Author Topic: Best laid plans...  (Read 8357 times)

AdrianC

  • Pencil Stache
  • ****
  • Posts: 778
  • Location: Cincinnati
Best laid plans...
« on: May 04, 2017, 10:01:36 AM »
The best laid schemes o' Mice an' Men,
Gang aft agley


We have an ACA plan. DW got sick a few weeks ago. We already reached our deductible for her, and the problem is ongoing. Then my son hurt his foot. I expect our health care costs will be $12K insurance + $10K deductibles + $2K out of network= $24K, this year.

Next year, who knows what to budget? Plus, it's not clear that we will even be able to buy insurance. My FIRE plans might be going agley.

Just venting a little! It is what it is.

waltworks

  • Handlebar Stache
  • *****
  • Posts: 2479
Re: Best laid plans...
« Reply #1 on: May 04, 2017, 10:55:08 AM »
I'm with you. No way to FIRE (though the numbers are theoretically there) without providing for healthcare for the family, and it looks like that might end up being a LOT.

Sigh.

-W

bacchi

  • Handlebar Stache
  • *****
  • Posts: 2185
Re: Best laid plans...
« Reply #2 on: May 04, 2017, 11:18:14 AM »
There's always expat living and expat insurance.

AdrianC

  • Pencil Stache
  • ****
  • Posts: 778
  • Location: Cincinnati
Re: Best laid plans...
« Reply #3 on: May 04, 2017, 02:17:34 PM »
There's always expat living and expat insurance.

That is a real option - I have a UK passport. DW just isn't up for it, and has family responsibilities (elderly aunt and father). Maybe later on.

I don't think the latest ACHA they just voted on will help much, if it becomes law. We'll get more in the way of tax credits, probably offset by even higher premiums.

Mr. Green

  • Handlebar Stache
  • *****
  • Posts: 1410
  • Age: 34
Re: Best laid plans...
« Reply #4 on: May 04, 2017, 03:43:25 PM »
I don't think moving out of the US will be the only option. Assuming the Senate can pass a bill, and assuming the House can reconcile the differences, there will be states that choose not to implement high risk pools. And even with those changes, I think you have to allow insurance to lapse before increased rates can be charged? The change from 3:1 to 5:1 will hurt older people but maybe the option to provide plans that don't require certain things like maternity care (in the case of older people), and what would probably be increased competition since insurers likely won't lose money, will actually bring costs down. One can only hope, assuming anything actually comes of this bill that is.
FIRE, Take Two.

bacchi

  • Handlebar Stache
  • *****
  • Posts: 2185
Re: Best laid plans...
« Reply #5 on: May 04, 2017, 04:43:28 PM »
A lapse in coverage triggers a 30% surcharge on premiums for a year.

If you have a pre-existing condition, the MacArthur amendment provides no cap on premium adjustments at your yearly policy re-up. In other words, you can't be denied but the premiums could be $10,000/month if, for example, your cancer is in remission.

Mr. Green

  • Handlebar Stache
  • *****
  • Posts: 1410
  • Age: 34
Re: Best laid plans...
« Reply #6 on: May 04, 2017, 04:48:05 PM »
A lapse in coverage triggers a 30% surcharge on premiums for a year.

If you have a pre-existing condition, the MacArthur amendment provides no cap on premium adjustments at your yearly policy re-up. In other words, you can't be denied but the premiums could be $10,000/month if, for example, your cancer is in remission.
Ouch. That I was not aware of. That's insanity.
FIRE, Take Two.

brooklynguy

  • Handlebar Stache
  • *****
  • Posts: 2111
  • Age: 37
Re: Best laid plans...
« Reply #7 on: May 04, 2017, 07:50:47 PM »
A lapse in coverage triggers a 30% surcharge on premiums for a year.

If you have a pre-existing condition, the MacArthur amendment provides no cap on premium adjustments at your yearly policy re-up. In other words, you can't be denied but the premiums could be $10,000/month if, for example, your cancer is in remission.

