Like most of you, every December we are faced with a dilemma that employers affectionately refer to as Open Enrollment. In our case, this is a chance for an insurance company to have an employer-sanctioned way to sell us all kinds of insurance policies we don't need. This year's list of “designed to be sold, not bought” insurance we don't need and had to decline included:
- Short-term disability
- Accidental death
- Vision insurance (totally misnamed, should be called “glasses and eye exam insurance”)
- Critical illness insurance
- Group life insurance
But there were also two types of insurance that we do need on the list and one that we want:
- Health insurance
- Long-term disability insurance
- Dental insurance
Long-Term Disability
Let's do the easy stuff first. I've written before about why we have both individual and group long term disability insurance. Although we're getting very close to feeling comfortable canceling both of those policies, we've decided to keep them for at least another year or two.
Dental Insurance
Dental insurance isn't insurance that we need. In fact, it really isn't insurance at all given the low maximum benefit ($1500 per person.) The reason we pay for it is that it allows us to pay for dental care with pre-tax dollars without having to burn HSA money on it. We figure cleaning, x-rays, and exam is about $200 once or twice a year for each of the six of us paying cash. So that's $1200. Dental insurance covers that and costs about $100 a month, or $1200. But I can pay for dental insurance with pre-tax dollars, so I do. There's a little bit of extra benefit including up to $1500 per person worth of non-preventive dental care for cavities and such, but it only pays like 80% for minor stuff and 50% for major stuff. We also get the benefit of the insurance negotiated rates. We were purchasing dental insurance on the open market the last few years, but this year our “open market” plan increased premiums and our partnership plan offered a cheaper option, so we actually had our premiums go down about $50 a month (a 33% decrease) for not much less benefit. That doesn't happen very often, but we'll take it!
The Health Insurance Dilemma
Now on to the elephant in the room, health insurance. It's one of those insurances that everybody needs because becoming seriously ill or injured can wreck even the best financial plans. We've also been buying this one on the open market for years because we could get a plan that was cheaper than what my physician partnership was offering. However, this year our open market plan premiums went up 16% and the plan was significantly worse.–higher deductibles, a crummier prescription benefit etc. Then I got an email from the partnership saying the premiums were staying the same as last year. Hmmm…maybe time to go back to the partnership plan I haven't been on since I made partner and had to start paying the premiums myself.
This girl is gonna need health insurance!
Let's compare:
Open Market Plan
It qualifies as an ACA bronze plan, but we just buy it through a health insurance broker instead of through an ACA exchange since it doesn't cost us anymore and we don't qualify for a subsidy anyway.
- Premium: $1192.75
- Deductible $6,650/$13,300
- Max out of pocket: $6,650/$13,300
- Benefits: 100% after deductible
Partnership Plan
Also an HSA plan, just like the open market plan, which is best for us since we're pretty healthy and haven't hit our deductible in years.
- Premium: $1224.11
- Deductible: $3,000/$6,000
- Max out of pocket: $4,000/$8,000
- Benefits: 20% co-pay after deductible met until max out of pocket met
So it's not quite apples to apples, but it's pretty obvious that one plan is way better than the other and the price is essentially the same.
Health Insurance Vs Health Sharing Plan
The other thing I always look at each year is whether we'd be better off with one of the Christian Health Sharing organizations such as Liberty Healthshare, Medi-share, Christian Health Ministry, and Samaritan Ministries. Although comparing these plans to health insurance is again an apples to oranges comparison, the “shares” (premiums) are dramatically lower than health insurance premiums. This year, I compared to Christian Health Ministry. Our family would be “three units,” one each for me and my spouse, and one for all the kids combined. It costs $150 per month per unit, or $450 for the “gold plan” where you're only responsible for the first $500 of each incident. However, it has such a low maximum benefit that it would only make sense to buy the “Brother's Keeper” addition, which would be another ~$75 a month plus $40 a year.
