The Average Cost Of Family Health Insurance Is Now Outrageously High

According to the Kaiser Family Foundation, the average cost of family health insurance offered by companies is now a whopping $20,576 a year, or $1,714.66 a month. Employers paid for 71% of that cost on average.

Meanwhile, the average premium for single workers was $7,188 a year, or $599 a month. Employers covered 83% of that cost on average. The KFF surveyed over 2,000 companies.

If they had asked us what we paid, we would have brought up the average because our health insurance cost is jumping by 7% to $23,131.38 a year, or $1,927.64 a month for a family of three! Previously, we were paying “only” $21,788.88 a year, or $1,815.74 a month.

With one child we have a PPO Platinum plan with a $250/$500 deductible (single/family), a $3,200/$6,400 out-of-pocket max (single/family) and 80% co-pay insurance.

The Average Cost For Healthcare Soars

The Average Cost Of Health Insurance Is Unsustainable

Despite workers' earnings rising roughly 26% from 2009 to 2019, healthcare deductibles rose by 162% over the same time span. In other words, employees are getting squeezed. It is only logical that companies not pay employees as much if they have to pay for ever-increasing benefits.

Below is a list of other items that have inflated quite drastically over time. If you want to save on costs, then you should stay as healthy as possible, don't go to college, don't have kids, and be a homeowner.

Inflation Of Goods And Services

Out of curiosity, I asked our healthcare agent how much our healthcare premiums would go up if we had a second child. He said adding a second dependent under age 15 to our PPO Platinum plan would cost an extra $440 a month for a total of $2,360 a month or $28,320 a year!

Using a 25% effective tax rate, our family needs to earn $37,760 a year just to pay for our healthcare premiums. Using a 4% return or withdrawal rate assumption, we would need to accumulate or allocate $944,000 in investments to cover our healthcare premiums if we continue to stay unemployed.

If you don't think you need at least $2 million to retire early with kids, you are seriously fooling yourself. The math doesn't lie folks. $1 million needs to be set aside for healthcare costs that are growing by 5% – 7% a year. The other million is used to pay for basic living expenses.

Healthcare costs are going to be your largest unavoidable expense. You can save on tuition by just going to public grade school and public university. Housing costs can be controlled if you pay off your mortgage or relocate to a lower cost area of the country. But there's nothing you can do about runaway healthcare expenses unless you retire in or near poverty in order to get subsidized healthcare.

Average annual worker and employer premium contributions and total premiums for family healthcare coverage, 2009, 2014, and 2019

Analyzing Our Health Insurance

Given both my wife and I don't have employers to subsidize our healthcare expenses and we earn more than 400% of the Federal Poverty Limit ($83,120) from our retirement portfolio, we do not qualify for goverment healthcare subsidies either.

Once my wife stopped working in 2015, we decided to just get the best plan possible so we could minimize health insurance headaches and rest easier knowing we can get the best possible care. However, healthcare costs are now starting to push the upper limits of our comfort zone.

Current Medical Plan

One solution to lower our healthcare cost is to downgrade from a Select Plus PPO Platinum plan to a Select Plus PPO Gold plan to save roughly $160 a month in premiums. However, if we do so, our out-of-pocket max rises from $6,400 to $12,000.

Given we have a 2.5-year-old, we still don't know for sure how his overall health will be. So far he's doing OK, but we won't really know until maybe after he's five years old what other health issues he may have.

Further, if we have a second child, having our current plan saves us more money given the lower out-of-pocket max and 80% co-insurance. You can't just get a better plan to cover a big healthcare expense and then downgrade to save on premiums once that expense is covered the next month. These plans are year-long contracts.

We analyzed this comprehensive list of family healthcare plans arranged by price. You'll have to zoom in on the graph to see the details. I'm curious to know which plan you'd choose and why if you are a relatively healthy family of three with no chronic illness or pre-existing conditions. Your child is 2.5-years-old and you may have a second child.

Various insurance plan options

The Core PPO Platinum plan seemed like a great alternative, but our agent informed us it has a much smaller network of doctors which excludes some of our current doctors. We'd also have a similar problem of a smaller network of doctors if we switched to an HMO plan, and would require PCP referrals for specialist care, exams and tests.

How Do Retirees Afford Healthcare?

I've been scratching my head a lot, wondering how other early retirees / long-term unemployed afford healthcare insurance. Therefore, I went and asked a bunch of people and this is what they said:

1) Have you looked into Liberty Health Share? It’s a Christian based plan. It’s equivalent to a PPO with a $2250 deductible/ max out of pocket for only $499 a month for my family of four! I’ve had it for four years and love it.

2) I have Liberty Health Share as well. Last year we had our first child and paid only a 1,500 deductible. It was amazing. What impressed me from the very beginning was you could get a person on the phone right away and they actually cared and tried to help you with whatever you were calling about.

However over the past 6 months or so the service has gone downhill. They no longer try to pay claims within 60 days and sometimes it seems like it’s an absolute nightmare to get them to do their jobs. Still it’s better than I remember from Blue Cross Blue Shield so we are holding on and hoping things get better again.

Note: Dealing with insurance companies who may not pay the claims is the nightmare I'm trying to avoid by getting a better healthcare plan. I really don't have the time or desire to deal with insurance BS.

The Average Cost Of Family Health Insurance Tops $20,000

3) My wife works and we are all on her company's healthcare plan. We pay about $550/month for our family of three for a Gold-level plan. Our estimated net worth is $2.5 million.

4) Both of us are retired and live off about $38,000 a year from our $2 million investment portfolio and part-time work. We live in a very low cost area of the country where you can buy a house for $250,000. We are a family of five and qualify for tremendous healthcare subsidies given our income is only 130% of the Federal Poverty Limit. We pay less than $120 a month for a Bronze health plan under the ACA. Our deductible is $15,000.

5) We are a childless couple who live on about $28,000 a year. Our portfolio is about $1.1 million and we live in a middle-to-higher cost area of the country. My wife has a pre-existing condition that requires constant medical supervision. Our household income is at about 150% of FPL, so we only have to pay about $3,200 a year for our health insurance under ACA. We make an extra ~$10,000 a year in side income working online.