No, Mr. Green's understanding was correct -- the MacArthur amendment allows States to opt out of the "community rating" requirement (which prevents insurers from discriminating on the basis of health status when setting premiums) only with respect to policyholders who fail to maintain continuous coverage.  So a lapse in coverage serves as a trigger not only for the imposition of a premium surcharge, but also for the ability of an insurance company in an opt-out State to charge higher premiums based on pre-existing conditions (in lieu of charging the otherwise-applicable surcharge).

bacchi

  • Handlebar Stache
  • *****
  • Posts: 2185
Re: Best laid plans...
« Reply #8 on: May 04, 2017, 11:06:18 PM »
A lapse in coverage triggers a 30% surcharge on premiums for a year.

If you have a pre-existing condition, the MacArthur amendment provides no cap on premium adjustments at your yearly policy re-up. In other words, you can't be denied but the premiums could be $10,000/month if, for example, your cancer is in remission.

No, Mr. Green's understanding was correct -- the MacArthur amendment allows States to opt out of the "community rating" requirement (which prevents insurers from discriminating on the basis of health status when setting premiums) only with respect to policyholders who fail to maintain continuous coverage.  So a lapse in coverage serves as a trigger not only for the imposition of a premium surcharge, but also for the ability of an insurance company in an opt-out State to charge higher premiums based on pre-existing conditions (in lieu of charging the otherwise-applicable surcharge).

I stand corrected.

The result is eventually the same, however. States with waivers will allow insurers to underwrite those without continuous coverage. This creates 2 pools, effectively -- the community rating pool and the underwritten pool. Someone who is healthy can apply to be underwritten, not provide continuous coverage proof, and get into the lower cost, underwritten, pool. The community rating pool will still have continuous coverage rates but will become more and more expensive for everyone as the healthy leave. In other words, this isn't the insurer's first rodeo. It's very similar to what they did pre-ACA; in this case, it's the government that will create the rising cost plans to weed out the very sick and very expensive.

It gets worse.

https://www.actuary.org/files/publications/Acad_eval_indiv_mkt_011817.pdf

Those with mild pre-existing conditions (like asthma) will also opt out of the community rating pool and choose to be underwritten; this will create higher rates for them and make the community rating pool even more expensive.

The end result is that the chronically sick can get coverage but only at very high rates as their pool death spirals. It'll be very similar to what happened years ago with the high-risk pools.


azure975

  • Stubble
  • **
  • Posts: 126
Re: Best laid plans...
« Reply #9 on: May 04, 2017, 11:17:38 PM »
I'm confused.....If you maintain continuous coverage, then even if you have a pre-existing condition you can get the community rating, right? So you're ok as long as you never have a gap in your health insurance?

bacchi

  • Handlebar Stache
  • *****
  • Posts: 2185
Re: Best laid plans...
« Reply #10 on: May 04, 2017, 11:25:30 PM »
I'm confused.....If you maintain continuous coverage, then even if you have a pre-existing condition you can get the community rating, right? So you're ok as long as you never have a gap in your health insurance?

You can get the community rating but you might not be able to afford it.

brooklynguy

  • Handlebar Stache
  • *****
  • Posts: 2111
  • Age: 37
Re: Best laid plans...
« Reply #11 on: May 05, 2017, 06:06:29 AM »
The result is eventually the same, however. States with waivers will allow insurers to underwrite those without continuous coverage. This creates 2 pools, effectively -- the community rating pool and the underwritten pool. Someone who is healthy can apply to be underwritten, not provide continuous coverage proof, and get into the lower cost, underwritten, pool. The community rating pool will still have continuous coverage rates but will become more and more expensive for everyone as the healthy leave. In other words, this isn't the insurer's first rodeo. It's very similar to what they did pre-ACA; in this case, it's the government that will create the rising cost plans to weed out the very sick and very expensive.

It gets worse.

https://www.actuary.org/files/publications/Acad_eval_indiv_mkt_011817.pdf

Those with mild pre-existing conditions (like asthma) will also opt out of the community rating pool and choose to be underwritten; this will create higher rates for them and make the community rating pool even more expensive.

