Author Topic: Healthcare budget - does everyone assume subsidies?  (Read 1571 times)

Ceredwyn

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Healthcare budget - does everyone assume subsidies?
« on: October 09, 2017, 02:50:27 PM »
I'm interested in what people on the forum are currently thinking for healthcare budgeting. Specifically, my concern is that a lot of the numbers I see widely quoted are either assuming subsidies (ACA) or ignore the employer contribution when comparing to pre-FIRE costs.

For example, when I searched for independent estimates of the all-in cost of family coverage I found
Quote
In 2017, the average annual premiums for employer-sponsored health insurance are $6,690 for single coverage and $18,764 for family coverage
https://www.kff.org/report-section/ehbs-2017-summary-of-findings/

Interestingly enough, those numbers are premiums so total out of pocket would be higher. Regardless, most of the FIRE budgets I see quoted are not assuming anywhere near $19k/year for healthcare coverage. I can see assuming that your personal number will be a bit lower due to not insuring small expenses via a HDHP but anything less than $10k-15k (gross of subsidies) seems pretty unrealistic to me for family coverage. MMM's self reported cost last year was about $11k and knowing his philosophy towards insurance I'm guessing that was nowhere near the max out of pocket.

What do you assume when planning? Primarily interested for those truly in the "early" category where medicare is too far off to be part of the answer.

Caoineag

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #1 on: October 09, 2017, 03:20:33 PM »
We are on the extremely early end. For now, we assume some subsidies but we also assume that if ACA goes away, then buying more catastrophic insurance on the individual market like I did before ACA. This is part of the line item called life happens. We do have reserves for higher spending when needed but right now and for early on, our health expenses should be pretty minimal. Because we are keeping our expenses on the low end at the beginning, the portfolio should be able to support health care expenses later on. We are also not above using geographic arbitrage if needed later on. If the worst happens (rescission makes a comeback, no insurance for "preexisting" conditions, etc) then there is a possibility of employment solely for the sake of health insurance.

seattlecyclone

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #2 on: October 09, 2017, 03:22:31 PM »
Medical budgeting is probably the biggest unknown for me.

The ACA is pretty great for an early retiree. Keep your income below 400% of the poverty level, and your net premium after subsidies will be predictable regardless of what crazy amounts of money doctors start billing next year. After November's election results I would have expected it to be gone by now, and yet it remains the law of the land. There's still a ton of uncertainty though.

I don't so much care about the exact details of whatever health care policy we settle on, as long as we pick something that both parties can agree to stick with for a while. With the possibility of drastic changes each time the government switches parties, any sort of planning for what you might need to spend 10 or 20 years down the road is pretty much impossible.
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wenchsenior

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #3 on: October 09, 2017, 03:30:10 PM »
Heath care is a huge chunk of our projected spending.

We assume no subsidies and remaining on civilian Federally subsidized coverage. Right now our premiums for two people are ~6K/year, but it goes up about 250-500$/year, so...I am planning for 10K minimum for premiums plus 5-10K for out of pocket spending (I have chronic health conditions and I'm only in my 40s...it could get worse).  So our bare-bones FI target right now is 60K + 20K for health care costs.  I really would not be comfortable with less than 80K of retirement income.  It would be great to get it higher, so we'll see how it goes. 


ender

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #4 on: October 09, 2017, 05:26:40 PM »
I'm honestly surprised that the subsidies are entirely income based and not at all means based.

I would expect that to change longer term though in some sense I'm also surprised it was implemented that way.

maizeman

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #5 on: October 09, 2017, 06:41:07 PM »
I was starting to write a post about how employer-sponsored health insurance tends to be more expensive than the exchange plans... then realized my comparative data was several years out of date.

Before I got my current position I was paying <$300/month for unsubsidized health insurance through a state exchange (call it ~$3,000/year). Now my employer subsidy alone costs them more than that, and because I have to mess around with grant budgets and matches, I know they spend WAY less on fringe benefits (insurance + retirement) for my position than we're supposed to budget for someone with my salary.

However, today it looks like it would take more like $7,000-$8,000/year to buy insurance on my states' exchange for 2018. ...so yeah, I guess it's a bit of a hole in my budget. Will cross that bridge when I come to it though.
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ixtap

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #6 on: October 09, 2017, 07:04:55 PM »
We plan on leaving the US immediately. We will likely have catastrophic coverage, but we plan on being places we can afford basic care for the first several years.

