COBRA is not necessarily more expensive than individual insurance, if you're older.
COBRA charges the same premium as the group insurance you had with your employer, perhaps with a small surcharge tacked on. It's more out of your pocket simply because your employer isn't pitching in anymore.
If you're young and healthy, COBRA may cost more, since it's a rate for a group that probably includes older and sicker people. You're healthier than the average person in the group so individual insurance is cheaper.
But if you're older or sicker yourself, going with individual insurance means you no longer have those healthy young people propping up your insurer's profits, so you'll pay more with individual insurance. A friend of mine was charged quite a bit more, and wasn't even especially unhealthy.
Of course all this will change at the beginning of 2014.
COBRA coverage ends after 18 months, which makes it risky even when it's cheaper -- if you come down with a chronic illness (cancer, diabetes) in the meantime it will be much harder to find follow on coverage because now you have a precondition.
Or at least that's my understanding from my CPA who was trying to talk me out of using COBRA coverage. That conversation was before AHCA ("Obamacare") passed.
If the ban on precondition screening starts in 2014, perhaps it's safe to start COBRA this coming June.
Are you in California or another state? I don't know about other states, but if you're in CA, your CPA is quite wrong. If you go on COBRA and use up both the 18 months of federal COBRA and the additional 18 months of CAL-COBRA, then you are entitled to a HIPAA guaranteed issue plan if you are declined for an underwritten plan. In fact you can apply for both simultaneously, and it's wise and customary to do just that.
I posted a couple of ca.gov links elsewhere in the comments with more information.
Exactly but the ban starts on January 1, 2014. You can safely start COBRA now, since with the recent election there's no chance the law will be overturned before then, and little chance within the next four years. After that it'll be pretty well entrenched.
It's interesting to consider that at this point, people are going to start planning things like COBRA coverage on the assumption that they'll be able to automatically obtain private coverage in 2014; this bolsters the case against any partial repeal of guaranteed issue, as it'll screw lots of people over if they do it.
This post gives terrible advice for those in the Ongoing Medical Conditions category. For most pre-existing conditions there's very little chance of getting approved for any of the plans they recommend. A bit surprising coming from a company that should apparently know what they're talking about.
As an independent software developer with Type 1 Diabetes, COBRA from my previous employer is my only option. Fortunately, California extends the national 18 month maximum duration to 36 months. Unfortunately, my COBRA will run out 4 months before 2014, so I'll need to figure something out before then.
Under current California law, when your COBRA runs out, you are entitled to a HIPAA guaranteed issue plan. Insurers can't turn you down for this plan as long as you've had insurance for 18 months and have exhausted your COBRA options.
For example, when you apply for a Blue Shield individual plan, you have three options:
1) Answer all the medical questions and apply for underwritten coverage.
2) Skip all the medical questions and apply for a guaranteed issue plan only (if you meet the 18 month and COBRA requirements).
3) Apply for both simultaneously: answer the medical questions and hope to get underwritten coverage, but also request automatic guaranteed issue if they decline the underwritten plan. This is the option I'd recommend of course. (Even with a pre-existing condition, it's possible that they may still offer an underwritten plan in a higher rate tier, which would still be less than the guaranteed issue plan.)
More information from the California Department of Managed Health Care:
Freelancer is a solid choice for individuals, but if you're company is paying for it, the New York plans are surprisingly comprehensive. Nice to see the city supporting entrepreneurs like this!
I'm pretty sure this is an incomplete way to pick insurance.
Obviously under 26 is different, or over 65. Or military or veteran. Exploit spousal insurance if that works for you too.
Otherwise, I care about being able to see my current doctor or choice of great doctors, which is where Kaiser totally fails, and where HealthNet also is inferior to the better plans (blue shield or anthem).
High deductible plans (for HSA) come out pretty well; I paid $90-118/mo for mine at 31-33 (big increases the last 2y due to 100% preventive coverage and no lifetime limits, so it was easy to cost the insurer $300/y on a catastrophic plan....)
These folks don't appear to understand the health insurance market: if you have ongoing medical conditions, basically none of these options will be available to you at these premium levels.
Insurers underwrite applicants in the individual market, meaning that for someone with preexisting medical conditions, these options will either:
1. Simply not be offered (they will deny you coverage)
2. Offer coverage, but exclude coverage of any preexisting conditions (usually for at least 6 months)
3. Charge a much higher premium rate than those shown here
Not to be harsh, but this analysis is dangerously misleading. Do they have domain knowledge of this area?
Based on the description, it sounds like they're purchasing for themselves (founders purchasing individually, not pooling into a small group plan for a company).