The end result is that the chronically sick can get coverage but only at very high rates as their pool death spirals. It'll be very similar to what happened years ago with the high-risk pools.

Insurance companies would be allowed to use medical underwriting to increase premiums for people with lapsed coverage in lieu of charging the normally-applicable surcharge, and those increased premiums would only apply for the same period during which the surcharge otherwise would've applied (generally, one full plan year).  There is no mechanism for using underwriting for the policyholders' benefit.  So this feature won't lead to separate, permanent risk pools.

However, the structure of the normal surcharge itself (which would apply everywhere, not just in States with waivers), creates a substantially weaker disincentive for healthy people to opt not to purchase health insurance in the first place than does the ACA's individual mandate provision (because it imposes the same penalty regardless of how long you've been out of the insurance market before deciding to jump back in once health conditions cause you to need coverage), so that creates substantially higher potential for death spirals than exists today.

Mr. Green

  • Handlebar Stache
  • *****
  • Posts: 1410
  • Age: 34
Re: Best laid plans...
« Reply #12 on: May 05, 2017, 06:19:57 AM »
This creates 2 pools, effectively -- the community rating pool and the underwritten pool. Someone who is healthy can apply to be underwritten, not provide continuous coverage proof, and get into the lower cost, underwritten, pool.
I don't think it's going to work out that way. If insurers can't discriminate against policyholders based on health status when setting premiums. Raising rates on the entire community pool "because they're sicker" is exactly that, discrimination based on health status. Plus, the policies for people that don't maintain continuous coverage may not end up being that inexpensive, so there may not be any appeal in letting coverage lapse. I can only hope that allowing some different plan types does actually bring premiums down, and the rates draw more people in, which makes more insurers want to participate, which brings rates down even further. Maybe that's asking too much but it's possible.
FIRE, Take Two.

AdrianC

  • Pencil Stache
  • ****
  • Posts: 778
  • Location: Cincinnati
Re: Best laid plans...
« Reply #13 on: May 05, 2017, 07:06:41 AM »
What a mess.

We're in a relatively good position. We'll get large tax credits (no subsidies right now) and can max out the bigger HSA. We'll probably never pay income tax again.

I guess the last resort would be to...dare I say it...get a job. That would be a shock. DW hasn't had a paying job for 10 years (SAHP). I haven't had one in 17 years (self-employed, work from home).

dude

  • Handlebar Stache
  • *****
  • Posts: 1830
Re: Best laid plans...
« Reply #14 on: May 05, 2017, 10:47:43 AM »
I feel terribly sad for people for whom this b.s. will directly effect. And though I will have retiree health care from my employer, I suspect I'll be indirectly affected as well. Part of what the ACA sought to achieve was to bend the cost curve for health care -- that does not appear to be even a minor consideration for Trumpcare. It's tax cuts for the rich above all else.

brooklynguy

  • Handlebar Stache
  • *****
  • Posts: 2111
  • Age: 37
Re: Best laid plans...
« Reply #15 on: May 06, 2017, 11:10:47 PM »
Insurance companies would be allowed to use medical underwriting to increase premiums for people with lapsed coverage in lieu of charging the normally-applicable surcharge, and those increased premiums would only apply for the same period during which the surcharge otherwise would've applied (generally, one full plan year).  There is no mechanism for using underwriting for the policyholders' benefit.  So this feature won't lead to separate, permanent risk pools.

I had written the statements quoted above based on my own reading of the text of the MacArthur amendment (a PDF of which is available here).  However, I just came across this analyis (dated April 27th) by the Brookings Institution, which agrees with bacchi's assertion that the MacArthur amendment might effectively result in separate risk pools between which applicants can effectively choose (a recipe for death spirals).