Paul der Krake

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #7 on: October 09, 2017, 07:27:35 PM »
I assume we will get subsidies when living in the US, and a non-issue anywhere else.

GetItRight

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #8 on: October 09, 2017, 07:46:43 PM »
I'm very far from FIRE, so consider that, but I don't factor any subsidies. I plan to not have insurance and pay whatever tax is forced on me at the time. For age related medical issues I will seek treatment at one of the free market facilities like the Surgery Center of Oklahoma. They advertise prices and from what I've read and heard offer great service, excellent treatment, publish prices, and give quotes in a timely manner. If I cant' afford treatment I won't get treatment and will die prematurely, resultant from government eliminating the free market on heallth care and health insurance. or maybe we'll all be fortunate enough to have a free market eventually... Bottom line, I figure at least $2500/yr in extra taxes, $2500 less to spend on healthcare when I eventually need it.

Gin1984

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #9 on: October 09, 2017, 07:51:09 PM »
One major reason my FIRE budget is high is because I am expecting about $16,000-20,000 in medical.

MayDay

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #10 on: October 09, 2017, 08:53:25 PM »
We expect ~25k a year medical center with no subsidy.

We have a decade to go so we'll see how healthcare legislation shakes our over the next ten years.
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chasesfish

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #11 on: October 10, 2017, 04:56:24 AM »
Medical care/costs are why I'm working until 36 even though I hit my FI number at 34...

The first reason is I preferred to keep my job while going through some large medical expenses, we couldn't enjoy Early Retirement (hate saying ER in a post like this) and the extra cash is a nice buffer. 

We became a high consumer of healthcare with a difficult injury.  I priced out the ACA plans and kept coming up with a $15,000 or so in total out of pocket costs (Premium + $11,000 out of pocket max for one person).   I decided to budget $20,000 to start for healthcare and then let that drop back to $13,000.   I got really serious into looking at the prices and went through various state options, I kept coming up to around $15,000 if you're going to actually use it.

Even with the subsidies I expect after eighteen months of retirement (I'll retire in Q2 '18 or Q1 '19), the out of pocket max is still steep on these plans.

Leaving the US healthcare system isn't an option for us either.
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koshtra

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #12 on: October 10, 2017, 06:45:21 AM »
Yes, it's just a huge unknown. We might have to move somewhere, say Ecuador or Uruguay, where we'd be able to afford insurance. I'd hate having to do that, because I love Oregon, and my kids are here. But you do what you have to do. I'd find things to love about anyplace, I'm sure.

jim555

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #13 on: October 10, 2017, 01:30:46 PM »
Right now I give it 4 years before the free/subsidy gets slashed.  Then plan B.  You have to be adaptable to the circumstances.

BlueMR2

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #14 on: October 10, 2017, 04:49:53 PM »
I'm planning on $13k/yr for 2 of us.  I may be bumping that up to $20k now after seeing the last round of numbers.

pecunia

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #15 on: October 10, 2017, 07:49:12 PM »
I am hoping that they will pass the single payer thing as do most Americans, but I doubt if they will do it before I retire.  I am still working and have only a few years until Medicare so I think I can weather a few years of high deductible insurance.  It is very odd.  I never used to think there would be anything good about turning 65. 

I am not counting on subsidies. 

triangle

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #16 on: October 11, 2017, 12:55:18 AM »
Expect $0 subsides when FIRE-able, unless you are living at a low standard of living, since by definition you should have more income than a "poor" person. Ignore my comments if you have amassed assets/cash and live without much income.

This is not meant to be political but if you are getting somewhat close to the traditional retirement age and do not have a large stash then plan on living without insurance and managing your health as best you can. Premiums in 2017 approach the cost of (or more than) a typical home mortgage and that does not include the deductible which is many thousands more. So for most people it is better to pay-as-you go for medical care on your own, and game the insurance system if a family member comes down with a chronic problem. Unfortunately ACA mixed insurance with welfare payments and prohibited high-deductible plans which a FIRE person might otherwise find useful to plan their early retirement.

justchristine

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #17 on: October 11, 2017, 05:27:27 AM »
I'm not expecting subsidies to last  so I'm forecasting my healthcare expenses at 12k/yr for just myself.

