Oct 28, 2013 217 comments

Obamacare: Friend of the Entrepreneur and Early Retiree

It has now been a whole year since the MMM family made the jump to a low cost / high-deductible health insurance plan, so I figured it would be useful to provide an update on how the year has gone.

The one we ended up with was called the “Saver80”, a barebones but useful plan provided by Golden Rule, which is a subsidiary of the very large United Healthcare. We found it through the insurance search engine called ehealthinsurance.com, using its “sort by price” feature.

At the time of the article I received many speculation-based complaints that are now worth addressing:

Complaint: “Those Ehealthinsurance quotes are all fake window dressing – once you sign up, the real premium is much higher”.
Diagnosis: Mostly False.
In our case, the original quote was $219 per month for our 3-person family, and after “underwriting” they raised it to $237 after noting the costly birth of our son (since if we chose to have more kids, they would statistically incur higher costs). Not too bad. And after the Affordable Care Act is fully activated in January 2014, past medical history will no longer be a factor.

Complaint: “They always jack your premium way up after the first year”
Diagnosis: False. We just got the renewal notice for the plan. I was frightened to open it, expecting a doubling of premiums. And indeed it was a premium increase notice. Our costs are rising $4.24 per month, or 1.8%. One penny of this is the “standard increase” and the other $4.23 is the “age increase”, as Mrs. MM and I are a year older and, sigh, closer to our eventual death. If we account for inflation at 3%, the premium has actually gone down.

Complaint: “High deductible insurance is risky – you’re better off with full coverage”
Diagnosis: False in most cases. Although there is plenty of statistical variation involved, on average you win when you self-insure. For example, as usual this year I went to the doctor once for an annual checkup and it was covered by the plan under preventative maintenance. Now pushing 40, I feel better than ever, and I like to say that bikes, barbells and salads are my primary health plan. Mrs. and little MM each caught two bacterial infections over the course of the year that required antibiotics, and we had to pay for the doctor visits and prescriptions out of our own pockets. This raised family health care costs for the year to about $600 (plus the $2844 in insurance premiums, of course). The high-deductible plan was still the clear winner even in this unusually bad year.

Complaint: “Your plan will not be available after the Affordable Care Act comes in”
Diagnosis: True and False. Existing plans purchased in 2013 or earlier will often be allowed to remain in effect until at least the end of 2014, and checking ehealthinsurance, I can see my plan is still available today, for the same price. It will probably disappear at the end of the year.

According to my correspondent Xiao Sun who is part of a small business insurance firm called simplyinsured.com, high deductible plans are not going away, just being thinned out due to stricter rules. Xiao’s summary:

Some older plans are grandfathered in, so they don’t have to change. The main rule that high deductible plans have trouble with is the 80/20 rule, which requires at least 80% of premiums to be spend on medical expenses rather than SG&A and marketing. Plans that don’t spend 80% of premiums on medical expenses are supposed to provide rebates back, though many insurers are responding by not offering the high deductible plans anymore. More on that situation on this Kaiser Health News article.

OK, What about the Affordable Care Act (aka Obamacare)?

Although some misguided souls continually spread fear and doubt over it, this new law actually has some great potential. Remember, we’re starting from one of the worst healthcare cost situations in the rich world (Canadians pay about half of what we spend per capita for full universal coverage for life – including vision). So by moving the US closer to these more successful systems, we all have a good chance at saving money over time.

For an early retiree like myself, the option for a $10,000 deductible fades away after 2014. The new limit seems to be $5,000, which seems silly to a Mustachian (after all, who couldn’t rustle up $10k in a rare medical emergency!?), but necessary in a country where most people don’t even have a grand. Running through ehealthinsurance.com again for a 2014-compliant plan, I see this as my best option:

$460 per month, with a $5000 individual deductible, $10,000 family, and $12,700 annual out-of-pocket maximum.
This is for the “Kaiser Permanente Colorado Bronze” plan. Colorado residents can also do the same search on the state-run connectforhealthco.com (where the same plan is listed) and any US resident can search on healthcare.gov* (which just lead me back to the Colorado exchange).

Update: As of January 2015, more competitive providers have entered the Colorado market and I can now get a better-looking plan from Colorado HealthOP which includes children’s dental coverage for $408/month.

So we would be increasing our premiums, but cutting the deductible in half, as well as gaining prescription drug coverage (a $20 copay after deductible) and some other goodies. And the new plan is HSA-eligible, which means all costs will be covered with pre-tax money. More insurance for more money – not my favorite bet to make, but also not completely devoid of value.

But now that I’ve got you braced for a costly-yet-manageable worst case scenario, I can reveal the good news: Most Mustachian-level early retirees will get virtually free health insurance under the new law.

When you select a 2014 plan, a little box pops up: “check if you are eligible for a subsidy on this plan”. Working through the options, here is what I see for my own family:

Whoa. So although I could pay a maximum of $5520 per year for this new and improved coverage, in reality I will only pay this much in years where my annual income is over $80,000. For incomes below that generous level, the federal subsidy kicks in and my net cost drops, until I get to the point of free health insurance somewhere around $26,000. With annual living expenses of about $25,000, we could in theory live this current lavish lifestyle and get fully subsidized health insurance simultaneously, if our ability to earn money somehow dried up someday**.

