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Our health insurance plan for 2021 is set! It was fascinating to take a couple of cold winter months to review a few options and get to a plan we felt comfortable with. The personal details we focused on for our research included living full time in the USA this year (instead of being international nomads), and changing our residency from Washington State to the state of Arizona this year as well. We started by looking at our previous insurance plan for 2019 and 2020, and then added two other options that seemed realistic for us in 2021.
Our goal with health insurance is to prevent major medical conditions and catastrophic emergencies from draining our retirement accounts. We want to avoid being in a situation where we’re dealing with a combination of medical and financial turmoil, which feels attainable since we reached FIRE (financial independence / retire early). And in case we haven’t said it enough, reaching FIRE definitely changed our lives. Our FIRE plan included making sure we had enough disposable income to pay for health insurance and a plan for our Long-Term Care needs as well. We kept this concept in mind as rule #1 when comparing our three options for health insurance in 2021. Those three options were global medical insurance, national health insurance in the USA, and ACA health insurance in the state of Arizona.
First, the Options We Won’t Consider
Since we keep getting asked questions about two health insurance alternatives, I’ll start by saying there are a few options that we are not willing to consider. We aren’t willing to consider having no medical insurance at all. We also aren’t willing to consider faith-based health share ministries or a direct primary care physician plan.
Health shares: Monthly premiums with health share ministries tend to be much cheaper than real insurance. But/and, health shares ministries offer scenarios like “freedom from insurance” for “like-minded” people following Christian traditions with a “commitment to core biblical principles.” Health share organizations can discriminate, exclude people, exclude pre-existing conditions, and refuse to reimburse medical costs for many reasons. Sure, LGBTQ families like ours can join as two separate individuals instead of joining as the legally married people couple we are. And sure, people can join and sign documents saying they will commit to following Christian traditions and avoid “behaviors and lifestyles” that the organization doesn’t approve of, and then people are free to disregard all of that and live normal lives like us. But that is not something we would do. If you don’t mind that health shares discriminate and you also don’t mind committing to their version of what’s acceptable in terms of lifestyle and behavior, there are lots of other good reasons to avoid them. For example, health shares tend to treat pre-existing conditions differently for people who were adopted, which makes no sense at all. And they really can refuse to pay for normal medical tests and normal medical procedures. They have no legal obligation to pay for medical claims! WTF? In short, health share ministries are offensive to us personally. And from a personal finance perspective they are poor wealth protection systems since there’s no guarantee they will cover your medical costs.
Direct primary care: These simply don’t appeal to us because they’re not comprehensive insurance. Sure, you might be able to save on costs with your primary care physician by having a direct connection to them and paying a monthly retainer to your one doctor to cover appointments with them. And sure, there are other benefits like saving time on paperwork by having direct access to a physician without involving an insurer. But this is not a real health insurance plan, it’s just a direct connection to a single physician. With direct primary care you’re still in a self-insuring scenario without standard benefits relating to the most important elements of essential coverage such as specialists, urgent care, emergency rooms, and hospital stays. If we’re living in the USA full time there’s no way we would consider being self-insured. The idea of having a gap of even a few days without comprehensive insurance in the USA terrifies us because medical costs are so extreme in our home country. That’s why we went to the UK for the last 3 months of 2020, to avoid losing our health insurance before the end of the year. In short, the level of financial risk with having a direct primary care physician instead of actual health insurance is too high for us personally. And from a personal finance perspective this is a poor wealth protection plan without systems in place to cover major medical costs.
Second, the Options We Did Consider
Option 1 – Worldwide Insurance With IMG
We were insured with International Medical Group’s (IMG) Gold plan for 2019 and 2020. Our plan was to start using our plan electively in 2020 for a broad range of preventative care as well as specialist appointments since preventative care becomes available after 12 months. But first we interacted with IMG a few times in 2019 because Alison had emergency blood pressure issues when we moved from Ecuador to Panama.
When Alison received emergency care as well as specialist care in 2019 we were able to waive half of our $5,000 deductible for treatment outside of the USA so we only had to meet a $2,500 deductible. But our total out of pocket costs were only $1,623 (for an emergency room visit, lab tests, a visit with a cardiologist, an echocardiogram, multiple visits with a primary care physician, a 24 hour blood pressure monitor, and about six months of blood pressure medications). We were grateful that we never met our reduced deductible in 2019.
