Health Insurance Help

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Health insurance is probably one of the most vexing problems that a financially independent person has to deal with. Many who have reached FIRE status now have self employment income. If you and your spouse don’t work for someone else, you likely have to purchase your own health insurance.

Health insurance premiums for a self-employed person is tax deductible on Schedule 1 of your taxes, limited to your net business income.

There are lots of other sites that will detail for you what the terms mean – copays, deductibles, total out of pocket costs, coinsurance, premiums. It is important to look at all of these for each policy and decide which is most relevant to your situation.

If you rarely go to the doctor, a deductible that is high might be OK. If you want to protect yourself against high catastrophic medical expense, you might want to go for the plan with the lowest total out of pocket.

I have 2 kids, and I am over age 45, which means my body breaks down more often than when I was 25. One MRI or ultrasound or X-ray, and I’m out $1,500 – $2,500. My kids and I sometimes have frequent visits to the doctor – ear infections or flu or various other issues. I prefer zero copay, higher deductible, coinsurance and a lower total out of pocket. This way I have lower premiums; a plan that pairs with the supercharged retirement account known as an HSA; I don’t need permission to go to any doctor I want that is in network. Also, the networks are bigger with a PPO type plan such as this vs an HMO.

For those that have low adjusted gross income, it is possible you will qualify for a subsidy for health insurance. Be very, very careful that the subsidized plan has better inputs than a non-subsidized plan. Use the GROSS premiums in your calculations, in case your income is higher than you projected and you are on the hook for the total premiums. In many cases I have seen that the plans on the exchanges are inferior to plans you can get direct from the health insurers or through a broker (depending on your state).

One thing a good financial advisor can do for you is help you figure out which health insurance plan is best for your situation and what it might cost at various stages of life. The best plan for you depends on how you will use the insurance in the upcoming year, which is obviously an educated guess. Charting all the inputs (premium, copay, deductible, coinsurance, total out of pocket) is a good start.

I will address COST of health insurance at various life stages in another post.

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