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Our New $237/month Health Insurance Plan

It’s finally November 1st, and it means that for the first time in history, the Money Mustache family is running on a fully unsubsidized health insurance plan which we’ve paid for out of our own pocket. Isn’t that scary?

As noted in past articles, I’ve had a pretty cozy health insurance situation up to this point. Growing up in Canada, I was blissfully unaware of the issue, since like virtually all other rich nations, that country provides universal healthcare for all citizens. I took advantage of that system for exactly two major health events: being born in the early 1970s, and a broken ankle after a bike accident in the late 1990s. Both times, the hospital got the job done well.

Moving to the United States, I found the choice of employer-offered health insurance plans confusing, so I just went with the cheapest one. Occasional gaps in coverage occurred as I hopped between employers throughout the early 2000s, but I didn’t notice since I was fortunate enough to have no occasion to visit a doctor during those years.

Then early retirement came and my wife was kind enough to throw me under the umbrella of coverage offered by her part-time employer for the last five years. Although I was grateful, I was not able to take advantage of the insurance outside of an annual visit to the doctor for a checkup. But it did help out greatly by paying most of the bill for the hospital birth of our son.

At last, she quit her part-time job, the free insurance ended, and we were forced to think for ourselves earlier this fall. So all of the health history above went into deciding how to cover ourselves for the rest of our adult lives, during which we will probably never be conventionally employed again.

The thing about insurance is that it is best enjoyed as a game of numbers and probabilities – not feared as a nightmare of imagined outcomes. As I noted long ago in Insurance: A tax on people who are bad at math?, there are only two situations in which I buy insurance:

  • If I am significantly riskier than the insurance company thinks I am, or
  • If the consequences of being uninsured would be too disastrous for me to handle, yet still have a reasonable chance of occurring

For car insurance, the choice is clear: my car is worth about $7,000 right now, so if I destroyed it in a crash, replacing it would not make a big dent in the ‘Stash. Plus, I’ve never been in an accident, and my car lives in a cozy garage and rarely get used (meaning I am probably even less risky than the insurance company expects). So I don’t buy collision or comprehensive insurance.

Health insurance is different: medical care is expensive in the US, with lifetime costs for major conditions potentially reaching to a million dollars or more. On top of that, my young son is a wild card who is more likely than me to injure himself while playing, and I still have the slightly dangerous hobbies of mountain biking and snowboarding. We may even be slightly riskier than the insurance company estimates, making the choice to buy health insurance a positive one.

The next step was looking at our own health care spending over the 13 years we’ve lived in the US:

  • From 1999-2005, costs were negligible: less than one check-up per year each, with no treatments or prescriptions. They were covered by insurance, but even if paid out of pocket, this would have averaged to under $200 per year.
  • In 2006, the birth of the boy and related issues racked up a bill of about $20,000 (a routine surgical intervention was needed,  quadrupling the cost), $4,500 of which we had to pay ourselves.
  • From 2006 to the present, we have averaged one doctor checkup each per year, plus one antibiotic prescription per year between us, which if paid out of pocket would have cost about $600 per year.

Total medical spending (mostly covered by insurance): about $25,000
Total premiums paid by from employers to insurance companies on our behalf: about $100,000

Hey, there’s an unexpected result! We took a 12-year period which included the once-in-a-lifetime (for us) event of a hospital birth of a baby with added surgery, and it still ended up that the insurance premiums were about four times higher than the insurance benefits. This told me that I should probably shop carefully for insurance, in order to get something that protects me from those million-dollar illnesses, but does not attempt to pay for any hundred-dollar incidents, since the cost for that extra protection is clearly very high.

The next stop was an insurance comparison engine. We used ehealthinsurance.com* to do this search, which allowed me to see offerings from the companies that compete specifically in my area – sorted by price. I was pleased to note that prices drop rapidly as the annual deductible rises – meaning most health care expenses are statistically the lower cost ones, and the million-dollar illnesses are indeed very rare (otherwise the premiums would be different).

The winning plan for us was one called the “Saver80 United Health One” plan from United Healthcare, with a quoted price of $219/month** for the family (two 38-year-old adults and a 6-year old boy). The price is low because it comes with a relatively whopping $10,000 per-person/ $20k-per-family deductible, meaning we are very unlikely to ever use this coverage. But at the same time, covering $10-20k in the event of a catastrophe would not be a significant hardship for us, especially given that this is an unlikely event. Even if the expense were to reoccur annually for decades, we could adjust our lifestyle as needed, or earn more income, or get a job with insurance coverage, or make any number of other changes – assuming we even survived that long with such a serious condition. So it passes the test of putting a safe cap on expenses.

All plans these days also provide one free checkup (or “annual physical”) doctor visit per year, with no copay or deductible at all. The value of this alone is worth 10-15% of the annual premium of our new plan.

The Quote Process:

Here’s a screenshot of the quote comparison on ehealthinsurance.com

We also decided to search directly through United Healthcare and received nearly the same quote from them:

This particular plan does not team up with a “Health Savings Account” (HSA). I do like the idea of such an account, because you can put pre-tax money into it over time, then spend it on health expenses without penalty. But my tax rate is already low, and investment options may be limited within an HSA (note that some readers have mastered this issue and do fine with the accounts – see the comments below). I probably do better keeping my cash invested in stocks and real estate, where I earn over 7% in the long run, than in a cash-based investment in an HSA, with yields on cash near zero these days. The biggest issue in my case was that the HSA-friendly plans were at least $100 per month more than non-HSA for equivalent coverage, negating any possible savings.  The “HSA 100″ quote from United (see image above) is $393 per month.

The most illuminating part was comparing our new high-deductible plan to the old one that has covered us since 2005:

Old PlanNew Plan
Monthly fee$1,218.06$236.81
Deductible (individual)$1,000$10,000
Deductible (family)$3,000$20,000
Out of Pocket Max (individual)$3,000$3,000
Out of Pocket Max (family)$6,000$9,000
Coinsurance80/2080/20
Doctor Copay (annual checkup)$0$0
Doctor Copay (other visits)$25n/a (not covered)
Specialist Copay$50n/a (not covered)
Emergency Room Copay$250n/a (20% after deductible)
Urgent Care Co-Pay$75
Annual cost (including base premiums) if everything is maxed out for one individual$18,616.72 + copays$15,841.72
Annual cost if everything is maxed out for family$23,616.72 + copays$31,841.72

See, our old insurance was fine, but it was still far from Cadillac. With their various loopholes, you still have to pay the first several thousand dollars of any sort of surgery, which is a good part of fixing your own broken arm anyway. And yet it was six times more expensive, at over $14,600/year for our family.

We also calculated how much we would have to pay out of pocket in a year under the very worst situation. These results are shown in the last two rows of the table.

On top of this, the deductible for our new plan drops each year that you don’t make insurance claims. After three years, it will already be down from $10,000 to $5,000 per individual, thanks to the Deductible Credit, which means last two rows of the table above start looking even better.

Deductible Credit Info from the United HealthCare Web Site:

Doing the math, there are very few situations in which the more expensive insurance would be a good buy. Under the current regime, we save almost $12,000 in premiums every year, just for coverage of doctor visits and a lower deductible on major care. I’d have to immediately get a chronic heart condition or cancer, or be a member of the crew of the Jackass TV show to end up saving money in the greater coverage case.

And there are greater savings out there for the self-insured. I recently got an elective procedure done (the one a man must do when he requires no more children) while under the old insurance. But I asked the doctor first, if there is any difference in the cost if a patient is paying out of their own pocket. His answer was quite interesting:

“Oh yeah! If you’re not going through insurance, we can do it right here in the office, and the cost is $600. If you use insurance, they insist that we do it in the Surgery center across the street because of legal reasons, and it costs an extra $250 there, plus the scheduling takes a month longer”.

Since the cost was less than my old deductible, there was absolutely no reason not to self-pay. This got me thinking even more. I called around to several clinics in my area and asked for their “self-pay” price for the same procedure. The prices ranged from $500 to $1000. It turns out that healthcare is indeed a competitive market, if you bother to ask. The same applies to prescription pricing: you will probably pay much less at Wal-mart’s pharmacy than at Walgreens. In the end, I chose the original doctor because he was the closest to home, but after the search I will never view costs as a fixed thing again.

In the end, we got through the labyrinth with a newfound understanding and a sense of relief. Health insurance is not scary after all. All of us have different situations – if you have a pre-existing condition, the insurance calculations will be different. If there are children planned in your future, the math changes yet again. And if you don’t live in the United States, none of this may matter at all!

And it’s all changing in the near future again. Starting in 2014, the Affordable Care Act begins to shift the balance towards fuller coverage for all. Plans like mine with very high deductibles will phase out (although existing plans will be grandfathered in), meaning you will have to get more coverage and pay more for it. Balancing that out, however, are subsidies that will offset most or all of the extra cost for Mustachian-level early retirees, so the end result could be getting better coverage at similar cost. When you combine this with the new much-better options for people with pre-existing conditions, the ACA provides a serious boost to entrepreneurs and aspiring early retirees alike, because the risk of unexpected medical costs is greatly reduced. Thus, fewer people will feel trapped in large company jobs simply because of the health insurance they provide.

Karawynn at the blog called Pocketmint wrote a great post on this issue here.

Medical insurance is a complicated field, but the MMM family is feeling nicely set for now. If it changes, we’ll re-evaluate and act as needed. The bottom line is that the issue of health insurance does not need to get in the way of early retirement for most of us. And the more you learn about it when the time comes, the better you’ll do.

 

* The ehealthinsurance.com link is an affiliate link, so if you end up using it for your own insurance shopping, this blog will benefit (and thanks!).

**- after applying for the plan, you fill out a detailed survey about past health conditions online. After hearing about the more costly birth of our son, they raised the rate by $18/month over the original quote to that $237/month you see in the article title. Probably because any additional births are more likely to be high-cost as well. In this case, it would be good if information were more transparent, since we should actually get a discount rather than a penalty due to the fact that there will be no additional MMM children!

  • Kris November 1, 2012, 6:34 pm

    First. Nah, I am just kidding. I will have to research this more because I did not know about the phase out of similar plans. I might have to buy one sooner than planned so that I can be grandfathered in.

    Reply
    • Mr. Money Mustache November 1, 2012, 6:45 pm

      Cool, and let us know what you find!

      I know the Republicans have been hyping the “be scared! high-deductible plans are going to disappear” angle as part of their anti-Obamacare message. But I don’t think the verdict is as to exactly how much they will change. The free market often surprises you, and I have been pleasantly surprised with how the ACA has affected insurance plans so far.

      Reply
      • Rusty Williams November 2, 2012, 7:34 am

        it’s too late at this point to purchase a grandfathered plan. Grandfathered plans are those that were in effect before the law was passed (March 23, 2010). If you made any change to your plan since then (deductible changes, remove maternity,etc); you lose grandfather status and will have to take the mandated coverages in 2014. At least that’s the way it stands today.
        As a health insurance agent, I agree there needs to be something done to reform health care, but I am not sure this plan does it. The issue we have is controlling healthcare costs, not insurance companies. You don’t control costs by making health insurance cover everything. Imagine what your auto insurance premium would be if it covered oil changes, replacing tires, inspections, new windshield wiper blades, etc. If it did cover that, how many times would you replace your tires to “get your money’s worth” out of those higher premiums you were paying? Usage will go up because it’s “free”, but since there are no new doctors going in to the system to make up for the new patients, expect delays.

