Inexpensive Health Insurance - Health is Wealth

Inexpensive health insurance is a luxury these days, but it should not be. Let me explain further. Health is wealth. Nothing is truer than this statement. Without your health, it is impossible to do anything worthwhile at all. You cannot work, you cannot do household chores and you cannot create wealth. That is the reason health is wealth since it is essential in creating wealth. Given that, we must everything in our power to ensure that we are at the best of our health all the time. 

But sometimes that is not possible. If we do not have the wealth to support us during medical emergencies, it might lead to medical complications and eventually death (hopefully not). So you can begin to see why it should be more than a luxury.

If you have the money to pay for your medical bills whenever you need to then good for you. But like most people, this is not always the case, especially in today's economic crunch. That is why applying for inexpensive health insurance coverage is a wise thing to do. By doing so, you are able to plan for a future happening without excessive financial stress, thus giving you a level of security and peace of mind.

There are several ways you can do so. One is to get a job with a company that offers insurance for its employees. That way, they can subsidize the insurance for you (and your family if possible) thus making it inexpensive for you to get one. You can also opt to get inexpensive individual health insurance while you are looking for a job. That way, there won't be any gap with you having no insurance, which is certainly risky.

Therefore, not getting health insurance is certainly not excusable. Not doing so constitutes irresponsibility, and might cost you or your loved ones undue financial suffering should unfortunate circumstances present themselves. Hence, make sure to get one as soon as possible if you don't already have one.

American health insurance is expensive. Government-subsidized coverage (Medicare, Medicaid, and CHIP), employer subsidies, and exchange premium subsidies make coverage affordable for most people, but what if you're not getting any subsidies? Do you have any options for affordable coverage? 

How Much Does Health Coverage Cost?

Most employers pay a significant chunk of this cost, leaving employees with a more manageable portion—but that's not always the case when you're adding family members to your plan.For people who buy their own health insurance, the average full-price cost of a plan purchased in a state that uses the federally-run exchange (HealthCare.gov) is $597/month per enrollee in 2018. 

But most people who buy coverage in the exchange qualify for premium subsidies (premium tax credits) that bring their average premium down to just $78/month.However, about 13 percent of exchange enrollees nationwide do not qualify for premium subsidies and have to pay full price for their coverage. In addition, everyone who enrolls off-exchange (ie, buying coverage directly from an insurance company) is paying full price, as there are no premium subsidies available outside the exchange.

What If You Have to Pay Full Price?

So while employer subsidies and premium tax credit subsidies serve to keep private coverage affordable for most people, they don't help everyone.In both cases, your income is too high for subsidies. But if you're earning $500,000, the premiums are only 6 percent of your income, whereas if you're earning $105,000, the premiums are 29 percent of your income.

For perspective here, it's important to understand that for people who doqualify for premium subsidies, the IRS determines what's considered "affordable" based on a percentage of the household's income. For households with the highest subsidy-eligible income (ie, up to 400 percent of the poverty level), the IRS expects them to pay just under 10 percent of their income for the benchmark silver plan. They can pay less if they buy a cheaper plan, or more if they buy a more expensive plan. Lower-income households pay a smaller percentage of their income for health insurance, and the premium subsidies make up the difference.

Who Has to Pay Unaffordable Health Insurance Premiums?

There are a few different circumstances in which a person might have to pay well over 10 percent of their household income for health coverage, and still not be eligible for subsidies.

Let's take a look at what they are:

• Your household is impacted by the family glitch. This means that you or your spouse has access to employer-sponsored coverage that's considered affordable for just the employee's coverage (ie, it doesn't cost more than 9.56 percent of the employee's household income in 2018; this will rise to 9.86 percent in 2019), but the cost to add family members pushes the payroll-deducted premiums above that level.
  
  In this circumstance, unfortunately, your family members don't qualify for premium subsidies if they buy coverage in the exchange. And you may find that regardless of whether you add the family members to the employer-sponsored plan OR purchase coverage for them in the exchange, the cost ends up being an unaffordable percentage of your household income.
   

• You earn more than 400 percent of the poverty level, but not enough to make premiums an affordable percentage of your income. For 2019 coverage, the 2018 poverty level numbers will be used to determine subsidy eligibility (the prior year's numbers are always used, since open enrollment occurs before the new numbers are published). To see what that amounts to for your family, find your family size on this chart and multiply the income amount by four.
  