Total cost: $6,340
That is dramatically less than the cost of my health insurance ($14,688,) especially given the lower deductible. Again, it isn't an apples to oranges comparison though. The CHM “deductible” is “per incident,” not total. It doesn't cover any preventive care. It doesn't cover chronic care or prescriptions for stuff like hypothyroidism. No psychiatric care or substance abuse care.
Overall, I don't like what it covers and doesn't cover, but could deal with that in exchange for paying less than half as much. But then I run the numbers….
Running the Numbers
In reality, while my premiums seem quite high at first glance, that's not really the price I pay. You see, health sharing premiums (i.e. “shares”) are not tax-deductible to me. But the health insurance premiums are. They're an above the line deduction for the self-employed. In addition, using a High Deductible Health Plan (HDHP) allows me to use a Health Savings Account (HSA). We can contribute $6,900 to that in 2018. That's also a tax deduction. All told, going with a Health Sharing Plan instead of an HDHP/HSA would cost us a $21,588 tax deduction.
At our 46% marginal tax rate (no, I have no idea what my rate will be in 2018, but that's what it was in 2016 and probably is in 2017), that's worth $9,930. Subtract that from $14,688 and all of a sudden that health insurance only costs us $4,758, about $1,600 a year LESS than the health sharing plan.
Then I told my wife what we'd have to do if we went with a health sharing plan. We would have to send our “shares” to a different person every month manually instead of just automatically having our health insurance premium paid out of our checking account. We would also have to negotiate every medical bill we got during the year, rather than getting the price the big health insurance company negotiated. When I told her that she gave me an “Are you kidding me?” look, which combined with the lower price, made the decision pretty easy. But next year, we'll probably run the numbers again.
What do you think? What are you doing for health insurance in 2018? Are you doing health sharing? What has it been like? Comment below!
Dear Jim – we have hybridized our approach, buying for me and the children through our employer, and for my wife through Samaritan Ministries. After doing the same analysis as you did, we still save a couple thousand dollars per year (including paying her “share” with after tax dollars). We have never been on the receiving end of a “share”. We’ve only sent them. All in, I think this effort is worth $1000 – $3000 per year. I wouldn’t recommend it in your shoes, but it’s been fine for us. I wrote a post about our experiences that should be linked above on your site. Thanks for your work! Matt
Doc, this is the first post I’ve seen where someone chose NOT to use the Health Sharing Ministry approach. Great article, and interesting tax angle of being self-employed. I’ll achieve FIRE in June ’18, and am tracking Health Insurance decisions of other bloggers VERY closely. I’ve added your article to my “Log Of Articles”, thanks for the unique perspective.
Dental insurance, if not subsidized by an employer or you have a bunch of kids, is usually a hefty loss. If single or married without kids and you would pay more than $100 a month I would skip it. Most every plan covers 2 exams and cleanings, but only one fluoride and xrays a year. In Utah there are so many dentists it would be pretty easy to negotiate a cash discount that would cost less than that.
The fact that you are self employed changes it though as you can pay with pretax money. Not everyone can do that though.
You should check on Medishare. None of the hassles you described there. I am self-employed and our insurance option (family of 4) was $1600 per month for an $8000 deductible. (Only two insurance options for Indiana.) This means that I’ll pay $27,200 each year before the insurance company pays a single dollar toward our healthcare! (I realize we would have preventative care for free with this insurance but that is not a large amount.) We went with Medishare which is $205 per month ($2460 per year) for a $10,000 deductible. They automatically deduct $205 every month from my checking account, very hassle-free. They already have a lower negotiated price in place with providers (through their PHCS network) so we don’t have to do anything there either. I do miss not being able to contribute to an HSA but when I compare $19,200 a year for insurance vs $2460 a year for Medishare, it’s seems a non-decision, at least for us. Plus, I get the benefit of knowing I’m not contributing to a failed and unsustainable Obama-care wealth-redistribution system that is being crushed under it’s own weight. Not being able to claim monthly Medishare premiums hardly levels the playing for insurance either because of the drastic difference in the price of the two plans, $19,200 vs $2460. Another catalyst that helped me make the decision to go with Medishare was when my local insurance agent, who only makes money if she sells me an insurance plan, recommended I use a Christian sharing network instead which makes her nothing. We switched in Jan 2016. I wish I’d switched sooner and had back those thousands I paid in monthly insurance premiums.