The text of relevant provision of law that would be added by the MacArthur amendment (Section 2701(b)(1)(C) of the Public Health Service Act) says that one of the purposes for which a State may obtain a waiver is to "(i)...not apply any increase to the monthly premium rate that would otherwise apply under section 2710A [i.e., the premium as increased by the 30% penalty]...and...(ii) instead, ... apply subsection (a)(1) [i.e., the subsection that lays out the full universe of factors that can be included in determining the premium] as if health status were included as a factor described in...such subsection."  Because of the manner in which this is drafted--with health-status-based underwriting specified as permissible "instead" of imposing the 30% penalty--I had read it to mean that insurers can only use medical underwriting to policyholders' detriment (in lieu of imposing the penalty), and not to their benefit.  However, I am now persuaded that this is not the case.

However, because the lead-in to this waiver provision says "with respect to an individual who is an applicable policyholder [i.e., a policyholder who can't demonstrate continuous coverage]...with respect to an enforcement period (as defined in section 2710A(b)) [i.e., the period during which the 30% penalty would ordinarily apply]," the waiver provision's scope appears to be limited to the period during which the 30% penalty would otherwise apply (generally, one plan year).  So I still think insurance companies in opt-out States would only be allowed to charge underwritten premium rates on a temporary basis, and not on a permanent basis (in other words, the health status rating would only apply for the period during which the 30% penalty would have applied--which is never longer than one year).  The Brookings Institution analysis seems to overlook this point.

AdrianC

  • Pencil Stache
  • ****
  • Posts: 778
  • Location: Cincinnati
Re: Best laid plans...
« Reply #16 on: May 09, 2017, 08:24:23 AM »
I was feeling a bit pessimistic when I wrote the OP. I'm back to my optimistic self again. DW is feeling much better. Son is running around again, the crutches have been returned to the family we borrowed them from.

Health care in FIRE is a re-occurring theme. I've seen several posters say they are nominally FI but are waiting to FIRE while they see how this latest health insurance deal shakes out. I totally understand, and yet wonder: is this another version of One More Year syndrome?

We can't rely on subsidies or tax credits. They're nice to have but are far from certain. Our FIRE budget must have a substantial amount for healthcare, that is for certain. How much?

Here's mine:
$12K Premium from second-lowest cost Silver plan. Assume this rises 5%/year for age, 5%/year for medical inflation.
$14K Max family out of pocket
$2K Out of network
$1K Dental
$1K Glasses/contacts

$30K Total

Assume the AHCA is no worse for us than the ACA was (as it is now I think it will be better for us - we'll get tax credits that we don't get under the ACA).

This is pretty much worse-case. If our health care costs are more than this we have go to plan B (get a job) or plan C (move to the UK).

If this fits within our budget at a 4% SWR then FIRE is looking good, yes?

AdrianC

  • Pencil Stache
  • ****
  • Posts: 778
  • Location: Cincinnati
Re: Best laid plans...
« Reply #17 on: May 11, 2017, 11:11:36 AM »
So I still think insurance companies in opt-out States would only be allowed to charge underwritten premium rates on a temporary basis, and not on a permanent basis (in other words, the health status rating would only apply for the period during which the 30% penalty would have applied--which is never longer than one year).  The Brookings Institution analysis seems to overlook this point.

Posting this here because it will likely get lost in the 47 page "What comes after the ACA" thread:

A local rep (not ours, who is even worse) sent an email crowing about the AHCA. In the Q&A section is this:
Can states raise costs for pre-existing conditions?
You won't be charged more as long as you maintain continuous coverage. If you live in a waiver state, have a pre-existing condition, and go without insurance for more than 63 days, only then can an insurer charge you higher premiums based on health status; however, this would only apply during the year following your lapse in coverage and the AHCA provides significant resources at the federal and state level for risk-sharing programs to help lower your premiums.

Is this correct? Answer: yes. I was getting the idea that in a waiver state the insurance company could charge higher premiums based on health status even if you had not had a lapse in coverage. Not true says brooklynguy:

https://forum.mrmoneymustache.com/welcome-to-the-forum/what-comes-after-the-aca/msg1549152/#msg1549152
Quote
Yes, this is correct, based on my reading of the AHCA bill (which I discussed in more detail in this post), except that I would not characterize the last condition in the italicized text as a requirement that "significant" risk-mitigation resources be dedicated (according to many health care policy experts, the minimum level of resources that need to be dedicated would be better described as "woefully inadequate").