  So if you're a single person applying for 2019 coverage, your subsidy eligibility ends if your income is above $48,560. And if you have a family of four, your subsidy eligibility ends if your income is above $100,400. Those are certainly not low-income wages, but people earning a little above those levels probably wouldn't be considered wealthy in most areas of the country (obviously $100,000 goes a lot further in the middle of Kansas than it does in San Francisco or New York City, but there's no adjustment based on the cost of living in different areas).
   
• You're in the Medicaid coverage gap. There are 19 states where Medicaid has not been expanded under the ACA (this will drop to 17 once Virginia's Medicaid expansion takes effect in 2019, and once Maine's voter-approved Medicaid expansion is eventually implemented). In 18 of those states (all but Wisconsin), there's little in the way of financial assistance for people who earn less than the poverty level but don't qualify for Medicaid (including all non-disabled adults who don't have dependent children). If you're in this situation, you have to pay full price for health insurance, which generally isn't realistic for people living below the poverty line.

What Can You Do If You're Facing Unaffordable Premiums?

Most Americans get coverage from a subsidized government-run program (Medicare, Medicaid, or CHIP), an employer-sponsored plan that includes significant employer subsidies, or a subsidized individual market plan through the exchange. So the people who have to pay full price for their coverage are sometimes lost in the shuffle. But if you're faced with a premium bill that amounts to a substantial portion of your income, you're not alone. 

Let's take a look at what you can do in this situation:

First, understand why you're not eligible for financial assistance with your premiums. In most cases, you'll be in one of the three scenarios described above.

Talk to Your Employer:

If your family is affected by the family glitch, it may help to discuss the situation with your employer. If, for example, your employer offers coverage to spouses but requires the entire premium to be payroll deducted (ie, the employer isn't paying any of the cost to cover the spouse), they may not realize that they may be inadvertently consigning families—particularly those with lower incomes—to unaffordable premiums due to the family glitch. Once they understand the implications for their employees' families, they may consider changing the benefits they offer (or they may not, but it can't hurt to discuss it with your employer).

Adjust Your Income to Qualify for Subsidies:

Adjusting your income to qualify for premium subsidies in the exchange can work on both the high and the low ends of the subsidy eligibility spectrum.If your income is too low for subsidies and you're in a state that has expanded Medicaid (that's DC plus 31 states and counting), you're eligible for Medicaid, so you'll still have coverage. But if you're in a state that has not expanded Medicaid, you may find that the eligibility guidelines for Medicaid are very strict. 

And you can't get premium subsidies in the exchange unless you earn at least the poverty level (that's $12,140 for a single person enrolling in 2019 coverage, and $29,420 for a family of five; note that kids are eligible for CHIP in all states with household incomes well above these levels, so it's just adults who are stuck in the Medicaid coverage gap).

So if your income is below the poverty level, make doubly sure that you're reporting every bit of income. Things like babysitting income or farmers market proceeds might be enough to push your income over the poverty level, making you eligible for significant premium subsidies. Depending on your age and where you live, these subsidies can amount to many thousands of dollars per year. And if your income ends up a little above the poverty level, the subsidies will allow you to obtain health insurance that only costs you about 2 percent of your income. So it's well worth your while to see if there's a little bit of side income you could earn that would push you into the subsidy-eligible range.

On the upper end of the subsidy eligibility scale, there are also changes you can make to get your income into the subsidy eligibility range without actually having to scale back your earnings. Essentially, it's all about understanding what counts as income. For subsidy eligibility determinations, the IRS uses modified adjusted gross income (MAGI), but it's a formula that's specific to the ACA, so it's different from MAGI that's used in other situations.

This chart is useful in seeing how MAGI is calculated for subsidy eligibility. In a nutshell, you'll take your AGI from the bottom of the first page of your 1040, and for most people, MAGI will be the same as their AGI. But there are three income sources that—if you have them—must be added back to your AGI to get your MAGI (foreign earned income, tax-exempt interest, and non-taxable Social Security benefits).

But the deductions listed on lines 23 - 35 of your 1040 will serve to lower your AGI, and they don't have to be added back in when you're calculating your MAGI for subsidy eligibility determination. This is different from MAGI calculations for other purposes.

None of this should be considered tax advice, and you should consult with a tax advisor if you have questions about your specific situation. But the takeaway point here is that there are steps you can take to reduce your MAGI and possibly qualify for premium subsidies. And the best part is that if you're using IRA contributions and/or HSA contributions to lower your MAGI, you're also improving your financial future at the same time.