So far I’ve covered these changes from my own narrow perspective: a young high-income family with considerable savings and no health issues. But the Affordable Care Act is really designed to help people less fortunate than us – students and seniors, people with existing conditions, the unemployed and quite notably self-employed entrepreneurs. With this new law, you can now drop the decades-old tradition of great fear and dependence on your employer for health coverage. You can quit your job, switch to another one, or create your own, with no more worry about who will cover you, because cost is affordable and minimal at lower incomes.

This is big. If you’ve read this blog for long, you know how excited I get about small business, self-employment, and the General Starting of Some of your Own Good Shit. It provides variety, challenge, and an early escape from The Man. And if you could see my email inbox, you would see just how many creative people are afraid to go out and do exactly that – over the mundane issue of health insurance fear. So I am going to place my bet that the Affordable Care Act will be VERY good for entrepreneurship in the years to come.

And just to maintain this country’s libertarian principles, you still retain the choice of opting out of the whole program. The penalty for failing to sign up is fairly painless – $95 for lower-income single people and rising to about $900 for a family of three making $100,000. So despite all the talk of lost liberties, your range of choices with the new health insurance law are better than ever.

Further Reading: Ezra Klein is a rather brilliant Washington Post columnist who has been digging into this and other neat policy issues for years in a column called Wonkblog. Here’s a link to everything his team has recently written on healthcare.

*Wow, I notice that the healthcare.gov site is snappy and fast now. Despite widespread controversy in the news about the supposedly catastrophic launch of this new website. Again the Low Information Diet prevails: stay calm, tune out of 24-hour-news cycle talking heads controversy, check site again a few weeks after launch, get health insurance quotes quickly.

** Unfortunately, I have to admit that this year we will have a household income above $80,000 and thus would not be eligible for a subsidy. Higher-than-forecast investment and Lending Club returns, rental house, carpentry, and real estate income plus this blog have all contributed to this. Please don’t tell the Early Retirement Police. If this terrible condition persists into 2015 and we are kicked into a new plan, I guess we will have to settle for a slightly lower savings rate. What an oppressive country!

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Want More?

Joe October 29, 2013, 10:05 am

I’m all for health coverage for more people. My mom couldn’t get health insurance due to existing condition and now she could. I’m having a hard time enrolling right now, but I expect it to work out by the end of the year.
We are covered with my wife’s employer plan for now, but eventually we’ll have to buy insurance for the whole family too.
JBS October 29, 2013, 10:13 am

The passage of ACA, the affirmation by the Supreme Court and the reelection of Obama (thus preventing any form of repeal) set the stage for one of the best
moments in my life since the birth of my children: I quit my miserable corporate job without fear. My fear being born with a very expensive chronic disease (Ulcerative Colitis) that was essentially not insurable in the the private market pre-ACA.

Rock on ACA! This is a huge win for individual economic freedom. The conservative vision of an “ownership” society is much more possible with this reform than without it. Which is exactly why this idea was born inside the walls of The Heritage Foundation and its first implementation was under a republican named Mitt Romney.
Troy October 29, 2013, 10:35 am

Your experience with Individual Health Insurance is not common, or representative of many others, including my experience. I am self employed, and my HSA premium increased 13%, with no claims last month. The real rate increases will not happen until 2014 anyway.

From the LA Times…

“middle-income consumers face an estimated 30% rate increase, on average, in California due to several factors tied to the healthcare law.”

Pam Kehaly, president of Anthem Blue Cross in California, said she received a recent letter from a young woman complaining about a 50% rate hike related to the healthcare law.

“She said, ‘I was all for Obamacare until I found out I was paying for it,'” Kehaly said.

“Blue Shield of California sent termination letters to 119,000 customers last month whose plans don’t meet the new federal requirements. About two-thirds of those people will experience a rate increase from switching to a new health plan, according to the company.

HMO giant Kaiser Permanente is canceling coverage for about half of its individual customers, or 160,000 people, and offering to automatically enroll them in the most comparable health plan available.” The most comparable health plans are universally more expensive.

More people in just the state of California recieved cancellation letters for their individual insurance than the entire country signed up for Obamacare.

With all due respect to this fine blog, you are somewhat off base regarding your position on the ACA IMO.
RMore October 29, 2013, 11:17 am

You are talking to us on this one! I’m 49, my hubby 54. We are early retiring this month and moving to Fort Collins. We will work part-time so we will make less than $25K/yr and live off of our savings until we can tap our IRAs.

The ACA is our saving grace because now we will be able to 1) get health care (I have hereditary blood pressure issues), 2) afford it, 3) not worry about getting cancelled, and 4) most importantly, not worry about it bankrupting us and losing our nest-egg. The plans that I’ve seen on Connect for Health Colorado will cost us anywhere from $0 to $500/month depending on which we choose (I think we like the $0 plan best!). All of them have a max out of pocket of $12,700 should a catastrophe occur. We can’t bet on nothing happening since we’re getting to the age that stuff happens.

