retiree" and not yet eligible for Medicare, or if you have found healthcare insurance to be unaffordable in the past and are interested in getting insurance through the ACA, you may qualify for a premium subsidy that could make it much more affordable. If you are opposed to the ACA for personal or political reasons or don't like the idea of accepting a subsidy from the government, then you can pay full price or pursue the other options listed below – that is your personal decision.
Option Two: Conventional
If you don't qualify for a subsidy under Obamacare, or if you just want to consider a wider array of options, you may want to shop for insurance outside the Marketplace Exchange. Prices are tightly regulated in each state, so you should never pay more for a specific plan in a specific region regardless of how you shop.
The only things that affect the price of your health plan are: what plan you get, your location, your age, your family size, your income (if you are eligible for cost assistance subsidies), and factors like employer contributions. Your health status or where you shop should no longer affect the price of a specific plan – that changed with the ACA.
The more money you make, the more viable shopping outside the marketplace becomes. If you just barely qualify for cost assistance under Obamacare, you may want to understand all of your options as you'll probably find that even the most expensive subsidized plan on the Exchange is still cheaper than an unsubsidized one outside of it. That being said, healthcare costs go beyond premiums – the more medical services you plan to use in a year the more sense it will make for you to shop around and see all of your options.
So, as a general rule of thumb, the more cost assistance you are eligible for, the less sense it makes to shop anywhere except your state's Health Insurance Marketplace.
Option Three: Non-Traditional
If you don't want to shop inside or outside the exchange, there are some "non-traditional" options to consider.
One is Direct Primary Care (DPC), which involves a simple flat monthly fee that covers routine primary care services instead of the typical fee-for-service model. This makes your routine health care expenses more predictable. DPC can sometimes be used along with a Health Savings Accounts (HSAs) or high-deductible health insurance, to cover major medical care expenses.
There are also high-end "concierge medicine" programs that are similar to DPC. This is where a group of patients pay an annual retainer and receive exclusive services from their doctor. Those familiar with such practices say that they may do well in affluent areas, but will likely be challenged to keep up with the information technology and infrastructure demands of modern medicine.
Finally, there are the faith-based health care ministries, which function like private insurance pools for groups who have similar beliefs and philosophies. These are cost sharing plans where members pool their resources when they're healthy, to provide for times when they're not. In these plans, everybody pays equally and is eligible for equal benefits. No government regulations or insurance company rules are involved. But payments aren't guaranteed either — they depend on cash flow. In general, the plans seem to work: You'll find many reports online of high satisfaction and significantly lower premiums and deductibles than Obamacare.
Most people who aren't covered by an employee plan will opt for Obamacare. If you can qualify for a premium subsidy, all the better. If you choose Obamacare, you'll need to choose between several different plans, each of which has certain coverage limits and annual deductibles. For help with this, check out this article from kiplinger.com.
If you dont want Obamacare, you have other options. If you are 65 or older, Medicare will probably be the way you get coverage. I will look into some of those specifics in my next article.