        Is grandfather status that important? The arguement I see with other insurance professionals is this with grandfathered plans (GF). GF plans will become a closed book of business, meaning no new people will be going into that pool of people. As the pool ages, the claims tend to rise and the pricing does also. If it becomes extreme it could lead to a “death spiral.” In the death spiral, those paying more but not using coverage, will find something else, leaving the sicker people in the pool, thus increasing the premiums even more. Will it be less expensive as what is available through the exchanges? I am not sure.
        Pricing of plans will be a shock for young people in the future. The law mandates that coverage can only be 3x more for the 64 year old as it is for the new born. One of companies I represent now has 18 different pricing brackets between a newborn and 64 year old. If you squeeze that to down to 3 rate levels, the pricing will shift toward the 64 year old rate and not towards the newborn rate. What will likely happen is the 64 year olds will get a price break and the younger people will pay much more.
        Currently there are many issues that have not been released by the government for companies to prepare for. Several of the insurance exec I have spoken with believe more will come out after the election, not so much as a evil conspiracy, but more along the lines of who the winner is and what direction the reform takes.
        I think there are some good points to the health care reform and I doubt at this point the law can be repealled, but there needs to be some changes because it will have some serious impact on our economy in the future.

        My advice is to stay as healthy as you can. That’s probably the best real health plan you can depend on.

        Reply
        • Mr. Frugal Toque November 2, 2012, 8:15 am

          ” Imagine what your auto insurance premium would be if it covered oil changes, replacing tires, inspections, new windshield wiper blades, etc. If it did cover that, how many times would you replace your tires to “get your money’s worth” out of those higher premiums you were paying? Usage will go up because it’s “free”
          —-
          I’ve seen several analogies like this to universal health care (food, car care etc.) but they don’t work out in practice.
          My body is not a car.
          For example, I’m not going to have open-heart surgery just because it’s paid for. The system here in Canada just doesn’t allow it, and people don’t think that way.
          Do people go to the doctor for checkups more often? Yes, but not as many as should. And if they do? That’s a *good* thing, because checkups are cheap ways to find out you’re unhealthy *before* you get really sick and need that open heart surgery. So it makes both personal and financial sense to get those checkups.
          But the idea that universal health care leads to people wasting money? It’s just not that significant an effect.

          Reply
          • Emmers November 2, 2012, 8:58 am

            The “idea that universal health care leads to people wasting money” is presupposing the idea that preventative care is a waste of money. Which it’s not. :-/

            Reply
          • Jamesqf November 2, 2012, 11:05 am

            “For example, I’m not going to have open-heart surgery just because it’s paid for.”

            True, but assume your auto insurance covers mechanical repairs, but not maintenance. Then you might well decide to skip the cost and effort of oil changes &c, because the insurance will pay for the automotive equivalent of open heart surgery.

            Now isn’t this just what a lot of people do in our current environment? They skimp on the maintenance of their bodies (diet & exercise) expecting modern medicine to cure the resulting problems, with insurance picking up the tab.

            Reply
            • Mr. Frugal Toque November 2, 2012, 11:32 am

              Yes.
              People skimp on healthy living under the American private system and the Canadian universal system.
              There is an issue of personal responsibility and procrastination here, I won’t argue, but I don’t think that has anything to do with which system you’re under. It’s just the current way our underlying culture handles problems and (I betcha) strongly correlates with credit card debt.
              But the analogy won’t hold there either, because our universal health care system *does* cover routine maintenance and checkups – and open heart surgery is a huge hassle compared to just dropping your car off at the shop for the day.

              Reply
              • Rusty Williams November 2, 2012, 12:58 pm

                I would definitely agree with you regarding the issue of personal responsibility. I have people come to me and we get coverage for them at a very low rate, but then they tell me they are not going “waste” money or they can not afford it, meanwhile they drive away in a brand new car or have a new iphone in their pocket. Personal responsibility is a rare trait in the US, at least from my experience. As a former home/auto insurance agent, I had access to my client’s financial situation and about 70% of those were in big trouble if they missed a paycheck. People in this forum do not think that way, but you would be shocked if you had insight into the average “american family’s finances” as I did a couple years ago. It was stunningly sad.

                As for “But the idea that universal health care leads to people wasting money? It’s just not that significant an effect.” – I think we will find out soon enough, however I hope you are correct.

                I am not familiar with the taxes in Canada, but what are your tax rates there? Obviously Universal Healthcare is not free, so curious what the trade off is.
                THanks

              • Jamesqf November 2, 2012, 2:29 pm

                “But the analogy won’t hold there either, because our universal health care system *does* cover routine maintenance and checkups…”

                Err… No. The analogy doesn’t quite stretch, because MOST health care – that is, what goes into attaining & maintaining a state of health, as opposed to medical care which treats people after they’ve become sick – is not something you get in a doctor’s office. Indeed, from my admittedly limited experience, few doctors even know much about health maintenance, and treat every visit as an excuse to prescribe some pallative drug or other.

              • Anonymous Today November 2, 2012, 2:45 pm

                I agree people need to take personal responsibility, but I believe there should be an overall cultural responsibility as well. Every place I have ever work pushes the thumb down on their employees at the expense of their health. As children their is an emphasis on recess and getting exercise, but once you hit the workplace it is like no one cares if you are healthy anymore. I have never worked for a company who rewarded a healthy lifestyle, actually the opposite, they rewarded unhealthy lifestyles. I do think their is a paradigm shift happening in the way people see this but older managers are stuck in the 50/60s mode of work til you die. I work in an office where walks, getting up from your desk will actually raise questions from your supervisor, which I might add are all overweight. I think if we can put pressure on companies to do more to really encourage healthy lifestyles (not just give lip service) it will go a LONG way since we spend most of our time in the work place. I even offered to start up a program at my current company to try to encourage and reward weight loss and personal fitness, but management didn’t like it, thought it was too much of a distraction from peoples jobs while they all keep eating unhealthy quick meals and gaining weight sitting for 8 hours straight. I just hope the mindset continues to change toward a better life balance which will lead to healthier lifestyles, which will lead to overall reduction in unhealthy related health care costs. :)

              • Mr. Frugal Toque November 3, 2012, 7:11 am

                Rusty – it’s very hard to compare tax rates. If it matters, I work in high tech and about 27% of salary goes to taxes of one form or another (income, property or sales). Of course, I’m saving a lot, so I don’t pay taxes on that part.

                Jamesqf – Maybe my GPs are the odd ones out, but when my blood pressure was a little high (130s), it was they who told me to start doing more cardio to head that off.

          • Gus November 2, 2012, 3:05 pm

            @Toque

            I have to (respectfully) disagree with you. I also come from Canada and I see lots of people overusing/misusing the health care system. For example, why do people go to the ER if they have a cold or a headhache instead of going to a clinic? The cost is the same to them (0$) but it is not the same for society. This causes the ER to be constantly engorged, and significant delays for “really” sick people.

            I am not able to substantiate my claim with numbers, but I think that misuse is a non-negligible factor in the Canadian health care. If the direct cost was not zero* for users, I am sure that people would be much more diligent in using the healthcare.

            This is not a knock against universal health care. I love it, but I think people are much more reasonable when they have skin in the game.

            *Ignoring taxes which are difficult for me to ignore, even if the cost was very small

            Reply
            • Mr. Frugal Toque November 3, 2012, 7:16 am

              Oh, I know that bit. I’ve got family in the paramedic and nursing biz. They get weird calls from lonely old people and they constantly get people coming into the ER for ear infections because the clinics they can reach are only open when the sick people have to be at work.
              Some of that’s inefficiency (we need the cheaper clinics open when people can reach them) and some of that is random abuse.
              But compared to the cost of the private system, I still think it’s very small. At least it’s nowhere near as high as, for example, offering universal food insurance and therefore having everyone eat steak and foie gras every day. That’s why the analogy doesn’t hold.

              Reply
          • Amicable Skeptic November 4, 2012, 8:22 am

            There’s an interesting study in about this question (do people spend more on health care if they are covered by insurance). The answer appears to be yes (though we still need a few more years of data to be sure about the long term savings of wellness treatments). But it is also rather conclusive that being covered leads to massively better health and financial outcomes on the whole. Planet Money gives a good summary of the issue and the study here http://www.npr.org/blogs/money/2012/06/15/155135781/episode-379-does-medicaid-actually-help-people

            or go and read the full study if you’re inclined over at http://www.nber.org/papers/w17190.pdf

            Reply
          • TMLutas April 30, 2013, 7:07 pm

            Imagine a condition for which there are two medicines. Medicine #1 is old and out of patent coverage. It costs $30/month. It effectively treats 75% of sufferers. Medicine #2 is new and not out of patent coverage and won’t be for 11 years. It costs $300/month. It effectively treats 95% of sufferers.

            Now if you’re a doctor and your patient has insurance and pays $15 co-pay for both medicines, which do you prescribe? That’s right, you prescribe #2 because it’s new and is more likely to fix what ails the patient right off. If it fails, you can always try the alternative.

            Now take a second look and remove insurance with the patient paying cash. Of course the doctor is going to try Medicine #1 first because it’s cheap and likely will work just fine. If it doesn’t, there’s always the expensive alternative as a fall back.

            Two perfectly logical decisions with radically different costs to the system. This is one way that insurance blows up expenses without ever engaging in overuse of the medical system.

            Reply
        • Lindsey November 2, 2012, 8:46 am

          If insurance were a non-profit enterprise, rather than the creepy make-a-aprofit if you deny coverage as often as possible it is now, cost would not be an issue. Nationalize it and the price falls.

          Reply
          • lurker November 2, 2012, 10:26 am

            exactly. I am with you on this. my daughter developed anorexia and UNH has fought not to pay for much of her treatment ever since…as if the stress of watching your daughter starve herself were not enough!!!

            Reply
            • superbien November 2, 2012, 12:49 pm

              Oh god, I’m so sorry that your daughter and your family are going through such an awful situation. Especially with the added hassle from insurance. My prayers for you all.

              Reply
            • Rusty Williams November 2, 2012, 1:57 pm

              Lurker,
              I think that is a terrible situation with your daughter and I hope everything turns out well soon enough for her.

              I can understand the contempt for “for profit” companies, however I would say that most companies run a much lower profit % than what people think. Healthcare reform now dictates that carriers must have 80-85% of a dollar spent on claims. Some carriers were not doing that before reform, some were above and beyond that before the law are passed. This is call the Medical Loss Ratio (MLR).
              With the companies I am associated with, they are constantly trying different approaches to providing health care and keep costs down. They understand customers don’t like rate increase and they hate sending them out. They are not the stereotypically fatcat just raking in the money and laughing at the little man. Many are experimenting with new ideas. Example would be eliminating claims processing and simply pay a doctor a certain fee per year per patient. Others are trying to innovative care delivery methods for those patients who have extremely high cost of care issues.
              With regards to costs, they simple have to pass what they are charged by the doctors/hospitals/drug companies/etc on to their clients. One of my biggest carriers don’t not like to take credit card payments simply becuase that % they would have to pay the credit cards is their profit (3-4%).

              Companies also have to keep a certain amount of money in reserves for claims. The media will say it’s “evil” that they keep this much in reserves, but the media fails to mention that the law requires them to keep a certain number of months of claims in reserves.

              One reason for the increase in health care is the fact that those who make the decision to run a test or procedure have no idea of the costs or are directly involved in paying the bill. LIke group coverage, the doctor has no idea what procedures cost. The patient thinks it’s the co-pay ($20). The insurance company (the payor) generally has no say in discussion. I believe if you put the patient more involved in the payment process (like HSA plans) you will see costs stablize. My HSA went up in 2010 by 3%, 2011 it dropped by 2%, 2012 it increase by 3%. To me this tells me theses plans are working better than the current copay plans most people have.