I'm curious to know, for the "Ongoing Medical Conditions" case, whether they verified if you could actually get insured in the first place on the plans they recommended. This seems to be the biggest issue with private insurance - they don't have to take you, and generally won't, if you have a "preexisting condition" of any sort.
HealthNet in particular appears to be prone to decline coverage for preexisting conditions. All insurers currently do this, though, so unless you're a single man in your 20's, getting insurance on the private market is a royal bitch.
To get a feeling for the problem, consider that common reproductive health issues in women, like endometriosis or uterine fibroids, are both extremely prevalent and actuarially unacceptable to insurers (they correlate with expensive surgical interventions, which aren't common but are common enough for insurers to wave women off).
Also: Going with some mickey mouse plan is essentially a bet that you'll never be diagnosed with anything that is chronic during coverage. My wife manage to strike it rich with an autoimmune disease, and now we essentially cannot move nor change plans in any way.
(ACA will help a lot, but I still wouldn't put it past the assholes in DC to repeal it before it helps us.)
Now that Barack Obama has been reelected there's no way the ACA is getting repealed before January 2017 (he's not going to let his signature accomplishment get repealed, and there's no way Republicans will amass a veto-proof majority in the legislature). After that, it likely will be too entrenched to repeal wholesale.
added info: flexible spending arrangements (health FSAs) are capped at $2,500 for 2013. This is a rather large drop and might require you to do some additional budgeting this year.
Thanks, I didn't catch that cap change. We debated going into FSAs versus HSAs in the article, but it was already getting long - I think it's worth looking at in more depth separately.
FSAs are only available to people choosing an insurance plan from their employer. So, they're not applicable to the situation we cover in this article where somebody is buying insurance individually.
It looks like FSA caps are reduced from a previously employer-determined limit (often e.g. $5000) to a federally mandated $2500, but HSA caps are increasing from $3100 to $3250 (for individuals).
Are HSA's the kind of thing you need to opt-into during the enrollment window, or you've missed the opportunity till next year? Never used one before, but it might make sense this year.
HSA != FSA. The former is a savings/investment account that lets you keep your money year over year, to be used for medical expenses. FSA's are use-it-or-lose it. HSA's are typically paired with a particular type of high-deductible insurance, while FSA's tend to go along with any type of plan.
The U.S. has public education, and people still worry an awful lot about whether their kids' schools are any good, to the point of some spending a premium of literally hundreds of thousands of dollars on housing in the "right" districts, or on private education. The poor are still underserved, racially-measured outcome disparities are substantial, etc.
None of this is directly an argument against public health care, since obviously there's a benefit to universal availability in both education and health, but certainly it wouldn't be a panacea.
When you adjust for demographics, American education is as good as any system in western Europe, and by and large middle of the spectrum families can be assured that their local public school will at least not be a complete disaster.
The same isn't true for healthcare. This bizarre system of tying your healthcare to your job means even middle and high income families don't have any peace of mind when it comes to healthcare. Heck, my wife and I are a high income couple and have expensive health insurance, and we are still completely paranoid about all the ways the insurers could find to screw us over, especially now that we're about to have a baby. Every time my wife goes to a pre-natal visit, she ends up fighting with the insurer about how something was coded, etc.
If you don't mind my asking, what's your health plan? I'm on a Blue Cross Blue Shield of MA PPO and couldn't be happier. It's indeed very expensive, but considering what my family has gotten out of it with essentially 0 hassles, I have no grounds for complaint. Essentially everything's covered, even out to some wacky stuff like acupuncture. I can walk into a specialist's office at a world class hospital with no referral for a $20 copay. During at least two health crises, they've reached out to make sure care was being coordinated properly.
Sorry that this sounds like an ad, but we don't all live in fear of our health plans. (I dislike the term "insurer", since what they sell stopped behaving like insurance a long time ago.)
Don't quote me, but something like $1000/month for employee +1 coverage. Of that, ~30% comes out of my paycheck and is tax deductible. Not to put too fine a point on it: $300/mo pretax is a steal. Even assuming the full cost would, IMHO, be reasonable. $12,000 sounds like a lot but I suspect that BCBS is doing more for me in real terms right now than the Federal government to which I hand over the equivalent of a mid-range Mercedes in income tax every year.
Even with the "high income" surcharge here for health-care, it's less than $1000 a year for an individual. Since it's deducted from your income along with regular payroll taxes, you don't even have to pay for dependents. They're covered under their own plan which is basically free until they start earning and paying deductions of their own.
