I’m in the leadership group at work, so I knew this was coming. With the new Affordable Care Act requirements, my old health care plan was canceled. The plan didn’t meet some portion of the ACA’s requirements. Our problems at work were compounded because our insurance brokers never let us know that there was a provision in the ACA which allowed us to lock in our 2013 rates for 2014 albeit with a shorter duration (Plan ended Dec 31, rather than Mar 31).
The president of our company has stated that we should not expect raises (yes…like ever again). That’s one hell of a pay freeze. I’ve been looking at ways to optimize my expenses. Republic Wireless…done it. Reduced insurance coverages…done it. Asked for a discount with the internet company…done. No cable TV at home. Cook 99% of our meals at home, yep. I just need to learn how to make my own wine (AND I’ve received an offer to be taught how to make wine…that’s a win IMO).
Essentially we’ve made our monthly budget as efficient as possible. Total savings from this optimization: about $400/month. The last bill I had to pay, which I had no control over, was my health care bill. My company is generous. The total insurance bill for my family and I was $483/month and I was responsible for $140 of that. Because I own over 2% of the company, I was not able to pay for that insurance pre-tax through an HSA or anything like that.
With the exchanges, I all of a sudden had the opportunity to optimize my health care as well. In order to really examine my health care options, I needed a few pieces of information:
1) Our company sponsored health plan’s costs were set to increase by 92% for FY2014.
2) My portion of the bill in 2013 was $140/month
3) The company only anticipated a 25% increase in health insurance costs for 2014 (company would cover $428/month)
Based on this information, I ran some very rough numbers as a starting point:
Total estimated 2014 health care costs (group plan): $927
Company coverage: -$428
Difference: $499 – (An increase of 356% from my contributions in 2013)
Using this information, I went to Healthcare.gov and started surfing for plans. Our company sponsored plan is/was a really good plan. Low deductible, coverage for a bunch of things, etc. The only problem with this plan is that my family and I are fortunate to be quite healthy. We don’t need a really good plan, we need a catastrophic plan (now called a High Deductible Health Plan, HDHP). There is no sense in paying for a $1,000 deductible if you never even hit $1,000 in medical expenses in the year. Yes, I may have a bad year where I do have significantly more than $1,000 in medical expenses, but maximum out of pocket expenses under Obamacare is $12,500/year. In a worst case scenario, I can use the cash flow from my rental properties to pay the full $12,500 (I receive about $982/month from the properties if I self-manage).
On Healthcare.gov, I learned a few things:
1) Because my W2 income is low enough (and apparently not projected to grow…), I qualify for the state’s health insurance for children. Because I qualify, I have to use the state program rather than the exchange for my daughter. ($77/month; $5 copays)
2) The HDHP plan I found is a catastrophic plan. The deductible is $12,000/year, or only $500 less than the max out of pocket. This plan only costs $307 before any tax credits (let’s assume I don’t qualify for a tax credit)
Using the available data, I quickly calculated that with a health care plan that I can choose for myself (rather than forced into one specific plan), I should be able to realize a savings of $499-$307-$77 = $115/month, excluding any company match/kick back, etc.
The current plan proposed by the president of the company is to give all employees a ‘raise’ equivalent to the anticipated company expenditures for health care in 2014. For me, this means a raise of $428/month. Knowing this last bit of information, I can dial in my savings/health care optimization a little tighter.
1) We are not going to use the plans that are 92% more expensive.
2) The company is not offering health care for 2014, but giving everyone a ‘raise’ to compensate for the company paid portion of health care ($428/month)
3) In addition to the company portion, I was paying $140/month for health care in 2013
Under the new scenario, we can add the company ‘raise’ with my previous out of pocket expense and subtract my new premiums. In doing so, we arrive at the following equation: ($428+$140) – ($307+$77) = $184 savings/month. To really optimize this whole process, I will have to open an HSA and deposit at least the $184/month into the HSA.
While I grumbled when I first heard that our premiums were jumping 92% because of the Affordable Care Act, I decided that the ACA actually benefited me significantly by allowing me to 1) choose my own plan and 2) get a savings/’raise’ in 2014.