              I understnad the frustration with this issue, but want to at least say that the people involved on this side are not “evil” or out to screw you. Many are simply trying to service clients. Sure that are examples of bad behavior, but I don’t see it much if any from my side. Maybe I represent several companies who are simply trying to do the best they can, and if so I am happy to represent them.

              Again, Lurker, I wish you and your daughter the best of luck with that situation.

              Reply
              • Anonymous Today November 2, 2012, 2:02 pm

                Your right about carriers, but private hospitals and specialized front end caregivers, etc are not maxed at 85% and trust me, I know first hand, they are doing everything they can to maximize profits at the expense of providing patients with the minimum care needed to stay in public favor.

            • Jamesqf November 2, 2012, 2:33 pm

              Seems like nobody wants to ask the elephant-in-the-living-room question: is anorexia in fact a medical condition which is treatable?

              Reply
              • Georgia November 2, 2012, 5:12 pm

                Yes.

              • lurker November 3, 2012, 7:14 am

                I think it is…my daughter is doing much better now but I really will never get over the attitude of the insurance company about paying for her care…I actually think she could have recovered as much as a year sooner with the full support of my insurer. In the six or seven years leading up to my daughter’s illness the company was happy to collect well over $40k in premiums from my paycheck and then when my daughter got sick they were really bad about the types and amounts of treatment they would pay for. It was a double nightmare. In hindsight I wish I had just saved the money and gone without the “illusion” of health insurance. thanks for all your good wishes and she seems to be on the mend but it was a horrible two years and something I would not wish on my worst enemy…

              • anon November 3, 2012, 5:27 pm

                there are no treatments proven to work. sometimes the therapy/hospitalization can go on for very long periods of time (decades sometimes). therefore, as for other mental illnesses, insurance companies don’t like to pay.

              • Emmers November 3, 2012, 7:34 pm

                There’s a lot of BS information on the Internet about anorexia (including pro-anorexia sites, argh), but if you can filter through the BS, you can learn a lot about this. Maybe start with Wikipedia, look at the References section, and go from there?

                The tl;dr is that yes, it is a medical condition which has a treatment; like all medical treatments, it’s not always successful, but that’s just life.

        • Littlegreengecko January 16, 2013, 4:31 am

          I live in Australia and do not understand the current US user pays health care system nor that its citizens are fighting against introducing a free minimum standard of healthcare for all (that is what you are fighting about yes?).

          The argument that people will overuse the healthcare system as a reason not to introduce free healthcare is ridiculous. As one of the othe commenters from Canada said, you do get some people overusing the system but that is the exception rather than the norm. Besides I think some one getting frequent check ups is preventative treatment which as everyone knows is generally far cheaper than major treatment like hospital surgery.

          Also, in Australia our health system does have some disincentives to discourage ‘frequent flyers’, namely the requirement to make some financial contribution to visits to the doctor (and hospitals as well in some cases). The healthcare system covers maybe 75% of the doctor visit and the prescribed medicine, the patient pays the remainder – unless they qualify for social welfare, in which case it is free.

          Reply
      • James Steamer April 28, 2013, 8:15 am

        My wife and I have never had any health insurance except for a year or two when she got it for free as a school teacher in TX when she also had a baby but otherwise we simply do not believe in the whole insurance concept. There is no incentive for the health care industry to cut costs when they always know they will be paid by insurance so the only way to force costs down is to largely eliminate insurance. I have spent about $700 total in 55 years on my medical care and a bit more on dental. You want to really see how frugal one can live? Take a loot at my book http://www.amazon.com/Wealth-Minimal-Wage-James-Steamer/dp/0793122406

        Reply
        • Alex R April 30, 2013, 9:30 pm

          Nice pitch. And nice luck so far (yes, some of it is luck), in paying only $700 in medical expense. But the reality remains that regardless of your particular situation, people do become badly injured or chronically ill, and in today’s American healthcare system, they often go bankrupt as a result. I.e., they end up with their increasingly important (especially for those under 50) credit rating shot by unpaid bills. So there is a place for at least a “catastrophic loss” policy that doesn’t cover every little thing.

          Reply
      • Lisa February 6, 2014, 11:57 am

        Fast forward to 2014. We were previously covered under HDHP plans and had HSAs. The same company cancelled our HDHP plan, and suggested a new plan compatible with ACA, that cost $20 more than the exact same plan offered in the exchange. That was the first bit of “cheese.”

        The worst part is our Insurance Commissioner allowed Premera Blue Cross/Lifewise (same company now) and Regence/Bridgespan (ditto) to offer ONLY plans that do not cover a large number of highly regarded doctor groups in the Seattle area, and do not cover hospitals like Swedish, Children’s Hospital, etc. This is based on my own research. A blog I ran across last night details this issue. http://www.correntewire.com/drastically_thin_provider_networks_on_obamacare_exchange_plans#more

        There are others.

        AFTER I bought the HDHP offered by Premera (it was called just Bronze, HSA 5250) and having checked the Premera website (showed our regular doctors all within the plans called “Heritage” with various other monikers), I found out the new plans (all of them, both inside and outside the exchange) call these providers “participating.” This is a new on me. According to Premera rep, we would benefit from the contract allowances for these providers, but would have to pay a separate $10k deductible, coinsurance would be 50% instead of 0% after deductible, and, wait for it, the coinsurance is NOT CAPPED.

        Emails to our insurance commissioner disingenously said this was an issue between the carriers and the providers, that that office does not govern this issue. However, the Commissioner was quoted in a article stating some providers were not allowed to offer new plans because they lacked a good range of providers. http://www.spokesman.com/stories/2013/aug/02/more-people-covered-costs-lower-for-washington/

        Oddly, one of the evidently previously-non-accredited companies is now offering the plan we ended up with through the exchange, that does cover the good doctors and hospitals. (A non profit Washington only company that recently teamed with an administrator with a huge network – likely how it was allowed to offer the Exchange policies). The only problem for us (aside from the fact that it costs even more per month, although with copay visits and copay for prescriptions that we take that defrays that some) is that we can no longer park money in our HSAs with this plan.

        TAKEWAY – There is little time to sign up or change your exchange plan (March 31, 2014 deadline), but it would behoove all to check their plans for coverage. Do not assume the company did not strip your policy bare. Do not take no for an answer if you need to change (I was told I would be “allowed” by the computer “this one time” — but the law is open enrollment until the end of March – more cheese). My husband found articles from New York and New Hampshire, so this is not a-Washington specific issue.

        I take some issue with Mr. Williams (below) because this is, absolutely, an insurance company problem. Why are we paying them 20% to mess things up?

        Good luick!

        Reply
    • Karawynn @ Pocketmint November 2, 2012, 1:38 pm

      While it is possible that plans with a $10K deductible like MMM has will no longer be available, there are likely to be many options in the $2K-$5K deductible range. (source)

      Furthermore, deductibles overall are expected to drop significantly (15-23% by one major estimate) relative to 2013 numbers … so essentially you can expect to get more coverage for an equivalent or lower amount than if you were on a $10K deductible plan.

      Reply
  • Mrs. Pop @ Planting Our Pennies November 1, 2012, 6:38 pm

    Just out of curiosity, MMM – since you view the kid as riskier, did you look into trying to purchase coverage that would have lower deductibles for him than for you and the Mrs?
    I ask primarily because a friend was recently between jobs, with a baby, and found she was unable to purchase a high deductible plan for herself and a low-deductible plan for the kid – he’s an infant that was born with complications not too long ago and will need regular check-ups and vaccinations. The sales rep was claiming it was due to the ACA and it shot up her quotes dramatically.
    Luckily for her, she found a new job within 6 weeks, so the discussion ended up being moot, but I was shocked at her difficulty in finding appropriate coverage for her son and for her due to their separate levels of “appropriateness”.

    Reply
    • Mr. Money Mustache November 1, 2012, 6:47 pm

      Nah.. I don’t think it would be profitable to try to get lower-deductible insurance for him.

      Accidents are by definition unpredictable, so it is best for me to just stick with my general rule : “Insure only against things you can not afford to cover yourself”.

      Reply
    • TOM November 2, 2012, 5:57 am

      I’ve never heard of separate insurance plans for a child only, or separate deductible for a certain member of the same plan. Administration hassles prevent the latter, and you probably can’t hold children liable to pay for the policy in the former.
      Theoretically if your friend had a spouse, they could purchase separate coverage with different deductibles, etc. But you’d still need one parent to have the same coverage as the child.

      Reply
      • Rusty Williams November 2, 2012, 6:18 am

        Not quite. Insurance is regulated at the state level. Each state has it own rules. In my home state of NC, there is only one carrier that offers child only policies. Others used to, but they decided to stop offering child only policies. I write a number of policies in my state in such situations.

        Also with Ehealth, you may want to investigate you state BlueCross BlueShield. They are usually not included in the quotes with ehealth.

        MMM, you should check with them also. In my state, they often have the best coverage for the premium. Good luck.

        Reply
        • Mr. Money Mustache November 2, 2012, 9:06 am

          Thanks for the feedback (here and above) Rusty! It is great to get the scoop from someone who actually works in the industry.

          It is also nice to hear from the non-US residents, because people who have only lived in this country often have some incorrect assumptions about universal health care. But at the same time, I know we’re stuck with what we have at the moment (although with voter support which could happen with proper education, we could end up universal here too within a decade).

          Reply
      • Kimberly V January 26, 2013, 9:28 pm

        There NEEDS to be a way to get health insurance for only a child and I know that in California you can. If you could never get separate insurance for a child my daughter would be screwed! I’m a single mom with pre-existing conditions (the last time I applied for independant coverage I got a letter with about 10 reasons why they wouldn’t cover me including a minor surgery to remove a cyst 11 months before and my mild childhood athsma). There IS no other parent to get her coverage with and I couldn’t qualify for traditional coverage with her, so I got her her own plan.

        Reply
  • jtmoney November 1, 2012, 6:45 pm

    Long time reader, first time commenter. Great read. I’ve also been thinking about insurance stuff recently. I’m a Mathematician and from crunching the numbers from a risk/price standpoint, it seems like full-blown ‘standard’ coverage would hardly ever make sense for someone in good health with no family histories. Nice to have a concise description of your process. Keep up the good work, Cash-stache.

    Reply
  • Mike McEwan November 1, 2012, 7:03 pm

    And self-employed people can pay their premiums with pre-tax dollars! There are so many perks to having your own business. Write off the cellphone, Internet, business trips, etc!!!

    Reply
    • Mr. Money Mustache November 1, 2012, 7:13 pm

      Good point, Mike. Our LLC company (of which this blog is technically a division!) will be paying and deducting these premiums, which is a sweet little perk. I paid for some my health insurance today, just by writing about that very same health insurance. What a life.

      Reply
      • Anthony N. November 2, 2012, 10:29 am

        Request: I’d like to see a nice post on the benefits of operating a LLC.

        Reply
        • lurker November 2, 2012, 11:49 am

          me too!!! and how to set one up, of course! what a punch in the face…

          Reply
        • Steve D November 5, 2012, 8:30 am

          me three!
          can a blog only be an LLC?
          (and of course, I have a ton of other questions)

          Reply
  • Erica / Northwest Edible Life November 1, 2012, 7:03 pm

    We had UHC as part of a corporate plan for 5 years and it was a glorious company to work with. Seriously – I loved our experience as UHC customers and if the cocked-up, anti-competition, state-line-zoning system on health care allowed us, in the state of Washington, to hire UHC privately we would absolutely do so. I might even be willing to pay a few dollars more. Congrats.

    Reply
  • Jeff November 1, 2012, 7:10 pm

    Did the fact that you could easily move your family back to Canada if shit hit the fan factor into your analysis?