What’s the maximum benefit on your $205 plan?
I have looked at MediShare as well, and while I don’t know the specifics, I would guess that the Maximum Out of Pocket is $10,000. At $10,000, based upon where I live, our monthly payment would be $243.
The premiums are so low, I thought to myself, “How are they a viable entity?” The way that MediShare (and other similar organizations) are able to sustain themselves financially is that they have a long list of exclusions and don’t pay for many things (e.g. psychiatric care, prescription medications, etc.) that a typical insurance plan would cover. They also won’t pay for accidents/incidents that are secondary to actions which are non-Biblical in nature (e.g. injuries incurred in an MVA while driving drink, maternity costs for pregnancy out of wedlock, etc.). In essence, they are cherry-picking the “winners” (healthy people), which is great if you are one of the healthy people and lead a life based on the principles outlined in the Bible.
I have signed my family up for MediShare because we meet the criteria outlined above. However, if you are considering taking such an approach, read through the list of exclusions and items that are not covered carefully because it is not the right path for everyone.
C. Maximum Sharing Limits
Each Member enjoys sharing of his or her Eligible Medical
Bills with no annual or lifetime limit.
Here is the link. Click on Medi-Share Guidelines PDF and go to page 25.
https://mychristiancare.org/site-search/?term=maximum+benefit#results
I am 44 and for my family of four the monthly cost was about $245. The rate was knocked down to $205 because we qualified for the healthy incentive discount (online questionnaire where they ask your diet and exercise habits as well as previous medical history). There is no maximum benefit.
That sounds like quite a bit better deal than CHM. What’s the catch? Why does CHM have clients?
I never looked at CHM. I had only heard of Medi-Share so that’s who I looked into and then went with. I said I joined them in Jan 2016 but it was actually Jan 2017. I just got an email from them stating that because the oldest person on the account (me) is turning a year older (in Dec) that our monthly premium for next year will go up a bit. Their website is pretty easy to plug in your info and get a quick quote. I believe the healthy incentive discount saves us an additional $40 or so per month. I’d be interested to hear your opinion if you look deeper into Medi-Share. We’ve been happy so far and my old insurance agent said she followed up with previous clients that switched to Medi-Share in previous years and she said she couldn’t find anyone who had a bad thing to say about them. Just understand what they do and don’t cover. Good FAQ into on their website. Thanks for posting articles like this, BTW. I always learn something.
Maybe I should do a comparison article between the four of them sometime. I really was surprised by how low yours was. I expected them to all be in the same ballpark around half as much as insurance.
That would be great. I’d be interested in what you find out.
Great post and thanks for the detailed analysis on Health-Share Ministries. I’m facing a dilemma of my own that has yet to play out. I’m still employed part-time and have Aetna HMO through my employer. As I’m sure you’ve heard, CVS is buying Aetna.
So I’m not sure what’s going to happen. Sort of an odd combination, but obviously connected from the pharmacy/drug angle. I just worry that my rates will go up or that they’ll make some drastic change. Or it could be good and maybe I’ll just get all prescriptions way cheaper. Time will tell.
Jim – it would be helpful to know your family size when looking at the premium.
Also, group life insurance can be a real bargain through an employer. For years, I was paying about $2 a week for 7x my salary which was about 20% of what many major insurance companies were offering me.
The problem with evaluating the quality of ANY employee benefits is that no two plans are alike and it is critical to understand all of the details.