6) We started a business so that we can deduct our health insurance costs. Our business income comes from doing various consulting work online and offline. Last year we pulled in roughly $40,000 of consulting income and deducted $24,000 of health insurance expenses for the three of us. Effectively, we've lowered our health insurance expenses by roughly 20%. We also make roughly $90,000 a year from our various investments.

Healthcare Is Only Going To Get More Expensive

For most retirees, the solutions to comfortably afford healthcare insurance are to either get on your working spouse's healthcare plan or earn 200% or less of the Federal Poverty limit to get tremendous subsidies from the government. Even earning between 300% – 400% of FPL, you're only required to pay at most 9.86% of your gross annual income to healthcare premiums under the ACA.

The high cost of healthcare also makes me wonder whether more workers will be hesitant to retire early as well. I guess so long as you're willing to earn less than 400% of FPL in retirement, healthcare is manageable.

Unless we want to incur a tremendous tax bill by selling our income-generating assets, the only way our family can immediately reduce our health insurance expense is if at least one of us goes back to work. If the new employer pays 71% of the annual cost, then we would be getting a healthcare subsidy of $16,423 a year or $1,368 a month.

It might very well be time to dust off the old resume!

Related: POS vs. PPO Plan – What's the Difference?

Readers, how much do you pay for health insurance a month and how much does your employer pay? Do you think it's morally OK to get healthcare subsidies if you are a millionaire? If you don't work, how do you afford such egregious healthcare costs?

94 thoughts on “The Average Cost Of Family Health Insurance Is Now Outrageously High”

  1. Charles Dart

    I’ve recently concluded that health insurance is a scam if you’re generally in good health. In nearly all cases you’re better off banking your annual premium into an index fund and using that to pay medical bills in cash.

    I’ve been paying my family’s private insurance premiums for years. Our expat insurance had US coverage and a $10k deductible and cost ~20k/yr for our family of 6. Geoblue, our carrier, paid in full office visit fees outside the US, no deductible. Any tests or charges beyond the doctor fee counted towards the deductible, or in other words we had to pay it. We never, ever reached the deductible amount in any year.

    One day I decided to download our visit history and payments from my Geoblue account. I found that OVER 10 YEARS WE PAID ~$70K MORE IN PREMIUMS ALONE THAN WE WOULD HAVE JUST PAYING STRAIGHT CASH TO THE PROVIDERS. Bear in mind in addition to the premiums we paid health bills that fell under the deductible.

    That blew me away. “This can’t be right,” I thought. “You’re always supposed to have health insurance. Not having it is irresponsible. Financially it’s a good deal.”

    Math doesn’t lie.

    Then we moved to the USA. I found out health insurance here is even worse.

    Bronze plans will cost us $2600/month with a $14k deductible plan (Platinum plans are just overpriced bad math and like 2x more expensive which is insane). And unlike our expat insurance, Bronze US health plans rarely pay anything for doctor visits until you hit the $14k deductible. So with a plan we’re paying ~$30k in premiums PLUS up to $14k in care expenses = $44k until the “insurance” (LMAO) pays anything!

    What a monumental joke.

    It’s even worse because I discovered that often you will pay MORE with insurance per visit than you will if you have NO insurance. Yes you read that right. The cash-pay price often can be less than the deductible charge if you have insurance. It’s because providers jack the price for insurance carriers.

    Many providers will give you a 50% discount if you have no insurance and pay cash. I paid all-in $3k for a colonoscopy, cash. My kid’s pediatrician cut a $300 bill to treat an ear infection to $150 because we paid cash, no insurance. We’re just a month into our experiment — in the first month we’ve paid about $1200 in health bills, and it was a heavy use month. Compare to $2600 premium plus $1200 = $3800. No brainer.

    I’m still gathering data on health costs not having insurance as we encounter the health system in the US. Maybe I’ll discover something that will change my conclusion. But even so I reckon we always can sign up for a plan in November each year if disaster hits. But the disaster would have to be pretty bad to make the numbers turn against not buying insurance. Meantime we are banking $30k/year (less cash health expenses) for our health fund.

    So to recap — insurance will cost us minimum $30k/year in premiums. Then we have to pay the first $14k in health bills anyway. So up to $44k/yr before I see any real benefit from health insurance, and even then my health bills would have to be >$74k before insurance turned net positive for me.

    Yes, I’m taking more “risk” in terms of getting some terrible chronic costly disease. But again Obamacare prohibits discrimination for pre-existing conditions, so the most we’d wait to get a plan is max 1 year and more likely ~6-8 months. That seems like a reasonable risk to me given what “health insurance” will charge me to insure against that risk. I can afford a surprise $100k-$300k hit. Call it “self-insurance.”

    As Sam points out, insurance is expensive because most people eat poorly and don’t exercise. Looking at my own numbers I’m convinced there’s a power law in effect — a small fraction of the population is driving the lion’s share of health cost. “Health insurance” isn’t insurance at all — it’s a cost sharing and subsidy scheme. Do the math — I bet 90% of readers have paid more into health insurance than they ever got out if you include what employers pay. Plus providers and carriers have incentives to jack costs.

    I would love to buy a policy where I pay 100% of the first $75k/year health care cost, then it pays 80% of everything above that. That is real “insurance.” But it doesn’t exist. Because if it did financially and probability-savvy people would buy it and deprive the cost sharing/subsidy scheme of cash cows.

    Am I missing something? I know it’s heresy, but I’ve been over this again and again and don’t see a flaw to my logic. I know my risk tolerance is higher than most.

  2. Hi,
    I’m an ex health insurance executive in CA and I can show you how to cut your overall healthcare and health insurance bill in half. I’m not a broker or selling anything, just want to help you and your readers. Your $24K health insurance (plus copays, etc) and overall after-tax healthcare bills can be lowered by $10K in Y1 and likely $14K in Y3 using great CA healthcare providers and insurers such as Kaiser Permanente – an institution revered nationwide for its great care. Happy to help you with a more elaborate blog post including specific San Francisco health plan options, a spreadsheet that demonstrates the savings and perhaps a Q&A discussion that helps dispel various misconceptions.

    1. Yes, Dan. Please do share your trick.

      I’m thinking of moving my family of 5 back to the CA from the EU to help my dad. However, at these costs, it would be all but impossible.

      Thank you in advance.