    Reply
    • Mr. Money Mustache November 1, 2012, 7:19 pm

      Good question Jeff, and I have wondered about that myself. I really don’t want to move out of the US, we are all citizens here and we love it. So we set up the insurance and other financial stuff with the plan to stay here regardless of what happens.

      On top of that, I would be unfairly sponging off of Canada’s system if I moved back and said “Hi honey! I’m home with a chronic condition!”. Most of the taxes I have paid over my lifetime were here in the US, not to Canada. So in general, no – that is not really our backup plan. The real backup plan we use for comfort is, “One of us can always go out and start earning real money again if something crazy happens to the family”. But we all know that’s not really going to be necessary :-)

      Reply
      • Hanah November 1, 2012, 7:39 pm

        Actually Canadian citizens are no longer covered at home once they’re non-residents. Even if you move home you have to wait several months to be covered, so that won’t work if you were hit by a bus/have malignant cancer.

        Reply
        • Tara November 2, 2012, 10:21 am

          Correct – I know Quebec has a 90 day waiting period. Not sure about other provinces.

          Reply
      • superbien November 2, 2012, 12:52 pm

        I really respect that one of the primary points in that decision (stay in US or return to Canada) is an ethical consideration. Sometimes personal finance blogs go down the route of saving at all costs, so I appreciate that you point out that ethics come first.

        Reply
  • Anthony Nelson November 1, 2012, 7:18 pm

    Nice timely post for many of us workers with Open Enrollment coming up. A high-deductible plan is something I have recently been considering, but with two young kids and a job where family coverage on a low-deductible plan is only $250/month more ($500/mo), it’s hard for me to justify the risk.

    $250/month would be a nice addition to the stache, but one accident/condition and the savings is gone.

    Reply
    • Mr. Money Mustache November 1, 2012, 7:21 pm

      Ahh, but that’s one accident/condition PER YEAR. The odds might still be in favor of the higher-deductible plan, but it depends on your tolerance for risk. I tend to sleep well with risks, while others might feel differently.

      Reply
    • madage November 1, 2012, 8:19 pm

      Anthony, have you looked at your “normal” health spending and what the total cost, including premiums, would be under the high deductible plan? For my wife, two small children and me, the total cost was slightly in favor of the high deductible plan. What put it over the top for me was the availability of the HSA, which is basically a “Super Roth” savings vehicle for someone so inclined.

      It’s also important to do the maximum out of pocket calculation for each plan, as MMM has done. In my case, the HDHP actually won out because the full-service plan maximum out of pocket is based on a percentage of salary, while the HDHP is a fixed amount.

      Reply
  • Andrew November 1, 2012, 7:30 pm

    MMM, What is your Max Payout? (The most the insurance company will pay, in an event where you all need allot of work)

    Reply
    • Mr. Money Mustache November 1, 2012, 7:34 pm

      There is no annual or lifetime maximum, and if I understand the Affordable Care Act correctly, clauses like that are no longer allowed in new insurance policies. (And if I’m wrong on this, someone feel free to send me a link with the correct info)

      The US Gov’t run site http://www.healthcare.gov is packed with well-written information on all of this.

      Reply
  • Lars Olson November 1, 2012, 7:36 pm

    Hi MMM, a few years ago our small family also started off with policy like yours that was around $300/month to begin with. But wouldn’t you know it, every year on the anniversary of signing up, the insurance company jacked the price up $100/month until a few months ago, they said we’d need to pay $700/month to keep the policy. That’s a pretty bad deal if you ask me, since we see the doctor very rarely. So we’ve gone the “self-insured” route and found out that doctors/hospitals will give us a 25% discount if we just pay upfront with cash. We’re hoping for the best, but the point is, don’t be surprised if your small premium gets jacked up to high heaven in the near future.

    Reply
    • Andrew November 1, 2012, 8:38 pm

      I have a 5k deductible, on my health insurance, but am looking to increase it to 10k like MMM, that being said, I get all my health care done at Virginia Commonwealth University and I tell them I have no insurance and pay with cash. So I am never paying down my deductible, but enjoying the cash discounts.

      MMM do you plan on using no-insurance disounts, or paying down your deductible for minor items?

      I always seem to get better care from student doctors, since they seem to care more about me, and are not always putting me into these small boxes.

      Reply
      • Mr. Money Mustache November 2, 2012, 9:10 am

        Definitely taking no-insurance discounts. I don’t expect to ever meet that deductible except in the event of a HUGE 1-in-100,000 event, so there is no sense in trying to nibble away at it, only to have it reset in 12 months.

        Reply
    • Katie November 1, 2012, 9:16 pm

      We’ve had the same experience. Actually, our premiums have gone up at our annual renewal and on my husband’s and my birthdays (older = more expensive, I suppose).

      However, our daughter has some expensive health issues and, as another commenter mentioned, it’s not possible to purchase an alternate plan for your child. In the eyes of insurance, my husband, daughter and I are one expensive family rather than two healthy adults with an expensive kiddo.

      In our situation, we’ve actually found that the math puts a lower deductible in our favor, as we’d easily meet the $20,000 you’ve mentioned each year. $600+/month for health insurance (+ deductibles. copays, etc) sucks but it’s certainly saved us a fortune over the past 17 months of my daughter’s life.

      As MMM makes clear – it’s important to do your homework. Know what your personal health expenses are likely to be and do the math when considering the various options.

      Reply
    • Dan November 2, 2012, 4:09 am

      This is one topic where MMM will be the student, not the teacher.

      I also have an individual health plan (from UHC, basically the same plan MMM is talking about) and the premiums do go up about 25% a year. They also recently increased the premium to cover additional administration costs of healthcare reform. The plans are priced as such that you feel like you’re getting a really good deal when you get it vs. the group/subsidized plan you were on, but after 3-4 years, the premiums are no longer bearable, let alone competitive.

      My tactic has been to simply increase my deductible annually to keep my premiums relatively flat. If I were still at the same deductible I started at, my premiums would have already doubled.

      Reply
      • Lina November 2, 2012, 6:56 am

        Without knowing anything about american insurances. Can’t you change company when the prices go up? I understand that it is not an option if you have major problems with your health.

        Normally I shop around for insurances every year for my home.

        Reply
      • Mr. Money Mustache November 2, 2012, 9:12 am

        A note to Dan and others regarding the premium jack-ups:

        I’ve heard stories both ways. I have friends in town who have had a similar plan to me, and the annual renewal pricing is only slightly above inflation.

        At the same time, I have no problem re-doing the shopping every time someone tries to raise the premium on me. That’s the way I handle car and house insurance as well. Grease the wheels of the competitive market by being an ever-slippery customer!

        Reply
        • Joe November 2, 2012, 11:35 am

          Under most states’ old systems, there was a feedback cycle of increasing premiums and healthy users jumping to new plans:

          Insurers set premiums according to group expenses. When you joined a plan by purchasing your own insurance, you would join a group of people with similar expected health care costs. Because only fairly healthy people could self-insure with new plans, your group would basically consist of healthy people. As people in the group would acquire chronic illnesses, the mean cost of treatment for the group would go up. This drove up premiums. Those who could, the healthy, would leave the group to insure under a new plan. This would drive mean cost of care up further, increasing premiums further, driving more healthy people from the plan.

          If acquired a chronic illness, you would be stuck in a group with ever higher mean costs of treatment.

          This will be addressed to a degree under PPAPA.

          Reply
      • Holly@ClubThrifty November 2, 2012, 10:35 am

        Yes. This is true. Before we got a group plan at work, we had individual coverage. Within three years, our premiums went from about $400 per month to over $1000 per month. They raised our rates every 6 months.

        Reply
  • RubeRad November 1, 2012, 8:08 pm

    Very interesting.

    Two things.

    First, I have a friend who is in like a Health “co-op”, where a large number of people all pay a “premium” into a central pot, pay only cash for medical needs, and get reimbursed for co-op-covered bills from the pot. I don’t know all the details, like what kind of stuff is covered, whether there are copays/deductibles, etc. but it seems like maybe the analogy is Bank:Credit Union :: Health Insurance:Health “Co-op”. ANYWAYS, the reason I bring this up is that my friend discovered that often when you are presented with a bill, you can go back to them and say, “I don’t have insurance…” and they’ll come right back with “Oh, sorry, let me just change that to the CASH PRICE” — which is invariably lower, sometimes a lot lower (and this is after-the-fact, so it’s not for a different service)

    Second, what I’m not seeing here is the breakdown of previous premium costs in terms of how much was borne by the employer, and how much by you?

    My company pays more of my health premium than I do (and takes great pains to continually remind us!), but my contribution costs more than your whole new plan! I’d have to do some math to determine whether my benefits are better-enough than yours to justify buying into the company plan. How common do you think it would be that an employee would do better buying private insurance than buying into the employer-subsidized options?

    I wish I could strike a deal with my company for them to give me half of their current contribution to my insurance. With that (plus the contribution I’m already making) I would surely be able to buy private with much more benefits than your plan — and then shop the cost down from there. But somehow I don’t see that happening.

    Reply
    • 205guy November 1, 2012, 9:21 pm

      I was going to say that MMM might get a surprise when he gets a bill for a regular office visit. It was my understanding that insurance co.’s pay *lower* prices to the doctors than the “rack rate.” I thought the justification was that individuals paying cash (or not paying as the case may be) was riskier and thus justified the higher cost. Insurance co.’s “negociate” a lower rate in exchange for prompt and unquestioning payment.

      I don’t know how true this is because I’ve never tried to pay cash, but all my doctor’s bills have a “insurance adjustment” that lowers the cost to the insurance. I got the impression that if I were paying cash to the doctor, I’d have to pay the full amount.

      As for HSA’s, I’ve always refused them because you have to use up all the money in them (or it’s lost!). So you essentially bet you’re going to be sick to save a bit of tax money. Or you have to come up with some elective doctor’s visit in the last month to use it up–plus you have to remember to do it. I hate stuff like that.

      Reply
      • Aaron November 1, 2012, 9:35 pm

        The FSA (Flexible Spending Account) is the “use it or lose it”. HSA money stays in the account even after the end of the year, and actually is transportable from one employer to another.

        Another difference is that the FSA, once declared, is fully funded (by the employer). You pay into the plan throughout the year. Once you make your election, you are done. So if you want to contribute $1200, and get paid monthly, your employer puts $1200 in the account at the beginning of the year and you pay them back $100 per month until the end of the year. If you use the money in January (all $1200) and then leave the company, you don’t owe them anything. If you stay with the company, but only spend $200 of the total that year, the other $1000 is forfeited to the company.

        For the HSA, you can contribute what you want (though your employer may limit your ability to change this) throughout the year. What you contribute is what is available. So if you wanted to have $1200 in the account, you would elect to have $100 contributed in each monthly paycheck. However, if you went to have something done in January, you would only have the amount in the account that you contributed ($100). If you went in August you would have $800 (assuming you had used none so far). At the end of the year you would have whatever you had not spent ($1200 if you spent none of it) and the next year you could do the same. This could accumulate year after year (it’s just another savings account, but with pre-tax dollars as long as your withdrawals are for approved medical expenses). If you leave your employer, it is still your account and the money is still yours.

        Reply
        • Karawynn @ Pocketmint November 2, 2012, 1:53 pm

          Just a clarification (although Aaron is largely correct): there is an annual cap on the Health Savings Account, so it’s not quite ‘pay what you want’. For 2013, those limits are $3250 per individual or $6450 per family.

          Reply
      • JaneMD November 1, 2012, 10:06 pm

        A few physicians are moving to an all-cash practice because they can have alot less office staff if no one is processing insurance claims. The ethics of this is debated because it can allow physicians to avoid taking care of resource poor underserved patients. (You’ll hear it called ‘concerige medicine.)

