Obamacare madness

I had my first real girlfriend in High School. That relationship lasted about a year and a half and was an emotional roller coaster of love, hate, breakups and makeups. It felt like madness. My relationship with Obamacare has lasted even longer, but it feels like the same love-hate-madness relationship that I had in High School. Let me explain.

Obamacare beats Private Insurance

When I was first contemplating leaving my Wage Slave job and FIREing, I loved the promise of Obamacare. There’s no way I would’ve considered FIREing in 2012 if I didn’t know Obamacare was coming in 2014.

You may remember that before Obamacare, you had to get health insurance through an employer, Medicaid, Medicare, or a private health insurance policy. But private policies sucked because they could be denied for pre-existing conditions. Make sense, right? Why would sick people want health insurance anyway? 😡

So when I FIREd in 2012, my only option was to buy a crappy private policy directly from an insurance company. Every member of my family had to get a physical just to apply. It was a High Deductible Health Plan (HDHP) that cost $4,360 in 2013.

But I knew Obamacare was coming and I was looking forward to it like I used to look forward to a hot date.

Obamacare sign-up nightmare

Healthcare.gov – Typical screen for 2013

In November 2013, I hated Obamacare because the stupid Healthcare.gov site WOULD NOT WORK. The site was down or it would crash or it would lose all my data even when it was “working”. I called Healthcare.gov customer service many times and in my best I’m-not-going-to-lose-my-shit voice asked them what to do. They told me that they could try to enter all my data over the phone (just shoot me now!) but it probably wouldn’t work for them either. To add insult to injury, the system kept sending me automated emails telling me that my application was incomplete and I was running out of time. This went on for weeks.*

Love the tax credit

Anyway, by January 2014 all the initial sign-up aggravation was over and I was in love with Obamacare again. Why? Subsidies! Take a look at my 2014 Premium tax credit:

My 2014 Obamacare Subsidy

Do you feel the love? The eligible amount is greater than the amount I was using for premiums to the tune of $169.47 per month or a whopping $2,033 per year! This is real money that would come back on my tax return as a credit.

Things didn’t turn out quite this good because my income was higher than I expected. My income increased because my youngest son got an unexpected ROTC scholarship which meant some of his income from the scholarship flowed to my tax return.

But still, my love fest with Obamacare continued until 2016. Life was good!

Fun with Congress

Near the end of 2016 and during most of 2017 I hated Obamacare again for two reasons. First, my Obamacare insurance options were limited – I could pick any health insurance plan I wanted as long as it was Independence Blue Cross. This worked out OK, but, still, I would like more than one insurance company as an option.

Second and more importantly, Trump was elected and threatening to end Obamacare. I got worried and scared to the point of feeling like I was having a heart attack. Really. I went to my doctor and he did an EKG to see what was up. My heart was OK, so it was more likely a panic attack. It’s hard to tell the difference sometime because they feel similar.

I was losing my mind with Obamacare Repeal, Replace, slice, dice, whatever. Trump and Congress came up with wacky new healthcare schemes every week that made no sense whatsoever.

Did I just hit the lottery?

This month I started to love Obamacare again because it was still available for 2018. Hooray!

Plus I got an awesome premium tax credit:

My 2018 Obamacare Subsidy

To see what I mean, here’s a table that shows all my Obamacare info based on my actual tax returns and future estimates:

Tax Year Monthly Credit Monthly Used Annual Net Credit**
2014 $912 $912 $0
2015 $835 $792 $516
2016 $845 $765 $960
2017 est. $1,387 $1,274 $1,356
2018 est. $2,333 $1,748 $7,020!

Holy Crap, my Monthly Credit increased by 68% ($2,333 / $1,387) between 2017 and 2018, while my Monthly Used increased by only 37% ($1,748 / $1,274). And if I hit my expected income, I’ll make a profit of $7,020 for 2018 which is a 517% ($7,020 / $1,356) increase over 2017!!!!

What just happened?

It’s a little complicated, but here we go. When insurance companies were trying to price healthcare.gov plans for 2017, Trump was threatening to cut off subsidies for the Silver Plan co-pays and co-insurance. Trump eventually did exactly that.