Gin1984

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #18 on: October 11, 2017, 06:24:22 PM »
Expect $0 subsides when FIRE-able, unless you are living at a low standard of living, since by definition you should have more income than a "poor" person. Ignore my comments if you have amassed assets/cash and live without much income.

This is not meant to be political but if you are getting somewhat close to the traditional retirement age and do not have a large stash then plan on living without insurance and managing your health as best you can. Premiums in 2017 approach the cost of (or more than) a typical home mortgage and that does not include the deductible which is many thousands more. So for most people it is better to pay-as-you go for medical care on your own, and game the insurance system if a family member comes down with a chronic problem. Unfortunately ACA mixed insurance with welfare payments and prohibited high-deductible plans which a FIRE person might otherwise find useful to plan their early retirement.
ACA did not prohibit high deductible plans, my mom is on one in California (and there were many to choose from) and her cost with no subsidy is no where near the cost of a mortgage.

pecunia

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #19 on: October 11, 2017, 07:17:58 PM »
Quote
ACA did not prohibit high deductible plans, my mom is on one in California (and there were many to choose from) and her cost with no subsidy is no where near the cost of a mortgage.

I think she is the exception to the rule,........or,..........maybe they do things better in California than in the Midwest.  I have a very high deductible and figure what I pay is getting close to a mortgage payment (approx $550 / month).  On the other hand, I haven't had a mortgage payment since the 1990s when I was paying for a $45,000 house.

It really bugs me to make that payment every month.  In my opinion, I see very little for it.  I'd rather pay it as a tax, then I could take some justification that it may be going to help a sick person somewhere.


triangle

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #20 on: October 11, 2017, 10:19:15 PM »
I heard a news report on NPR today talking about the potential for an executive order that would authorize association health plans. They gave an example of the Tennessee Farm Bureau, which currently offers low-cost high-deductible plans that are not ACA compliant whereby the enrollee can get catastrophic coverage. But the enrollee is still subject to the ACA tax penalty for not purchasing compliant coverage. I do not care for executive orders that side-step the law, but I do like the potential for more affordable insurance sooner rather than later.

Of course the cost of current ACA plans depends on your age, location and choice of bronze/silver/gold package. In NC if one is over 50 years old the premium for the cheapest plans approaches the cost of housing (renting/mortgage) for a single person. Add a spouse and include the deductible which would need to be spent if medical care were actually needed that year, then the total quickly gets out of hand.  IMO the cost is large enough that only households with a family member having a chronic medical condition, or those in the top 10-20%, or bottom 25-35% (or whatever cutoff point is for getting a substantial premium subsidy) will buy coverage because they will believe it is too costly for what is gotten in return.
« Last Edit: October 11, 2017, 10:23:36 PM by triangle »

des999

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #21 on: October 12, 2017, 07:26:57 AM »
I used to assume subsidies, but at this point I don't think that is a good assumption.  I'm planning to work a little longer/save a little more, or else find a nice part time job with health ins.

But, I have a son with a pre-existing, so I have to have ins, if it were just the wife and I, I'd not plan to have as much saved for medical issues.

slappy

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #22 on: October 12, 2017, 07:31:16 AM »
Quote
ACA did not prohibit high deductible plans, my mom is on one in California (and there were many to choose from) and her cost with no subsidy is no where near the cost of a mortgage.

I think she is the exception to the rule,........or,..........maybe they do things better in California than in the Midwest.  I have a very high deductible and figure what I pay is getting close to a mortgage payment (approx $550 / month).  On the other hand, I haven't had a mortgage payment since the 1990s when I was paying for a $45,000 house.

It really bugs me to make that payment every month.  In my opinion, I see very little for it.  I'd rather pay it as a tax, then I could take some justification that it may be going to help a sick person somewhere.

I pay $320 a month for a HDHP through my employer, so $550 through the exchange doesn't seem bad. Granted, my plan has a $4k OOP max, vs the $13k OOP max legally allowed for those plans.  My mortgage on a $160k house is $1300ish.

lifeanon269

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #23 on: October 12, 2017, 07:49:20 AM »
I do feel there has to be some type of subsidy in the future. Whether it is available to those with high net-worths (early retirees) or not is another question. But, there is no way that a system that costs $10k-20k a year for those with low incomes is sustainable without some type of subsidy to help them out. The system will either come crashing down or a drastic change would have to take place. So ya, either there will be a subsidy or there will be a completely different system in place, but I don't think either of those scenarios will result in low income earners shelling out $10k-20k for insurance.