  3. I’m late to the discussion, but you should consider signing up with a Direct Primary Care Physician. These physicians provide you primary care for a fixed ongoing monthly fee, that is much less than what your cost would be if you went to a fee-for-service doc and they billed your high deductible insurance. And if you have children, it strikes me as even better deal as everyone I know who has kids seems to max out their deductible and with these DPC docs you will still come out ahead.

  4. My wife and I are retired, accidentally from rental income, just like Sam. We’re 53/54 now.

    We don’t have any health insurance, never had it, and don’t plan on having any. What for?

    Primitive pharmaceuticals?

    MERS and Candida infested hospitals?

    Doctors whose ethics are so bent they are seeing dollar signs everywhere?

    A system in which “help” means drugs with side effects that need more drugs?

    A fear-based proposition where not taking responsibility for your own health and always “talking to your doctor” who really knows only about studies and averages, but your body and mind are nothing like the “average”?

    Pushing people into drugs and procedures they could do without?

    Being all about money?

    We see healthcare system in the U.S. as a fraud of gigantic proportions. We talked about buying insurance, but decided it’s not even about money.

    We both agreed we’d rather die than let us go under the “tender care” and “mercy” of American health industry. Perhaps for things like fixing up a broken bone, for which we’d pay ourselves.

    But for anything else, I’d take my chances with better food, exercise, discipline and whatever my genetic code has in store for me, and be at peace with it, over glorified leeches called the healthcare system.

    It’s shameful the shackles of fear this industry has over Americans. Actually the shame is more on Americans for falling for it all and believing there’s a “pill for everything”, than on bunch of greedy unscrupulous people who tried to con us all.

  5. Exactly the reason i’ve remained in the military and intend to do so to not only earn a pension at 41, but healthcare for my family and I. The healthcare is more valuable to me as the cost appears to be exponentially growing. Even in a HCOL area of the Bay Area (where we’ve been stationed multiple times), my family and I find the care great.

  6. Is there anyway you can label your article on the date?

    Btw I really resonate with your previous article about how the middle class in the Bay Area requires at least 300k of income and still barely sail by. We pay 39% fed and state tax, property tax, 9.5 sales tax and our disposable income is so low we can’t even afford health care. It’s pathetic

  7. I am deciding whether to retire at 50 in 5 months, or work till 55 at which point my municipality offers paid for medical for my entire family!

    At 50, my yearly premium would be $20,000 plus the out of pocket costs for family coverage, (on a great BCBS PPO) until my wife and I are eligible for medicare.

    After having saved and invested for decades and being debt free, it’s unsettling to have to pay $1,666 per month in premiums until Medicare, knowing darn well that these premiums will continue to skyrocket until I am eligible for Medicare. Even after decades of saving and invested, I feel handcuffed to my job!

    I think an area that could help improves costs dramatically is in nutrition. We are a nation with many obese and chronically ill people that are addicted to sugars and starches.

    This has led to an increase in type 2 diabetes in the young and old. A devasting disease which many other diseases stem from like heart disease and cancer.

    The food industry should be regulated like the tobacco industry. They have caused so many americans to be sick and the government has been complacent and in bed with them by not telling americans the truth that the food pyramid is dead wrong and so was Ancel Keys!

    Imagine if we could stem all these chronic diseases by eating real food like our ancestors. Our “sickcare” system wouldn’t have the demand for services that we are currently putting on it. And hence the cost would go down.

    In a perfect world, we’d eat like our ancestors and there would be a DRAMATIC reduction in all of the diseases that were unheard of hundreds of years ago!

    But I know it will never happen, because profits are what drive people and people in government that could change the food pyramid, can be bought with donations.

    The food industry wants to keep us sick. Doctors receive very little nutrional education in medical school. And most give bad nutrional advice as a result. Those that speak up contrary to the food pyramid, get sued! And we pay the price as we get sicker and sicker!

    Grant it there are accidents and genetics that will not prevent some from falling ill, but for a majority of people, if they can fix their nutrition, we could put alot less of a burden on our sickcare system and drive the costs way down.

    Unfortunately, we are a nation of addicts, addicted to the very crap the food industry sells us and I won’t see it ever changing.

    If I was only concerned about myself, I’d roll the dice and retire, but I can’t control what my teenagers eat, and their well being obviously concerns me.

    There is no incentive by the government and corporations to want to make us healthy. And I am a capitalist at heart and believe in smaller government, but the food companies should be regulated by how much sugar they put in the foods they make. And Americans made aware of how devastating it is to our health!

    Apology’s for any typos.

  8. Whenever politicians (Republicans + Joe Biden) complain about the costs of a Medicare for All plan, they conveniently leave out the amount we’re already paying to for-profit healthcare companies. True, Medicare for All might cost $32 trillion over 10 years, but our current system will cost at least $34 trillion and STILL not cover everyone or ensure affordable coverage.

    Despite what some might say, Medicare is also highly efficient, only spending about 2% of its budget on administrative costs compared to 15-20% for private insurers. Further, Medicare is able to set prices for services. Price is a huge reason why health care is so expensive in the US as mega hospital systems dominate markets, resulting in an MRI cost $3,000 while Medicare pays $500.

    Saving $2T in the economy that could be spent on more productive activities while also covering everyone with comprehensive coverage seems like a no-brainer to me.

    1. Medicare’s administrative costs are in large part passed on to providers and hospitals. This is why they are so low.

  9. Financial Freedom Countdown

    The Health Sharing ministries are not insurance companies and are under no obligation to pay any claim. Not sure why folks in the FIRE community continue to be enamored by a “religious” exemption loop hole in the ACA. They also exclude a number of pre-existing conditions. Insurance premiums are to be paid for piece of mind. Last thing I need when ill is to be worried what would be covered or not by these ministries.

    Also ACA is watered down from the original plan and it is worse in the Republican states which voted against expanded Medicare coverage. CA and other blue states have decent options and prices on the respective state exchanges.

  10. Ms. Conviviality

    The cost of health insurance is a major obstacle for my husband and me to retire early. It would take us an extra 3 years of working to build up the capital to generate the passive income needed to pay for the health insurance premiums. Now, if everyone was provided with Universal Basic Income of $1,000/month then health insurance premiums would be paid for. How awesome would that be?!