        Some office will take a flat fee for some office visits and simpler office only procedures. I got my teeth cleaned in college for a flat fee rather than going through insurance. However, hospitals will not offer the same, and if you are ‘self-pay,’ the bill is generally huge. (Guess I should finally put up my post about how your hospital bill is calculated)

        Reply
        • Anonymous today November 1, 2012, 11:02 pm

          I work for a physician practice doing financial and operational analysis. Specifically I work a lot with billing, A/R, managed care plans, contract negotiations, etc. And in summary our health insurance in this county is a complete clusterf*ck. There are so many hands in the pot between the physician and you it is ridiculously increasing your rates and mine. Plus all the lobbyists who are paid gobs of money to sway politicians to not lower Medicare rates which most all insurance companies use as there base for pricing. My job for the past 6 years has been how to make the largest margin off of patient care. It’s rare you find physicians in large companies who care more about patient care then there bottom line or are being driven by administrators to drive more procedure codes and up code patients.

          Every year our government is given the option to lower Medicare costs but it is always votes it down… because lobbyist are paid $$$ to sway the politicians.

          Anyway, to get off my soapbox for a minute…companies charge a gross bill charge but contract down to collectible rate which is usually 40 to 50% of gross. This is to scare people into thinking that without insurance you will be paying through the roof. But our company is so afraid of cash payers not paying we will discount the gross pay down to insurance collectivize and sometime negotiate more to ensure payment. The last thing insurance companies want are cash payers.

          Even the way Medicare reimbursement is constructed is crazy, with a base and then add ons for thing like location facility fees, litigation insurance fees, etc

          Hope this gives some insight into the system.

          Reply
      • Naomi November 1, 2012, 10:18 pm

        205guy,
        I think you’re confusing HSAs and FSAs. HSAs are not “use it or lose it”. You can accumulate funds each year you have an HSA-qualified medical plan. And at age 65, there is no penalty for withdrawal for non-medical purposes.

        Reply
        • Rusty Williams November 2, 2012, 6:36 am

          There is no penalty after 65, but you still pay income tax on the gains in the account. The government is not going to let you get that money tax free ; )

          Reply
          • madage November 2, 2012, 6:53 am

            Yes, the funds are taxed as regular income if not used for qualified expenses after the age of 65, but you can also use the funds to reimburse any eligible medical expense incurred since you first qualified for the HSA. It’s not a stretch to say someone could have tens (hundreds?) of thousands of un-reimbursed medical expenses sitting around by the age of 65 that can be tapped completely tax-free. In my opinion, the HSA is the most tax-advantaged savings vehicle that currently exists under US tax law.
            https://www.hsaresources.com/faq/#distributions-07

            Reply
      • Greg November 1, 2012, 10:49 pm

        You’re confusing the FSA with the HSA.

        HSA contributions stay with you for life, and it has the advantage that if you haven’t spent the money (contributions are pre-tax dollars) by the time you are medicare eligible, then you can remove the cash without paying a penalty. If you are still in the stache-building, pre-retirement phase, and are maxing out your 401(k), Roth, etc, then the HSA becomes another potential tax favored retirement plan (assuming you don’t spend it on health care).

        To have an HSA, you must have a qualifying high deductible plan.

        An FSA is also contributed to with pre-tax dollars, but if you don’t use it up by year-end, then you lose it.

        HSA FTW!!!

        Reply
        • Mad Fientist November 2, 2012, 6:50 am

          Greg, I had to look up what “FTW” meant but after I did that, I completely agree! HSAs are extremely useful for people in the pre-retirement phase.

          I can understand why MMM didn’t want to pay extra for an HSA-eligible plan, but for those of us still employed, usually the HSA-eligible plans that employers offer have the lowest monthly premiums (due to the higher deductible). And since I already max out my 403b and Roth IRA, having an HSA gives me another tax-advantaged account to contribute to.

          My HSA with Fidelity allows me to invest in a variety of stocks/bonds/funds/ETFs as well so I don’t have to settle for the cash-based investment returns offered by the HSA that MMM looked at. I am able to invest in the market, just like I can with my 403b and IRAs.

          As you mentioned, it is more beneficial if you don’t withdraw money from an HSA for medical expenses so I just leave the HSA money invested in a stock market index fund and watch it grow, tax free. Each medical expense I incur, I keep the receipt and update a spreadsheet that keeps track of how much of my HSA can be withdrawn before age 65. The more receipts I accumulate, the more my HSA acts as an early retirement account rather than a standard retirement account, since I am able to take tax-free distributions for the value of the receipts at any time.

          HSA, FTW (which means For The Win, I think)!

          Reply
          • madage November 2, 2012, 6:55 am

            Mad Fientist gets it!

            I can’t wait until I have access to a Fidelity HSA on 1/1/13 (the first year my employer is offering it). My current HSA is sitting in a bank account earning 1.25%, just waiting to be transferred.

            Reply
          • Mr. Everyday Dollar November 2, 2012, 8:05 am

            MMM makes that point that his “tax rate is already low, and investment options are limited within an HSA. I probably do better keeping my cash invested in stocks and real estate, where I earn over 7% in the long run, than in a cash-based investment in an HSA, with yields on cash near zero these days.”

            I think that makes sense for him and his family but for others using an HSA is tax deductible which has benefits! For singles, the maximum HSA contribution for 2012 is $3,100. For someone in the 25% tax bracket this reduces taxes by $750! It’s worth looking into further if you’re considering an HSA vs non-HSA plan.

            The other reasons why I like an HSA account is that it grows tax free from year to year and like another comment mentioned, it can be invested just like with an IRA! So if you want you can invest your HSA dollars in stocks, bonds, mutual funds and CDs. This is awesome.

            The other nice thing about an HSA is that if you decide to switch health plans you can keep the same HSA.

            I did a reader case study on my blog recently and found the cheapest plan for me (age 33) rang in at $40.33/mo with a deductible of $5,000 and 0% coinsurance (pay nothing after deductible).

            The second cheapest plan rang in at $45.97/mo with a deductible of $3,500 and 20% coinsurance.

            For my reader, who is 43, the cheapest plan rang in at $64.03/mo with a deductible of $5,000 and 0% coinsurance (pay nothing after deductible).

            The second cheapest plan clocked in at $72.99/mo with a deductible of $3,500 and 20% coinsurance.

            I’m wondering if, like another comment mentioned, the premiums are increasing at 25% a year.

            Reply
            • Mr. Money Mustache November 2, 2012, 9:25 am

              Great summary on the HSAs, Fientist and Dollar. I didn’t realize you could invest in ETFs and such with some plans, so I’d better change the article to reflect that.

              In my case, the much-larger premium for an HSA-eligible plan wipes out any tax benefits. But for people choosing between employer plans, it sounds much better.

              Also, damn, Mr. Everyday Dollar has some ultra-cheap insurance premiums in his state! This is a key issue, since I have heard that states currently vary widely. Illinois is cheap, Colorado is medium, and someone told me NY is much higher. Eliminating inter-state boundaries should help over time.

              We need the Wal-Marts and ING Directs of the world to come and ruthlessly compete away the profit margins of this industry and streamline everything down to the size of a smartphone app. It can happen, but you have to crush the shit out of lobbyists first – no narrow personal interests allowed, only the benefit of overall system efficiency must be optimized!

              Reply
    • TOM November 2, 2012, 6:12 am

      I believe if you’re employed, private insurance is NOT purchased with pre-tax money, which probably swings employer insurance heavily in your favor.

      Reply
      • RubeRad November 2, 2012, 7:06 am

        Yeah, that’s another thing that struck me as odd; why would there be a pre-/post-tax difference for buying into employer-subsidized insurance rather than private insurance?

        Reply
        • Kimberly V January 26, 2013, 9:59 pm

          The pre-tax on insurance comes in when you are self-employed. You can write off your health care premiums as a business expense. Not sure about the whole family though. My tax lady told me I could only write off MY premiums, not my daughter’s (don’t know if this is a hard and fast rule or if it was because we had separate plans).

          Reply
  • JR November 1, 2012, 8:48 pm

    Wife and I are in our late 20s and pay $130/month for a $5000 total deductible plan. It is HSA eligible and I plan to open one at HSABank (nonexistent fees with minimum balance and brokerage window).

    PA resident if anyone is wondering.

    Reply
  • Aaron November 1, 2012, 9:12 pm

    My company is (yet again) switching insurance around this year. However, this year will be the first time that the High Deductible option is the one that requires no employee contribution. I’ve always gone with the option that didn’t require me to pay anything, but I’ve never had an HDHP before.

    On the plus side my employer contributes the first $1200 to the $2500 annual deductible into the HSA. And if we don’t spend the money, the HSA just keeps growing. I figure even if I don’t contribute anything, if me and my family could avoid costs for the first 2 years, we would be covered for a bad year if one came up. But I’m not counting on that and just plan on matching the other amount.

    I also figured that going with the HDHP would be good practice for when I retire early and need to self-insure. The nice thing is that while I’m working at my current company they will be contributing to possible future medical expenses, even if I don’t work for them anymore (since you bring the HSA with you).

    You did mention though that your plan is not compatible with an HSA. What exactly does that mean? I mean, like in my situation, if you already had established an HSA, would you not be allowed to use it? Or does it just mean that you can’t make new contributions to the HSA (but can still spend the current savings)? I figure that the answer will determine how much I try to contribute to my HSA to maximize my tax savings.

    Reply
    • Debbie M November 3, 2012, 7:40 pm

      “…if you already had established an HSA, would you not be allowed to use it? Or does it just mean that you can’t make new contributions to the HSA (but can still spend the current savings)?”

      It’s the latter. You can always spend your money on medical costs. Not compatible means not compatible with contributing to the HSA.

      Reply
  • JaneMD November 1, 2012, 9:13 pm

    Congratulations on selecting your health insurance. As some one who is financially independent, high deductible health insurance works because you can afford the deductible without significant financial hardship. I would not recommend the same plan if you cannot imagine paying your deductible twice in one year. All it takes is a car accident/semi-serious medical illness to crush a family’s finances.

    I saw it all the time in my old teaching hospital – family with high deductible health insurance has a kid who gets a bone infection – 14-21 days of IV antibiotics with possible discharge in a week if they had a PICC line and IV services at home. When they wanted to go home after a few days, the infectious disease team had to explain that since bone infections are so difficult to clear that, if they left, the team would see them soon for the amputation. (http://en.wikipedia.org/wiki/Pyogenic_osteomyelitis)

    That is a less common, more extreme scenario, but much more common ones are RSV hospitalizations for infants, asthma attacks requiring oxygen, appendicitis, pre-term birth. Definitely go to regular checkups, get vaccinated, and keep your prescriptions filled to decrease the risk of a hospitalization.

    Reply
    • JR November 2, 2012, 6:58 am

      HDHPs are not just for financially independent people. They are for people who would rather save money spent on outrageous premiums than pre-pay doctors visits that they may never use.

      Reply
    • Mr. Money Mustache November 2, 2012, 9:34 am

      Jane: the scare stories are generally not helpful for people trying to make decisions based on statistics.

      For example, ER doctors and firefighters often wax poetically about the dangers of small cars when they crash into trucks, but the actual statistics on the matter say that a lifetime of small-car driving affects your life expectancy by barely a few months – you lose far more lifespan working the extra years to pay for the more expensive vehicles and gas!

      Regarding high-deductible plans: Remember that in some cases, your premiums alone might be $5,000 higher when selecting a low-deductible plan. So after one healthy year, you’ve already saved half of a $10k deductible. After two, you’re at 10, and the savings compound further.