In 2020 we increased our deductible from the original $5,000 family amount to $10,000 in order to lower our monthly premiums, and we scheduled some appointments for March and April of last year. We had appointments with a primary care physician and some specialists in Mexico including a cardiologist, a dermatologist, and an ophthalmologist. We managed to see the ophthalmologist but once COVID became a pandemic our other doctors canceled our in-person appointments and social distancing became our new primary focus. We were disappointed to see our medical tourism plans fall apart last year but we came up with a new plan for health care in the USA.
We each had a pair of virtual appointments in September of 2020 with a primary care nurse practitioner in the USA to handle our preventative care appointments and order our comprehensive blood tests. The preventative care appointments and blood tests were billed through the UnitedHealthcare PPO network, IMG’s arm for medical services in the USA. Our IMG insurance allowed for $250 of adult preventative care services per year after 12 months of continuous coverage. Our costs totaled $372 (for four virtual appointments with a primary care provider, one trip to the lab for blood tests for me, and two trips to the lab for blood tests for Alison). That’s after UnitedHealthcare negotiated our costs down on our behalf and covered $250 for each of us. That $250 for preventative care would have gone a lot farther for treatment outside of the USA, but we were happy with how things went with our care inside the USA using our IMG plan. We never met our deductible in 2020 and we were especially grateful for that.
IMG Premiums for 2021
Minimum Essential Coverage With IMG: All benefits are available (outpatient services, emergency services, hospitalization, mental health services, prescription drugs, rehabilitative services, laboratory services, preventative and wellness services, pediatric services, and maternity and newborn care). Though maternity and newborn care are only included at the platinum level. Whether these benefits are available before or after meeting your deductible is another matter, as long as they are available.
What We Like About IMG: Global coverage with no tax implications. $250 for preventative care each period/year. For treatment outside of the USA, or treatment in the USA using the concierge system, they waive 50% of the deductible up to a maximum of $2,500. They negotiate rates with providers in the USA to get costs down. You can enroll at any time, as long as you’re willing to leave the USA and travel internationally with enrollment. And when I called them in a panic in 2019 to clarify the rules before taking Alison to the emergency room in Panama, the IMG representative I talked to basically said, “Don’t worry honey, you can go to any hospital and see any doctor. If they don’t accept our insurance we’ll still reimburse you for costs over your deductible.”
What We Don’t Like About Our IMG Plan: Pre-existing conditions are not covered, and IMG can refuse coverage for individuals based on their pre-existing conditions (and they have refused coverage for some of our friends including a cancer survivor). There are a ton of limitations and exclusions for various types of medical treatments that we think should be covered such as abortion, infertility, sex change, etc. Coverage limits exist including $5,000,000 per policy for each individual; $2,250 per day for hospitalization/room & board in a semi-private room; and $4,500 per day in intensive care. And of course what we disliked the most is their limit of 180 days allowed in the USA, but I can understand that since health care costs are so expensive in the USA.
Bottom Line on IMG: We were very happy with our global health insurance from IMG. We started our policy in January of 2019 and we’ve paid for coverage through the end of January in 2021. Our policy requires that we reside outside of the USA for six months or more in a calendar year, and since we have no plans to travel internationally anywhere near that much in the next few years this policy no longer fits us. But we would gladly consider using IMG again in the future if a full time travel lifestyle becomes safe and desirable for us again someday.
Option 2 – National Insurance With HSP
I wanted to make sure we considered at least one option for national health insurance in the USA, outside of the ACA system. I got into this option knowing nothing about it beyond the fact that these plans don’t have tax implications and we had hoped to continue with health insurance that wouldn’t have tax implications. My attempts at gathering information from some FIRE community friends who have this type of insurance themselves didn’t answer enough of my questions so I contacted an insurance agent and had her build a couple of proposals for us. The agent explained that the plans she works with are commonly referred to as “RV health insurance” because they’re most frequently used by people who live a nomadic travel lifestyle within the USA. The plans we discussed are not ACA compliant and you don’t need an RV to qualify. These plans are a popular alternative to the ACA for people like us who don’t have employer-sponsored benefits and are also too young to qualify for Medicare. Even if people are living in one place and not living nomadically like RV’ers.
