Health Insurance While Unemployed
Feb. 22nd, 2012 07:44 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
livingdebThere's no point in reading this unless you have any interest in high-deductible individual health insurance and Health Savings Accounts. (I should have much more interesting, or at least prettier, entries about my cruise soon. Though why is it taking me so long to make those?)
My old insurance covers me through the end of the month because I worked at least one day this month (hard to believe it's still February!). Unlike last time I was unemployed, I am able to afford health insurance. I wasn't too worried because I planned to try for a high-deductible individual health insurance plan, which I read about in Early Retirement Extreme's post, Health Insurance for Extreme Early Retirement.
Was that a big mistake? Nope--totally worked out. I have been accepted and am now (mostly) insured.
I do have one pre-existing condition that won't get covered (hypothyroidism), but I've heard that's pretty cheap to treat. (I'm not treating it until I confirm the diagnosis with a second test in case stress was causing the wacky results in my last test. Because I have no symptoms at all.)
Plan B was to get group insurance from one of the following:
* COBRA
* Texas Exes (which I joined for various benefits I used to get from working at UT)
* Pearson (the company for which I've scored teacher certification tests) or
* NCTM (National Council for Teachers of Mathematics) of which I have been a member off and on for, um, decades.
But I am happy I got the high-deductible plan. The deductible is $5000 and the insurance pays nothing until that deductible is met (except I actually think it pays for an annual physical and possibly a few other preventative things like mammograms). However, maximum out-of-pocket expenditures are also $5000. (Note: these numbers are only for in-plan doctors; it's $10,000 for doctors outside the plan.)
So, with such terrible benefits, why even bother?
1) In case something dreadfully expensive happens, I don't have to go bankrupt, and my doctors get to be paid. (No more joking, like McKath and I used to, that if we found ourselves lying in the street after a terrible car crash, we might end up fighting the paramedics over a piece of glass we were trying to use to end our lives because we couldn't afford the treatment. That sort of joking is kind of horrible.)
2) The insurance company negotiates the prices I pay--so I pay insurance prices, not originally billed prices. Technically, paying cash probably also means having lots of bargaining power, so I'm not sure how big of an advantage this really is (if any). I do know that I hate bargaining, though, so not having to do so is a definite advantage. (Unless I could have just asked "and is there a cash discount?" and magically gotten nice low rates.)
3) High-deductible insurance qualifies me to open a Health Savings Account which is sort of like an IRA for only for medical costs instead of retirement costs. You can contribute a certain amount each year tax-free and then use the money to pay for your medical expenses. Any extra money at the end of the year gets rolled over, so there's no horrible guessing about how much will be spent. Plus, when you turn 65 you can spend it however you want, not just on medical stuff. Sadly, I can't pay for my insurance out of that money (although unemployed people sometimes get to, it's only if they're collecting unemployment or paying for COBRA).
So, why don't I use COBRA, with a much more reasonable deductible (which I've already met for this year)?
1) Cost. If it costs the same as it cost my employer while I was employed, that would be $462.26/month. The insurance I'm going with is $177/month. I could pay for a fair amount of medical services and supplies with the extra $285.26/month. And the whole $5000 deductible comes to $416.67/month, so even in the worst-case scenario, my finances wouldn't be much worse, if any (after all, my old insurance still requires co-payments once the deductible has been met).
In addition, there are some tax savings for the HSA. There's no telling what my marginal income tax rate will be by the end of the year, but even at just 10%, I can contribute my maximum 258.33/month for a cost of only 232.50, saving me another $25.83/month.
2. Longevity. One can only get COBRA coverage for a limited time, whereas one can keep this high-deductible coverage indefinitely. And who knows if I will have additional pre-existing conditions by the end of that period?
3. If I don't use all the money I contribute to my HSA, it continues to grow tax-free.
How did I find an insurer?
I followed exactly the strategy described by Early Retirement Extreme, checking out ehealthinsurance.com, limiting the plans to those that were HSA-qualified, looking at the cheapest one, and seeing if I liked it. It's a Blue Cross Blue Shield plan, which I'm not going to say is a company with no shenanigans, but at least they do sometimes pay for things.
How do I find an HSA provider?
That's more of a pain. After loads of googling, I'm basically following the advice of some guy who said, "Stanford CU and Alliant CU appeared to be best the bets for me. I ended up going with Stanford. Many options to become eligible to join either CU." They both pay over 1% interest (you could invest the money in real stocks at some places, but I'd rather have this health money be more stable) and there are no monthly fees.
