Author Topic: Can't retire due to cost of medical  (Read 8155 times)

darelldd

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Can't retire due to cost of medical
« on: September 24, 2014, 12:25:49 AM »
So here we are... we seem to have all the boxes checked for early retirement. We're reduced the cost of living in every area we can, no mortgage, and have a good bit of savings. BUT... seemingly no way to retire because of health care premiums. Now, we're both active and healthy... yet I have plenty of chronic, expensive issues that were mostly handed down to me by my parents - that I can't Mustache away, no matter how hard I try. And none of them seem to be getting better with age. So... with all the other ducks in a row, how do we pay for our family's health care without a corporate plan? Paying for a private plan would mean we're done with any sort of luxuries like travel... new clothes... food.

We live in CA, are about 50 (with a teenage daughter) and have been on a corporate plan our entire adult lives. Well, all of our lives when you include parental coverage. At least one of us has always had a corporate job - and this has allowed one of us to be self-employed. But it seems that we can't BOTH be self employed. And this is supposed to be a civilized country?

I will honestly say that I have no idea what ACA can or will do for me - beyond *requiring* us to have coverage.

So... what do the smart folks do when the only hesitation to retire early is the cost of medical coverage?

Spartana

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Re: Can't retire due to cost of medical
« Reply #1 on: September 24, 2014, 02:41:24 AM »
It seems that most people on this forum have plans to reduce their taxable income (MAGI) in early retirement so that they can maximize ACA premium subsidies and have lower cost premiums - almost zero in some cases. That still leaves high deductibles though depending on the plan you choose for yourself and your family. Also, some here are very low taxable income but high asset (me for example) and in a Medicaid expanded state so can go that route to get free insurance if they want. But I think those people are rare for the most part. Others like me, have some other kind of health insurance from a previous employer that they are able to use (think ex-military and those with government pensions who may be able to get medical insurance thru their pension plan). But I think most people are just planning on paying for it and making cuts in other areas of their spending instead so they can retire early.

Fishingmn

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Re: Can't retire due to cost of medical
« Reply #2 on: September 24, 2014, 04:19:02 AM »
First thing you need to do is figure out how much ACA will cost. Go to the California plans website and go far enough in registration to see what it would cost for the different plans including premiums, coverages, deductibles and out of pocket costs. Then see how much of a subsidy you might qualify for.

Once you have a firm number you can plan around it just like every other expense you should be planning for in retirement.

Based on that you make a decision on whether you can retire now or need to keep earning income in some way until you are covered.

Another Reader

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Re: Can't retire due to cost of medical
« Reply #3 on: September 24, 2014, 05:59:50 AM »
ACA coverage is generally of very poor quality, and California is no exception.  Your employer plans likely cover a lot more at a lower price.  Go to the CoveredCA site and use the shopping tool.  The deductibles are very high, so you need to include them to accurately determine the best plan for your family.  The percentage covered is low, so estimate your annual medical expenses and calculate what your out of pocket expense will be up to the maximum.  Estimate your retirement income as accurately as you can to see if you qualify for a subsidy.

If you are 50, you should understand that the premiums rise significantly throughout your 50's, especially as you get closer to 60.  Your employer plans average costs over the pool of insured, so ACA pricing for those in their late 50's will come as a shock.  Try pricing your selected plan as if you were 5 and 10 years older, because it will help you see if coverage will be affordable as you age.  Don't forget inflation when you make that calculation.

With chronic medical conditions, you should check to see which plans cover your health care providers.  Before you make a decision, verify with the providers that they accept the plan you select.  If you have expensive medications, check if they are on the list of drugs the plan covers and what the co-pay is. 

I think you will be shocked at the cost, especially as you get older, unless you qualify for a substantial subsidy.

Paul der Krake

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Re: Can't retire due to cost of medical
« Reply #4 on: September 24, 2014, 06:11:41 AM »
Can you set up shop abroad until Medicare kicks in?

sirdoug007

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Re: Can't retire due to cost of medical
« Reply #5 on: September 24, 2014, 07:22:51 AM »
A little research on the ACA will go a long way.  Contrary to much of the political ramblings out there, it is a very good thing for frugal early retirees as it limits your health insurance costs as long as your income stays under 4x the poverty level.

