Over the past month, I’ve had a ton of conversations with people who work in and around the health insurance and benefits businesses about what it means to have insurance. A lot of them are surprisingly candid about what’s good about coverage and what’s not, and we look forward to having a lot of them share those thoughts with you to help you plan for a hopefully-early-retirement future.
I’ve also had conversations through social media about whether people who are responsible for finding their own health coverage — self-employed, freelancers, gig workers — should get an expensive ACA plan or get a short-term health plan. I’ll tell you now that, as a 40-something with a wife and kids, short-term coverage is out of the question for me. But the bottom line is that it should, in almost all circumstances, be out of the question for you, too.
The main reason is that it’s very close to what’s called “catastrophic” coverage, which basically means that you’re not going to get a lot of value from it unless something really, really bad happens. Yes, you will save money over the long run if nothing bad happens and you may have good luck playing the odds depending on the “risk profile” you have in your daily life (i.e. healthy, exercise, no family history of chronic illness, short commute, etc.). But as one person told me, “I’ve seen more FIRE goals go up in smoke when somebody gets hurt and has to pay hospital bills.”
So yes, coverage is a hedge. And yes, sellers of short-term plans are going to make them look really appealing to you, and you may luck out and beat the odds. But you’re screwed if you don’t.
On the other hand, yes, what’s currently available in the individual market is less than ideal. Plans have huge deductibles and, if you are a decent wage-earner, you may not qualify for subsidy help via the ACA’s Advanced Premium Tax Credit system. It’s not ideal, to say the least.
But I’ve seen people do nothing but look at the numbers — “I’ll have to pay X dollars per month, which puts me back on my FIRE goals by X amount” — and what’s important to realize is that 1+1 does not always equal 2 in health insurance. I’ve explained that idea in other posts on this site, but I wanted to link to a fantastic explanation I saw on Twitter by a broker with 20 years experience finding coverage for individuals.
2. “But what good is a bronze plan if I have to sell my first-born to cover the deductible?!” We hear that a lot. It’s true that deductibles are high on bronze plans. But a plan with a high deductible is far better than remaining uninsured. And it might help more than you think.
— Louise Norris (@LouiseNorris) December 11, 2018
The TL;DR of it is that ACA plans give you coverage pre-deductible that no short-term plan will give you. So if you don’t beat the odds on staying healthy, you are far, far better off with an ACA plan than with a short-term plan. That doesn’t come out in the simple math, but it’s really there.
If you need to get covered, you can go to healthcare.gov and see how to get covered in your state. There’s also a great website called HealthSherpa.com, which sells only ACA-compliant plans in most states. I do work with HealthSherpa but don’t make any money by referring people to them. I just think they do a good job of helping you know your options and getting you enrolled.
P.S. If you’re employed and eligible for coverage through your employer, the same concepts apply. Don’t opt out of coverage just because you think it’ll save you some bucks. It’s important to have coverage “just in case.” That’s what insurance is about, and that’s why we’re here to help you understand it better.Like