In Pennsylvania, the state told the insurance companies to adjust the 2018 Premiums for only the Silver Plans to account for the potential loss of subsidies. So the health insurance companies increased the premiums of the Silver Plans by much more than they did for the other plans. But the government calculates the Premium Tax Credit based on – you guessed it – the price of the Silver Plans only. Therefore, my subsidy jumped big time while the price of my Bronze HDHP jumped significantly less.

Madness

This big fat $7,020 profit is great for me. I’m not complaining and keep in mind that my Bronze HDHP has very high deductibles. So I may end up using all that profit and much more if Mrs. FF and I have a horrible health year.

But it seems like madness that someone like me, who is wealthy enough to FIRE, gets a potential Obamacare subsidy profit of over $7,000. It seems like madness when many in this country still have no health insurance. It seems like madness that we spend more per person in healthcare than any other country with poorer health outcomes. It seems like madness that we are the only highly industrialized nation in the world that doesn’t have a single payer system.***

But for now we’re stuck with Obamacare so we might as well make the best of it.

Tips for FIREing with Obamacare

I’ve used Obamacare since it first came out, so I have a few tips especially if you’re planning to FIRE soon or you’ve already FIREd:

  1. Get a Bronze HDHP if healthy: If you and your family are healthy and wealthy, then a HDHP is a no-brainer. Health Insurance companies are in business to make a profit and you can take back some of that profit by accepting a higher deductible. Your goal should be to protect yourself from unlimited medical expenses rather than a high deductible. And remember, you get a chance to change the plan every year if your health changes.
  2. Get different insurance for each family member if necessary: If some family members are healthy and others are sick (say, managing an expensive chronic disease), then you can get different insurance for different members. Get a HDHP for the healthy family members and a more comprehensive plan for sick members.
  3. Get insurance that pays out-of-network medical expenses: Some HDHP have no out-of-network coverage. This is a huge risk if you have an emergency and end up in a hospital that is out-of-network. Even if the plan pays for an out-of-network emergency room visit, it usually won’t pay for expenses after you’re admitted to the associated out-of-network hospital. Your financial exposure could be unlimited!
  4. Get an HSA: A Health Savings Account (HSA) goes hand-in-hand with a qualified HDHP. HSAs are really the best tax deal out there – money goes in tax-free and out tax-free (if used for qualified health expenses). We have our money in a regular HSA Savings Account at a bank, but other accounts allow you to invest your HSA money into mutual funds.
  5. Keep your taxable income low enough to maximize the subsidy: Our taxable income has been low since we FIREd. I have much of our money in Roth and Traditional IRAs, but I’ve had enough in post-tax accounts to live off of. It helps to keep your income low, but not too low or you’ll end up in Medicaid territory. And you won’t qualify for Medicaid because you’ll have too many assets. You’ll be in no-man’s land with no health insurance options.
  6. Use Roth Conversions to increase your income if necessary: My problem was that my taxable income was so low that I needed a way to increase it. The best way I found is to do a Roth IRA Conversion to increase my taxable income to whatever level I want. It also has the side benefit of creating more tax diversification between Roth IRAs, Traditional IRAs and post-tax accounts which will give me more control over my taxable income later.

Thanks for reading! What do you think of Obamacare?

* The government hired two separate contractors to build Healthcare.gov. One contractor built the back-end and another built the front-end. I had a career in software development and two contractors building one system was a red-flag for me. Another giant red-flag was that the contractors didn’t try to integrate the front and back ends until 1 or 2 months before Healthcare.gov was to go live. Any software developer knows that integration issues can kill a project and that’s even when one company does all the development. This was two separate companies which is even riskier. Whoever was the project manager for the entire system was a total idiot.

** Annual Net Credit = (Monthly Credit – Monthly Used) * 12

*** I try to keep this blog on the straight-and-narrow road of Personal Finance, but I occasionally lose control and veer off into the ditch of politics. Sorry.

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15 comments

  1. The out-of-network part is huge. Sometimes with pre-existing conditions, they are so specific and treatable by specialists in different states that this is a critical piece to have. Based on your table it does look like you hit at least a big scratch off 🙂
    I don’t know much about Obamacare except people love it or hate it. I’m fortunate to have work health insurance through the state and try to take full advantage of the benefits.

    1. Yep, it took me awhile to figure out the out-of-network risks. Most HHOs have little or no out-of-network coverage at least in the Bronze Plans that I look at.

