Hi. This is Mr. SixFiguresUnder. Because today’s topic is one that I like more than Stephanie, she has graciously allowed me to handle it. The topic: health insurance.
We get frequent comments and questions from readers on our budget items. Several people have asked about our health insurance and if/how it has changed under Obamacare (technically, the Patient Protection and Affordable Care Act, which I’ll just call the “ACA”). The short answer is that rather than paying $453/month in premiums, as of January 2014, we pay $114/month, leaving an extra $339 to go toward debt each month. The longer answer continues below.
When we moved to California and looked for insurance, the best individual plan we could
find in our area was available only to members of the California Farm Bureau. It was so
much better than any other plans that we joined the Farm Bureau as associate members,
happily paying the $72 annual membership fee to save hundreds of dollars on our insurance premiums. Because it was a high-deductible policy, monthly premiums were only $394 for our family of five. (See my discussion of the benefits of the high deductible plan in the comments to this post.)
By the end of 2013, our monthly premium had increased to $453. The increase was
due largely to the ongoing implementation of ACA provisions requiring insurers to cover
additional types of medical risks for all insured. Even so, $453 was considerably less
than any other comparable policy, so we happily continued.
On January 1, 2014, our plan, like most high deductible plans, was discontinued because it
was deemed “substandard” under the ACA. We needed new health insurance. The much-discussed “individual mandate” in the ACA requires every individual in the country to have health insurance that meets ACA standards, and prescribes a penalty for those who don’t. While the penalty for this first year is minimal, it increases over the next several
years to become very substantial. The penalty, however, wasn’t the main issue for us. We simply won’t go without health insurance, especially with kids as reckless as ours.
With the new ACA requirements for policies beginning in 2014, insurance premiums went up for most people, very substantially for some. Because our preferred style of high-deductible policy was now extinct, we were faced with a bunch of vastly more expensive options. Of course, the government foresaw this and the ACA provides subsidies for lower income folks facing a higher premium in 2014. I’m not crazy about signing up for taxpayer funded subsidies, but paying the entire premium of any ACA-approved policy with coverage worth having would have put an enormous hole in our already tight budget and cut out any meaningful payoff of our student debt.
Here in California, the way to obtain the ACA subsidy is to purchase a policy through Covered California, our state online insurance exchange. There are a total of four insurance providers who offer exchange plans in our area, so it was easy to choose. Because of our income, we qualify for an Enhanced Silver plan, which means that although the monthly premium is more than 2.5 times that of our old premium, we only pay $114 of it. The taxpayers pay a subsidy of more than $1000 a month to cover the rest of the cost of our plan. I don’t mind the smaller premium, but I would honestly rather have our old plan, where it cost more to us, but we could take care of it ourselves. Given our minimal historical use of medical services, it’s unlikely to make a lot of difference in our actual medical bills, although if we did use medical services heavily, it would take us longer on our new plan to reach our maximum out of pocket amount.
An unexpected twist was that to qualify for a subsidized exchange plan, I had to convince my employer to NOT offer me insurance. One of the normal benefits of my position would be health insurance, fully paid, for me, but none of my dependents. The trouble with that is that the ACA does not allow subsidies for any dependents of a person who has been offered affordable insurance through work, even if the work policy doesn’t cover dependents. So if I had been offered my normal benefit (even if I chose not to accept it), we would have been stuck paying the unsubsidized version of our new policy’s premium. That premium would equal almost half our monthly income, which is just not doable.
I explained the situation to my firm’s partners. They changed the employee benefits rules, and I no longer qualify for insurance. This seems like a backwards way of going about things, but many small businesses faced with the same situation have simply dropped insurance as a benefit because if they can’t provide it for the employee’s whole family, they’re actually making it worse for him by offering it just to him. Some of those businesses have also given a one-time raise to employees in the amount the business used to pay for insurance, to help the employee with the premium on their exchange-offered plan.
Getting insurance through the exchange wasn’t as easy as jumping online and signing up. We had some serious technical problems with the website. We couldn’t even look at plans for the first month after the site was open, and couldn’t sign up for a plan for another month. When we finally got signed up, they lost all of our information and we had to mail paper versions of application information instead. Without the help of a local insurance agent, there was no way we could have completed signup. He pushed our application through when we reached a total impasse, twice. However, in the end, we got through it, and we are now insured.
One thing I have to be careful about is to watch and report any changes in income to Covered California. Our subsidy level is determined by the estimates of income for this year we made when we applied for the plan. If our income goes up faster than expected, the ACA requires that we report the new income to the exchange, which will adjust our subsidy accordingly. If we don’t report, then the overpaid subsidy, plus penalties, hits us on next year’s tax return. This rule applies to anyone receiving an ACA subsidy who experiences a change in income.
So that’s that. Under the ACA, we pay about 25% of what we used to pay for health insurance. The taxpayers subsidize our policy at an amount about 250% of our old premium. We expect our medical bills to remain about the same. This should free up $339 each month from our previous budget to contribute toward debt repayment. Every little bit helps!
What about you?
- How has the federal health insurance overhaul affected you and your budget?
- Have there been any unexpected side effects for you?
Thank you for sharing your experience! One unexpected issue we have encountered with trying to sign up for an ACA exchange plan is that if your household income is too low, your children cannot be on your plan; they have to be insured through Medicaid or CHIP. And the eligibility limits are different based on the child’s age, so if we did an exchange plan we might have one child on Medicaid, two on CHIP, and the adults on a regular exchange plan. And at least where we live, a lot of doctors are very selective about which plans they’ll take, especially the CHIP & Medicaid plans.