      So the lesson is: if you don’t even have $20k available somewhere, you won’t solve the problem by paying more for full-coverage health insurance. You solve it by GETTING YOUR FINANCIAL SHIT IN ORDER!! – Move back into your parents’ basement, live in a van, cut expenses to the bone and maximize income, whatever. As a parent with children, one needs to have at least a basic ‘Stash in place in order to run things efficiently.

      Reply
      • Jamesqf November 2, 2012, 11:17 am

        “…the actual statistics on the matter say that a lifetime of small-car driving affects your life expectancy by barely a few months”

        Have to call you on that. Statistics show that small to medium sized cars are actually safer than large ones. See e.g. Wenzel & Ross, “AN ANALYSIS OF TRAFFIC DEATHS”: http://www.google.com/url?q=http://www.lbl.gov/Science-Articles/Archive/assets/images/2002/Aug-26-2002/SUV-report.pdf&sa=U&ei=tP-TUPTSLsbqiwK2p4G4Cg&ved=0CBQQFjAA&sig2=Z5Dt1KZ1gmzQuJZ-mr-3-w&usg=AFQjCNGLB9uephUx9TKIszo48Ql8caYKCQ

        Reply
        • JaneMD November 3, 2012, 7:06 pm

          The point of my comment is that when bad things healthwise, sometimes it can be very expensive and everyone needs to be mentally prepared to pay for it. My concern is for people who are squeaking by and won’t be able to take that financial hit. I don’t mean you need 20K in the bank for health expenses, but you should have a plan on where you would get it from – family, emergency fund, whereever.

          I picked an extreme example because it was heartbreaking to watch unfold. As I said, much more common ones that occur and a few days in the hospital can be very expensive. According to the CDC 8.4% of people in the US have asthma. Of them, 47% will have an asthma-related doctors visit per year, 8.4% will be in the ER at least once a year, and 2% will get hospitalized per year.

          Since the US healthcare system isn’t going to be fixed (again) this year, do the same thing the MMM blog always recommends – evaluate your situation individually and live a financially prudent lifestyle. (And attend your preventative care visits to keep whatever health condition you have from ending up in an expensive hospitalization-that’s from Jane.)

          Reply
  • Naomi November 1, 2012, 9:23 pm

    Two comments:

    1. HSA investments are not limited to cash-based investments. Health Savings Administrators offers 22 Vanguard funds, including Index 500 and International Stock Index.

    2. The individual underwriting process is brutal. I was almost denied coverage because of a breast cyst. Cysts are *not* related to cancer, but try telling the insurance company that! It took months of medical record shuffling before I was approved.

    Reply
    • Karawynn @ Pocketmint November 2, 2012, 2:03 pm

      Interesting. All we had to do to get individual coverage was tell them our ages and whether we smoke (no!). Maybe the difference is between states (Washington, here)? Or whether you’d had a gap in coverage (we had not)?

      At any rate, that problem goes away for everyone in just 14 months. No pre-existing condition refusals (or premium hikes) under Obamacare.

      Reply
      • biliruben November 4, 2012, 9:35 pm

        The difference, I suspect, is the timing between when you were last covered and when you get the new high deductible policy.

        By law, if you are COBRA eligible, which general means that you lost your coverage within the last 60 days, IIRC, they can’t be law insist on you completing a physical or a full medical disclosure.

        Reply
    • OhYongHao November 18, 2014, 2:09 pm

      This is what I found recently too as we are switching from the never used bare minimum plan to an HDHP through my employer. They don’t offer a cafeteria plan, but since I recently found the worksheet on the W-4 I’ve found how to calculate my allowances rather than using the front page sheet only.

      My front page allowance was merely 2 for my wife and I. Using the back sheet I was able to input all our numbers of expected pre-tax contributions to the HSA, and IRA’s that we now have 10 allowances, and around an extra $500/mo because of it, which is nearly enough to fully fund our HSA.

      The nice thing about the Vanguard funds is you can choose Admiral Funds without having to contribute $10,000 for each fund, the minimum is waved on all funds! So I chose 3 admiral funds to contribute to, and as Mad Finest suggested I will be keeping a spreadsheet of incurred expenses to use as our early retirement fund. This begins 1/1/2014.

      Reply
  • Mary November 1, 2012, 9:25 pm

    Have you checked the health insurance rates for Massachusetts? Our family of 6 paid $1972 / month health insurance when my husband was consulting. It would be interesting to run the numbers among the different states.

    Reply
  • Ozstache November 1, 2012, 9:46 pm

    Wow, health cover in the USA is very expensive compared to here in Australia. We had good private health cover many years ago, costing $1500 a year (not a month!) and even then it was most often cheaper to receive medical care under the government system because of Co pay requirements.

    Case in point, we had our first child under private care and it cost us about $500 in Co payments. Our second was under free public care and, even though there were more complications than the first, it was absolutely free. Now there’s an insurance system that rewards participants – NOT!

    Reply
  • Bob November 1, 2012, 10:08 pm

    Wait, how can the out-of-pocket max be less than the deductible?? Maybe I’m confusing the two, but this doesn’t make any sense to me… (Or is that the out-of-pocket max *after* the deductible?)

    Thank you for sticking it to the “waah, waah, you can’t retire early because you’ll never be able to afford health insurance” crowd. My own retirement date is in the distant future (well, not nearly as distant as the average young person’s ;) ), but the more logistical details I can absorb before that first day of sweet unbridled freedom, the better!

    Reply
    • TOM November 2, 2012, 6:15 am

      Out of Pocket Maximums is the maximum coinsurance you’ll ever have to pay. So, yes, you pay the deductible first, then you pay $3000 worth of copays (an additional $15,000 of medical care at 20% coinsurance), and if you require more medical care after that, it is fully covered by the insurance company.

      Reply
  • biliruben November 1, 2012, 11:32 pm

    I went this route about 8 months ago. A $7000 deductible, HSA plan for $218/mo for me and my boy through Regence.

    As soon as I turned 45 this summer they bumped it to near $300/mo. I don’t see a better option through link, unfortunately.

    Also, I have an HSA plan that allows me to transfer the money to a TD Ameritrade account and invest in anything under the sun. Until you get $5000 in however, they charge you $2.50 a month for the privilege. Hoping to make this a super ROTH that will help out in my golden years.

    Oh, you can also pay your long-term care insurance premiums from the HSA account. Something I highly recommend.

    Reply
    • Karawynn @ Pocketmint November 2, 2012, 2:13 pm

      Yes, whenever I’ve run the numbers I’ve noticed that the premiums (in addition to rising year-over-year) jump sharply for people in their 40s. We’d be paying 25% less per month right now on our HSA plan if my partner and I were both under 40.

      I suspect MMM’s family is going to dodge that bullet — if I have their ages right, both he and Mrs. MMM will turn 40 after Obamacare is in full effect.

      Reply
  • ael November 2, 2012, 2:03 am

    MMM–have you closely examined what is likely to happen in those years just before you qualify for Medicare (assuming it is still much like it is today) when you so arrive? ie, what assumptions do you make and what are their effects?

    Reply
  • Mrs EconoWiser November 2, 2012, 2:06 am

    Things have recently changed here in The Netherlands with our new cabinet. The amount we have to pay for health insurance in the future depends will depend on our income. So we can’t shop around anymore. Uncle Sam will decide how much we have to pay. My husband and I are probably going to have to pay four times as much as we do now. The lower incomes are going to pay less. Weird thing is: if were would have been Mustachians now (having enough ‘Stash and living off its interest) we would be paying the low amount as well. We feel we’re being fucked for working hard, going to university to get all of these degrees and earning a decent income.

    Still…we are even more motivated to pay off our mortgage and rack up a nice ‘Stash.

    Reply
    • Mr. Frugal Toque November 2, 2012, 6:45 am

      That’s how things are in Canada – and have been for some time: the people making the most money pay more taxes, and therefore are subsidizing the health care of those who make less money.
      On the other hand, I couldn’t be making all of the money I’m making now if it hadn’t been for the free health care, free public school education, roads, police, fire department, ambulance service and heavily subsidized university education I’ve received from the wise and generous people who came before me.
      My university education, after all, is only particularly valuable in a stable, thriving society that appreciate the contributions of an embedded software designer. Try selling that skill in Somalia right now (http://goo.gl/2jd9m).
      So I don’t complain too much about paying it forward to the next kid to come along (especially as, in my case, I have two children …).

      Reply
      • Hanne van Essen November 2, 2012, 7:37 am

        Of course, in the Netherlands, the higher incomes have always had to pay significantly more taxes as well. And no complaints, I like the fair education system, the support for those who need it, etc. etc. The change now is, that now the health insurance premium also gets higher according to your income. And somewhere along the line you just get very tired of hearing that the strongest should carry the heaviest burden.

        Reply
        • Emmers November 2, 2012, 9:13 am

          I’m just grateful that I’m strong. I’m not going to dump my load on someone weak just because I’m feeling lazy…

          Reply
      • Mr. Money Mustache November 2, 2012, 9:46 am

        These debates on the optimal degree of socialism are always interesting. Nowadays, they don’t even make me mad, because I am simultaneously living both sides.

        As a rich man who has earned high incomes in the past, I can see how you want to keep a good portion of what you make, as an incentive to work hard and not just sponge off of others.

        As a family who lives on lower spending now, I can see how it is nice to have a low tax rate on low incomes, rather than grinding less capable people into a homeless shelter by making them “pay their fair share”.

        And as Mr. Money Mustache, I’ve better learned the concept of “enough”, so that even with high income AND high taxes, I would not get pissed off, because you still have a shitload left over even after paying the highest possible taxes (here in the US anyway).

        The issue is then, are you smart enough to live a great life on your Absolute Shitload, or are you going to waste time complaining about how “the government took the money YOU made for yourself!”.

        Instead of complaining, I find it much more efficient to focus on living well on my absolute shitload of money.

        Reply
        • Mrs EconoWiser November 2, 2012, 1:22 pm

          Haha, I’ll stop being a complainypants then! Shitload of money, here we come! Thanks Mr. MM!

          Reply
    • Jimmy Gibbon November 5, 2012, 2:00 am

      Uncle Sam is in the Netherlands? lol

      Reply
  • Alan Jackson November 2, 2012, 5:14 am

    Interesting find about shopping around for your procedure.

    I had the opposite experience when I used to self insure. A procedure would have a negotiated rate of $1000 through an insurance network but if you self paid they tried to bill you $2000-$3000. I now view health insurance as 50% insurance, 50% getting access to negotiated rates.

    Reply
  • Mandy @MoneyMasterMom November 2, 2012, 6:17 am

    You didn’t mention if your situation changes that you could always move back to Canada, we’d take you back! Unless of course you’re running from the mounties!
    I’m just finishing up maternity leave and realized I paid 10% of our additional medical coverage to continue over my leave (for prescriptions, and visits to paramedical services like the chiropractor, physio, or massage therapy). I spent $300 for the year, my work spent $2700 and we didn’t get a single prescription or visit any paramedical service covered. If there is another Money Master baby I’ll think twice before signing up for this coverage.

    I know I know, I should quit my whining, us Canucks got it pretty good :)

    Reply
  • Paul D November 2, 2012, 7:45 am

    finished reading the blog from the beginning yesterday. I applaud your work here, MMM.

    I was pretty well sold on your badassity after all that reading, but today’s post seals the deal since you went through your elective surgery – it takes a real man to step up to the plate and do that.

