The Wall Street Journal recently published (paywall?) a chart showing how the average cost of employer-provided health coverage for a family has changed from 1999-2017. The total average annual cost was $18,764 for a family and $6,690 for an individual in 2017. The data source is an annual poll of employers performed by the nonprofit Kaiser Family Foundation along with the Health Research & Educational Trust, a nonprofit affiliated with the American Hospital Association.
In very rough terms: a single adult is ~$500 per month ($6,000 per year), and a family is about $20,000 a year. These numbers agree overall with the preliminary health insurance quotes that I have gotten for my own family.
In addition to the rising premiums, the average annual deductible is now over $1,200 for a single worker.
The implications for an prospective early retirees are obvious. How are you going to cover this huge expense? Here’s a quick brainstorm of options. Spoiler alert: There is no easy fix.
- Use an Affordable Care Act (ACA) plan and get a subsidy if your income is low enough to qualify. Do a lot of reading, then hope it doesn’t change?
- Plan ahead with a job that offers health insurance benefits in early retirement (don’t have to be a certain age). You’ll probably have to hunker down with the same employer for a number of years.
- Save enough money (or create enough income) to pay for health insurance premiums. Try a managed-care system like Kaiser for a low-cost HMO plan.
- Find a part-time job that you both enjoy and offers health benefits.
- Run a part-time side business that earns enough profit to cover health insurance costs. Look for potential group discounts or tax breaks that are available as a business instead of a consumer.
- Now and later, look for a high-deductible health plan (HDHP) and fund a Health Savings Account (HSA) due to the tax advantages.
- Join a direct primary care arrangement or health care sharing ministry that is exempt from ACA.
- Extend your current employer coverage for up to 18 months through COBRA (check cost).
- Move to a foreign country with reasonable and transparent cash pricing.
Am I missing anything? Right now, we have #4. My family’s future plan is a mix of #1, 3, and 5. However, #5 could push us over the income limits for #1.
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buy cheap health insurance through ehealthinsurance.com with high deductibles
Problem is, many of those aren’t “real” insurance and won’t cover you in a true emergency. It will cover a lot of things, but you could still find yourself bankrupt quite easily.
No standard the health insurance plans on ehealthinsurance are all real insurance now. They have to be real insurance and they do cover you in true emergencies. This was mandated as part of the ACA.
ehealthinsurance does also sell short term insurance which does not have to meet the legal requirements that normal insurance does. But its not too bad to cheaply cover a gap as they’re intended.
yes, problem now is, its limited to 3 months. So you have to rebuy every 3 months. For me, its 1/4th the cost.
Someone please research this. This has good potential
Any good topic, Jon!
I have been thinking about this topic and here is a good idea:
1.) Work for the federal government: You only need to work a minimum of 5 years to get full medical insurance (at the same low-cost as if you were still working) in retirement. This INCLUDES your spouse!
NM, I had never heard of this before. I’ll google for more info.
Jonathan, great post. Healthcare is the $1M dollar question. I’ve been thinking a lot about #9 lately. Is there an arbitrage play to moving to Canada?
Option #10, which I’m also considering, is to take care of myself (eat veggies, wash hands, wear sunscreen, exercise), self insure, christian sharing to avoid penalty, and ACA if catastrophe strikes (no pre-existing conditions).
Option #10 is interesting. I think everyone should be taking care of their selves (eat veggies, wash hands, wear sunscreen, exercise). I would add avoiding addicting substances to the list. If they did, much of the health insurance cost problem would be eliminated.
NM: It’s true that you can retire after 5 years of government service, but only if you are 62. You can retire at 57 if you work 10 years or more. It’s still a really good option for many early retirees before Medicare kicks in.
Canada is not at the top of the list for most retirees looking to benefit from #9. Panama regularly tops the list. I’ve got a little while still until retirement, but am seriously considering that option.
One thing I forgot to comment on is the horrifying trajectory of that plot. Extrapolating this chart out a decade or two and everyone is screwed.
No wonder why Warren Buffet recently said the following:
http://www.npr.org/sections/thetwo-way/2017/05/06/527193477/the-oracle-of-omaha-condemns-republican-health-care-bill-at-berkshire-meeting
“So when American business talks about taxes strangling our competitiveness,” he said, “they’re talking about something that as a percentage of GDP has gone down from 4 to 2.” Meanwhile, medical costs have exploded. “So medical costs are the tapeworm of American economic competitiveness,” he said.
#10 Vote in folks who are serious about solving the healthcare problem and have plans, not promises. (Not picking sides, I think an answer could come from either Democrats or Republicans.)
It starts with negotiating drug costs and separating employers from insurance. Free market solutions won’t work as long as the self-employed and individuals aren’t allowed to buy the same insurance available to large companies or the government. I think all health plans should be on the exchange and available to everyone. That would drive competition, lower prices and create innovation.
Frugal Professor’s option #10 is our plan.
Medical care is not equivalent to health care. If we could snap our fingers and magically provide health insurance for all at no cost, we still wouldn’t be a healthy nation. It’s frustrating to me that our lawmakers are focused on getting people covered instead of getting people healthy.
The costs presented are exactly in line with what my employer provides BTW.
I want to retire early but this issue could make that difficult. ACA will help because I will be under the 80K threshold and qualify for the discount. But, now that may go away if these guys get their vote next week. 🙁
What a pain living in the USA. If we had the same system as in other countries, imagine the freedom and energy it would release. People could retire early, start freelancing, start a business. Companies would save tons of resources not having to deal with this benefit.
skg: if you are considering early retirement you can go to any of the other countries you are referring to until you are medicare eligible. With a decent amount of money some of those countries will give you residency and therefore benefits.
I still think this is one of the best countries to make it to early retirement, if not the best.
Just saw a top Orthopedic Surgeon in the best hospital in Cochin, India. Cost was $US2.50….(yes TWO DOLLARS and 50 CENTS) for two consultations. MRI was $45. In China an MRI is $22. I don’t know what it is in Thailand at Bumrungrad Hospital or in Costa Rica but I’m pretty sure you can reach into your pocket and pay the bill with no problem…you don’t need four different procedure, diagnosis and location codes. You don’t need to worry about facility fees. You don’t need to sweat out “coverage is no guarantee of payment” And the healthcare you receive is comparable or better then what you receive in the US.
Like almost everything else in America, the entire focus of the US Medical Industry is to steal every last cent you have before you die. There are about 700,000-1,000,000 bankrupted Americans every year that I think would testify to that.
Hi Jonathan,
Thank you for keeping up well informed. I have somewhat of a unique situation. I have no income now, but do have an IRA account which I plant to convert a partial amount from to a Roth IRA= I plan to convert about $12,000 to a Roth and pay a small tax.
Now I’m purchasing full cost bronze level health insurance directly from the Insurance company, but in 2018 the rates will go up and diagnostic labs coverage (70% now) will be eliminated, and I’ll have to pay full amount up to a deductible.
I’m applying to get the Fed subsidy, but with my low income, I’m stuck with Medicaid (worst coverage), which my Doc (ND) will not accept. Would you suggest I convert $12,000 and claim as my income and hope I will not qualify for Medicaid. And Remain with my Private Insurance and hope I’ll get a subsidy? Or up the conversion to $17,000?