  11. Marie Jacobs

    Families planning to rely on a working spouse to get affordable health insurance should make sure to choose an employer that pays for family coverage. If employer just pays for employee only coverage but not family there’s an ACA family glitch that may make you ineligible for subsidies no matter how little the employee earns or how expensive the non working spouse and kids coverage costs. I’d say more but the page has reloaded twice while typing and I didn’t want to type this comment a fourth time. Google ACA family glitch.

  12. It’s a great financial point
    I came to USA roughly 5 years ago and we had to face with a pretty tough medical services reality as soon as in my home country all medicine is free. That’s disputable the quality sometimes but in general it’s affordable for almost everyone and you can get any commercial medical service for a little pay if you choose it. So just the thought itself to pay $300 monthly in US for our family of 4 for medical service which I can only use in theory was devastating.
    As soon as current president administration canceled fines for not having medical insurance we stopped contributing anything to this crime insurance lobbyists. And we are family with two teenagers.
    Our net worth is roughly $ 2000 000 without taking into consideration inheritance and other money could inevitably grow up in the next 10 years in 401(k), but we don’t even consider to keep living in USA after our kids are done with college education. We are planning to live everywhere all over the world including Asia, Australia, Europe and Latin America after our early retirement where is affordable cost of living, affordable medicine and fantastic food. I believe there’s always a choice to stay somewhere you get used to live being scared of any potential adversity which could happen when you change your life drastically, or move freely all over the world being challenged and saving as much money as it possible.
    Thus we are not horrified by cost of medical expenses when we turn 60-70-80 just because we are gonna meet that amazing age in another well developed country with a great medicine and still pretty good net worth.

  13. As with many comments on this subject, I am in what one commenter called the “danger zone”. My wife and I are 56 and have accumulated a very nice nest egg over 34 years of working. My wife works part-time w/no benefits so leaning on her to cover healthcare so I can retire next year is not going to work. We have budgeted $25K for Healthcare until we turn 65, then we budgeted $10K every year until age 99 to supplement Medicare. We budgeted $5K for Dental/Vision from 56 – 99. All dollars are inflation adjusted (2%). Using Personal Capital for our Retirement Planning assumptions & calculations. I can stay working for 5 more years and get all insurance supplemented through the corporate retiree program which is substantially lower than the individual rate in the open market. My issue is that I have to work another 5 years and I will be 61 to get it and really don’t want to be held hostage by healthcare to keep working. We may be able to take advantage of subsidies if we can keep our MAGI under the threshold of 400% but then again, I am taking a chance on ACA and it’s future. Our financial advisor tells us not to let Healthcare dictate my retirement date per our situation but spending this kind of money each year makes my stomach turn. Does it make sense to work through a Health Insurance Broker to navigate all of these choices to see which one is best?

  14. Joseph Andelin

    You need to present alternatives to traditional insurance (sharing plans, direct primary care, and more). The system can be arbitraged.

    I’m on a ministry plan and pay 80%+ less in premiums vs. the ACA plans in my area. Not for everyone, but an option.

  15. Not of fan of letting the government handle my business but this is one of the exceptions where there is no other way than to have our government handle it.

    I lived in Iceland for 20 years before I came here to college and now I work as a CPA in the U.S. I have relatives in Scandinavia so I have had exposure of having the government handle the health care and then being insured by the private sector here. Having the government handle has in my opinion been a more efficient (suprisingly) and a smoother experience.

    This might be the only thing the government handles better than the private sector.
    Thinking about it objectively makes you realize that it does not make any sense that the health insurance companies in the U.S had a combined net profit of around 90billion dollars in 2018.

    1. It’s the same reason we don’t have private police and fire departments, or private highways.

      Health care is a public good, just like those.

      1. doddiozil we should note that Iceland is not a good example because it’s a country the size of a small town(a little over 300k people). Many things are atypical in Iceland versus the rest of the world. One look at how it operated during the 2008 financial crisis and you could argue that the country is run similar to a large hotel. Therefore, it is not an apples to apples comparison.

        I too come from a country where healthcare is run by the government and let me tell you… IT SUCKS ! Anyone who claims otherwise has simply not been in a system to experience this and is jaded by people/politicians who throw out there unicorn ideas that appeal to people(who doesn’t want free healthcare or free $1000 a month) but in reality/practice, it would be a complete disaster and simply not feasible.

        First misconception is that it’s free. It is not. It is simply deducted from your paycheck without your say so or choice. If you happen to work as an employee AND have your own business on the side, you get “deducted” twice, no choice again.

        The most important part is that the service, conditions and doctors provided SUCK.
        When it gets to the point of 2 patients sharing a bed, having to bring your own bandages and such from home because the hospital is bankrupt, it will quickly change your mind. Dilapidated hospital buildings and reject doctors(cause the best fled to the west for real money) that won’t touch you unless they get “a taste” in an envelope, plus nurses that won’t check on your or change your bed sheets if you don’t make a personal donation to their pocket. Bribe to get in front/know someone or wait 2 months for a surgery. Literally wait in the E.R. until you die because they are understaffed/don’t care due to lack of funds. And when it’s all said and done, you’ll still need to drop by the private hospital for further treatment or a follow up to make sure you are treat of your ailment.

        I don’t generally like analogies, but they seem to be popular:
        Cars are not free. Not everyone gets a car. Want a Bentley ? Pay the premium.
        Food is not free. You die without food. Want a steak ? Pay the premium.
        Same with education and so forth.
        Not to sound harsh but it is not my obligation to make sure you have a car, food or a masters degree.

        Matt – how many years and in which country have you lived to be able to share your experience regarding government ran healthcare ?
        And I hope you won’t mention Canada because my brother complains every time we talk about what a joke their healthcare system is. Furthermore, there is no Canadian health care system. Health care there is funded and administered by each province and territory. By comparison each US state would have it’s own healthcare.

        I agree that costs are out of control, but instead of handing it over to the always-incompetent government, I’d rather aggressively deregulate and let capitalism take it’s course and drive prices down by competition.

        1. JimmyD:

          Thank you for sharing your experience.
          I am sorry you come from a third world country. It must have been hard for you growing up. My comment focused on comparing other developed countries to the united states, not undeveloped countries. Like i mentioned above my experience with health care in a developed country was significantly better than the health care here.

          There is just no reason for the health insurance company to have a net income of 80billion dollars in a year.