The subsidies on premiums limit premiums to 9.5% of your income if you are between 3x and 4x the poverty level.  However, once you go past 4x, the limit is gone.  http://www.valuepenguin.com/understanding-aca-subsidies

There is also an out of pocket maximum which is $6,350 for an individual and $12,700 for a family.  As I understand it, there is no income maximum for this limit.  https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/

Insurance will probably cost more than you are paying now because your employer is paying some of it as a benefit, but these numbers are not insurmountable for early retirees.

beltim

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Re: Can't retire due to cost of medical
« Reply #6 on: September 24, 2014, 07:36:59 AM »
A little research on the ACA will go a long way.  Contrary to much of the political ramblings out there, it is a very good thing for frugal early retirees as it limits your health insurance costs as long as your income stays under 4x the poverty level.

The subsidies on premiums limit premiums to 9.5% of your income if you are between 3x and 4x the poverty level.  However, once you go past 4x, the limit is gone.  http://www.valuepenguin.com/understanding-aca-subsidies

This, this, and this.  And to put things in perspective, 4x the federal poverty level for a family of 2 is $62k.  If you make less than $62k, having health insurance cost less than 10% of your income is a bargain.  If you make more than $62k, you can afford more expensive insurance (a plan in CA for 2 58 year-olds starts at under $1k per month, and goes up to $1.5k per month for a platinum plan).

Another Reader

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Re: Can't retire due to cost of medical
« Reply #7 on: September 24, 2014, 08:02:35 AM »
With a MAGI of $80,000, two 51 year old adults and a child under 18, the cheapest 60 percent bronze plan is $885 a month.  With chronic health conditions, you will easily be out the $12,700 in out of pocket expenses allowed in a family plan.  So you would likely be out about $2,000 a month.  That's if your health care providers take that plan.  If your MAGI is $70,000, there is a large subsidy of around $654 a month or $7848 a year.  However, with chronic conditions, you will likely be out the $12,700.

There are a lot of nuances to buying the ACA insurance.  You may be better off working with an agent that understands all the moving parts and can find you the best policy that allows you to use your healthcare providers and covers your medications.

seattlecyclone

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Re: Can't retire due to cost of medical
« Reply #8 on: September 24, 2014, 08:17:26 AM »
If you do have a chronic condition, you may find a gold or platinum plan to be the better deal. You pay higher premiums, but the amount covered is higher. You'll need to run the numbers with some of your past medical bills to make a ballpark estimate for your situation.

The bottom line is that health care under the ACA will still be expensive, but you're guaranteed to be given coverage and the premiums are subsidized if your income is low enough. That makes the expense predictable and manageable. You just have to account for it in your planning.

Bob W

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Re: Can't retire due to cost of medical
« Reply #9 on: September 24, 2014, 08:30:40 AM »
 You could have researched the real numbers for medical coverage prior to posting.   

You could also mention the hereditary health issue.   Most people consider high BP,  Diabetes and obesity hereditary.  They aren't.  Many health issues can be sharply improved by cutting out wheat altogether.  (I know,  just sounds insane doesn't it?)

Lifestyle can cure or much improve most health issues.   How often do you walk, stretch, bike,  swim, exercise?   

And lastly,  I are you taking the expense reductions recommended here?   If so,  your monthly expenses would be below 2K.  Plus health insurance.   

If you want a full case study please divulge the following:

Your present income and where it is derived from,  your detailed expenses (every stinking one of them),  your savings and where invested,  your health issues,  your retirement plans and when they kick in, how much you are putting into 401Ks and IRAs each year,  and the value of your home.   

You are probably less than 2 years from retirement and just don't know it.  We can help. 

Another Reader

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Re: Can't retire due to cost of medical
« Reply #10 on: September 24, 2014, 09:07:36 AM »
My understanding of the program may be incorrect, but it seems like the OOP maximum on all family policies is $12,X00 ($12,500 for 2014 per CoveredCA web site).  All the more expensive plans do is pay a higher percentage until you meet the OOP maximum.  If you have a very expensive chronic condition that you know will cause you to exceed the OOP maximum no matter which plan you select, aren't you better off buying the cheaper bronze level plan, reaching the OOP maximum sooner, and then letting the insurance company cover 100 percent after that?  You pay less in premiums but the net coverage is the same.