The plan I ended up focusing on was the Philadelphia American Health Saver Plus (HSP) Gold Edition Policy. The agent I worked with clarified that this plan starts with a main umbrella policy and then offers some additional pieces you can add to get an overall package that looks similar to what we’re used to seeing in a single health insurance plan. Of course you can opt to only take the main umbrella and decline any other pieces. But since we’re looking for health insurance and wealth insurance with that plan, we only looked at the combination of pieces that the agent said would offer us more comprehensive protection during a major incident. When I asked if there were also bronze and silver options the agent said there’s only one policy and it’s called “gold” to differentiate it from previous versions that were not as benefit rich as the current plan. The HSP policy has different deductible levels and it also has different “unit” levels. The more units you have the better and more expensive your policy will be. We priced the two unit plan and the 3 unit plan, but skipped the 1 unit plan since it carries too much risk of having huge medical bills that wouldn’t be refunded.
In order to try to simplify the confusing amount of details and options I was given for the HSP policy, I’m only including costs for the recommended 2 unit package below. Note that there would also be $70 in non refundable application fees for this package.
HSP Premiums for 2021
Minimum Essential Coverage With HSP: Most benefits are included (outpatient services, emergency services, hospitalization, prescription drugs, rehabilitative services, laboratory services, and pediatric services). But maternity and newborn care are not included. The only mental health related treatment they cover is confinement. Preventative care appointments are allowed after 60 days but there’s no coverage for routine health exams, periodic check-ups, or routine physicals. Whether these benefits are available before or after meeting your deductible is another matter, as long as they are available.
What We Like About the HSP Plan: Nationwide coverage with no network provider limitations. No tax implications. Lower premiums. People can enroll at anytime.
What We Don’t Like About the HSP Plan: No network means they don’t negotiate costs with providers on your behalf. Pre-existing conditions are not covered for the first 12 months, and they can refuse coverage for individuals based on pre-existing conditions. There are a ton of limitations and exclusions for various types of medical treatments that should be covered such as abortion, infertility, sex change, etc. Qualified reimbursements are at fixed prices like $3,000 max for the first day of hospital admission after hitting your deductible (and reimbursement options are lower for lower deductibles and plans with fewer units). Coverage limits exist including $250 per year for mammogram costs and $500 for the first three years for colonoscopy costs without polyps.
Bottom Line on HSP: This plan would cover us outside of our residency state in the same way it would cover us in our residency state. Even though it’s more affordable than unsubsidized ACA plan options it’s still expensive. And it carries too much risk of having huge medical bills to pay without reimbursement so it doesn’t meet our requirement for providing wealth protection.
Option 3 – Neighborhood Network With the ACA
There were 28 Affordable Care Act (ACA) plans available in the specific county in Arizona we will be moving to in about a month including three gold plans, 16 silver plans, and nine bronze plans. All 28 of those plans were HMOs, there wasn’t a single PPO option available. The most expensive family deductible was $17,100 and 20 of the plans had high deductibles over $10,000.
ACA Tax CREDITS
Lots of people reference the second-lowest cost silver plan (SLCSP) when they talk about ACA costs. Some people reference the SLCSP vaguely enough that it comes across as a recommendation, but it’s not a one size fits all option that works for everyone. The reason to make note of the SLCSP is because it’s a baseline for tax purposes. Every state in the USA calculates subsidies based on premium costs for their own SLCSP, though many locations reference the one and only silver plan they have available for their calculation.
ACA subsidies are premium tax credits. Unlike most tax credits ACA subsidies can be taken before filing taxes and in that case the government pays your subsidy directly to the health insurer and you pay your share of premium costs to the insurer as well. We’re choosing to use our ACA premium tax credits in advance, which means we have to carefully monitor our actual income throughout the year and if our taxable income changes in 2021 we have to immediately modify our application with actual numbers and recalculate our subsidy to match our income. Some people might choose the option of claiming the entire ACA premium tax credit on their tax return at the end of the year. We’re more comfortable taking ACA premium tax credits in advance and being vigilant with our income, since withdrawing the entire cost of premiums from our portfolio would raise our taxable income and lower our subsidies at best, or raise our taxable income above the ACA cliff and disqualify us from receiving subsidies altogether.
