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I talked last year about how we planned to keep our health insurance costs low once we moved back to the U.S. from Panama. Well, that time is now and I wanted to share how ACA subsidies have enabled us to keep our costs even lower than anticipated.
One of the toughest areas to plan for in early retirement is health insurance. Finding quality health care coverage at an affordable price to tide you over until Medicare eligibility at 65 can be difficult.
When we were living in Panama, this wasn’t much of an issue. We decided against traditional health insurance while living there because of the low costs of quality medical services the country provided.
However, we did enroll in an ex-pat insurance plan through International Medical Group (IMG) for our years there for two reasons:
- As perpetual tourists, we traveled back to the U.S. a couple of times each year. Should we get sick or into something like a car accident while in the U.S., we wanted some type of insurance in place just in case.
- Although the medical costs in Panama are cheap, if something more catastrophic or intensive had reared its head (i.e. cancer), insurance could still be worth the cost.
We had a Silver Global Medical Insurance plan that ran us less than $350/month total in premiums for our family of three. Not too shabby, right? If you’re curious, you can see what an expat Global Medical Insurance plan through IMG would run you here.
But that was then and this is now. How in the world would we be able to afford the ridiculously-priced health insurance here in the U.S. when we returned?
The answer was exactly what we were hoping for… help from ACA subsidies.
What are ACA subsidies?
To assist low-income families in purchasing health insurance, the government helps pick up part of the tab for the insurance premiums. This is all handled through, HealthCare.gov, the companion website of the Affordable Care Act (ACA).
These ACA subsidies can then be applied toward the health insurance plan you choose. And they’re no joke either – if you qualify, you can save some big money on your insurance!
There’s an interesting twist though that I talked about last year in my post, Health Insurance in the U.S. – How We’ll Keep Costs Low. Because we’re living a somewhat modest lifestyle in early retirement with our yearly Roth IRA conversions being most of what qualifies as our household income, we’re able to benefit from the ACA subsidies.
When I filled out my application on HealthCare.gov and the questions revolving around ACA subsidies, we were happy to see that we qualified for $607 in credit per month…
Essentially, we would receive a discount of over $600/month on whichever plan we would choose.
Think about that – as I type this, Personal Capital shows that we have a net worth of over $1.5 million…
As a side note, if you’re not using Personal Capital to help manage your finances and track your investments, you’re missing out. I’ve been “all-in” on using Personal Capital for a few years now and love it. You can check out Personal Capital here – it’s easy and free to use and the built-in tools are phenomenal.
Our $1.5 million is far from the most money anyone has ever stashed away, but it’s still a significant amount of dough. In fact, the median net worth of U.S. households is only $121,700 as revealed in the Federal Reserve’s 2019 Survey of Consumer Finances.
As early retirees with almost 10x that, you wouldn’t think that we should qualify for ACA subsidies. Be it as it may, the formula is based on income and not net worth.
Is it right that a household with a net worth of $1.5 million should get ACA subsidies for health coverage? That’s not for me to decide but I’m definitely going to take advantage of the benefit while it’s offered.
You can get a rough idea of how much in ACA subsidies you’d qualify for by using one of the many calculators out there. I like the simplicity of Kaiser’s Health Insurance Marketplace Calculator as a good starting point.
Bear in mind that the ACA subsidies are not written in stone until you settle up after the end of the year as you file your tax return. If you over-estimated your income projection for the year, you’ll be getting a tax credit toward your tax return. But if you made more over the year than you had projected, you’ll be paying Uncle Sam back the difference as part of your return.
A bonus for me is that the vast majority of what counts as income in our case revolves around the Roth IRA conversions we’re doing at the end of each year. That means we can essentially mold what our “income” amount will be by just converting less or more for the year.
The ACA subsidies aren’t necessarily a forever thing either. They were set to expire recently but it looks like that will be changing around the time this post comes out.
It’s expected that President Biden will sign the Inflation Reduction Act into law this week (it may have even already happened by the time this post was published). Regardless of your political views, this bill does provide something important to early retirees such as myself:
The passage of the Inflation Reduction Act will extend temporary subsidies, preventing out-of-pocket premium payments from rising across the board next year for virtually all 13 million subsidized enrollees. In the 33 states using HealthCare.gov, premium payments in 2022 would have been 53% higher (more than $700 per year more) on average if not for these enhanced subsidies. The same is true in the states operating their own exchanges.— Kaiser Family Foundation – Five Things to Know about the Renewal of Extra Affordable Care Act Subsidies in the Inflation Reduction Act
In other words, the ACA subsidies will continue for at least the next three years.
This is great news because these ACA subsidies are really the only reason we’ll be able to continue to afford health care insurance. Without that help, we would need to utilize other options such as Health Care Sharing Ministries (HCSM), which then carry their own set of issues.
Our health insurance plan
Open enrollment for insurance on Healthcare.gov tends to run from November 1 through December 15. That wouldn’t work for folks like me who moved back from Panama in the middle of the year.
They do offer special enrollment periods for qualifying life events though. Fortunately for us, our move back from Panama/Texas to Ohio was a valid qualification to take advantage of this.
However, I did notice that “the pickings” on HealthCare.gov offered seemed a little sparse. There were still a fair amount of health insurance plans available but not as many as I was expecting to see. My guess is that this is because it’s not open enrollment, but again, that’s just a guess.
Regardless, Lisa and I had long discussions in trying to determine the right plan for our family. Yes, premium costs are important to consider, but there are so many other factors to think about as well.
In our case, the three of us are all thankfully healthy and don’t usually require many visits to the doctor’s office. And fortunately, we have enough money to cover higher deductibles if desired.
After a lot of digging around and much discussion, we decided that we would go with a less costly plan that covered our needs. The odds are that we’ll barely use it and we’ll save a lot of money rather than going with a more expensive plan. Of course, there’s always the gamble that something catastrophic could happen, but we could still cover the out-of-pocket maximum if needed (though it would still sting a little).
Here’s what we decided on…
The total premium for this health insurance plan for our family comes to $834.34/month. But after our $607 in ACA subsidies, that brings our monthly premium down to $227.34 for our family of three.
As insane as it is, I was paying almost double this amount out of every paycheck when I was working, even after my employer’s subsidy. This is one interesting country we live in.
One thing that I do like is that we’re looking at this as a sort of temporary coverage plan just to carry us through the rest of this year. At open enrollment in November, we’ll be re-evaluating the available plans. We’re hoping to see more choices at that time so we can find a plan that’s a little more finely tuned to our needs.
Even though I’ve been retired for over 3 ½ years, most of that time we were in Panama. So this is the first year where we needed traditional health insurance.
The costs for health coverage in the U.S. can be expensive (stupidly expensive) but the ACA subsidies available have the power to make it a little more palatable.
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Thanks for reading!!