        2. Thank you for sharing your experience. The U.S. can control runaway health care costs without having to become a health care provider itself. They can set prices for premiums and requirements for quality, just like Switzerland did. The health care providers and insurance companies can still survive, just like they do in Switzerland. In that country, monthly premiums are about $300 per person and $900 for a family, and the premium covers everything.

  16. I used to sell health insurance. After Obama my premiums and deductible went up 4-7x. Now with a family of 3 we choose to self insure. Anytime we have had to go to the doctor we pay a reduced amount in cash which is about 20% cheaper than paying with insurance and we rotate dentists using Groupon for 90% off dental cleanings. I fractured an ankle a few years ago and paid 300 bucks for xrays and doctor visit. I found the ankle support brace on craigslist for 40 bucks as opposed to the new one they wanted to bill me $500 for. We drive a big safe SUV and carry over 500k in unsinsured/underinsured motorist coverage to cover any car accident injuries. Given that most insurance plans don’t kick in until the deductible is met people are paying out of pocket anyhow and if we need catastrophic coverage maybe well get employed with a friend’s company or find a job at a bank. Its outrageous what medical care costs and we think medical tourism will become even bigger business if the US healthcare system isn’t fixed. Some people might say going without health insurance is stupid but then again so is a life of risking obesity and getting sick eating unhealthy food working a desk job. To each their own, but HSAs were supposed to be the saving grace but that hasn’t turned out so well unfortunately. At a minimum all healthcare expenses including premiums should be tax deductible for everyone. Employer sponsored or not.

  17. Great financial and ethical questions.

    If I retired now I would roughly make 60k in passive income. That comes within 3k of the subsidy cutoff for a couple. In the area I live in 60k is a little over the median household income. We owe nothing other than the bills no one can avoid so I think money wouldn’t be an issue so long as we didn’t do anything too nutty.

    The one thing that keeps my wife from being comfortable with me retiring is our insurance. We pay $600 a month in premiums and are constantly hit with a barrage of copays, deductibles, etc.. which we keep well managed. I can easily see how medical bills could quickly pile up even with insurance. She’s afraid that we would eventually get behind. With a nut of around $3k and an income double that I think we would be fine. I especially feel comfortable if we took advantage of the subsidy.

    With the subsidy I believe I could get the Blue Cross gold which would amount to a $500 premium with similar deductions and copays as I have now. Anyway you look at it I’m gonna spend between 10 and 20 thousand on health care.

    This begs the question you already asked. Is it ethical for a high net worth couple to play the system? In my opinion, ABSOLUTELY. We have a system that is rigged to gaff the middle and upper class for the supposed benefit of the poor. Who’s really benefiting? The insurance companies. And the political machine on both sides of the aisle. We don’t have socialized medical and we certainly don’t have free market medical either. Because if the market was mostly free with some important regulations (think preexisting conditions and antitrust policies), competition would drive it back to more manageable levels. I would have no problem taking advantage of subsidies set up for people with my income level.

    Is there a better way? I’m sure. It won’t happen as long as big industry and their political pets are getting their palms greased.

  18. One more data point for this discussion: my mother is moderately wealthy and has had private (individual) health insurance from age 50 until Medicare age arrived (about 10 years ago). Prior to her becoming eligible for Medicare, she was paying approximately $20K a year for an individual platinum level plan (plus an additional ~$150 a month for concierge service).

    She was (and fortunately still is) incredibly healthy – so for all those years she never had any major medical issues. Yet the amount of money she had to allocate each year really made an impact on my wife and I. We quickly realized that we will need over $1.5M in investment assets alone to cover a plan for our family of three when we retire around age 55 (five years from now). We can’t imagine how people cover private medical insurance and other living expenses in a high cost of living area without at least $5M in investment assets.

  19. Michael Fake

    Have you explored the idea of developing your numerous posts into a book and marketing it to college students and young professionals. You have a wealth of information that would be valuable to serious professionals that have not discovered your site. I am an old dude (working as a CFO in manufacturing) and look forward to your weekly posts and generally learn good information.

    Regards, Mike

  20. Hi Sam,

    Longtime reader. New poster.

    I live in Saudi Arabia. My healthcare costs domestically are virtually $0. I pay nothing for all of my care. I pay nothing for all of my prescription drugs (and some over the counter). I work for an oil company, and my company has its own hospital within compound. Because I’m an American, I pay $200 a month into a health insurance policy (for my family of 3) through Aetna that kicks in if I need insurance while I’m abroad or in the US. If I work for my company for 10 years and reach 50, then I can keep my insurance at $583 (current cost). I’m 42 now, and I consider working here until 60 because American health insurance is such a mess. If anything, I consider trying to get a job in Canada for the geoarbitrage in terms of insurance and university tuition/acceptance rates. If single-payer health insurance through Medicare for all becomes a reality in the US, and everything insurance wise doesn’t suck anymore, I’d feel more confident.

  21. The outrageous cost of healthcare is the reason my husband and I are still working. I’m 49 and he’s 54. We have rental properties generating a total net income of $100K per year, a paid off home, and $2.5M in investments. But, even with a net worth of $5.5M, I don’t feel that it’s safe to retire and personally assume the cost of healthcare. My company completely subsidizes the monthly healthcare premium in our high-deductible plan. So, if we both retire, we will need to absorb about $30K per year of premiums – cost that we don’t pay for at all right now. So, not only will we be losing our income, but our net expense will also go up significantly. We’ve found the right balance of having jobs we like and take lots of vacations. I don’t see a need to retire and just be stressed about money. That wouldn’t be a fun retirement at all.

  22. I’m a retired 56-year-old with Kaiser in the Bay Area (South Bay). Kaiser just sent me my 2020 premium quote for next year. I don’t qualify for any subsidies so bear the full cost myself. My 2019 premium is $632.46 for an individual. My 2020 estimated premium will increase to $706.74. I’d rather go with a PPO rather than an HMO like Kaiser but Anthem is the only PPO insurance carrier around and I’m assuming the monthly PPO premium will be approx. $1100-$1200 per month. I could probably afford it but barely. When I can no longer pay my premiums due to price increases, my plan is to take in a renter to offset premium costs. That’s the only way I can think of to remain in retirement in the very expensive Bay Area.

  23. I like the idea of universal cheap health care for everyone. However, I would be terrified of the thought of the government running the health care system. I say this as a gov employee. They cannot even maintain basic websites, they are rife with inefficiencies, and 90% of the work force would not make it in the private sector.

