Why I'm Dropping My Health Insurance

Jesse’s Take: Dropping health insurance coverage is an extreme cost cutting measure. And Mark has enjoyed the mental exercise of entertaining other “extreme” ideas, like moving to a 2-bedroom apartment, walking to work, and probably some others I can’t think of at the moment.

There’s no need to take this post as general advice. Mark is in a situation where he is questioning EVERY assumption, and learning as he goes. For instance, in the comments below he was instructed on high deductible plans with an HSA option, and also learned about some non-insurance…insurance (cost sharing).

I think we would all do well to honestly question our budget line items.

Now, for what I personally do regarding health insurance? We do as high a deductible as we can afford and try and strip everything off the policy we can except for catastrophes that we would not want to, or could not bear.

My goal in the next few months is to set up an HSA, max out the contribution and not ever (if possible) use those dollars, letting them grow tax free until I can use that medical money in retirement where the need will statistically be more frequent, and the tax advantages are maximized. We hadn’t done this before because there always seemed to be a baby on the way 🙂

My guess is, after the lesson learned from the comments, that Mark will likely do the same. I anticipate he’ll write a follow up post, and likely title it in some extreme way again. 😉 Enter Mark:

With tax day nearly upon us two months behind us, it’s about time I filed my 2012 return.

I was still self-employed last year, so I can deduct my health insurance premiums. Writing down my total premiums paid for the year made me just a little sick: over $8,200.

Eight thousand two hundred dollars??

In 2013 I’m on pace to pay close to $9,000 in premiums.

The monthly tally:

Mark: $167
Kate: $301
Son: $127
Daughter: $148

Total: $743

Wondering what makes my family so expensive? Two things:

I’ve never shopped health insurance.

It never occurred to me that the kids and I might be over-covered until recently; I just took my insurance agent at his word (not implying he did anything wrong – I should have been more proactive in finding the right plan).

Our infertility.

Because we’ve been through infertility treatments (like IVF), Kate is automatically denied private health insurance. Adding insult to injury, the kids and I can’t even get a family policy without my wife because of the infertility. When I applied about a month ago, we were denied based on the possibility that my wife and I would do further infertility treatments in the future which could result in a higher risk pregnancy and multiple births.

And that’s why we have a 1:1 ratio of policies to people in our home.

Well, this madness has to stop.

The kids will still have their own policies, but I’ll be moving them to a higher deductible ($10,000) plan that will cost about $36 per month per child. The policy I’ve found allows up to four office visits per year for $35 each. It also carries some prescription assitance, so we’ll be comfortable with the kids having coverage. Moving from their old policies to the new ones will save us $200/mo in premiums.

I’ll drop my health insurance for the time being. I’ll choose to play the odds because I consider health insurance a bad bet given my circumstances.

We’ll also drop Kate’s coverage. Because of the infertility, her $301 only buys her a spot in the Utah high-risk insurance pool, so everything except major medical comes out of our pockets.

Dropping Kate’s and my coverage puts the entire $470 back in the budget. We’ll take $100 or $125 of the savings and start building up a ‘Medical’ rainy day fund.

What About the Affordable Care Act?

This calculator estimates my family’s post-Obamacare annual premium at $11,137. Depending on my income, tax credits could cover 25% to 30%.

If Kate and I choose to stay uninsured under the new law, we’ll have to pay an annual penalty (unless our total premiums exceed some percentage of our income).

In other words, I can’t say how the Affordable Care Act will affect today’s decision to drop coverage. I’ll have to evaluate again next year.

In the meantime, I’ll be playing with an extra $400 to $500 per month in my budget, which comes in handy.

Comments? Any self-employed people out there who’ve chosen to be uninsured?