I totally agree with you that this is a dream come true for early retirees. It’s what we’ve been waiting for. I guess I’m a socialist, communist, Muslim from Kenya too!
Bryan October 29, 2013, 11:28 am

I got a letter: my premiums up 42%, my deductibles up 50%.

How is that a “friend” of the entrepreneur and early retiree?

Hmmm…..
- Troy October 29, 2013, 1:38 pm
  
  This is the point that I made a few posts up. Premiums are going way up for a lot of people as we type, and this is only the beginning.
  
  While it is possible that a select few, including MMM have seen very slight increases in premiums, a vast majority of us entrepreneurs or those with individual health insurance are getting hammered by higher premiums as they renew.
  
  In fact, following in this blogs mindset of having a high income and high assets, a cheap high deductible health plan is the most sensible thing. That is what I have, or had. High income, high assets, cheap HSA with a large deductible. These plans are going away, and being replaced by plans with more insurance and more premium to met the new laws requirements.
  
  The argument that more insurance is better, or even valued, is flawed. MMM makes that argument above when he states “More insurance for more money – not my favorite bet to make, but also not completely devoid of value.”
  
  I disagree. It is completely void of value when this decision is forced upon those of us who don’t want or need more insurance simply to subsidize or spread risk for those who do value it. I do not find value in paying for anything that I do not want or need. More so, If the primary reason I am paying more is so other can pay less, I find that disconcerting.
  
  I think the exact opposite of the post’s claim will ring true. This is not the friend of the entrepreneur, but instead a hindrance. I speak from specific experience
Susan October 29, 2013, 11:33 am

Great post. I love Ezra Klein – thanks for giving him a shout out. He’s one of the few Washington reporters that writes about complicated issues in a way that’s easy to understand.

My husband and I are currently covered under his company policy but the coverage is pretty low – to non-existent in some cases. I’m a fan of the open market and can’t imagine more competition could possibly be a “bad” thing.
Chelsea October 29, 2013, 11:40 am

We live in Indiana and are self-employed. We just recently had our insurance cancelled effective Jan 1st. It was $380 monthly premium for a family of five with a $7,000 deductible and I think $12000 max out of pocket. I’ve skimmed available plans on ehealthinsurance. The plan I found that would best suit our needs would be $830 a month with a $6,0000 deductible and then 40% copayment after that until $12,000 max out of pocket. The lowest plan offered was $800 a month. So our insurance would more than double because of this.

Last year when I was shopping for insurance there were probably at least seven to eight companies serving the individual market on ehealthinsurance. This year there were only two. The one which had the plan I liked I haven’t really heard of and it makes me wonder what type of network they cover.

We are planning to talk to an insurance broker about our options. We’re trying to balance giving the exchange enough time to be working for us to check our their plans versus ensuring that we have coverage effective January 1st.

We may be eligible for a subsidy the first few months of the year due to our income this year, but we would most likely have to pay back the subsidy as we would make too much next year (projected recurring revenue from the business). We are also looking to buy a house in the next year or two and so we are balancing showing we earn enough versus taking out too many deductions.

So the increase in insurance cost (when the other policy was suiting our needs just fine) will eat into our savings and paying down debt money. People are talking about the increased premiums and increased deductibles, but who is paying for the subsidies for everyone? Even if you are subsidized, taxes will go up to fund the subsidies and you will pay for that either through increased costs or other measures.

Plus, as a business owner, the more that we are taxed then the harder it is to hire employees and invest in our business.
- Mr. Money Mustache October 29, 2013, 11:51 am
  
  Thanks Chelsea – good to hear a few examples of how things are not always working out for the better (although congratulations on a very successful business as out-earning the subsidies with a 5-person family is no small feat!)
  
  Note that even if you do face higher income taxes some day, this should not affect your ability to hire workers and invest in business: Business expenses including payroll come straight off your taxable income and thus reduce it. If anything, higher taxes increase the incentive for a business to invest rather than return profits to the owners, as the marginal value of taking extra income is reduced.
  
  My business pays for our health insurance premiums, which allows them to be funded with pre-tax income. That lessens the bite considerably. You might also get better group rates if you shop around for business insurance that covers owners and employees.
  - Jacob October 29, 2013, 3:04 pm
    
    I was going to mention this, but you just did. This is a HUGE tax-advantage to the self-employed as they can write off all their health insurance premiums as a deduction. For those with traditional jobs, the medical cost deduction outside of an employer provided plan are subject to 7.5% AGI, which would also require the person be itemizing.
    
    So yes, the working middle-class are actually getting a worse-off deal here than the FIRE crowd and small business owners. For me, I have until the end of 2014 before our premiums and deductibles raise…need to do a bit of research to find a replacement. Luckily, I do have a small business on the side, so I can deduct any plan I find, even outside of work :)
MonicaOnMoney October 29, 2013, 11:42 am

I’ve personally looked into several health care options or individuals and families and ended up not choosing low cost high deductible health insurance. But that was mostly because I am eligible for Tricare right now but I will likely consider it in the future. I think it all really comes down to cash on hand and risk and individual health needs.