    Health care costs are out of control. One way to get those costs down would be to increase the technological efficiency of health care. Putting it in the control of the gov would take it in the other direction — guaranteed. The current system is broken and unsustainable, but there have to be other solutions to consider.

    1. But govt is already in healthcare with Medicare. Ask older people about whether they want their medicare, I bet most would fight tooth and nail if you tried to take it away from them. Medicare is their trial, the result is based on whether you think Medicare works for our older population.

  24. When my wife and I retire, we plan to do a combination of:
    1) Self-care – eat healthy, workout, etc.
    2) Direct Primary Care
    3) Medical tourism
    4) Self-insurance
    5) Catastrophic insurance.
    Should be less expensive and avoids having to rely on insurance companies for most needs.

    1. All these people who think they can lifestyle future healthcare needs away are dead wrong. You don’t know what you don’t know. You are going to get sick and the sickness may be something you don’t understand, you can’t exercise away, you can’t eat whole grain avacado toast away, and you can’t overcome without a good diagnostician and science backed treatment. You will be scared, tired, and in pain. If you choose to go the cheap ass way about covering yourself of family, you’ll be getting cut rate care-treat and street. Just enough care to get you out of a chair or bed that a good paying customer can occupy.

  25. Hello, FS

    Great topic, on my wife’s and my mind a lot lately as we are planning a change soon.

    I work for myself and my wife is a part time nurse. We have two boys ages 3 & 1, with a girl on the way due in February. We are on her employer subsidized plan currently, plat. PPO. Since she is part time they pay half of the $1900/month, so we are paying 950/month right now which I think is great. The costs are even more affordable if we use her hospital and their affiliates for services.

    Due to my work taking me out of town often, my wife is planning on leaving work for the foreseeable future to be home with our children.

    We do not qualify for subsidies so we will be bearing the full burden of insurance costs. I do agree with you 100% on getting the best plan possible, and that is what we will be purchasing. Growing up the oldest of 6 boys I saw first hand what a huge variable medical costs can be for even a healthy family with children. My brothers and I were all healthy kids, but there were still plenty of broken bones, stitches, burns, ect. My parents enjoyed an excellent employer subsidized plan through Ford For the majority of our childhood, requiring little out of pocket costs. They said back then they didn’t have to pay a dime to birth any of us for example, I’m 32 and my youngest brother is 23. Those days are gone though.

    If I could get a subsidy for insurance I would take it, I feel the amount of taxes and insurance premiums I’ve paid over the years would more than make up for it.

    I will say I am not looking forward to leaving the security and affordability of my wife’s insurance. The burden of being responsible for the premium every month feels quite heavy. My hope is that at some point my wife will go back to work part time once we are done having children and they get a bit older so we won’t have to fork over such large premiums all on our own.

  26. TheEngineer

    Health Insurance is statistically rigged scam for the mass. Evaluate your lifestyles and match it up with the kind of insurance you need – pick the highest deductible insurance if you are living sensibly.

    A simple and sensible living for body and mind example –

    1. Eight hours of sleep
    2. Drink water when first get up in the morning and throughout the day
    3. Two miles run + 1 hour weight training
    4. Cook and eat foods from raw ingredients
    5. Have a stimulating hobby or career with the proper challenge but is under your total control
    6. Spend time with family or friends who share your personal values
    7. Repeat step 1

    1. Sound advise that everyone should follow, however stuff still happens to perfectly healthy people. “Scam” might be a little strong, maybe just plain “expensive.”

      1. TheEngineer

        You are absolutely correct – very small percentage of the population will face head wind with regard to their health because of genetics wiring.

        However, the majority of us are buying insurance based on fear – a very unreliable financial metric.

        Insurance companies are selling insurance based on mathematics modeling – a very RELIABLE financial metric.

        If you have a sensible lifestyle and knowing that an insurance company is willing to bet on your health – you should not have any fear when it comes to evaluate the right level insurance coverage.

    2. Eat Right
      Keep Fit
      Die Anyway

      All these things just mean Chronic Disease (Long term & pricey), kicks in later & lasts longer. And that’s if you genes are good & a crippling accident doesn’t occur.

      Some form of inexpensive ( or subsidized) quality healthcare will be needed by (almost) everybody.

  27. Long time reader, infrequent poster.

    I’m a reserve in the army and pay $40/month with $1000 max out of pocket (cumulative) expense for tri-care.

    For a family, it’s $250/month with $2000 max.

    It’s a key reason I stay in. I’ll do it until retirement either way, but often wonder the extent of how/if/when single payer will negatively impact me (selfish, I know).

    1. I’m in a similar boat James.

      I’m retired military (24 years NAV) so I have access to what I would now consider world class health care/insurance with low co-pays and MOOP.

      I’m also in an area where I can either use VA (not likely, way too many vets around here with months long wait times) or get access to some of the best medical care in the country with very short wait times.

      All of that said, we still pay a few thousand a year in out of pocket costs and keeping track of medical expenses, submitting receipts to the flexible spending account (available from my employer) and pushing back if/when things are billed in-correctly takes up more and more of our time (similar to other areas of life where the consumer does much of the work that used to be done by others, think travel agent etc.). Even still, I am tremendously grateful for the coverage (tricare) that we have.

      Based on Sam’s calculations, that medical coverage is worth around 1 MIL, and I’d put it even higher since there are not catastrophic limits/end to care etc. The funny thing is that while I was in, the medical care was pretty abysmal, it was “just good enough” to keep you in the fight/working as long as you didn’t sustain any major medical injuries. (this does not speak to battlefield care, it’s probably best in the world?).

      NOW, since retiring, and never having been exposed to “civilian health care” I took a job with one of the “top 5” health insurance companies since the position allowed me to work from home (my key criteria) and I was ignorant of the company culture and the “stigma” attached. Let me say that I think it’s a fine company and I don’t think the boardroom is a bunch of evil/greedy/nasty folks BUT, they are VERY risk adverse and engaging in some self-delusional behavior. There are lots of other issues around/about culture/setting of rates etc. etc. etc. but I’ll leave it at this, I’m looking for other work due to the cognitive dissonance created by working for them, reaping the rewards of the excellent benefits, and being WELL overpaid, all of which someone has to pay for as part of their insurance premium. I have always been conscious of the fact that the GOVT can’t “make money” so we in the military should be frugal since every dollar we spent had to be paid by someone in taxes (I know, it’s not a perfect analogy but you get the idea right?). And there is a dis-connect internally at this large health insurance company, folks don’t seem to mind that other people are having to pay huge rates to pay for their health care and the overhead that gets attached.