So, we maintain coverage and we're good. Rates increase for age and we get a tax credit that increases with age. And we get to stash twice as much into an HSA.

I'm not seeing why this should derail someone's FIRE plans (once it's settled law, that is).

Taking my $30K estimate for healthcare, subtracting $12K for tax credits, we're at $18K, or $3600 per person. This is pretty much worse-case. We'll spend MORE than that this year under Obamacare.

The rich get richer and the poor are screwed, no doubt. But for your typical mustachian close to FIRE, I'm not seeing this as a big loss.

brooklynguy

  • Handlebar Stache
  • *****
  • Posts: 2111
  • Age: 37
Re: Best laid plans...
« Reply #18 on: May 11, 2017, 11:27:24 AM »
But for your typical mustachian close to FIRE, I'm not seeing this as a big loss.

Per the ongoing discussion in the linked thread, the typical (or at least the stereotypical) mustachian, whose post-retirement income is or will be low enough to qualify for substantial tax credits under the ACA (unlike you, it seems :-)), would be substantially worse off under this legislation (not to mention the potential for everybody (mustachians included) participating in the individual insurance market to become worse off as a result of death spirals triggered by this legislation's poor structural policy design).

AdrianC

  • Pencil Stache
  • ****
  • Posts: 778
  • Location: Cincinnati
Re: Best laid plans...
« Reply #19 on: May 11, 2017, 04:44:38 PM »
Per the ongoing discussion in the linked thread, the typical (or at least the stereotypical) mustachian, whose post-retirement income is or will be low enough to qualify for substantial tax credits under the ACA (unlike you, it seems :-)), would be substantially worse off under this legislation (not to mention the potential for everybody (mustachians included) participating in the individual insurance market to become worse off as a result of death spirals triggered by this legislation's poor structural policy design).

Our post-full-retirement income would certainly be low enough to qualify for ACA subsidies. Until we start to draw from IRAs our income will be long term cap gains, dividends and spending our capital. Taxable income will be very low. My semi-retirement income is too high, admittedly. A good problem to have.

We didn't expect to ever get ACA subsidies, so don't feel the loss, I guess.

FernFree

  • 5 O'Clock Shadow
  • *
  • Posts: 56
  • Age: 48
  • Location: Austin, TX
  • On my way!
Re: Best laid plans...
« Reply #20 on: June 12, 2017, 09:19:27 AM »
Is anyone aware of any web pages that track healthcare differences by state?  If this law passes I can foresee the need to track which states are going off the rails and prepare to move to one with a better healthcare system.  If that fails, I feel like I need to move to another country, but same dilemma - is there a good web resource that compares healthcare systems/costs by country anywhere?



rayt168

  • 5 O'Clock Shadow
  • *
  • Posts: 50
  • Location: Florida
Re: Best laid plans...
« Reply #21 on: June 13, 2017, 05:12:28 PM »
Is anyone aware of any web pages that track healthcare differences by state?  If this law passes I can foresee the need to track which states are going off the rails and prepare to move to one with a better healthcare system.  If that fails, I feel like I need to move to another country, but same dilemma - is there a good web resource that compares healthcare systems/costs by country anywhere?

I was thinking something along the same lines.  I am NOT aware of any web pages that track healthcare differences by state.  However, I would predict that the blue states would keep more of the ACA rules than the red states would.  Personally, if I had to pick a state right now, I would pick North Carolina or Virginia. 

As far as expats, see the following link. 