For tax purposes we are Married Filing Jointly (MFJ) with no dependents. We’re able to qualify for tax credits to help pay for an ACA marketplace plan as long as we can keep our taxable income level below the 400% federal poverty level, which is $68,960 for 2021. Our spendable income is well below the limit, but our taxable income including Roth conversions can easily disqualify us from subsidies if we continue with our previous Roth conversion strategy.
In 2019 we converted $62,000 from our IRA’s to our Roth accounts and once we added our spendable income (in the form of dividends, capital gains, and other interest) to that amount to calculate our total taxable income we would not have qualified for ACA subsidies for that year. In 2020 we converted a little less at $58,000 from our IRA’s to our Roth accounts, and once we added our spendable income to that amount we would have exceeded the 400% poverty level again and been disqualified from ACA subsidies for last year as well.
One additional complication for 2021 is that we need to buy a car this year which means we’ll have to withdraw extra money from our portfolio for that purchase, boosting our taxable income some more. With all of that in mind we came up with a new strategy for 2021, and we tried verifying the implications of our taxable income plan with our CPA. Sadly, they didn’t understand the question and didn’t take the time to dig in deeper. This is the type of experience we’ve had with our last two CPAs now with every question we ask relating to our own personal finance situation. We had hoped for more helpful information from them but I guess we have become special FIRE unicorns with personal finances our traditional CPAs aren’t familiar with. Nonetheless, we did our research through the IRS and a few FIRE community members and decided to reduce our taxable income by lowering our Roth conversion.
In 2021 we will convert $6,500 from Alison’s IRA to her Roth instead of continuing with around $60,000 in conversions for our family again. By making that change we qualify for a higher subsidy of $1,536 per month. This lower estimated taxable income and a less expensive bronze level plan means we’ll end up with premiums of $144.71 per month, and a savings of $18,432 for the year in premiums.
ACA Enrollment Periods
The open enrollment period went from November 1 until December 15 and we used that time to do all of our ACA research, this time focusing on the county we decided to live in next year. We weren’t originally sure if we would qualify for subsidies in 2021 so we considered postponing our start in the ACA in order to save money since we could have kept our IMG plan until July before being disqualified by overstaying in the USA. We then would have qualified for a Special Enrollment Period either by choosing July as the right time to officially move our residency from Washington State to Arizona, or by “losing” our previous insurance with IMG when that policy was canceled. Another topic our CPA firm staff were all unable to discuss with us. We verified our Special Enrollment Period options by calling the ACA help line not once, but three different times on three different days, because we needed to hear the same answer about our special enrollment options from multiple people in order to feel confident. But once we finalized our income plan for 2021 our monthly premiums turned out to be lower with Blue Cross than with IMG, which was shocking, so there was no reason to delay starting our ACA plan.
Ambetter vs Blue Cross
Among the 28 plan options offered in our county there were only two insurers, Ambetter and Blue Cross. Blue Cross offered seven plans and Ambetter offered 21 plans. Before we retired we were insured by Blue Cross through an employer so there was familiarity there, but we had never heard of Ambetter before.
The Ambetter plan prices were all lower than the equivalent Blue Cross counterparts, and some Ambetter plans included vision and dental coverage which was very appealing. Since I saw so many different Ambetter plans I assumed they were well known in our area, but since we had never heard of Ambetter I did some digging and found that as of 2018 Ambetter was providing plans in 15 states, and a class action lawsuit alleged they misled customers with physician coverage networks that were narrower than advertised. For the 2021 plan year Ambetter is claiming services in 20 states. Ambetter is still an unknown and unproven brand from our perspective, which is ok for little things like clothing but we wouldn’t go with an unknown brand for a car purchase and we definitely wouldn’t go with one for our health insurance.