For example, say you have a chronic condition that costs an insurance company negotiated cost of $100,000 a year to treat.  Without the OOP cap, you would pay $20,000 on the gold plan but $40,000 on the bronze plan.  However, your OOP family limit is $12,X00.  Don't you receive the same net benefit with either plan?

beltim

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Re: Can't retire due to cost of medical
« Reply #11 on: September 24, 2014, 09:51:28 AM »
My understanding of the program may be incorrect, but it seems like the OOP maximum on all family policies is $12,X00 ($12,500 for 2014 per CoveredCA web site).  All the more expensive plans do is pay a higher percentage until you meet the OOP maximum.  If you have a very expensive chronic condition that you know will cause you to exceed the OOP maximum no matter which plan you select, aren't you better off buying the cheaper bronze level plan, reaching the OOP maximum sooner, and then letting the insurance company cover 100 percent after that?  You pay less in premiums but the net coverage is the same.

For example, say you have a chronic condition that costs an insurance company negotiated cost of $100,000 a year to treat.  Without the OOP cap, you would pay $20,000 on the gold plan but $40,000 on the bronze plan.  However, your OOP family limit is $12,X00.  Don't you receive the same net benefit with either plan?

For a chronic condition that costs $100k per year, you're right.  But for lower-cost chronic conditions, the more expensive plan may be better.  Consider, for example, a chronic condition that costs $30k per year.  A bronze plan that covers 60% may cost $1k per month, leading to a total yearly cost of 12*1,000 + .4*30000 = 24,000.  A platinum plan that covers 90% may cost $1,500 per month, giving a total yearly cost of 12*1,500 + .1*30000 = 21,000.

Also, the max out of pocket for platinum plans is lower - $4,000 for an individual and $8,000 for a family.

forummm

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Re: Can't retire due to cost of medical
« Reply #12 on: September 24, 2014, 01:05:38 PM »
ACA coverage is generally of very poor quality, and California is no exception.  Your employer plans likely cover a lot more at a lower price.  Go to the CoveredCA site and use the shopping tool.  The deductibles are very high, so you need to include them to accurately determine the best plan for your family.  The percentage covered is low, so estimate your annual medical expenses and calculate what your out of pocket expense will be up to the maximum.  Estimate your retirement income as accurately as you can to see if you qualify for a subsidy.

If you are 50, you should understand that the premiums rise significantly throughout your 50's, especially as you get closer to 60.  Your employer plans average costs over the pool of insured, so ACA pricing for those in their late 50's will come as a shock.  Try pricing your selected plan as if you were 5 and 10 years older, because it will help you see if coverage will be affordable as you age.  Don't forget inflation when you make that calculation.

With chronic medical conditions, you should check to see which plans cover your health care providers.  Before you make a decision, verify with the providers that they accept the plan you select.  If you have expensive medications, check if they are on the list of drugs the plan covers and what the co-pay is. 

I think you will be shocked at the cost, especially as you get older, unless you qualify for a substantial subsidy.

I don't think this is an accurate assessment. There is a wide range of plans, and they are all standard private insurance plans, and are all required to cover a robust set of essential health benefits that are based on the benchmark plan (frequently BCBS) for the state. Some with higher deductibles and lower premiums. Some with higher premiums and lower or no deductibles. The platinum plans are designed to cover 10% of the actuarial value (total average annual medical expenses) through premiums and only 10% out of pocket. For me a platinum plan would provide similar coverage and at less cost than my employer sponsored plan. But I keep the employer plan because my employer pays part of the premium.

forummm

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Re: Can't retire due to cost of medical
« Reply #13 on: September 24, 2014, 01:10:12 PM »
With a MAGI of $80,000, two 51 year old adults and a child under 18, the cheapest 60 percent bronze plan is $885 a month.  With chronic health conditions, you will easily be out the $12,700 in out of pocket expenses allowed in a family plan.  So you would likely be out about $2,000 a month.  That's if your health care providers take that plan.  If your MAGI is $70,000, there is a large subsidy of around $654 a month or $7848 a year.  However, with chronic conditions, you will likely be out the $12,700.

There are a lot of nuances to buying the ACA insurance.  You may be better off working with an agent that understands all the moving parts and can find you the best policy that allows you to use your healthcare providers and covers your medications.

