How to hack health insurance

David Gardner For the Camera
David GardnerFor the Camera

Health insurance is straightforward when you have it through work or you’re married to someone who does. The answer is also easy once you turn 65, as you’re most likely eligible for Medicare. But what about other circumstances? When people come to me interested in early financial independence or simply want to take a sabbatical, usually their most pressing concern is health insurance.

While health insurance in this country is still not as simple as in other developed economies, we have many more options than we used to. In short, health insurance should not prevent you from ending work early or taking an extended break. Consider these health insurance hacks to decouple your health insurance from your current workplace.

Affordable Care Act: Now over ten years old, the ACA has made available health insurance without medical underwriting nor any preexisting condition exclusions. Earlier this year there were fears that the Supreme Court would nullify some of its provisions. But in a 7-2 decision last month, the ACA was upheld with former Boulder County resident Justice Neil Gorsuch among the dissenters.

The Connect for Health Colorado website offers scores of health insurance plans available now through Aug. 15 (and during typical enrollment periods). You can supply your favorite providers and facilities as well as prescriptions to verify the coverage works for you. In general, the ACA options are less comprehensive than employer plans. You won’t find PPOs that permit a combination of in-network and out-of-network providers. Instead, you’re limited to HMOs with a limited network of providers and often a primary care physician gatekeeper for specialized services. There are also EPOs (exclusive provider organizations) with similar network limitations but usually with direct access to specialists.

While at first glance the premiums look pricey, the ACA includes subsidies through tax credits. Through the end of 2022, you won’t pay more than 8.5% of your income (and in many cases less) for health insurance after tax credits. If you qualify for unemployment this year, you will receive the maximum subsidy in 2021. Even after 2022, the ACA will subsidize your health insurance in years your adjusted gross income is below 400% of poverty, which is $106,000 this year for a family of four.

COBRA: Before the ACA, there was (and continues to be) COBRA continuation coverage for workers. If you had health insurance with a qualifying employer with at least 20 full-time employees, you are eligible for the continuation of health insurance for 18 months after you leave in most cases. One significant convenience is that you can keep the same doctors and facilities as it’s the same health insurance. The (big) downside is that you need to pay the full employer cost of health insurance plus a two percent fee, which can be over $1,500 a month for families.

Retiree plans: A surprising number of local employers offer retiree health insurance plans for those who stop working before 65, and in many cases their spouse. Many former state, local government, and school district employees are eligible for subsidized health insurance. Federal government and University of Colorado retirees also have health insurance plan choices. Private sector retirees may have access to similar plans, although they are much rarer and tend to be only available from large corporations.

Other choices: Individual, non-exchange health insurance policies may be available, which is useful outside of enrollment periods or a qualifying event. Also, many people swear by faith-based health care plans that are less expensive than traditional health insurance, but there are few laws in place to protect members in case of astronomical health insurance bills. The plans are quick to point out that it is a health care “cost solution” and not true insurance. In addition, other countries offer health insurance to residents at a low cost if you qualify for a visa. If that appeals to you, it could be just enough to spur on dreams of financial independence or an extended sabbatical overseas.

Finally, please remember that health insurance does not cost more if you use the services of a broker. Consider wading through these complexities with professional help.

David Gardner is a Certified Financial Planner professional at Mercer Advisors practicing in Boulder County. The opinions expressed by the author are his own and are not intended to serve as specific financial, accounting, or tax advice. They reflect the judgment of the author as of the date of publication and are subject to change.