I'm 10 years away from my FIRE date, so at the moment, I'm not budgeting $10k-20k for insurance in my FIRE plans. I really don't think a system that costs that much would be able to sustain itself for that long. If I'm wrong about that and I'm at my FIRE age, then I'll just have to decide to work an extra year or so to make up the difference. In the meantime, I'm figuring $2k-5k annually for health insurance in my budget calculations.

iris lily

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #24 on: October 12, 2017, 07:53:22 AM »
I'm honestly surprised that the subsidies are entirely income based and not at all means based.

I would expect that to change longer term though in some sense I'm also surprised it was implemented that way.

The arguments I have heard against means testing is that it is too complicated to do, and besides, the number of multi-millionaires on ACA dictated Medicaid is a tiny percemtage.

Evgenia

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #25 on: October 12, 2017, 06:30:20 PM »
We've been FIRE for 2.5 years. We do not assume the subsidy, never have.

We do deduct our monthly premiums as a business expense, which is huge. It is a beautiful thing that yes, can change, but seems less likely to change than subsidies, since many businesses benefit from this. We're able to deduct the monthly premiums as a business expense because, despite our best FIRE efforts, we periodically take on paid work we like and that brings in enough to make us self-employed on paper vs. traditionally retired.
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Gin1984

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #26 on: October 12, 2017, 06:54:44 PM »
Quote
ACA did not prohibit high deductible plans, my mom is on one in California (and there were many to choose from) and her cost with no subsidy is no where near the cost of a mortgage.

I think she is the exception to the rule,........or,..........maybe they do things better in California than in the Midwest.  I have a very high deductible and figure what I pay is getting close to a mortgage payment (approx $550 / month). On the other hand, I haven't had a mortgage payment since the 1990s when I was paying for a $45,000 house.

It really bugs me to make that payment every month.  In my opinion, I see very little for it.  I'd rather pay it as a tax, then I could take some justification that it may be going to help a sick person somewhere.
Or your idea of a normal mortgage is a little off. ;) "The national average for a home loan is $222,261 with a $1,061 average monthly payment for a 30-year mortgage at 4 percent, according to LendingTree"

pecunia

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #27 on: October 12, 2017, 08:00:08 PM »
Quote
Or your idea of a normal mortgage is a little off. ;) "The national average for a home loan is $222,261 with a $1,061 average monthly payment for a 30-year mortgage at 4 percent, according to LendingTree"

It certainly is off as my former housing years ago was a single wide trailer and the first home we bought was a reconverted old one room school house. 

Housing is one of people's biggest costs.  It is also one that can be voluntarily controlled.  I don't see a lot you can do personally to control the cost of your health insurance except go without good coverage or move to one of these other countries that have been mentioned. 

triangle

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #28 on: October 12, 2017, 11:08:19 PM »
...... "The national average for a home loan is $222,261 with a $1,061 average monthly payment for a 30-year mortgage at 4 percent, according to LendingTree"
I had been speaking generally of how the average ACA premium was about the cost of a home mortgage. According to https://resources.ehealthinsurance.com/affordable-care-act/much-obamacare-cost-2017, the averages are very close. With an average monthly Family premium of $1,021 (and a $8,352 deductible) .

BlueMR2

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #29 on: October 14, 2017, 07:16:23 AM »
Or your idea of a normal mortgage is a little off. ;) "The national average for a home loan is $222,261 with a $1,061 average monthly payment for a 30-year mortgage at 4 percent, according to LendingTree"

Definitely varies by area...  :-)  As someone living in the MidWest, typical mortgages around here are $500-650 because our average price for a house is around $100k...  Yeah, so health insurance is VERY scary in comparison as the insurnace quotes I'm seeing are 2x a mortgage!

human

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Re: Healthcare budget - does everyone assume subsidies?
« Reply #30 on: October 14, 2017, 07:20:38 AM »
Definitelyvaries by area. i'm in Canada where we have a sane approach to health care. I've been counting on a subsidy since I was born (incubator for a while) and intend on conting on universal health care until I die.