As with any insurance plan, it's important to pay attention to the details. If you are older and higher income you will have higher medical expenses and will have to pay more for care. If you are worried about out-of-pocket expenses you can look into platinum plans. Many have maximum out of pocket expenses capped at $1500 for the year. The premiums are higher, but generally less than the $6250 annual individual cap for bronze plans. So you can save money overall with a better plan in many cases.

forummm

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Re: Can't retire due to cost of medical
« Reply #14 on: September 24, 2014, 01:13:25 PM »
My understanding of the program may be incorrect, but it seems like the OOP maximum on all family policies is $12,X00 ($12,500 for 2014 per CoveredCA web site).  All the more expensive plans do is pay a higher percentage until you meet the OOP maximum.  If you have a very expensive chronic condition that you know will cause you to exceed the OOP maximum no matter which plan you select, aren't you better off buying the cheaper bronze level plan, reaching the OOP maximum sooner, and then letting the insurance company cover 100 percent after that?  You pay less in premiums but the net coverage is the same.

For example, say you have a chronic condition that costs an insurance company negotiated cost of $100,000 a year to treat.  Without the OOP cap, you would pay $20,000 on the gold plan but $40,000 on the bronze plan.  However, your OOP family limit is $12,X00.  Don't you receive the same net benefit with either plan?

Nearly all (if not all) gold and platinum plans have lower deductibles. Generally in the $0 to $1500 range. And annual out-of-pocket limits in the $1000-2500 range. It varies a lot by where you live. You can check out the premiums at any time at healthcare.gov to see what's available in your area.

forummm

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Re: Can't retire due to cost of medical
« Reply #15 on: September 24, 2014, 01:22:38 PM »
The best way to find real info about what's actually available is to go to https://www.healthcare.gov/find-premium-estimates/

You can find out what plans are available in your area, and how the different medal levels affect your total cost for the year. If your income is 138%-400% FPL in a Medicaid expansion state (100%-400% FPL in a non expansion state) you can see how much of a tax credit you can get, and what your premium will end up being. If your income is 0%-138% in a Medicaid expansion state you qualify for Medicaid (and your costs will be very low).

If you qualify for a tax credit and your income is below 250% FPL, you also get "cost sharing reduction" which means that your deductibles and copays and maximum out-of-pocket cap for the year are lower if you select a silver plan. For example, my brother (wife and 4 kids) fits in that range, so he and his family have a $750 deductible, pay $3 to go to the doctor after that, and have a maximum cap of $2500 for the year in the silver plan they signed up for. It's amazingly good coverage for him, and great since he hasn't been able to afford having insurance for his kids before (their jobs don't offer coverage). Their premium is $250/month.

beltim

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Re: Can't retire due to cost of medical
« Reply #16 on: September 24, 2014, 03:03:11 PM »
My understanding of the program may be incorrect, but it seems like the OOP maximum on all family policies is $12,X00 ($12,500 for 2014 per CoveredCA web site).  All the more expensive plans do is pay a higher percentage until you meet the OOP maximum.  If you have a very expensive chronic condition that you know will cause you to exceed the OOP maximum no matter which plan you select, aren't you better off buying the cheaper bronze level plan, reaching the OOP maximum sooner, and then letting the insurance company cover 100 percent after that?  You pay less in premiums but the net coverage is the same.

For example, say you have a chronic condition that costs an insurance company negotiated cost of $100,000 a year to treat.  Without the OOP cap, you would pay $20,000 on the gold plan but $40,000 on the bronze plan.  However, your OOP family limit is $12,X00.  Don't you receive the same net benefit with either plan?

Nearly all (if not all) gold and platinum plans have lower deductibles. Generally in the $0 to $1500 range. And annual out-of-pocket limits in the $1000-2500 range. It varies a lot by where you live. You can check out the premiums at any time at healthcare.gov to see what's available in your area.

The bolded part is really true.  I just checked the 8 platinum plans available at my last address, and they all have no deductible, but a max out of pocket of $8,000.  Healthcare is still very much a set of 50 local markets, and each one is different.

okashira

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Re: Can't retire due to cost of medical
« Reply #17 on: September 24, 2014, 03:30:56 PM »
So here we are... we seem to have all the boxes checked for early retirement. We're reduced the cost of living in every area we can, no mortgage, and have a good bit of savings. BUT... seemingly no way to retire because of health care premiums. Now, we're both active and healthy... yet I have plenty of chronic, expensive issues that were mostly handed down to me by my parents - that I can't Mustache away, no matter how hard I try. And none of them seem to be getting better with age. So... with all the other ducks in a row, how do we pay for our family's health care without a corporate plan? Paying for a private plan would mean we're done with any sort of luxuries like travel... new clothes... food.