Glad to hear that it’s working for you even a year later. I’d love to see an update based on any changes from ObamaCare.
Debt BLAG October 29, 2013, 11:48 am

(I’m going to try very hard to stay apolitical)

This is a great take on an issue that’s become politicized to a level I’ve never seen before.

With contentious federal decisions of times past — think of the decisions to go to war in Iraq, for example — the party that didn’t get their way may have continued to be against the decision — truly, the anti-war protests never stopped — but you almost never heard anyone cheering against the *success* of the federal action.

Not so this time.

Furthermore, you rarely saw the party that didn’t get its way *actively working* toward the failure of the federal action (paying for advertisements misleading people away from signing up on the exchanges when something close to universal participation is so key to success).

One important note that I think you touched on — the poor execution of the exchanges’ rollout doesn’t invalidate the legislation. And even more important — the poor execution doesn’t invalidate the very pressing need to work toward fixing health care costs in this country.
- Leslie October 29, 2013, 11:59 am
  
  What if Pelosi, as speaker of the house, had demanded a defunding of the wars in Iraq and Afghanistan?
Andrew October 29, 2013, 11:50 am

MMM,
I’ve heard you say many times that Canada has higher taxes than the US. Is this not a function of the Canadian government providing universal services like healthcare? I’m not up to speed on how the Canadian healthcare system works. I guess it’s time to go do some reading.
- backyardfeast October 29, 2013, 2:36 pm
  
  For those interested in the complicated question of the difference between Canada and US’s health care and tax system, I think the wikipedia article is fair:
  
  http://en.wikipedia.org/wiki/Comparison_of_Canadian_and_American_economies
  
  The first sections cover taxation, government spending, and health care (pre-ACA of course).
  
  No one has suggested that the Cdn system is perfect, or free. We do have wait times that can be long and painful. We don’t have wait times if you are in an emergency situation. If people are wealthy, they can still pay out of pocket for services in other provinces or countries to speed things up. Remember that otherwise, you don’t pay AT ALL. Since the 1990s, cuts to public spending and some privatization have increased pressure on the system. There are horror stories from time to time. But I would bet that an emergency room visit in the wrong side of town for an uninsured person in the US is just as bad?
  
  It is absolutely true that the cost of living in the US is lower. And that you get what you pay for…If you are wealthy, the US is probably the best place in the world to live. If you are not, there are many other countries that could give the US a run for its money (see Australia, above, which I am a big fan of :) ). I know that there are many political and ideological values that come into play, and don’t intend to start such a discussion.
  
  That said, one of the interesting takeaways for me from the article is that the US spends a lot more on debt servicing that Canada does, and this means that Canada’s tax money does go to more services and infrastructure than the US…(our federal tax levels are very similar, even lower in some cases) Another key difference in spending decisions is that in the US system, profit (legitimately) has to come from somewhere. There is no profit margin built into our public healthcare, which means it’s by definition cheaper to provide.
  
  The rest of the comments re Canada here, IMHO, are too variable to discuss. Like the differences state to state, we have a ton of differences province to province (including at least one with no sales tax).
  
  Hope that helps!
Wes October 29, 2013, 12:00 pm

MMM – rather than spending $5500/year on insurance that you don’t really need (given the “bikes, barbells, and salads” policy), why not just pay the fine (minimum savings of $4600) and then sign up for insurance once you, the Mrs, or the little ‘stache needs it? They can’t deny you for a pre-existing condition, and you are already effectively self-insured (have you ever exceeded your $10k deductible?). So if, god forbid, a real medical issue arises, you sign up for insurance, otherwise you effectively continue as-is, paying for healthcare out of pocket.
- Jon October 29, 2013, 1:00 pm
  
  There are open enrollment periods, so you can only sign up during those periods absent qualifying events that allow one to sign up outside the open enrollment period. Getting sick is not a qualifying event. Even during open enrollment, the coverage doesn’t begin immediately. You can’t get coverage on the way to the hospital.
Dan October 29, 2013, 2:16 pm

Ezra Klein did a great piece a while back (before he wrote for the Post) called The Health of Nations – an overview of how other countries (writing from the American perspective) do health care. It’s here:

http://prospect.org/article/health-nations

Note that I don’t say “health insurance.” We in the US have an insurance-based approach to health care. Others don’t. There are many ways to approach health; in the states, we happen to do it via insurance. It’s nice to get a different perspective, IMHO.
Ken October 29, 2013, 3:43 pm

Here are real numbers from my choices under Obamacare for a family of five.

I had an existing plan with Blue Cross Blue Shield that I liked and would have liked to keep, but due to Obamacare it was canceled. It cost me $7236/year, with a maximum $2,250 individual and $6,750 family out of pocket.

The new, cheapest, Bronze plan would cost me $10,964/year with a $6,350 individual and $12,700 family maximum out of pocket.

So the new plan costs me 52% more up front and potentially 88% more down the road if I max out the medical expenses in the year.

The options before were better and cheaper in every way.
chad October 29, 2013, 4:15 pm

MMM I love the site and I’m a huge fan. But I thought I’d speak up for your many conservative readers who oppose this law, largely because I’m curious what you and those who agree with you think about them. I’m open to being persuaded that I’m wrong about any or all of them. But you might as well hear the opposing view.