I just wanted to jump in here. I am a retired (Engineer, last DEC) and wanted to comment that this is a fantastic website even if you not a WC. So much information posted. Thanks so much.
We’ve got 4
website modelskids.With CHM, you don’t send monthly shares to different people each month — it can be automatically paid by a credit card, which is what we do. We do the bronze plan at CHM for $45/mo per unit ($90 for me and spouse), and love it. Plus, when we’re traveling abroad our “coverage” is the same. No need to worry about networks. Yeah, we really prefer CHM to traditional health insurance. But not everyone’s situation is like ours, and situations can change, so WCI is right to run the numbers every year.
That’s a lot more convenient. Glad to hear.
With the Bronze plan do you worry that your maximum benefit is only $125K? That’s relatively easy to get to.
Yes, I do worry. But I take the risk right now. We’ve used the Gold plan as well. In the future and for longer-term, we’ll probably switch to the Gold Plan with Brother’s Keeper:
http://www.chministries.org/catastrophicbills.aspx
We switched to health sharing for 2018. We have a few partners that switched last year and they really like it. Premiums were going from $1700/mo. 2017 to be a staggering $2700/mo in 2018! For real – I couldn’t believe it!!!
$500 a month plus a little more for Brother’s Keeper ($75 a quarter, not a month)
I did quite a bit of research. I think the two preferred options for a high income doctor are CHM and Liberty. Samaritan is the weird one where you have to send the money directly to the stranger. I guess some people love that fact, but for me, no thanks. Medi-share has a “in-network” people they prefer you to use. No Thanks.
Liberty will do the bill negotiating for you, but cap at a million.
CHM has no limit, but you have to front the money and negotiate the bills. Not a problem for me. Just something strange to note. CHM won’t cover a helicopter to the hospital, only between facilities. I talked to a medical helicopter pilot in our church and he said it is SUPER rare for them to pick up “out in the field”. It also says you need to max out your car insurance medical limit. (that was pretty cheap to do).
If there was a huge problem and you started approaching the million limit, I assume I’d just switch to an ACA plan in open enrollment, so it’s not a huge deal and Liberty would probably be good too.
I went with CHM due to unlimited sharing.
Question. How can your marginal tax rate be 46% when the highest tax bracket is 39.6%? I don’t understand this. Thank you for any clarification.
Federal + the non-deductible portion of state + the non-deductible portion of 2.9% Medicare + 0.9% Obamacare.
The easy way to calculate it is to add another $100 to your income in Turbotax. If your taxes go up by 46%, your marginal rate is 46%.
I see. Thank you. Good tip on Turbo Tax. I will try that.
The Christian Health sharing option is intriguing, but I’m a little confused by it. Do I have it right that you have to pay for services up front, but then are essentially reimbursed by other members later? It sort of sounds like a pyramid scheme in that regard. Also, how they know that you were engaged in an “Unbiblical” activity when you required health care. Is it just the honor system? Or do they have someone read through all the notes to determine that yes, your BAL was over the limit and yes, you were in fact the driver? It sounds unenforceable at best and a breach of privacy at worst.
It’s not a pyramid scheme. That’s kind of a knee-jerk reaction to call anything that is new or different a pyramid scheme. A pyramid scheme is when an investor takes new investors’ money and pays it to the old investors’, telling them it’s a return on their investment.
But yes, that’s the way it works. You negotiate a cash price. Then you pay and then you submit it for sharing and get reimbursed. If it is a high amount, you can negotiate to pay in a month after you get your shares.
The second question is great. I don’t know what kind of a record review is done. I can see why enforcement could be tricky, driving up costs for everyone. Certainly there is an element of the honor system there, which is nice to see.
I would definitely love to hear more about these plans as a curiosity.
Agree that it isn’t a pyramid scheme, but it certainly seems ripe for some degree of abuse.
It would be fascinating to hear how the religious aspects are adjudicated. If you fall and hurt yourself at a wedding after 3 beers is that nonbiblical? Or if get in a physical altercation? Deliver a baby 8.5 months after your wedding date?