      Due to the incentives not being aligned with single payer, I just don’t see it happening any time soon, maybe in 25-30 years but not before then. I guess we can keep saving until it does happen and plan for the worst, hope for the best!


  28. Hospitalist

    We are a family of 3. Just retired in our 40s. Health insurance cost us $1140 per month. PPO. Insurance pays 100% after deductible, which is $6750 per person, $13500 per family. Everything goes to deductible first, including medications, office visits, labs, hospitalizations, etc. Max out of pocket is the same as deductible, after insurance premium.

  29. Tweaking with the health insurance rules created the higher costs. It had to be paid for by someone and it was us.

    We could go back to the old days when kids were people under the age of 18 and people could be disqualified due to preexisting conditions like obesity (gasp! how cruel!).

    Now the people who do the right thing, eat healthy, workout, pay for insurance; bear the burden.

  30. Devin Forbes

    As a Canadian these numbers boggle my mind. Looking up tax / property tax rates between where I am and SF, the numbers for effective income tax rates actually come out to precisely equal for someone making 100K, but I can’t imagine having to add the monthly expenses and the potential for the max payments. Very few people I know, my age (early 30’s) have tens of thousands laying around if they suddenly need a surprise surgery or something.

    I’m wondering your opinion on universal care after writing this article. After this research has it changed from what it was?

    1. Health Insurance coverage and actual Health care are two very different things. One does not guarantee the other.

      1. Devin Forbes

        Why do Americans purchase health insurance other than to guarantee health care when you need it? Isn’t that why it exists?

        1. I purchase what is left of a private health insurance plan to guarantee the payment of the health care service provided to me by a doctor, as recommended by my doctor. Why do I need the government in the middle of that? They are the reason it is so expensive in the first place.

  31. I’m in the same boat as you, use ACA, all unsubsidized, live in the Bay Area, but with a 6 year old kid. Back in 2008 when I early retired, I paid for COBRA, then I was on private health insurance before ACA passed, then I switched to Platinum PPO for a few years until it got too expensive, and now I’ve been on Silver PPO for the last few years.

    Silver PPO has worked out just fine, my 2019 premium was $1492. From reading your article, I’m guessing it will go up again for 2020. I’ve experienced massive premium increases every year, some years as high as 40% which was why I switched to Silver PPO. I will also note that my premiums went up the most *after* ACA passed.

    The last time I read an article that analyzed ACA premiums mathematically with graphs, the author concluded that it was almost always best to go with Bronze even if you have terrible health. Platinum came out ahead in only a very small part of the expense curve. You will save many thousands in premiums every year but still be protected by the out-of-pocket max. So view the health insurance as a catastrophic insurance that will keep you from going bankrupt. If your family is in good health, you won’t spend anywhere near the out-of-pocket max. I’ve had surgeries and other procedures, never got close to the out-of-pocket max.

    The cost-benefit analysis may have changed a bit due to premium changes and out-of-pocket max changes, but I bet the conclusion still holds true now. I haven’t re-done the math for 2020 though.

  32. Healthcare premium is one of the reasons why only I do business in the USA, but live in the Czech republic. It’s called geoarbitrage, you could use some. Why do you diversify your income generating assets but not your major expenses and most importantly life accordingly? By all means, rent the hell out of your properties in SF, speculate on their further appreciation, buy more real estate through the whole USA, but live somewhere nice and quiet, somewhere more safe, way cheaper and with comparable healthcare and public service qualities and amenities.

    While being financially independent, it does not add up to live in SF bay area if you are not working or else to live in the US if you can achieve similar or even higher quality of life somewhere else for a fraction of money you spend in the USA while still relying on income made in the USA. Let your fellow US citizens that still thrive for american dream pay for your life and smile. Your children can still go to study or work in the USA, you wife may retire as well, there is no reason the keep up with the Joneses anymore, the idiom has been outlived long years ago, but many still pretend it exists.

    When you start thinking global and stop comparing yourself with your peers, life gets much easier. Don’t get stuck with short vision, this is 21st century.

    1. Cool. I like Prague. Was it easy to get your kid(s) to move to Prague with you? And once there, what schools did they start attending? International schools would be nice.

      Can you elaborate on how you got to the conclusion of comparing yourself to your peers and thinking globally, given this is the topic of healthcare?

      Thoughts on just finding a way to accumulate another $1 million in capital to pay for healthcare instead of moving to Prague?


  33. In your recent posts, you seemed to have developed a certain anxiety about providing for your young son. Related to that is your desire to return to a “real” job in the near future. While understandable, I had expressed that you were likely being over-anxious and that you’re financial position is more than sufficient to handle his future needs.

    But with the cost of healthcare, I’m starting to see your point. The cost of independent healthcare for a family of 4 had been somewhat of a mystery to me and the annual increases even more so. Healthcare insurance is a major reason why my wife retains her full-time W-2 job despite my pleas for her to negotiate her layoff.

    Perhaps we should start own insurance collective of early retirees.

    1. Just want to be thorough about the realistic costs of raising family, that’s all. Hope I don’t sound too anxious. If so, I want to do some tweaking as I want to slowly remove myself from my articles and let the numbers speak for themselves. thx

  34. Healthcare certainly expensive but profits and executive compensation similar to industry that you worked for. Never have seen a severence package in medicine. Why are profits of finance and tech viewed so different?

  35. This is something I take for granted as a Canadian… but from looking at the cost of private U.S. healthcare (among other things) vs. headline or core “inflation” I understand that some needs to give. I believe the change will come with the election of Elizabeth Warren in 2020.