So although there are definitely benefits to the ACA (especially the pre-existing conditions rules) it’s definitely made things complicated!
Dave,
We ran into the same difficulty. I left out the details to keep the post from getting too long, but as of January 1, our children are covered by Medi-Cal, California’s implementation of Medicaid. Until our income increases substantially, the exchange plan won’t cover them, so we two adults are enrolled in the ACA-approved exchange plan and the three kids are covered through Medi-Cal. We don’t have anyone of an age to qualify for CHIP rather than Medi-Cal, so our situation is one plan simpler than yours. Here too, many doctors (some would argue many of the better doctors, but at least many of the established doctors) either only accept a certain number of Medi-Cal patients or take none at all. We haven’t been to a doctor since the switch, so we’ll be looking soon to see who we can find that will take the kids insurance.
On an interesting note about the future, California is experimenting with a change in Medi-Cal. In a few test areas in the state, Medi-Cal recipients are actually enrolled in a private commercial plan instead of in the state-run Medi-Cal system. The recipient has the same financial responsibility that they would on a Medi-Cal plan because the state pays the rest. If the idea turns out to be financially feasible for the state, I’d love to see it roll out everywhere.
Oops, guess I forgot to check the box for email notification of replies to my comment! Five months later, I see you responded–thanks!
In our state they use commercial HMOs to provide Medical Assistance benefits, so you get to choose from a selection of commercial providers’ health plans. This adds an additional layer of complication wherein doctors may accept one Medicaid HMO but not another, while your pharmacy or the children’s hospital may accept a different combination.
Hopefully this is saving someone time and money in the long run, but it certainly adds to the complication now!
Our insurance went up with my husbands job $100 out of our pocket per month, as did the insurance offered through my company.
Insurance through both our jobs is a benefit that goes with pay. It’s part of the package and the employers are only willing to take on so much of the hit, of course passing down what they don’t want.
I went to see my eye specialist yesterday and the girl said, we have one of the highest deductibles she’s seen…
I hear a few of my friends working in small companies saying their employers are dumping the coverage because it’s cheaper not to carry it, now.
Personally, I’m someone who’s has preexisting conditions, that’s the great part of the ACA, however, there’s got to be more done to make insurance and medical services affordable and I don’t think this is the answer.
I sure don’t have the answer either. It’s nice that you don’t have to worry about your preexisting condition, but always frustrating to have costs increase. I think we’ll see more and more employers, especially small companies, not offering insurance because they just can’t afford to do it.
Fortunately my husband and I have kept our same insurance at the same rates as before. Actually, most people I have spoken to were able to keep their same insurance or CHOOSE to switch to a plan under the ACA because it was more affordable. So it has not affected our debt payoff. I am glad that you have more freed up though.
I did want to comment that the subsidy isn’t from tax payer money. The subsidy money is coming from the penalties people are paying for not having insurance. Just wanted to clarify that.
If you have had the same plan since 2009 you are grandfathered in and allowed to keep your plan (assuming the insurance company is still offering it). I also know people who were allowed to stay on their old insurance for one more year. Many people who get insurance provided by their employer won’t notice a big difference this year, but may in subsequent years, as the employer mandate takes effect.
CeCee:
Please list for me ONE other thing in all of the United States that you are required to purchase or will be penalized. One. Auto insurance? Simple fix – don’t have a car. No car = no required insurance. Home owner’s insurance? Simple fix – either don’t buy a house or pay it off. No house payment = no required insurance. The reality is that ObamaCare IS a taxpayer-funded subsidy, it IS unconstitutional and it has reduced the BEST healthcare offered in the free world to a federalized, one-size-fits-all medicare band-aid. You may be cheerleading that this year your rates have gone down. What you do not yet see (but you will in VERY short order) is that the quality of care will be drastically reduced; very smart and talented people will opt-out of becoming doctors and nurses and our children and grandchildren will be receiving their care from the B-List of talent instead of the A-List which we’ve grown accustomed to and take for granted.
But, hey, you saved a couple of bucks this year on insurance. Mine “necessarily skyrocketed” (Obama quote) in order to subsidize that insurance act which you say is not subsidized.
I’m sure the next thing I’ll hear is how great common core is for the kids.
Because of ACA rules, my company can no longer deposit money into a health savings plan for me. That alone is $1200/year out of my pocket that I have used each year to pay for braces, contacts for my daughter, doctor co-pays, etc. We have yet to see how much insurance premiums for my husband’s work are going to increase, but the information we have received to date is kind of scary. You are one of the only people I have heard of paying less than before.
Sheila I am so sorry to hear that! That is so much money to miss out on. I have heard lots of people who were hit pretty hard by the changes. We are not big fans of the program in general. Eventually it will be nice to reach an income level where we don’t qualify for a subsidy, but for the time being, we are being blessed by the subsidy.
I have read several posts similar to yours. Basically, the ACA in my opinion accelerates competition. If your state has set up a separate, well run exchange, then many families should be able to take advantage of competitive pricing. I’m excited to see that it has freed up so much extra money towards debt repayment.
Hi Michelle! We feel really blessed to have some money freed up to go toward our debt. California had anything but a well-run exchange, but it did turn out well for us.