As I see it, the main arguments against Obamacare are these:

1. Prices for healthcare services are going to balloon. The main reason is that many younger people will simply pay the “penalty” rather than signing up for expensive insurance plans. They will do this because it is in their financial best interest. To make up for the lost revenue, the insurance industry will have to raise prices on their plans. This is not good for early retirees or anyone else.

2. The subsidies are going to cost a ton of money that the US does not have. This will contribute to the exploding debt problem we have in the US. Most of us conservatives think that the only politically feasible way of dealing with that debt problem is copious amounts of inflation. This is not good for early retirees or anyone else.

3. We’re increasingly going to see a shortage of doctors as talented people either go into more profitable sectors or become “concierge” doctors for the rich. This is not good for early retirees or anyone else.

4. Healthcare rationing. When the government is regulating the whole heathcare industry, saying what sorts of plans we can or cannot have, and what sorts of things can or must be covered, they will decide whether it makes sense for an 80 year old to have en expensive procedure. We conservatives want to have the option of earning the right to decide these matters for ourselves with no input from the government.

5. The law rewards small business for staying under 50 employees and keeping them at a part-time status. For, in this way, small business avoid the “employer mandate” that requires them to buy expensive plans for their employees.

6. The government will require religious institutions to pay for plans that cover procedures that run contrary to their religious and moral values. There’s a lot of political nonsense trying to make it sound like this isn’t going on, but of course it is.

There are other arguments as well, but these are the main ones. I don’t see that you’re responding to them in your post.
- Dan October 29, 2013, 5:42 pm
  
  Just responding as a lukewarm supporter of ACA (I’d prefer something more single-payer, but that’s not realistic in the US right now).
  
  1) Prices on the individual markets have been ballooning for years, independent of the ACA. The markets adjusted by offering ever-crappier plans. We don’t know what young, independently-employed, single people who make too much money to qualify for the subsidy will do – because this stuff has never happened before. However, they did it in Massachusetts, and the state seems to be doing OK.
  
  2) You say inflation, I say growth. We had a much higher debt (as a percentage of GDP) during World War II. We grew out of it. Medical expenses, and tying the ability to go to the doctor – that’s a huge drag on entrepeneurship, which begets growing businesses, which is where growth comes from.
  
  3) We’ll see a shortage of doctors, perhaps. But we’ll likely see growth in nurse practitioners and PAs – here in California, we’ve expanded what those lower-tier providers can do, and it’s a great benefit. Oh, and there were record numbers of med school applications and enrollments this year. Anecdotal, but…may mean something.
  
  4) Replace “government” with “insurance conglomerates” in your point, and it has the same logic and engenders the same fears for me. Once you fight with an insurance company about coverage, where they won’t cover something that’s recommended by your doctor…ugh. I’d rather be able to raise a stink with my government – who can be embarrassed and voted out of office – than a corporation, whom I have no power to affect.
  
  5) Quoting from the estimable Ezra Klein: ““You’ve got 5.7 million firms in the U.S.,” says Wharton’s Mark Duggan, who served as the top health economist at White House’s Council of Economic Advisers from 2009 to 2010. “Only 210,000 have more than 50 employees. So 96 percent of firms aren’t affected. Then if you look among those firms with 50 or more employees, something on the order of 95 percent offer health insurance. So it’s basically 10,000 or so employers who have more than 50 employees and don’t offer coverage.” Those companies probably employ around one percent of American workers.” At some point morality comes into this. If you have fifty or more employees, and you’re not offering health insurance…are you taking advantage of those employees? I think this falls on the Lawful Evil side of the MMM Dungeons and Dragons matrix.
  
  6) I’m against the death penalty – my taxes pay for it. I’m against blowing up civilians with drones – my taxes pay for it. The Amish are required to subsidize roads that their horses and buggies don’t need. Or, putting it the other way – just because you work for someone doesn’t mean that you are required to obey their particular set of moral or religious values. And, on the large scale, the government already forces people and institutions to pay for actions and laws that run counter to sets of moral values through taxes.
  
  Tried to keep this as logical as possible in the few minutes I had to write it. Hope it helps illustrate what those of us on the supporting side are thinking!
  - chad October 29, 2013, 6:49 pm
    
    Thanks for the replies. I’m sorry I don’t have anything more constructive to say than what I’m about to say. I think you’re offering an opinion in good faith, but (forgive me!) I just find the views you offered so implausible in every case! Let me try to give you a sense of why I say this. Maybe progress is impossible. But it’s at least good to have clarity about where people stand, I guess. It at least allows us to identify where we disagree.
    
    1. You think that we don’t know whether young people will go through the inconvenient process of signing up for health insurance that they do not want or need rather than just paying a smallish penalty? I think we do know what they’ll do. We know that they will do what’s easy and in their best interest. So, whatever the problems we’re facing with rising costs already, this is clearly not the solution.
    
