Planning for Health Care in Early Retirement

We value our health pretty much above everything. If we had a such thing as a “health portfolio,” it’s safe to say we’d value that above its financial counterpart. Not that we’re perfect on healthy habits (see the great tater tot debate), but we try hard to make good choices so that we’ll be able to enjoy long, healthy lives. We want outliving our money to be a very real possibility, not because we mismanage our funds, but because we live that long. #goals

Something we are thinking a lot about — of course! — is how we’ll ensure that we always have access to good quality medical care at every stage of our lives. We know this is top-of-mind for lots of other American early retirees and aspirants, as well, and it’s hard not to feel like all of the current Affordable Care Act (ACA)/”Obamacare” options could change at virtually any time. We’ll have a new president next year, health plans are dropping out of the ACA,  and the merger of other plans is raising issues about price competition. (Friends in Canada, Europe and Australia — we’re soooo jealous that this is a non-issue for you! Feel free to taunt us dumb Americans in the comments.)

Related post: The Moral Ambiguity of Obamacare Subsidies for Early Retirees

We’re probably a little wacko for considering postponing our early retirement until the health care landscape is a bit clearer, but we’ve also moved past that idea, since we now accept that the landscape will probably always be shifting. We’ll just have to view health care coverage as a moving target, at least until we get to Medicare age, assuming Medicare is still around in 25-30 years. In the end, our health care plan probably won’t end up looking as clean and simple as what we’ve mapped out:

In the meantime, here are the health care options we’re keeping on our radar. (Also, how much does this pinnable image with the ferns look like an actual health plan brochure? Hahaha. No insurance for sale here, folks!)

Coverage on the ACA Exchanges (“Obamacare”)

Especially for those who qualify for subsidies (essentially discounts), as we plan to once we quit working, ACA coverage is probably the most affordable option when you factor in everything: premiums, copays and out-of-pocket maxes. Assuming there are any insurers still on the exchanges when we quit, this will be our first stop. Plans on the exchange have to be comparable as “apples to apples,” and are rated as platinum, gold, silver and bronze to make it easy to research the differences between insurers’ plans. Of course, there are still plenty of considerations to keep in mind, especially the subsidy cliff, as expertly outlined by Justin at Root of Good, and the impact of Obamacare on taxes, laid out in detail on Go Curry Cracker. Plans, costs and subsidy limits also vary by state and sometimes county. You can find out prices where you live by visiting Healthcare.gov, and it will route you to your state exchange if you have one.

Non-Exchange Health Insurance

The health insurance reforms mandated by the ACA (having to cover preventive care, disallowing different rates for men and women, no more annual or lifetime health coverage limitations, etc.) apply to all health insurance now, whether or not it is sold on an exchange. So for those who don’t qualify for subsidized coverage on an exchange, it may be a better deal to find other health insurance sold directly by an insurer since you’ll have more choices in most states. It’s smart to look at the fine print, though, since off-exchange plans aren’t held to the same qualified health plan (QHP) standard, and may or may not be comparable with exchange plans in your state. Also note that if you enroll in an off-exchange plan during the open enrollment period, you can’t switch to a subsidized exchange plan mid-year, even if you have a drop in income. You have to wait for the next open enrollment period. While we plan to get subsidized exchange coverage, if our income went up unexpectedly in retirement, we’d definitely do some price comparison shopping and include non-exchange plans in that research.

Related post: Protecting ourselves from higher health care expenses later in life with a big nest egg… for later

Catastrophic Coverage

Catastrophic coverage is insurance that only kicks in after a high dollar amount, and is meant to cover only the true catastrophes: serious illness or major injury. With this kind of insurance, you are on your own for routine and preventive care. Right now, only people under 30 are eligible to buy catastrophic plans, but in the pre-ACA past these were available to everyone. While we don’t love the idea of switching to a system that gives us a price disincentive from getting preventive check-ups, since we’d have to pay for those out of pocket above and beyond our insurance premiums, we’d definitely consider a plan that just covers the big stuff at a lower cost if the ACA goes away. We want to know that a serious illness or injury won’t wipe out our nest egg, and a catastrophic policy could still protect us in the case of, well, catastrophe.

Medical Tourism

If things get crazy with the ACA — let’s say every insurer drops out of the exchange so that no subsidized plans are available, but for some reason we can’t get a catastrophic plan — medical tourism is our next line of defense. Excellent and cheap health care is available in plenty of countries around the world, and we could make use of it if need be, especially since we plan to travel the world anyway. If we’re planning to visit, say, Thailand, then getting some dental care while we’re there is no big deal. Or if we need more extended treatment for something, we might post up for a while in-country. Several countries have built websites in English specifically focused on promoting medical tourism, like this one for India. The CDC has some cautions worth noting when considering medical tourism. And this option doesn’t address the individual mandate for health care coverage for U.S. residents — we might still be looking at having to buy health insurance of some sort, or having to suck it up and pay the tax penalty.

Full-Time Expat Living

Leaving the country is always on our radar as a potential future option, especially if the markets endure a sustained crash with rampant inflation and our dollars don’t stretch far enough in the U.S., or if health care costs just get totally out of control. We hope to stay put where we are, but think it’s smart to keep this option on the table in any case. While we would go back to work if things turn south in our planning within the first few years of retirement, but may not have that same luxury after we have several years away from the job market and have made our skills obsolete. As Go Curry Cracker also mapped out, living abroad exempts you from the ACA individual health care mandate, though there are limits then on how much time you can spend in the U.S. (roughly a month a year). Full-time expat living would be a huge adjustment, but we’d have the flexibility to choose a country with a low cost of living and high quality, affordable health care. (Probably tough to find that combo and great skiing, though!)

Medicaid… the Worst Case Scenario

We take comfort knowing that, if we truly start running out of money, we can get coverage through Medicaid. That’s not true for adults in every state (you can check your state’s eligibility levels here), since the states decided individually whether or not to expand their coverage to include low-income adults. And Medicaid varies widely in quality between states, based largely on how many doctors will accept it. So in some states you may technically have coverage, but be unable to find a clinic where you can actually use your insurance, while in other states, Medicaid is nearly indistinguishable from private health insurance. We think of it as our last health care safety net, but we’re sure glad it’s there.

How Are You Thinking About Health Care?

We’ve heard from aspiring early retirees who are taking more of a “wing it” approach to health care, and a few others who are obsessed with the details like we are. Where do you fall on the spectrum? Any health care options that you’re thinking about that aren’t on our list of possibilities, like health care ministries? How are you factoring health care expenses into your long-range budgets, knowing that so much is still unpredictable? Let’s discuss in the comments!