We live in CA, are about 50 (with a teenage daughter) and have been on a corporate plan our entire adult lives. Well, all of our lives when you include parental coverage. At least one of us has always had a corporate job - and this has allowed one of us to be self-employed. But it seems that we can't BOTH be self employed. And this is supposed to be a civilized country?

I will honestly say that I have no idea what ACA can or will do for me - beyond *requiring* us to have coverage.

So... what do the smart folks do when the only hesitation to retire early is the cost of medical coverage?

Why don't you share your conditions and perhaps we can apply MMM to your specific situation. I promise we don't know who you are.

forummm

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Re: Can't retire due to cost of medical
« Reply #18 on: September 24, 2014, 04:22:17 PM »
Nearly all (if not all) gold and platinum plans have lower deductibles. Generally in the $0 to $1500 range. And annual out-of-pocket limits in the $1000-2500 range. It varies a lot by where you live. You can check out the premiums at any time at healthcare.gov to see what's available in your area.

The bolded part is really true.  I just checked the 8 platinum plans available at my last address, and they all have no deductible, but a max out of pocket of $8,000.  Healthcare is still very much a set of 50 local markets, and each one is different.

Must be for a family. What state? Urban or rural county?

It does vary by county as well as state. The rural areas tend to have much higher premiums than the urban areas. In part because of health status, but mostly due to lack of competition between plans and providers.

For my county (in Atlanta), the highest annual out of pocket cap for an individual with a platinum is $1500, for any age.

beltim

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Re: Can't retire due to cost of medical
« Reply #19 on: September 24, 2014, 04:41:59 PM »
The bolded part is really true.  I just checked the 8 platinum plans available at my last address, and they all have no deductible, but a max out of pocket of $8,000.  Healthcare is still very much a set of 50 local markets, and each one is different.

Must be for a family. What state? Urban or rural county?

It does vary by county as well as state. The rural areas tend to have much higher premiums than the urban areas. In part because of health status, but mostly due to lack of competition between plans and providers.

For my county (in Atlanta), the highest annual out of pocket cap for an individual with a platinum is $1500, for any age.

I used California, San Diego county.  Premiums and deductibles didn't vary by urban or rural area.  And yes, I used a family, since that's what the OP was asking about.

Edit: The per person max out of pocket was $4,000 for all 8 plans available.

Tyler

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Re: Can't retire due to cost of medical
« Reply #20 on: September 24, 2014, 04:50:26 PM »
When evaluating ACA plans and you expect subsidies, it's important to look at the SILVER plans. 

Cost sharing reduces the deductibles and OoP expenses in the same way that subsidies cover the premiums, and is based on your income level.  The result brings Silver plan deductibles and OoP expenses closer to Gold and Platinum plan levels as your income gets lower.  Cost sharing does not apply to Bronze plans, however, so Bronze deductibles will remain high and are likely a bad deal compared to the silver plans at low incomes. 





« Last Edit: September 24, 2014, 04:57:30 PM by Tyler »

darelldd

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Re: Can't retire due to cost of medical
« Reply #21 on: September 25, 2014, 10:54:48 AM »
Some great info here. Of course it is still making my head spin. I've started a bit of research into ACA... and I get derailed in confusion quite rapidly! For some reason, my internet connection will not let me visit this page for the past two days - and I'm relying on cellular connection. But I AM here, and I'm paying attention!

Somebody wanted to hear about my conditions, but I'm worried about any character limit on these posts!  :-)

The biggies are psoriatic arthritis and skin cancer. The arthritis alone is requiring $1600/month in medication - something I'm currently paying $25 for.

surfhb

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Re: Can't retire due to cost of medical
« Reply #22 on: September 25, 2014, 01:39:57 PM »
How is anyone supposed to offer advice without you giving out your numbers?    Maybe you're not ready for retirement?   Maybe you are?   

What's your net worth and spending numbers? :)