    2. I and other conservatives (and a good number of moderate liberals, for that matter) don’t believe that growth will be strong if we continue to spend money the way that we are projected to on entitlement programs. Your point about WW2 actually supports my view. The reason that we grew after WW2 because the govt cut spending dramatically and got out of the way of the economy. That’s not happening right now, especially with new massive entitlements like Obamacare starting up. If you want to grow out of the debt problem, I agree that’s the best path. But it is politically not feasible, since the cuts to entitlement programs that are required for the growth to occur would doom any politician. That’s why inflation, which average people don’t understand, is a more likely “solution”.
    
    3. I agree. Fewer doctors. I think this is bad for the quality of care. It seems you’re saying you think it might be for the best. This is another point where I can’t think of anything better to say than: your view on this seems wildly implausible to me. Sorry I can’t be more constructive, but at least it’s nice to know what the opposition view is!
    
    4. I think it is also wildly implausible that corporations are less sensitive to the concerns of their customers than the govt. Corporations often kiss my rear end to make me happy because I can fire them immediately. I’ve never had that experience with the govt. Never. But perhaps my experience is just not typical? Maybe some people find the DMV and other government offices to provide superior customer service? If so, it really does seem like we’re from different worlds here!
    
    5. I don’t think it’s morally wrong to not offer health insurance to employees. Do you suppose it is morally wrong to not offer groceries to your employees? Of course not. You pay them so that they can go and buy their groceries. And that makes a lot of sense. I sure wish it were the same with health insurance. The only reason it isn’t is that there were wage controls under FDR that led to benefits packages being standardly offered as a way to raise compensation under that crazy law. But, even if it is morally wrong, my claim was not that it is morally permissible. Rather, my claim was that this is what is going to happen, and it is likely to result in a rise in unemployment and a fall in wages. If it is going to affect about 1% of the workforce, that’s something like 2 million people. That seems like enough to have a substantial economic impact. Perhaps you disagree.
    
    6. Right, another point on which we agree: the law will result in lots of churches being forced to pay for abortion services (etc) that they find morally problematic. We disagree in that I think this is a bad thing while you think it is acceptable. I don’t think I have anything to say that will persuade you. But I will add that the more libertarian among us (like me) do not believe that you should be taxed in the way that you are taxed to pay for the things that you find morally abhorrent, either. But the left-wing view seems to be that such taxation is acceptable. I just disagree. Once again: good to know where we differ.
    - Dan October 29, 2013, 8:44 pm
      
      I think it’s important to boil some arguments down to “well, we just don’t agree philosophically.” Frankly, that’s OK. What I find interesting in your responses is that we do have some common ground. I’ll number again, ‘cuz I’d like to clarify just a tad.
      
      1) I think we don’t agree on this one. I think that the super-young will stay on their parents’ insurance until they get a bit older and smarter. But, again, human nature is selfish. I’d like to think that MA is a good model – hasn’t happened there, so I’m being optimistic that this will work.
      
      2) I think we disagree completely here. No clarification necessary – I think we’ll see what happens in twenty years.
      
      3) Lack of clarity on my part. I don’t think that fewer doctors is a good thing – we’ve had an artificial limitation on the number of people that can become doctors in the past several decades, and have only made up for that by importing docs. I think the explosion in PAs and NPs are a reaction to that, and I think that those creative ways around the artificial doctor limit are going to be very helpful and…hopefully successful. But I’d rather have a bunch more of ’em, if that would help bring down our cost of care and help bring up quality. I think we actually fundamentally agree on the # of docs, but disagree that people are being driven out of going for medical careers. Again, I think that we’ll know in 20 years.
      
      4) We disagree. Service at the DMV (mine, and a recent experience with the state driver’s board) is way, way better than service from any health insurance company I’ve ever dealt with. When I leave the DMV, I’ve paid my money and I have what I came for. When I leave a conversation with a health insurance company, I have no idea what happened, and I may or may not be presented with a bill that is vaguely related to what just occurred. I’ve seen my wife reduced to tears while trying to find out if a procedure is covered or not, and getting no solid answer after two hours on the phone. That may not be your experience – your insurance company may be amazing – so I think we’re just not going to come to terms here.
      
      5) Disagree on the overall premise, and I didn’t do well by introducing a moral argument to your math. My bad, there. What I was trying to get at (poorly, I should add) is that people being covered is a net good – and if 1% of the companies have to change the way they do things because of this, it’s a price I’m willing to pay. Some of them may go out of business, yes. But a bunch more businesses will come into being because some folks won’t be tied down to a big job any more.
      
      6) Yeah, we disagree. I’m definitely not a libertarian. But that’s the joy of democracy, right? We disagree on stuff, but we all have to live together.
      
      Seriously – thanks for being civil. This kind of thing can get dangerous on these here Internets.
      - chad October 30, 2013, 6:17 am
        
        Yes, I think we’ve hit some pretty fundamental disagreements here. On almost all points I’m unmoved but have nothing else to say. But I do have something to say about customer service in the government vs in private corporations.
        