      I’m in one of my love phases with Obamacare right now, but I have no idea what the future holds for Obamacare. I would prefer a Single Payer System like a Medicare for all.

  2. Good post. So much so, that I’m bookmarking it for future reference. Although I’m sure it will change in the next 2 years, when we’ll need it. Keep us posted with updates as to the ongoing saga.
    Congrats on the ROTC scholarship. My husband was on an ROTC scholarship and had multiple great job offers when he resigned his commission after serving for 6 years.

    1. Dash2Retire – I’m glad you liked it!

      I think you’re right – Obamacare is likely to change in the next 2 years. I get anxious just thinking about it. 🙁

      The ROTC and Army has given my son some excellent learning experiences. He has been serving for 2 years now and I’m interested to see if he decides to stay in after his 4 year commitment is up. It’s really encouraging to me to hear that your husband got great job offers when he resigned.

  3. I’m also in software development and was involved in a lot of the meetings setting up the insurance exchange site here in California. As you mentioned, the biggest problems everywhere was the management aspect. There was no decision-maker. Every single state, federal and county agency had a say and would contradict each other. We would code to spec, only to see that spec get destroyed a week later and have to rip out the code and do it all over again. It was a nightmare.

    1. ThinkingAhead – Thank you for sharing and confirming my suspicions!

      Do you think using an Agile process would have worked better? We used Scrum in the last place I worked and it worked pretty well with constantly changing specs.

      You have my deepest sympathy for being involved with that project. I’ve been involved with my share of nightmare projects and they were pretty stressful. I hope you’ve moved on to projects that are more fun.

      1. I don’t think an Agile methodology would have worked any better. Agile really shines when used to make iteratively better products. Go live with a minimally viable product and then add features and fix defects in each successive sprint. We did that on certain projects.
        In this case, we had over a year from when the bill was signed to when the California exchange went live. This was well-suited to a waterfall approach, since all the systems were to work together and go live on the first day of open enrollment that year.

        What was really needed was a firm decision-maker who would tell all the parties involved what needed to happen and stick to it. When that wasn’t there, it devolved into a mess.

        The good news is that California exchange worked relatively well and was considered a very successful project. As a result, when the Feds fired the original Healthcare.gov contractor after their failures, they signed our company to fix Healthcare.gov, given our success with the largest state run exchange.

        https://washingtontechnology.com/articles/2014/01/13/accenture-healthcare-gov-takeover.aspx?m=1

        That fix-it effort then led to another large maintenance contract. I’ve since moved on to another employer, but reading this article just brought back a lot of memories.

        1. ThnkingAhead – What you said about Agile versus Waterfall on that project makes total sense to me.

          Thanks for the link and I’m really impressed that you (and Accenture) were involved in fixing Healthcare.gov! The site has worked well for me since that first awful year. I hope reading the article brought back fond memories and not just the nightmare of building the California Exchange.

          Thanks for the great story!

  4. Dang MR. FF no need to get so stressed over healthcare that you need to use your health care! That is scary man, maybe it would help to pay someone each year that is a specialist in this field to help you decide the plan you should be on. If something stresses me out that much I off load it not worth it.

    1. Damn Millenial – You’re right, I definitely overreacted. I just got pretty nervous at the idea of having no health insurance.

      The weird thing is that I’ve been through so many potential “repeal and replace” political cycles that I’ve grown immune to the turmoil. My backup plan is to get a part-time job just to get the insurance or move to a low-cost country like Panama. But I would have to do some convincing with Mrs. FF to move to Panama. 🙂

  5. Fantastic post, Mr. FF! Except that nasty opening pic – Jesus, Dude!!!
    I remember the opening nightmare of Healthcare.gov. The company I work for had to swoop in to save the day on that nightmare.
    Like you, I’m nervous about our future with Obamacare. Fortunately in Minnesota, we have more progressive healthcare policies, so I’m holding out hope. That and holding out hope for the 2018 midterms.

    1. Cubert – Thanks for sharing! Now I’m curious – did your company actually work on the healthcare.gov software?

      I think all we can say about Obamacare is that it’s likely to change. To what, I have no idea.

      I’m with you on the 2018 midterms. I’m feeling a little more hopeful now than a couple of months ago.

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