Expats[url]https://www.internations.org/expat-insider/2016/the-best-and-worst-places-for-expats/url]

FrugalFisherman10

  • Stubble
  • **
  • Posts: 180
Re: Best laid plans...
« Reply #22 on: June 21, 2017, 08:10:36 AM »
Is anyone aware of any web pages that track healthcare differences by state?  If this law passes I can foresee the need to track which states are going off the rails and prepare to move to one with a better healthcare system.  If that fails, I feel like I need to move to another country, but same dilemma - is there a good web resource that compares healthcare systems/costs by country anywhere?
http://www.kff.org/other/state-indicator/health-spending-per-capita/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

Not exactly what you were looking for I don't think but there's some stuff out there. And if there's not, maybe you should start it. Would be cool to look at

FernFree

  • 5 O'Clock Shadow
  • *
  • Posts: 56
  • Age: 48
  • Location: Austin, TX
  • On my way!
Re: Best laid plans...
« Reply #23 on: July 07, 2017, 04:20:07 PM »
Is anyone aware of any web pages that track healthcare differences by state?  If this law passes I can foresee the need to track which states are going off the rails and prepare to move to one with a better healthcare system.  If that fails, I feel like I need to move to another country, but same dilemma - is there a good web resource that compares healthcare systems/costs by country anywhere?

I was thinking something along the same lines.  I am NOT aware of any web pages that track healthcare differences by state.  However, I would predict that the blue states would keep more of the ACA rules than the red states would.  Personally, if I had to pick a state right now, I would pick North Carolina or Virginia. 

As far as expats, see the following link. 

Expats[url]https://www.internations.org/expat-insider/2016/the-best-and-worst-places-for-expats/url]

Thanks for the link.  Just spend an hour reading their 2016 report - good info but it's more geared for people who are working in other countries and not for retirees who are watching their spending. Also, everything is based on survey responses and the scores shift pretty wildly from year to year, so not sure if it is statistically sound.

Agree about the whole blue state/red state issue.  I live in Texas and if this law passes I think it will be time to move to a blue state or else to another country.  I would rather do that than keep working, but my kids are in Texas so we'll see. :(  I am so ready for universal healthcare in the U.S., but it might not happen in my lifetime.



Reynold

  • Stubble
  • **
  • Posts: 226
Re: Best laid plans...
« Reply #24 on: July 19, 2017, 01:13:28 PM »
We have an ACA plan. DW got sick a few weeks ago. We already reached our deductible for her, and the problem is ongoing. Then my son hurt his foot. I expect our health care costs will be $12K insurance + $10K deductibles + $2K out of network= $24K, this year.

Next year, who knows what to budget? Plus, it's not clear that we will even be able to buy insurance. My FIRE plans might be going agley.

We had already been planning on budgeting 25-30k for health care expenses, between premiums and out of pocket, based on checking Obamacare plans in our area.  I wouldn't personally feel comfortable budgeting less than that, even if I was willing to keep post FIRE income below 30k or so right now for big subsidies, as you never know when new legislation would come along that looks at ASSETS in addition to INCOME, like Medicare does already for example.  That would hit Mustachians hard.

Peter Gibbons

  • 5 O'Clock Shadow
  • *
  • Posts: 35
  • Age: 46
  • Location: SE Michigan
Re: Best laid plans...
« Reply #25 on: July 19, 2017, 01:29:38 PM »
We have an ACA plan. DW got sick a few weeks ago. We already reached our deductible for her, and the problem is ongoing. Then my son hurt his foot. I expect our health care costs will be $12K insurance + $10K deductibles + $2K out of network= $24K, this year.

Next year, who knows what to budget? Plus, it's not clear that we will even be able to buy insurance. My FIRE plans might be going agley.

We had already been planning on budgeting 25-30k for health care expenses, between premiums and out of pocket, based on checking Obamacare plans in our area.  I wouldn't personally feel comfortable budgeting less than that, even if I was willing to keep post FIRE income below 30k or so right now for big subsidies, as you never know when new legislation would come along that looks at ASSETS in addition to INCOME, like Medicare does already for example.  That would hit Mustachians hard.

Great point.  I must admit that I am currently among those that FIRE'd and am currently eligible to take a subsidy due to the requirements based only on income and not on assets.  Honestly,  from a taxpayers perspective, I think subsidies should have both asset and income requirements which would hurt me personally, but seems more fair to other taxpayers.