        Service from insurance companies is bad, I agree. This is precisely because they are similar to the government as things are currently set up: they are several steps removed from you as a paying customer. How they treat you, in other words, is not directly related to whether they will get paid. Not so at the hardware store, where I’m treated like a king. My solution: try to make insurance companies and doctors offices more like the hardware store and less like the government. Your solution: make the insurance companies *more* like the government. I honestly don’t understand how someone could think that this will help. But hey, maybe we’ve hit another fundamental disagreement.
Miss M. October 29, 2013, 4:25 pm

My family has the good fortune of living in Massachusetts. We purchased our business just as the economy tanked, and thus our income was VERY low for a few years. Thankfully, we qualified for free healthcare via the state. Did we have savings that could have paid the $1,000 monthly premiums? (Note – they were that high because we work in a relatively dangerous industry and I have two pre-existing conditions). Yes, but that would have meant we couldn’t use that money to grow the business. We train people for new careers, so if we’d gone under, that would equal 100 people who were not trained for the jobs they wanted to do and 75 companies that were unable to hire a qualified employee. Now we’re actually making money in the biz (yahoo!) so we no longer qualify for free or even subsidized care. But those interim years of free health care really saved our bacon.
CincyCat October 29, 2013, 4:54 pm

I guess the part I’m struggling with is how a premium that effectively “doubles” should not be an issue. For MMM, that meant a $237 to $460 jump. For other friends of mine who are earning income, but have to cover their own insurance, this kind of a jump means the difference between paying for federally-mandated coverage and paying their rent. (In fact, most info I’m hearing first-hand is that monthly premium increases are FAR higher…)

And, your own “individual” plan that you love is only grandfathered in under very strict circumstances, and only for a limited time. Already hundreds of thousands have received notices that their plans will be cancelled, or seriously altered (at a higher premium) in order to meet minimum federal standards.

And yet, if you have been financially savvy, and have responsibly saved more than enough liquid cash to cover a $10,000 deductible, then I think you should still have the choice of a plan with a $10,000 deductible! Why does DC get to force you to choose something otherwise because they think it is “best” for you??

Definitely have mixed feelings about this one, for sure.
Micro October 29, 2013, 5:10 pm

I might not remember the numbers correctly, but wouldn’t a family of 3 on 30k be eligible for the expanded medicaid? Granted, that would be dependant on being in a state that expanded medicaid. If that was the case then the subsidies wouldn’t matter. Of course, that would be dependant on being in a state that expanded medicaid. If you state legislature opted not to expand, you would fall into a coverage gap and have to pay full price. That would put a severe damper on the savings rate.
Self-Employed-Swami October 29, 2013, 6:19 pm

As a Canadian, I’ve lived with our universal healthcare system my whole life, and I just can’t wrap my head around not taking care of everyone’s healthcare needs, as a basic human right.

I’m sure I’ve used more than my fair share of healthcare dollars in the last year, with my complex hand/wrist surgery, and the 4 months of outpatient rehab. That being said, many years my only use of the healthcare is my annual physical, and my personal insurance pays for prescriptions (birth control some years, nothing on others). I am more than happy to pay a bit more tax, to fund our healthcare system. I can’t think of anything more dreadful, than someone dying from a treatable ailment, just because they can’t afford to pay.

I’m fairly socialist in my leanings, so my motto has always been:
“from each according to their skills, to each according to their needs”

I’m glad to not be someone who needs constant healthcare, such as a cancer patient, or someone with a chronic long-term disease, such as kidney failure. I’m more than happy to do my part, to pay for my share of their care, as others have paid for mine when I’ve needed it.
- CincyCat October 29, 2013, 7:39 pm
  
  Swami, I totally get that. What doesn’t happen here in the US is everyone doing their part to PAY INTO the system. There is a huge chunk of apparently able-bodied citizenry here who pay nothing into the system, yet gain every benefit paid for by those who do. If there was a flat tax rate, or a fair (consumption) tax, then those who collect food stamps & “free” health care while trading up their iPods & leased Cadillacs every year (seen inside of my own extended family) would also – in theory – have some skin in the game. We wouldn’t be having this lively and very intellectual debate otherwise. :)
Buddy Jay October 29, 2013, 7:14 pm

To the various commenters questioning whether it is moral/right/ethical to accept subsidized insurance, I ask this: do you think it is OK to accept tax deductions/credits? Because there is no difference from a government “handout” that comes as a direct subsidy or as a decrease in your tax bill (there is a reason that economists call these intentional loopholes “tax expenditures.”)

For example, there is no difference between deducting your mortgage interest and getting a subsidy for health insurance. Now maybe both are wrong (or both are right) but they are economically indistinct forms of government spending.
Jason October 29, 2013, 7:28 pm

Help me understand why you would be ok with $2-3,000 in additional insurance premiums that you do not need, but vilify a wasteful, 18 mpg vehicle driven 15,000 miles per year. Regardless of where you fall on the opinion side, these both seem to be contradictory to the mustachian way.
- Mr. Money Mustache October 29, 2013, 10:28 pm
  
  Oh, that’s an easy question:
  
  – burning unnecessary gasoline and buying unnecessary stuff creates pollution and is generally giving the shaft to the rest of humanity
  – spending more on a health insurance plan I don’t really need helps to subsidize the insurance of other people who aren’t as rich as I am, creating a social safety net. That net will be there for me too, if I ever need it.
  