In a start-up environment, $12,000 a year is not a lease on a Mercedes, it's the difference between your business floundering in obscurity and affording a few key networking trips, or the difference between living in a bedbug infested hellhole or having a decent apartment.
There are private insurance plans for exceptional circumstances, but these often over-lap with other policies to such a degree they're basically a luxury offered by companies to entice workers. The only real perk to them is the dental and optical coverage that isn't covered by the standard health-care system.
Are you comparing out-of-pocket costs for a single-payer health care system in Canada with the premiums for private health insurance in the US? Canada does spend less than the US on health care, but not ten times less; your taxes are making up a good chunk of that gap.
Factoring in that, the net cost might be subsidized by other taxes by at most ~$2000 more a year. Part of this is paid by the employer on behalf of the employee and isn't listed as a deduction. The rest is subsidies from the federal level of government.
The thing that makes this more affordable for people on limited incomes is how it's tiered, not a fixed price for everyone. If you're an entrepreneur barely making an income, you don't pay much.
I agree, the education system in the US has several problems, some of which are being made worse by attempt to "fix" those problems (Race to the Top I'm looking at you).
I would point out that these kinds of things are about trade offs. As a society we are much worse off without a national education offering, even if it has significant problems to overcome. At this point in time, private health insurance tied to employment have clearly failed as a way for US society to have decent health care, as we spend more for lower quality service than most other nations in our economic class. Universal health care programs are not so much about a panacea, but something that doesn't suck as bad.
Umm... that was a pile of mediocre advice. They compared a bunch of plans to costs in San Francisco, but they overlooked the #1 most important thing: for persons with fairly low to zero income, San Francisco already has universal healthcare. For founders, the care is actually pretty good, and the premiums are very low for end-to-end primary, emergency, hospital and prescription coverage. I've used it. No major complaints.
The program is called Healthy SF. If you're presently living in SF and not covered, check the enrollment site and get registered right away.
As a part-time member of the National Guard, I pay $54 (fifty-four) a month for private health insurance. The family rate is $192. It's subsidized by the taxpayer (thank you).
The Guard is not for everyone, but it has been great for me, on so many different levels. It has never substantially interfered with the three start-ups I've been in.
The inexpensive health insurance is a huge comfort for the periods where I work independently or before we get funding: it's like a massive drop in burn rate!
There are cyber opportunities (variable by geography), so talk to your local recruiter.
It must get tedious listening to Canadians go on about it, but this is about what we pay in British Columbia for people with full incomes. The coverage is pretty good, including 'out there' stuff like acupuncture. We top it up with private coverage for full dental; that costs the company about $100 to $200 per month per family. The service levels are good to excellent. This is all pretty consistent across the country, so talk to your travel agent.
Here's a bit of info about HSAs (Health Savings Accounts) since there are a few questions about them. In particular I'll contrast them with FSAs:
Like an FSA, pre-tax money goes into an HSA, and you can withdraw from it tax-free for qualifying medical expenses. You can also make taxable withdrawals with no penalty for non-medical purposes after age 65.
Unlike an FSA, an HSA is a real savings account and not a use-it-or-lose-it account. You own the money in it; it doesn't vanish at the end of the year.
You don't have to get an HSA from the same provider as your medical plan. You simply need to get an HSA-compatible medical plan like the ones mentioned in the article, and then you can open an HSA anywhere they are offered.
Once you have that plan, you can open the HSA any time you want. There is no "enrollment period" for an HSA when you open it separately from your medical plan.
You don't have to get an HSA that is "managed" in the way that most FSAs are. Instead, you can get an HSA that works like a checking account: You have your own checkbook and an ATM card that works at medical providers. Rather than submitting claim forms and getting reimbursed, you simply write checks or use the ATM card to pay your medical bills. Or if you use other funds (checking, credit card, whatever) to pay a medical bill, you can write a check to yourself from your HSA to reimburse yourself.
With this type of HSA, you don't have to decide ahead of time how much you will be putting into it. You get deposit slips or a way to make online deposits, and it's up to you to decide how much and how often to contribute, subject to the maximum contribution limits.
If you're maxing out your other retirement account options, you can contribute to your HSA but pay your medical expenses out-of-pocket, so your HSA balance grows like another IRA.
This kind of HSA is also portable: if you change insurance companies or plans, you can keep the same HSA instead of having to transfer it to your new provider. As long as your new medical plan is still HSA-compatible, you can keep contributing to the HSA.
If you change to a medical plan that is no longer HSA-compatible, you can keep your HSA and continue to use it for medical expenses, or let the money sit in it as long as you want. You just can't make additional contributions to the HSA.
