The open enrollment period for health insurance begins later this week. If you don’t have health insurance from your employer, now is the only time to either get coverage or change your existing coverage. If you don’t get insurance, you will owe your “shared responsibility” payment.
The one thing I noticed last year was that the rates for similar plans doubled from 2013 to 2014. Not only did the premiums double, but high deductible plans made up the majority of the plans offered on the healthcare exchanges.
Because most of the ACA plans have high deductibles, you need to take action to protect yourself against the risk of having to come out of pocket to meet those high deductibles. You need insurance to protect yourself from the ACA shortcomings. You need to pay attention to the Maximum Out Of Pocket (MOOP) expense and not just the Premiums. MOST of the ACA plans have a MOOP of $6,350. So even if you have a low deductible, you may find that you also have co-insurance that can still take your out of pocket expense up to $6,350.
The easiest way to lower your health insurance premiums is to choose a plan with a high deductible. If you have a low deductible, you will have a high premium and vice versa. You can cut your insurance premiums roughly in half by taking on the risk of meeting the deductible. It is one thing to knowingly choose a high deductible plan. But unfortunately, the ACA is forcing a lot of people to choose high deductible plans because that is all they can afford. And if they can’t afford the premiums, how are they going to be able to afford to actually go to the doctor when it becomes necessary?
The best way to protect yourself against having to pay the high deductibles yourself is to purchase two important supplemental insurance products. These pass on some of the risk of meeting the deductible. The first is a low cost accidental injury policy and the second is a term life with accelerated living benefits riders.
An accidental injury policy covers medical expenses resulting from an accident. So if you fall off a ladder and break your arm, the policy will reimburse your medical expenses. As long as you are in a relatively safe occupation, this insurance is usually no more than $15 per month for a reasonable level of coverage. Mine is only $11 per month.
The term life with accelerated living benefits riders will pay out for Critical and Chronic Illness. These policy riders pay a portion of your policy’s face value when certain conditions are met. Coverage varies by insurance company but usually the Critical Illnesses covered include heart attack, cancer, stroke, end-stage renal failure, blindness, ALS, and transplants. The Chronic Illness riders pay when you cannot perform two of the six activities of daily living for some defined length of time. The activities of daily living include:
- Maintaining continence
- Walking and transferring (such as moving from bed to wheelchair)
You can access up to 90% of the value of the policy while alive depending on the actuarial severity of the illness. Term insurance is very affordable. I have a 30-year, $250,000 policy that costs only $50 per month. And I took it out at age 49.
So, here is how it works, if you suffer a heart attack, stroke, or cancer, your primary health insurance will pay everything but your deductible and coinsurance. Instead of having to write a
check to cover the difference, the Life Insurance Policy will pay a benefit that can be used to reimburse yourself for the deductible as well as any other expenses.
Anybody who knows me and my retirement planning philosophy knows I am a proponent of using Permanent Life Insurance instead of Term. But this is one application where term is the better solution. My retirement plans involve leveraging the cash value of the permanent insurance to provide tax free income for retirement. The use of these riders on a permanent life insurance policies could impact the cash accumulation and retirement income for my clients.
These two supplemental insurance products really don’t cost much ($61 a month for myself) and offer a lot of additional protection. My clients that have implemented this solution kept their total premium at about one-third of what it costs for a good low-deductible health insurance plan. You are still at risk of having to pay the deductible for things that these additional policies don’t cover, but the additional coverage for accidental injury, critical and chronic illness reduces the risk substantially.
I’ve got links on my web page that you can use to find an affordable health insurance plan and sign up for the supplemental accidental injury policy.
Or feel free to call and let me design a custom solution just for you.