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Affordable Care?

Howard Rohleder

WHEN PLANNING OUR early retirement, I realized that getting and paying for health insurance for my wife and me would be our biggest financial challenge.

Before 2010’s Affordable Care Act (ACA) took effect in 2014, we talked to an insurance agent who gathered our medical histories and submitted them to insurers for consideration. Despite two major surgeries, I was deemed insurable. My wife, due to a congenital condition that had never caused a problem but might, was not.

When I actually retired, it was six months before key provisions of the ACA kicked in. We continued my employer’s coverage through COBRA to cover the gap and then switched to coverage under the ACA. That means I’ve been insured through the health care exchange created by the ACA for the entire time of its existence. My wife was also on an ACA plan until she enrolled in Medicare two years ago.

Under the ACA, we’ve watched premiums escalate far faster than inflation. Our doctor of 25 years dropped us. And our choices for in-network hospital care got tighter and tighter.

Being relatively healthy, each year we chose a bronze-level plan with a high deductible and a health savings account (HSA) option. We fully funded the HSA but stopped using it for current expenses after the first year. We realized it was better to allow the account to grow tax-free to pay for medical expenses later in retirement. We’ve accumulated a tidy sum that way.

From January 2014 until my wife entered Medicare in December 2020, we paid $113,000 in ACA premiums. The compound annual increase in our premiums averaged more than 9%. More disconcerting: Our rising premiums bought less coverage. Our deductible rose from $4,000 apiece in 2014 to $7,000 each in 2020. We also went from having a wide network of hospitals available to us to an extremely narrow choice.

When Anthem pulled out of the ACA Ohio market in 2018, the only plan left in our rural county was an HMO that didn’t include our longtime family doctor. Remember the old lie “if you like your doctor, you can keep him”? He apologized for dumping us, but dump us he did. He said he felt uncomfortable that our restricted HMO network limited his ability to refer out to specialists, if necessary.

The next year, our local hospital dropped our HMO because the insurer was so difficult to deal with. Fortunately, a new plan entered the market that included our community hospital. Still, for more advanced care, the in-network hospital list was extremely limited. There were literally no hospitals included that I would consider true tertiary-level facilities. As a strict HMO, in the event we needed true tertiary or quaternary care, we’d have no coverage.

We then relocated to a metropolitan area where we had more plan choices, albeit at a higher cost. Once again, we were in a tight network, though one with good advanced-care hospital options.

Besides our premiums for those first seven years, we paid out-of-pocket costs of almost $30,000. In only one year did we exceed our deductibles. In that year, our insurance company paid about $5,800 toward an emergency appendectomy. Other than that, we have cost our insurance companies nothing.

We did not elect dental coverage, but our eyes and teeth aged along with us and we’ve incurred bills for glasses and crowns along the way. This added $27,000 in costs over the same seven-year period.

What did we get for our $113,000 in insurance premiums? Three important benefits:

  • First and foremost, we were protected against a catastrophic claim. Just as I would not like to collect on my life insurance, catastrophic coverage was there if we needed it—most of the time. For 18 months in the one HMO, I’m not sure an in-network hospital could have handled a truly serious case.
  • Even when I’m paying bills within my deductible, I am paying the rate that the insurance company negotiated. That’s a substantial discount from what the medical providers would otherwise bill.
  • Insurance coverage was available to us. Before the ACA, my wife was deemed uninsurable in the private market. Only because of ACA could we retire early and obtain insurance coverage.

Like so much federal legislation related to health care, including Medicare and Medicaid, ACA solved real problems, such as coverage for pre-existing conditions. In the beginning, insurance companies underpriced their product. The ACA was truly affordable then. But the years that followed eroded affordability as reality kicked in.

First, insurers began to retrench. Some plans left the market while others expanded. Efforts to keep the premiums affordable were accompanied by higher deductibles and tightened networks.

Today, ACA health care coverage is no longer “affordable,” and I’ve concluded that Congress cannot legislate affordability. My single-coverage premium in 2022 is higher than we paid to insure both of us in 2014. To be sure, I’m now nine years older—and premiums tend to climb sharply once you’re in your 60s.

The promise of covering the uninsured was equally pie-in-the-sky. Even with subsidies, 30 million Americans under age 65 remain uninsured, according to the federal government. Still, the percentage of Americans under 65 who are uninsured was 10.8% as of 2020’s second quarter, down from 18.2% in 2010.

If you’re considering early retirement without the continuation of employment-based health insurance, you need to budget carefully. Realize, however, that insurance coverage is about more than simply affording the premiums and deductibles. If you have a significant health issue, the network of doctors and hospitals available to you will be of prime importance. Coverage and choices vary by county. You may need to move if you live where coverage is limited. Start early and plan carefully.

Howard Rohleder, a former chief executive of a community hospital, retired early after more than 30 years in hospital administration. In retirement, he enjoys serving on several nonprofit boards, exploring walking paths with his wife Susan, and visiting their six grandchildren. A little-known fact: In May 1994, Howard was featured—along with five others—on the cover of Kiplinger’s Personal Finance for an article titled “Secrets of My Investment Success.” Check out his previous articles.

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