Blue Cross of Arizona
The next thing we did after dropping the Ambetter options was to drop the one gold level Blue Cross plan because the premiums were so high at $2,459.99 per month unsubsidized. We want to avoid having super high premiums because that’s a commitment to paying high prices and we’d rather commit to lower premiums in hopes that we won’t have to pay the full deductible in a given year. Then we also dropped all of the plans that require coinsurance after meeting your deductible. There were three plans requiring coinsurance between 30% and 50%, and those plans come with a guarantee of still having to pay substantial out of pocket costs after meeting your deductible, which means they fail our test of providing wealth protection.
It was fascinating to see exactly how different income levels and subsidies change premium prices. We were initially leaning towards a silver plan but in the end we picked a bronze level policy, the Blue Portfolio HSA Bronze Neighborhood Network plan. That plan has the lowest deductible in the bronze category and lower premiums than any silver plan, and seemed like the right fit for us for next year since we’re relatively healthy and have a relatively large emergency fund.
Out of curiosity I then looked back at the equivalent Ambetter plan again which has an HSA plus dental and vision benefits. The two plans have the exact same family deductible at $13,800. The Ambetter Essential Care 2 HSA + Vision and Adult Dental costs $1,667.19 per month without subsidies, compared to $1,680.71 per month for the Blue Cross HSA plan. We could have saved a little money on premiums with the Ambetter option. More importantly we also could have had free annual dental checkups and cleanings, as well as free annual eye exams and costs savings towards prescription eyeglasses with the Ambetter plan. But again, we didn’t want to go with an unknown brand for health insurance. Maybe we’ll switch to Ambetter in the future after they have been in the marketplace for a few more years and grown their network.
Blue Cross Premiums for 2021
Health Savings Account (HSA) BONUS
We were not originally looking for an HSA plan. HSAs can be fantastic retirement accounts, but we wouldn’t open HSA accounts at this point solely for investment purposes since we would need to fund an HSA by pulling money from other investment accounts or with our emergency cash. But since the plan we chose comes with an HSA we fell into a new research project to make sure we understood what we can do with HSAs beyond the investment account option. And just because the HSA option exists with our plan, we don’t have to open HSA accounts. But after doing some reading we will each be opening HSA accounts. Since the standard MFJ deduction for 2021 is $25,100 and most of our income will be in the qualified capital gains brackets and taxed at 0%, we don’t have enough ordinary taxable income for an HSA tax deduction to be beneficial.
So why pick a plan with an HSA? We each want to fund HSAs for the purposes of paying for some larger elective qualified medical expenses as well as non-elective medical expenses that might surprise us. We also want to open HSAs to unlock tax-free IRA dollars for future long-term care expenses. And it turns out that process could lower our ACA premiums as well. Here’s our plan for making all of that happen:
Qualified HSA Funding Distribution (QHFD): We’re now limited in our ability to make sizable Roth conversions while also qualifying for ACA subsidies. But we can make a once in a lifetime rollover Qualified HSA Funding Distribution (QHFD) from an IRA to an HSA up to the annual HSA maximum per person regardless of age. Since we’re MFJ, in 2021 we’ll move $7,200 for family coverage plus a $1,000 catch-up contribution from Alison’s IRA to her new HSA since Alison is over 55 years old. Then next year in 2022, I can move $7,200 for family coverage from my IRA to my HSA, and Alison can move a $1,000 cash catch-up contribution into her HSA. One thing to keep in mind is that after making QHFDs we will be required to remain eligible for our HSA accounts for 12 months following each transfer. This will be a great way to unlock some tax free IRA funds early and reduce our RMDs in the future. This was another tax related topic that our CPA firm couldn’t speak to, so again we are unicorns!
IRA Distributions After Age 59.5: Regular HSA contributions using IRA distributions are allowed after age 59.5 without penalties. That combination of IRA distributions and the HSA contributions basically cancel each other out for tax purposes and keeps you from increasing your total taxable MAGI. Pre-tax dollars coming from an IRA after 59.5 are taxed at current ordinary income rates and contributing those funds to an HSA almost makes the IRA distribution a non-taxable event. If we combine funding an HSA with smaller annual Roth conversions we’ll basically be doubling the funds we’re shifting out of our IRAs into tax-free accounts ($6,500 into a Roth and a max of $8,200 into an HSA), making those funds available for future long-term care needs.