    Reply
  • Anna November 2, 2012, 8:15 am

    I’m a nurse and we have MANY people who cannot afford their medications. If you need a prescription filled, check out costco. You DO NOT have to be a member to use the pharmacy and their pricing model is wholesale cost + 5%. Some medications are less than my copay. For instance, at walgreen’s 30 generic zofran (a common nausea medication) run about $150 at Costco it’s $19. Almost a 800% markup! Shopping around really does pay off!

    Reply
    • Diana November 2, 2012, 9:34 am

      Awesome tip about Costco, thank you! I knew that you can use the service w/o being a member, and I always suspected that the costs were lower than my local Walgreens rip-off. Our Costco is too far away for now, but once the new one is built in my town next year, I will transfer all my scripts there!

      Oh, and for those who live in TX, you can also shop Costco’s liquor store w/o being a member. Apparently drugs and liquor are a top priority here, lol! ;)

      Reply
  • Emmers November 2, 2012, 8:15 am

    Apologies if this gets too personal, but: “with no treatments or prescriptions” –> how did you manage to only have one child? Perfect use of barrier methods?

    Reply
    • Mr. Frugal Toque November 2, 2012, 8:23 am

      I can’t speak for MMM, but if you buy your devices in bulk at Costco, your automatic budget categorization software would just throw that in with your grocery budget.
      If you do your budgeting manually, you would probably throw it in “Rec” along with camping supplies, picnic blankets and sparring equipment.
      To each his own.

      Reply
      • Emmers November 2, 2012, 9:15 am

        Oh, good point — I hadn’t thought about the fact of grocery-store (or Costco) pharmacies being where people purchased their hormonal birth control, and thus it getting lumped under “groceries,” but that might well be what’s going on here. (But if that’s the case, why wouldn’t antibiotics, from the same location, be under the same budget item as well?)

        Reply
        • Mrs. Money Mustache November 2, 2012, 9:33 am

          Our Costco is very far away. In the rare cases that we needed antibiotics (which I try to avoid), they were a last minute need that we picked up at our local walgreens by bike. In the last 16 months, we spent $60 at walgreens, which includes antibiotics as well as other last-minute drug-related purchases.

          Between 1999 and 2005, I was on the pill (the quote you were referring to). I think the cost was one co-pay for 3 months worth of pills through a mail-out option, so it was pretty minor.

          Reply
  • Freeyourchains November 2, 2012, 8:26 am

    If you don’t carry collison or comprehensive, be careful still when driving, because if your turning and they don’t stop at the end of a parking lot, you could turn into a new escalade that is some drunk rich 20 year old girl’s father’s vehicle, then your insurance will throw you off their plan, even if red flags were present because she was underage with alcohol in the car and then tried to throw it into an Alcoholic’s Annyomous Clothing bin in front of traffic waiting at a red light. She got off with a Fine, no points or license suspended, or arrests, while i get thrown off that insurance because a door is $10,000+ to repair and it’s deemed my fault. O.o No point in driving when your driving next to million dollar in debt cars with poor crazies at the wheels looking to get sue happy. It’s like they are using consumer Debt Collateral to get Rich quick by taking other’s out financially.

    Reply
    • Emmers November 2, 2012, 9:20 am

      Wait, isn’t your scenario covered by Liability?

      Reply
      • Freeyourchains November 2, 2012, 10:24 am

        It was covered by liability, thankfully, but then i was dumped by the car insurance company. They didn’t even give me an option to increase liability premiums because of the accident. I looked else where for insurance and a few years accident free later, the accident records are wiped clean.

        Though people still buy exotically priced SUVs, with exotic repair costs.

        Reply
  • Heather November 2, 2012, 8:35 am

    My doctor (Canada), said that their current protocol is to have you in for regular physicals only every three years, for younger adults with no issues. Makes sense to me, since that’s about what I ended up doing anyhow.

    Reply
  • Eschewing Debt November 2, 2012, 8:52 am

    We’ve been blessed with excellent health care through my husbands work, and with three young kids, we have definitely used it! Having a baby for only 600 bucks has been nice (of course, we have our monthly premiums also which are about $240/month, so not too bad)!

    I know many here disagree, but health insurance has been the main reason our goal is to have Mr. Eschewing Debt go part time instead of fully retiring early. Working 2-3 days a week still sounds pretty sweet, and we’d still get the great insurance coverage.

    This article makes some great points, though, that we’ll have to think about when the time comes. We are also waiting to see how health care looks in a few years after the changes. Right now a lot of things are up in the air in regards to how the Affordable Care Act will be implemented. It will be interesting to see how it all turns out. Great article, lots of things to think about!

    Reply
  • Diana November 2, 2012, 9:28 am

    Yet another excellent article, and while I admit I haven’t done much research on the topic yet, it was always a concern with regards to financial independence. I consider myself to be pretty healthy, although I am on a few scripts and working on going vegan to try and cut at least one of them out of the picture. Hubby has had issues w/obstructive sleep apnea, and had several surgeries to correct anatomical abnormalities. The good news is that after all that sufferring, his sleep apnea is cured, but I’m sure this, and other medical issues will create a barrier for us in getting healthcare at the costs MMM stated.

    However, I’ll shop around as we get closer to our retirement date (5 years or less, focusing on less!), and I’m hoping that the ACA will be in force, the kinks worked out, and this barrier to FI will just be another minor bill I’ll happily pay in exchange for not being a hamster in a wheel any longer.

    Thanks so much for this post, and the corresponding links – it’s a great start to my research! :)

    Reply
  • redagain November 2, 2012, 9:50 am

    The thing that made me most nervous when my husband and I were on one of these was that you could just be dropped once you got sick. That meant it was OK for a car accident, but not for anything that required serious, long-term care.

    My understanding is that Obamacare has fixed that loophole, which did keep me up at night.

    Reply
  • Freeyourchains November 2, 2012, 10:17 am

    I say have as many children as you and your husband/wife desire!

    Raising children isn’t all that expensive with high quality used and reused items, and the media and consumerist companies make it intentionally expensive to get more profits from parents.

    Money shouldn’t determine the growth of a Family! Love and Time to Love should be the determinent factors.

    Religious Farmers needed the helping hands so they had more children, a quarter of the reason.

    Now technology and modern systems can do the majority of physical work, so you would think that would free up more time for couples to have more children!

    Think of children as an investment to pass on your loving character and life story, and to pay forward the love you passed on to them.

    Reply
    • Faun November 2, 2012, 11:26 am

      The day I left the Catholic Church was when a priest looked me in the eye and said my husband and I were going to hell for choosing not to have children because of financial concerns.

      Having children without considering financial implications is immoral.

      Reply
  • schmei November 2, 2012, 10:18 am

    I’m an aspiring Mustachian… let’s say I have some peach fuzz over the lip, but am nowhere near handlebar status. THIS has been the topic that kept bugging me. “Sure,” I thought, “We’re starting to live such that maybe we could save enough in 10 years or so to do this early retirement thing, but WHAT ABOUT HEALTH INSURANCE?” You’re right that those of us born and raised in the US are basically indoctrinated with the idea that we have to work forever because WHAT ABOUT HEALTH INSURANCE? So this, perhaps more than any of the other articles I’ve read here, is liberating. Thanks!

    Reply
  • Chris November 2, 2012, 10:51 am

    This article makes me thankful for my health care options. I can’t remember the last time I spent anything much of anything on Doctor visits. I have excellent healthcare through the military, which I suspect is much like a UHC setup. When I retire in 6 six years, I’ll have comprehensive family coverage, under Tricare, for around 42$/month. We plan on retiring close to a major military healthcare facility in Anchorage, AK that should take care of all our medical needs.

    Of all the services a government provides to its people, “affordable” health care should be one of them.

    Reply
  • Matt November 2, 2012, 10:53 am

    How does the high deductible thing work if the health service provider charges a lower rate for paying-out-of-pocket? Do you just pay it with cash, and bank on not needing any insurance claims beyond the deductible? Or do you pay it with cash, then file it with your insurer, so they know to “deduct” from your deductible?

    I guess I don’t understand the logistics when you have a HDHP. I’ve always had pretty good employer-sponsored insurance. And the first question I’m asked by every single medical establishment I’ve ever visited is, “Can I see your insurance card?” Since I’ve always been covered, I just hand it over without much thought.

    Now if I walk into a service provider with a HDHP, and I know up front that insurance won’t cover any of this visit, what do I do? What if the rates are lower if I pay out of pocket?

    Also, MMM: do you have any kind of dental coverage? Is that included in your plan, or do you have a separate plan, or just completely pay that out of pocket?

    Reply
  • Clint November 2, 2012, 11:35 am

    A couple of years ago, when the business I work for changed hands and health insurance premiums skyrocketed, I shopped around and ended up moving my wife and daughter to a high-deductible plan from Blue Cross Blue Shield of NC. $10k deductible and HSA compatible. My wife and I are more than 10 years older than MMM and the price for wife and daughter is about $260 a month (went up about $25 from the initial year).

    I mention this because I first shopped ehealthinsurance and BCBS never came up. I think it has something to do with BCBS is not willing to pay Ehealthinsurance fee, but I’m not sure of that. My mom suggest them to me and sure enought, their Blue Options plan was cheaper than anything I saw on ehealth.

    So if you’re out there shopping, do take a look beyond ehealthinsurance. It’s not 100% comprehensive.

    Reply
  • Clint November 2, 2012, 11:38 am

    Sorry for all the typos. Somehow I lost by option to edit.

    Reply
  • Derek P. November 2, 2012, 12:39 pm

    This article gets me thinking on how much of Canadian’s income tax goes towards our health care system as our ‘insurance’ and how expensive it really is…. Sometimes I don’t mind the concept of private health care in my country at all if it means a much lower taxation rate.

    I pay around 40k a year in taxes after all possible deductions (insane!), lucky to use $56 a year in health care benefits (random doctor visit usually for my knee joints), only ride a bicycle, no social benefits, minimal government sponsored education over the course of my life, so why the hell should I pay this insane amount of money to government for a bunch of services that I don’t use???

    Life in the great white north I guess.

    Reply
    • Sarah January 3, 2013, 8:21 pm

      Hi, I know it’s easy to feel like you don’t benefit when you don’t directly use services, but it helps me to keep in mind that my personal economy doesn’t exist in a vacuum. For instance the ar e measurable increases to your salaries based on how educated your neighbors are, And although you bike, highways still do what their original purpose intended, transporting the goods and( to a better or worse degree people) which make up economic activity.I’m sure you feel blessed thar you have the health that allows you to bike and only visit the doctor once a year, and the income (close to 150k?) that means you don’t have to rely on the government for shelter or to insure your kids get food. Just remember that you do benefit from the stability and economic advantages provided even if you’re not getting a specific monetize le payout.

      Reply
  • GeoSmiley November 2, 2012, 1:56 pm

    I think Mr. MMM and all the commenters are missing something about HSAs. Just having an HSA doesn’t mean you have to have any money in it. Just let it lie around empty until you have an out-of-pocket health expense (which would include things like chiropractic visits, specialists visits without a referral, as well as certain purchases at the pharmacy, etc.), and then shuffle the money from your regular checking account into the HSA just in time for it to flow out to the doctor’s office.

    I think there may be yearly maximums for how much you can put in the HSA, which would be the only reason to fully fund them up to your deductible limit, but if you’re pursuing a plan of paying expenses up to the deductible out of pocket anyway, you might as well just treat the HSA as a transitory checking account, and pay through it up until the yearly max. Then pay from there from whatever source you would have otherwise used. No big. Simple tax break that’s practically free.

    The only expense would potentially be a monthly fee of $2 or so, but I bank with a mid-sized regional bank that doesn’t even charge an HSA fee.