  The second type of spending has positive instead of negative externalities. Mustachianism isn’t about saving money, it’s about improving the lot of the human race in general.
CB October 29, 2013, 8:16 pm

Many folks are quoting the changes in their current policies–how much premiums and deductibles are increasing, without discussing what they are getting in return for those increases. The ACA sets forward coverage minimums known as the 10 essential benefits. Only about 2% of current individual policies offer those 10 essential benefits. So yes, insurance companies are passing on those costs to their customers. I really encourage everyone to look at their current policies and compare the benefits pre/post ACA. It’s not like your paying more and getting the same thing. The AARP has a decent distillation here…
http://www.aarp.org/health/health-insurance/info-08-2013/affordable-care-act-health-benefits.html
Mark October 29, 2013, 8:33 pm

I am really conflicted about the ACA. We have friends with chronic illnesses who are working their asses off to pay $2,000/month for family coverage and will greatly benefit. On the other hand, their chronic illnesses are probably self-inflicted. My daughter and I are paying $292 for high deductible coverage. Contrary to some of the hysteria you hear in the media, we can keep our policy. But, a quick check shows that our monthly premium would more than double to over $700. for 60% coverage (California Bronze plan). 60%? WTF? Yet, if we lose our coverage and/or income, it is comforting that we will be able to work something out besides bankruptcy. On the other hand, I am not sure that I am comfortable as a taxpayer subsidizing those those with substantial talent and/or assets who are intentionally keeping their taxable income low. Something had to be done- the current system was clearly unsustainable. But, how can the ACA lower costs without taking any middlemen out of the system? Doesn’t regulation usually increase costs? My personal opinion is that all the information we are getting is propaganda, and that we will not know how good the ACA is for a couple of decades at best.
Chris October 29, 2013, 9:29 pm

I’m one of those very lucky people who at 60 years old does not have any but the most minor of health conditions. Will I end up paying more for an individual health insurance plan under the ACA? Yes. Am I for the ACA – absolutely.

At my age, I know several incredibly sad situations of people who could not get health insurance on the open market. One is a woman who had employer sponsored health insurance her whole life. In her early 60s her husband left her and she developed a serious illness that was unrelated to life style choices (she had frequent seizures). she lost her job and after 18 months of COBRA she lost her health insurance. She could not buy health insurance on the open market for any price. The high risk pool (minimal insurance for high cost) available in her state was financially out of reach. She got a minimum wage part time job at my workplace and used to beg us not to call 911 when she collapsed on the floor with seizures because she couldn’t afford the ambulance.

Could we have devised a simpler system than the ACA? Absolutely. Could it have passed our legislature? Most likely not.

Unfortunately, totally free market health insurance is for the healthy, only.

I’m retiring this year at 60 and only feel safe doing so because of the ACA. I’ve lived long enough to know that cancer or various other illnesses can strike even the most healthy at any time. I’m buying an open market, moderately high deductible plan for this year and have played around with the options on the healthcare.gov website to see what plans will likely cost when I move to the marketplaces. Like anything else, I can adjust various factors and find something that will work for me. It’s not perfect but it is – as others have said – a step in the right direction.
Bill Kiele October 29, 2013, 10:08 pm

MMM, I’m retired AF, healthcare is not an issue for my family, and, frankly, neither is income. We can live on retirement pay, but I also would not be surprised to see us bear a similar cost for Tricare Standard and as one part of keeping the government solvent–the “entitlements” problem has to be solved, not just addressed. Hence, I’ve gotten off my lazy financial butt so that if need be, we can get by on $25K (I’m 60+, the missus us 60-). Income is high enough for the next two years where we can be debt-free, inclduing the house. I tend to have a pessimist’s heart–probably endogenous–but it’s kept us out of any deep trouble.
I’ve read almost all your posts from the beginning until Oct 2012 in the last two weeks; when I got to your health insurance search, I wanted to see if you had posted about the ACA implementation, expecting (seriously) some rant about how messed up everything had become.

I can’t tell you how enjoyable reading your post on your EXPERIENCE was–CO is a smart state–lived in the Springs about 25 years until grandkids called us to Ruidoso NM, and this is NOT a health-care smart state (separate story). I was glad to see that the virtue of patience and a calm mind paid you an extra dividend as you found an acceptable, though less Mustachian, plan. To repeat, I don’t have a dog in the healthcare fight, but your informed explanation of what you are expecting, including why so many plans are being terminated as the news reports, tells me that eventually they just might get the national exchange right, though the next year should be quite the news magnet.
Regards to you and yours.
DC Jr Mustachian October 30, 2013, 1:44 am

I agree that the ACA model is good over-all and moving towards socialized medicine is a good thing, however like MMM, I am generally anti-insurance due to math.

The ACA sells us out, the American consumer, to FOR PROFIT insurance companies large and crafty enough to navigate the byzantine regulations of state and federal regulation while paying their overhead and fighting to maximize shareholder wealth.

Like MMM I’m also against classist health care treatment that leaves the poor out in the cold when they need expensive treatments.

I wish instead of the ACA insurance industry subsidy, we could have kept fighting for an efficient, single-payer option like in Europe or Canada. Care delivery still benefits from private innovation, small businesses, and non-profit hospitals, but the efficiency of having one entity paying the bills makes it fair, equitable, and much cheaper.

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