Qualified Medical Expenses: The other reason we’re motivated to fund HSAs is that we know we’ll have qualified medical expenses in the coming years. I have some pretty significant vision problems and it’s getting harder and harder to manage my vision with eyeglasses. I have been planning to consider elective corrective eye surgery in the near future and I was hoping to have that done in Mexico with the awesome eye surgeon I met there last year, but that doesn’t seem realistic now. So my new plan is to use HSA funds to help cover the deductibles, copayments, and other costs of having that procedure done in the USA where it’s much more expensive. Thank goodness lasik eye surgery, radial keratotomy (RK), and other corrective eye surgeries are qualified expenses under IRS Section 213(d) and reimbursable using HSA funds.
Our HSA Funding Strategy:
Blue Cross Neighborhood Network: In the county we’ll be living in next year we’re only able to choose neighborhood network plans which means our network is limited to our county for most services and treatments, with some specialized care only available in Maricopa County’s bigger hospital system two hours away. We’ll have to be extra careful about staying in our network for any medical treatment we receive.
Minimum Essential Coverage With Our Blue Cross Plan: All benefits are included (outpatient services, emergency services, hospitalization, mental health services, prescription drugs, rehabilitative services, laboratory services, preventative and wellness services, pediatric services, and maternity and newborn care).
What We Like About Our Blue Cross Plan: Pre-existing conditions are covered. You only pay your network cost share for emergency services, even if those services are received from health care providers outside of your network (we still have to be very careful about what qualifies as emergency services outside of our network).
What We Don’t Like About Our Blue Cross Plan: ACA premiums are incredibly expensive without substantial subsidies. Coverage varies by state / is not equal across the USA. There are a ton of limitations and exclusions for various types of medical treatments that should be covered such as abortion, infertility, sex change, etc. We are limited to our neighborhood network for all care other than emergency services, which means we don’t have access to comprehensive health care outside of the area we live in.
Bottom Line on Blue Cross: It’s frustrating for us that we won’t be able to do as large of Roth conversions now that we’re on the ACA and want to qualify for subsidies to help control our premiums. But it’s worth it to have comprehensive health insurance in the USA with pre-existing conditions covered. We’re grateful to have a deductible that we can cover with our emergency fund cash and peace of mind that our insurance will do its job after that. We’re very fortunate to have a health insurance plan that works for us since not everyone can afford an ACA plan.
The one thing that is most frustrating about ACA insurance is that it’s supposed to be affordable. It is the Affordable Care Act after all. But there are tons of families in the USA who don’t qualify for subsidies and can’t afford ACA plans, and that is unacceptable. As the ACA is reformed over time it must be made affordable for the families who need it most including everyone without extra cash to help cover all of the minimum essential coverage elements of comprehensive health care.
Bizarre Cost Comparisons
When we started our research into our 2021 health insurance options we really had no idea how expensive or affordable it might be. Our intent was not to choose the cheapest plan, it was to choose the most logical and comprehensive plan for us in 2021 alone. Now that we’ve finished reviewing all of these plans it’s pretty bizarre to compare the prices. Especially considering the fact that we chose a plan that is both the most expensive and the most affordable of the three plans we reviewed. The bar chart below includes the Blue Cross plan we chose with and without our subsidy, along with the costs for the IMG and HSP options as well.
The AOC Bottom Line on Health Insurance
In case it’s not perfectly clear by now, we believe having real medical insurance in the USA is incredibly important. It’s health insurance and it’s also wealth insurance. We’re financially independent, and we currently have two year’s of living expenses saved as an emergency fund. And we still need comprehensive health insurance for every single day that we are living in the USA. Being frugal and going without health insurance that we can afford to pay for would feel far too risky for us.
Our Blue Cross health insurance started on January 1, 2021. And we’re currently still covered by IMG as well. We feel a tremendous amount of relief knowing our safety net is in place, and that gives us the confidence we needed so we can return to living full time in the USA.