My guess is that it’s overwhelming made up of relatively affluent evangelicals with kids who just don’t have big expenses that often and for whom even the borderline examples like I noted above are just never an issue.
If you are young and healthy what are the most likely sources of needing very expensive health care?
Auto accident, this will be paid first by whatever auto insurance policy you might have.
Workplace accident, this will be paid for by workers comp.
Other types of accidents, these might be covered by some other insurance as well.
So my logic says you might not really need any health insurance, and only a very high deductible one which should be cheap.
Sorry, but I’ve seen lots and lots of young people with expensive medical conditions that wouldn’t be covered by any of that. RA, testicular cancer, sepsis, appendicitis etc.
And I’m amazed at how even high deductible plans aren’t cheap these days.
Stressed to the max on this. I’m a W2 with no Heath care benefits. We did not pay attention to a letter that came last year which switch us to a new plan that basically has no providers on it and pays for nothing. $1200/month family of 4 and $10,000 deductible. So we have been reading as much as we can about this so thank you for this post. We keep getting told services are covered then we get hit with $600+ bills. So today wife has been on the phone all day with the Insurnace company and drs office to get an accurate number on what our cost would be for a scan. Final was told $900. But come to find out if we didn’t have insurance the cost would only be $118!!!! So we said fine ignore our insurance card. They said they couldn’t.
So for those of you thinking these big insurance companies are negotiating prices down for you, your wrong! They just negotiate there costs down.
We are switching but don’t know to where yet. But being W2 I don’t believe we get any write off for the health insurance. We still plan on having more kids which is our biggest concern for coverage and I’m trying to understand better how things will get covered with these Christian health groups. They all say there is no guarantee that things will be covered.
That sounds like terrible insurance!
That’s garbage, of course, that they can’t give you the cash price.
Could you share the calculator?
At which premium price would the scale tilt towards ministry?
For a person in similar situation as yours but with higher ACA premium options…
Thanks!
So we just met with a private insurance agent for US health group https://www.ushealthgroup.com. We are still examining the ins and out with this type of insurance. Basically they are contracted with Cigna. So you are covered by any provider that takes Cigna. Which according to our agent he has yet to find anyone that doesn’t take it. It operates similar to how insurance was prior to Obama. So preventative is not covered but is discounted. However if there’s an incident they do pay their allotted portion. It doesn’t cover major medical (unless you opt for that addition) but supposedly you can upgrade to that level for one time with in 90 days of an major incident.
At any rate our family rate will be between $450-$500 so significant saving.
I’m just curious if any one has had experience with this group. Too many things seem too good to be true.
Jim,
Been following you for years, and thanks so much for all the helpful information and advice.
Quick question – I am the managing shareholder of a C Corp EM practice with 22 docs and 8 PAs.
We offer a group health insurance plan with 2 variants (bronze/silver) via BCBS in South Carolina.
We pay the premiums with company dollars and keep track of the expense for the individual MD/PA internally.
I had one of my PAs call me today and say that Blue Choice said that she could be reimbursed via the company if she moved to an INDIVIDUAL health plan with them away from our offered GROUP plan.
I was under the impression that this was not allowed (individual health plan premium paid with company dollars).
What have you heard?
Many thanks, and let me know if I need to flesh out more details for your advice.
Thanks!
Hunter Louis
Charleston, SC
Replied to you via email. For others, yes I think this can be done but it probably has to be run through a Health Reimbursement Account (HRA).
Thanks Jim!
If I am self employed and go under my wife’s plan for health insurance but she now has to pay more $800 to add me can I deduct from my self employment taxes. I am paying her to put me under her health insurance plan. I am assume the answer is no. Her plan is better than anything on the marketplace through her job. Her job pays 90% of her costs but only a minimal amount of mine.
Thank you
No, you can’t deduct that.