My old insurance covers me through the end of the month because I worked at least one day this month (hard to believe it's still February!). Unlike last time I was unemployed, I am able to afford health insurance. I wasn't too worried because I planned to try for a high-deductible individual health insurance plan, which I read about in Early Retirement Extreme's post, Health Insurance for Extreme Early Retirement.
Was that a big mistake? Nope--totally worked out. I have been accepted and am now (mostly) insured.
I do have one pre-existing condition that won't get covered (hypothyroidism), but I've heard that's pretty cheap to treat. (I'm not treating it until I confirm the diagnosis with a second test in case stress was causing the wacky results in my last test. Because I have no symptoms at all.)
Plan B was to get group insurance from one of the following:
* COBRA
* Texas Exes (which I joined for various benefits I used to get from working at UT)
* Pearson (the company for which I've scored teacher certification tests) or
* NCTM (National Council for Teachers of Mathematics) of which I have been a member off and on for, um, decades.
But I am happy I got the high-deductible plan. The deductible is $5000 and the insurance pays nothing until that deductible is met (except I actually think it pays for an annual physical and possibly a few other preventative things like mammograms). However, maximum out-of-pocket expenditures are also $5000. (Note: these numbers are only for in-plan doctors; it's $10,000 for doctors outside the plan.)
So, with such terrible benefits, why even bother?
1) In case something dreadfully expensive happens, I don't have to go bankrupt, and my doctors get to be paid. (No more joking, like McKath and I used to, that if we found ourselves lying in the street after a terrible car crash, we might end up fighting the paramedics over a piece of glass we were trying to use to end our lives because we couldn't afford the treatment. That sort of joking is kind of horrible.)
2) The insurance company negotiates the prices I pay--so I pay insurance prices, not originally billed prices. Technically, paying cash probably also means having lots of bargaining power, so I'm not sure how big of an advantage this really is (if any). I do know that I hate bargaining, though, so not having to do so is a definite advantage. (Unless I could have just asked "and is there a cash discount?" and magically gotten nice low rates.)
3) High-deductible insurance qualifies me to open a Health Savings Account which is sort of like an IRA for only for medical costs instead of retirement costs. You can contribute a certain amount each year tax-free and then use the money to pay for your medical expenses. Any extra money at the end of the year gets rolled over, so there's no horrible guessing about how much will be spent. Plus, when you turn 65 you can spend it however you want, not just on medical stuff. Sadly, I can't pay for my insurance out of that money (although unemployed people sometimes get to, it's only if they're collecting unemployment or paying for COBRA).
So, why don't I use COBRA, with a much more reasonable deductible (which I've already met for this year)?
1) Cost. If it costs the same as it cost my employer while I was employed, that would be $462.26/month. The insurance I'm going with is $177/month. I could pay for a fair amount of medical services and supplies with the extra $285.26/month. And the whole $5000 deductible comes to $416.67/month, so even in the worst-case scenario, my finances wouldn't be much worse, if any (after all, my old insurance still requires co-payments once the deductible has been met).
In addition, there are some tax savings for the HSA. There's no telling what my marginal income tax rate will be by the end of the year, but even at just 10%, I can contribute my maximum 258.33/month for a cost of only 232.50, saving me another $25.83/month.
2. Longevity. One can only get COBRA coverage for a limited time, whereas one can keep this high-deductible coverage indefinitely. And who knows if I will have additional pre-existing conditions by the end of that period?
3. If I don't use all the money I contribute to my HSA, it continues to grow tax-free.
How did I find an insurer?
I followed exactly the strategy described by Early Retirement Extreme, checking out ehealthinsurance.com, limiting the plans to those that were HSA-qualified, looking at the cheapest one, and seeing if I liked it. It's a Blue Cross Blue Shield plan, which I'm not going to say is a company with no shenanigans, but at least they do sometimes pay for things.
How do I find an HSA provider?
That's more of a pain. After loads of googling, I'm basically following the advice of some guy who said, "Stanford CU and Alliant CU appeared to be best the bets for me. I ended up going with Stanford. Many options to become eligible to join either CU." They both pay over 1% interest (you could invest the money in real stocks at some places, but I'd rather have this health money be more stable) and there are no monthly fees.