    Reply
    • madage November 2, 2012, 8:08 pm

      There are tremendous tax benefits to fully-funding an HSA when you won’t spend it all. Instead of only taking a deduction on what you spent, as GeoSmiley recommends, you can take a tax deduction on the total HSA contribution ($6250 for a family plan in 2012). If you open an HSA with investment options (your HSA is portable – feel free to shop around, especially if you pay a monthly fee for your HSA dollars to sit in a bank account) your investment income grows tax-free. When you incur a qualified medical expense and need to tap the HSA, the distribution is tax-free. It really is a “Super Roth” – tax-free contributions and tax-free growth. Using the HSA in this method may not be feasible for everyone, but it’s a great option if you’ve maxed out your other tax-advantaged savings.

      Reply
      • Debbie M November 3, 2012, 7:54 pm

        Also, my HSA account pays more interest than my other accounts. So I’m doing the opposite–putting money in and not taking it out even if I have a (small) medical expense.

        Reply
  • Spork November 2, 2012, 2:33 pm

    I cannot tell you exactly how many times I have expressed similar opinions as yours…. probably over a hundred. I went through 3 years of self-induced retirement (“pretirement”) and covered myself. I was TOTALLY EXPECTING insurance to be >$1000 a month — having heard horror stories. I was really surprised at how cheap it was.

    We’ve come to believe that the near-zero deductible is required. The math just isn’t that hard! One year’s worth of premium savings easily covers the deductible… and if you’re a normal semi-healthy individual, you bank it and have it for next year.

    Absolute worst case: If you can’t afford the $10k deductible, and you do have an unexpected emergency — that’s when you pull out the credit card.

    Reply
  • Dragline November 2, 2012, 2:47 pm

    The other side of this — as you noted — is how much you will pay out-of-pocket by choosing your medical provider carefully. There is a small but growing practice of physicians operating outside the insurance model and just charging cash.

    See http://www.surgerycenterok.com/ for an example. With a really high deductible, you may want to look into alternatives besides the usual criteria of “doctors that take your insurance.” Or be willing to travel for surgical procedures, perhaps even outside the U.S.

    Alternative therapies such as accupuncture or chiropractic, especially for pain, are worth looking into because they are usually much lower cost. For example, my wife was able to have labor induced by an accupuncturist for $25, which was refundable if it didn’t work. (We had our baby less that 24 hours later!)

    Then, you might also want to consider what your family is most likely to encounter. Almost nobody has “average health care costs” — they are either much lower or much higher, and very particular to the individual. If you are basically healthy with no family-related conditions, the answer is usually “not much.” But I have found that with children, the biggest risk to a big dollar cost is a trip to the emergency room induced by a blow to the head or a broken bone in some biking or sports-related activity. With active kids, figure to have one once every 3-5 years and another one or two trips where you can bring them in yourself for something minor like stitches.

    Reply
  • slowitdown November 2, 2012, 2:51 pm

    I’m sorry but this has to be said. The American concept of healthcare is completely ridiculous. Why is it such a weird concept to Americans that everyone should be entitled to healthcare in the same way that they’re entitled to free education? I would never in a million years move to a country with a health system like that in the U.S. Just the thought of having to pay for having a baby is revolting. Even if I do pay somewhat more in taxes here in Canada, it is absolutely worth never having to worry that I will be told that I will go broke or lose my house if anyone in my family becomes seriously ill.

    Reply
    • Georgia November 2, 2012, 7:44 pm

      Plus a million.

      Reply
      • Mr. Money Mustache November 2, 2012, 8:07 pm

        I’m working on it, slowitdown and Georgia. My fellow Americans need to hear from the citizens of countries with public health care systems, so they can stop being afraid of trying it here.

        Think about it: if everyone else does it, and they love it, AND it costs them half of what we are spending, why would we not want the same thing?

        Answer: the only people that DON’T want it are those who have been fooled by their political party and lobbyists into thinking it wouldn’t work.

        It would work here in the United States. It WILL work.

        Reply
        • Debbie M November 3, 2012, 8:02 pm

          There is also the belief that the care is of lower quality and that cutting-edge (= expensive) treatments are simply unavailable. Bankruptcy is the nightmare we have (also, insurance companies refusing to pay); death or other bad outcomes is what they fear. Their argument could be that people in other countries don’t know what they’re missing–they haven’t had our “excellent” health care, so they don’t know what it’s like.

          Again, (unbiased) statistics are so important here.

          Reply
        • victoria November 6, 2012, 8:00 am

          People also tend to set up a false dichotomy in the US, where the current system is all rugged individualism and a socialized health care system of any sort is taking money out of the pockets of good hard-working Americans.

          In actuality, between Medicare/Medicaid and the fact that we require that emergency rooms treat everyone who comes in regardless of ability to pay we’re already putting a huge amount of public money in the system. The question is do we want the semi-socialized plan we have now, where your access to care is largely determined by your employment status and/or being over 65, or an explicitly socialized (and possibly less expensive) plan where people can get preventive care and care outside of an ER no matter how much money they make?

          Reply
  • Spork November 2, 2012, 2:53 pm

    Incidentally, as an aside: For your “operation that you get when you desire no more children” — I had a different outcome entirely. My doc did it in his office (5 minutes from hand shake to “see you later”) and insurance covered it at 100% — EVEN THOUGH IT WAS AN 80/20 plan! I guess they figured out this was a surgery that was cheaper to promote than to pay for additional childbirths.

    Reply
    • Emmers November 2, 2012, 6:14 pm

      Excellent! I honestly do *not* understand why there exist *any* insurance companies that don’t cover birth control and sterilization. Financial incentives, people!

      Reply
  • Gus November 2, 2012, 3:29 pm

    OMFG! I can’t believe this hasn’t been mentioned yet!!!111!!!

    A real man does his own vasectomy! *Sheesh* I am hereby confiscating your badass card “Mr.” Money “Mustache”.

    You can get it back after you have successfully un-vasectomized yourself… The use of garden or carpentry tools is admissible but you get bonus points for doing it with a soldering iron.

    On a serious note, Mr Money Mustache, I am getting used to your writing style and I was kinda disapointed (terribly, actually…) that no jokes were provided on this front.

    Reply
    • Debbie M November 3, 2012, 8:05 pm

      Thanks for filling in that horrifying gap. I greatly appreciated it.

      However, we don’t need to sacrifice safety to badassity. I implore everyone to use the right tools for this job (though of course you should either rent them, borrow them, buy them used and re-sell them for the same or better price).

      Reply
  • Sustainable PF November 2, 2012, 7:45 pm

    Yes, I pay a LOT in taxes. My health is cared for as are our poor and the kids get good education generally the roads are in OK shape etc etc.

    O’ Canada – health care is a reason to not leave thee.

    Reply
  • Leah November 2, 2012, 9:15 pm

    United Healthcare has an Accident Rider you can purchase. There’s a monthly premium, but for accidents the deductible is waived and care is covered 100%. We had to use it in the first year we started with United Healthcare and they covered everything as promised and we still got our deductible credit for the year.

    Although we priced through esurance – it was really helpful that I called a health insurance broker. The policies are exactly the same as quoted on esurance, but there is a wealth of knowledge there -especially if you have pre existing conditions. Look up registered, reputable brokers!

    Reply
  • larryw November 2, 2012, 9:41 pm

    Practicing primary MD here.

    There are some bad things that happen randomly. Statistically low, but impact very high: cancer, auto-immune disease, any number of chronic illnesses that are not lifestyle related/preventable.

    Life saving medicines can be extremely expensive 10000+ per year for new cancer drugs. Same with doctor/specialist visits – easily run up 5000 per year for a serious chronic condition.

    Please shop carefully. MMMs plan does not cover any medications nor doctor visits. I’ve found golden rule – (the underwriter of the UHC saver80 plan) to be one of the worst by actively seeking to deny coverage for things you’d think are necessary (therapy, rehab stays, equipment, treatments, scans). If you’re unlucky one can open huge yearly liability.

    For maybe 50-100% higher premium on a more mainstream high deductible plan one can significantly reduce the risk of high expenditures – that’s the point of insurance. Protect against 10-20k+ expenses, especially ones that could be yearly if unlucky in health, otherwise your hard fought savings are all for nothing.

    With current Obamacare, if you get sick then you can apply for a better plan in 2014 and not be denied. But politics can change.

    Reply
    • lurker November 3, 2012, 10:39 am

      exactly: be careful…”by actively seeking to deny coverage for things you’d think are necessary” this says it all…until you need it some insurance seems fine….until you really need it…then a lot of shit that was never explained except in the very fine print comes out to bite you right in your badassity.

      Reply
  • ael November 2, 2012, 10:15 pm

    It’s all very complex when it should be simple. My wife has been in the medical field for 45 years (we won’t be retiring early! But the MMM lessons are still applicable.) In her private office, even after a billing person to handle most money matters, she still spent 30% to 40% of her hours on paperwork (insurance companies, including Medicare call it documentation–fraud prevention anyone?). It was not like this when she started in 1967 and patients still got well.

    I have to believe that a single payer system is the rational solution. First, documentation to prevent fraud is essentially no longer an issue, resulting in immense gains in productivity. You only document for the purpose of monitoring treatments and gains.

    Reply
  • ael November 2, 2012, 10:27 pm

    Second, all other developed countries, as well as say Cuba, find a single payer system less expensive and the citizens are at least as healthy as ours (the French for example live longer than Americans).

    We are unable to do so ourselves at this time because single-payer=socialism in too many minds. This would not be a disadvantage in many countries with a history of electoral participation by socialist parties. Here we only remember that the third word of the accronym USSR is socialist. Perhaps this will change, we have one avowed Socialist in the Senate, Sanders from New England. He doesn’t seem all that dangerous.

    Not all Socialist, nor Democratic, nor Republican ideas are good. We must always pick and choose, but names alone should not scare us.

    Reply
    • Debbie M November 3, 2012, 8:09 pm

      Plus, single payer doesn’t have to mean single provider. You can still have independent, competing medical providers (presuming your town is big enough). It drives me nuts that so many people don’t get that.

      Reply
  • Liz I November 2, 2012, 11:38 pm

    All the talk of Canada’s higher taxes paying for its healthcare doesn’t take into account that the American government actually pays *more* per capita than pretty much everywhere else in the world (bar Norway and Luxembourg, and I imagine their health care is pretty swish).

    Once you take into account non-government contributions the US has by far the most expensive health care in the world, at ~17% of its GDP. In comparison to the UK (<10%), Canada (~11%), Australia (~8%) etc America looks very, very expensive. And you don't get much bang for your buck. One article sums it up nicely: "In other words, we [the US] spent more on government care for the elderly and the poor than most normal governments spend on health care for everyone."

    To back up my claims:
    http://www.guardian.co.uk/news/datablog/2012/may/02/uk-healthcare-spending-gdp
    http://articles.businessinsider.com/2012-03-12/politics/31146733_1_health-spending-health-care-health-care/2
    http://www.nationalreview.com/critical-condition/47302/third-highest-world-i-i-obamacare/avik-s-roy#

    (Note, I am Australian, which makes me naturally biased against the bonkers idea of not having universal health care. But when the economics of it show universal health care is cheaper than the alternative I don't know how anyone can defend the current American system.)

    Reply
  • blissing November 3, 2012, 3:18 am

    I’m turning 50 soon and my insurance gift is a price raise to $800/mo. I have tried to apply for other individual plans and been rejected because, you know, I’ve been sick before. Had pneumonia in ’05, mild asthma (can’t even remember when I last used an inhaler). My numbers are all good.

    The only bright light is I’m engaged to someone who has insurance. Hopefully next year this bill will be done.

    Reply

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