I use HSA Bank for my HSA: http://www.hsabank.com/ At the time I opened my HSA many years ago, they were one of the few options for the type of self-managed HSA I wanted. I looked at other banks as well, but they were offering traditional managed HSAs where I'd have to deal with reimbursement forms. I would hope there are a number of other options for self-managed HSAs these days, but at least this is one place to look at. (I have no affiliation with them other than as long-time customer.)
I recently talked with the COO of a mid-size software company who was looking into HSAs and their payroll/insurance provider was pushing combined plans that included the medical and HSA into one managed plan. When I recommended he look into these self-managed HSAs and described them to him, he asked, "Is that legal?" I assured them that it is and that I've had one for many years. :-)
The annoying trick once you have an HSA is that you basically need to put $3k balance into it to keep from paying recurring fees on a decent savings account (HSA or Sterling, I think), or you have to have over a certain amount to then be allowed to use it to either buy funds (often overpriced) or do self-directed trading (also usually on subpar terms).
It's essentially a Roth IRA; it actually makes sense, due to compounding, to pay cash for anything your insurance doesn't cover, and max out your HSA every year, keeping it in there, and reinvesting. Well, it makes sense if 1) you have enough income or assets to want to shift an extra $3k/yr into Roth IRA equivalent and 2) you don't fear the law will change before you retire or need lots of uninsured health care money.
Another thing that can be annoying about HSAs is that they also have account closure fees. If you're going to shut down your HSA, make sure you drain it to $0 before you call to close it out. I lost $15 that way.
I recently moved to California and was surprised to find that HSA were not deductible here, although federally it is considered a deduction. Wouldn't be the first time California as bucked Federal rules though. =)
These premiums actually look pretty good. I was under the impression that non-employer based plans were much more expensive... Is there a catch? Do they have to cover pre-existing conditions in CA already? Are there coverage caps? Thanks for putting together the article, very helpful!
Starting in 2014 - it will be illegal to have lifetime caps on health insurance. Also limits on "essential services" will be illegal. They are loosely defined as:
- Emergency services
- Prescription drugs
- Mental and behavioral health, and substance abuse treatment
- Preventive, wellness, and chronic disease management
- Pediatric services
- Maternity and newborn care
Excluding based on pre-existing conditions will also be illegal starting in 2014. Until then - California has a health plan for pre-existing conditions here: http://www.pcip.ca.gov/Home/default.aspx and you can find information for all state here: https://www.pcip.gov/
I imagine those premiums are for Tier 1 customers (in good health without pre-existing conditions). Insurance companies also offer plans at higher cost for various pre-existing conditions. Once you apply they evaluate your medical information and place you in a rate tier. Blue Shield for example has tier 1 through tier 6 (plus a special tier 7 for minors).
If you meet some other qualifications (in particular have had coverage for 18 months and have used up any COBRA options you have), you are entitled to a guaranteed issue plan in CA if you are declined for an underwritten plan:
Thank you so much for posting this, I have been overpaying for my cobra health insurance for months now just because changing seemed so daunting and confusing.
how do they calculate the "worst case" numbers for chronic illnesses? are those for indefinite support?
(i'm curious because i have recently run into this. here in chile, private health insurance is unlikely to cover long term medication but, thankfully, there is a government scheme for many major illnesses. so, for example, a month's supply of interferon-beta is $250 instead of $2000.)
Worst Case is calculated using a simulated "catastrophic illness" - a combination of surgery, expensive drugs, emergency care, and hospitalization.
The costs we calculated are yearly estimates - assuming you stay with the same plan, and they don't/can't raise your rates or cancel your plan - this estimate should hold for chronic illness.
We can estimate costs for specific chronic illnesses - click the "Personalize" button on the left side of the result page. You can select the specific chronic condition you're worried about, and it will provide a customized estimate.
My contact info is my profile - feel free to call/email if you have further questions.
COBRA charges the same premium as the group insurance you had with your employer, perhaps with a small surcharge tacked on. It's more out of your pocket simply because your employer isn't pitching in anymore.
If you're young and healthy, COBRA may cost more, since it's a rate for a group that probably includes older and sicker people. You're healthier than the average person in the group so individual insurance is cheaper.
But if you're older or sicker yourself, going with individual insurance means you no longer have those healthy young people propping up your insurer's profits, so you'll pay more with individual insurance. A friend of mine was charged quite a bit more, and wasn't even especially unhealthy.
Of course all this will change at the beginning of 2014.