  36. Healthcare is a business, its not about health. Anthem (blue cross) made over 1 billion. Increased profit by 9% last year (check their investor relations page). Deductibles are higher and premiums are higher so we ‘have skin in the game”, but can get denied for MRIs, chemotherapy, etc. there is a cure for hepatitis C, but its expensive so you may just have to live with the fact that your liver may fail. Costs will keep going up because these are for profit companies. Same way that you cant buy Canadian meds that are cheaper even if they are made by the same company. I dont think anyone has the willpower politically to fix it, so plan on higher costs and just try to stay healthy

  37. A few thoughts:
    -The hypothetical 2M net worth family you mentioned might not actually need $1M set aside for health insurance cause they’d benefit from being below that 400% poverty line mark (given their investments would only generate around $80k–and that’s if they use relatively high 4% withdrawal rate). For those of us in higher cost living areas, that’s moot point of course cause $80k isn’t going to be enough even if you can benefit from cheaper premiums.
    -You mentioned wanting a plan that offers a low cap on out of pocket spending because you’re not sure if your child will have health issues. But, if you’re family is healthy now, I suspect you are “underusing” your current plan. Seems like it would be more efficient for you to get a plan w/ a higher deductible and out of pocket max for now. Even if disaster strikes, you wont end up paying that much more in total that you spend now w/ high premiums. And, the following year you can always switch back to a platinum level plan. Atleast do that Gold plan for now and (likely) save $160 a month.
    -We have a ~$4M net worth, but I still work for this very reason (health insurance). Were it not for astronomical costs, I’d be happily retired at 45. Definitely sick of the office grind though.
    -Unfortunately, I don’t see anything really changing unless there’s a massive rethink of our healthcare system. Given the increasingly burdensome costs, perhaps there wll be a political will for this in the near future. It’s so crazy.

    1. I agree with Rich that Sam is likely “under-using” coverage and probably subsidizing other less healthy people or enriching the health insurance companies. Sam should probably reduce coverage for now and change it if the need arises.

      There is a top Quora write named Gordon Miller who discussed a fascinating idea–self-insurance. He is a multi-millionaire who has figured out that for him and his family, it is far more cost effective to pay out of pocket for everything because health services are cheaper as a “cash” patient. He has the net worth to weather a catastrophic illness or injury. Based on horror stories that I’ve read, we’re “only” talking about $250K to $1M.

      Based on Financial Samura’s “Average Net Worth For The Above Average Person” post, self-insurance for a healthy family may not be a bad way to go. I’d love it Financial Samurai explored this topic further.

      1. I don’t mind subsidizing the less unhealthy. It’s an honor to help my fellow citizens. I’m just reaching a limit where paying $30,000 a year in healthcare insurance feels like too much now, and changes need to be made. It’s the same thing after paying $100,000+ in income taxes for so many years, changes were made to pay less.

        Therefore, I plan on changing, b/c everything is rational. If I don’t change, then I’m just complaining.

    2. You’re right on the $2 million net worth example, due to subsidies. So the question is, is it OK to take subsidies with a $2 million net worth?

      Is the main reason why you still work is due to health insurance? If so.. then I wonder how many other people do too, as most people have less than a $4M net worth.

      Do you have kids? And if so, are you OK with going on a Gold or lesser plan?

      1. Yes, we are another household that plan to have one spouse work due to health insurance. My wife works in healthcare and we plan to have her work the minimum hours to be “part time with benefits”, which is typically 30 hrs/wk once I leave the workforce. The good thing is that there are options for her to get flexible hours (when seeing patients) with work-at-home options to update patient records that count towards that 30 hour “quota”. There are also options to trade days with other practitioners so that if we want to take long vacations, we can arrange this in advance. As a family of 4, doing without employer subsidized healthcare makes us way too nervous as your analysis indicates. We will likely use this option until we are old enough to receive Medicare.

      2. -When it comes to taxes, my position is that you should minimize your liability through all legal means. Whether you achieve tax optimization in the form of “rebates”, “subsidies”, “credits”, or “deductions” is just semantics. Just as a business would do.
        -Yes, health insurance is the main reason why I work now. Based on the respnoses from some others here (including someone w/ 5.5M), I think yes, there are many high net worth people afraid to retire due to healthcare.
        -I have 1 kid. I don’t view the various metal-named levels of health insurance to be signs of “quality” (in fact, I think it was a mistake to name them that way because it gives that impression). Given a particular plan and type, the only difference between the various levels is the actuarial value of the plan. If you use the “cost estimator” feature you can get a better sense of the total amount of spending that each plan will likely cost you given you projected usage. Given our relatively high net worth, I care more about flexibility (so prefer PPOs) and breadth of network. So if/when I do decide to retire early, I’d likely choose a bronze level PPO plan with the best network I can find. Whether the deductible and OOP max is 5k, 10k or 20k matters less to me.
        -Even more so than cost, the thing that deters me from retiring early is that none of the individual plans I see offer anywhere near as good of a network as does the plan provided by my company. If I had the option of buying a “catastrophic” plan with an excellent network that’s what I’d do. Even if you paying completely out of pocket for all your regular medical care, it’s nice to do so using insurance negotiated rates.

        1. Do you feel there’s a chance you might look back on your life and regret having worked longer for what you think is the ideal healthcare plan?

          If you like your job, then this question doesn’t matter. But one of the consistent feedback’s I received from people who have retired is that they wish they did so sooner to live life sooner on their own terms.

  38. It’s crazy. It’s crazy to even SAY it’s crazy!

    I left FT employment about 3 yrs ago, at 50. Luckily my wife started a decent job with benefits soon after that. I think we pay about $500-$600 per month for that.

    That short window until she started that job, our consumer debt built up a little bit higher than I’m normally comfortable with…but it was good practice for figuring out a safer mix for retirement investments, along with a reasonable early withdraw strategy. (just as a small supplement to her income)

    My own highest salary was about $120K back in 2003, my last FT job was about $40K in 2015.
    Those numbers just don’t work to keep me chained to a desk for 40+ hrs a week, coupled with the commute and typical office BS. I STILL maintain there are a LOT of quality people on the sidelines for this very reason which is a sad waste.

    Fast forward to January 2019, when I had my hip replaced and I didn’t time it right, so all my deductible money was paid just at the end of the plan year.

    It’s been a learning experience to say the least.

    I’m retooling to do other type of work, including in the blog space, but the second I’m eligible to apply for SS, you can bet I’m going to be applying to suck that down as early as possible.

  39. My primary reason of paying off the mortgage in early retirement is this. I plan on spending that money on healthcare premiums. My son will be in or near high school age, and I will be near 55. This puts us in the position for paying for ourselves for 10 years or so until we can get some help from medicare.

    One thing that gives me hope is articles like this “”

    There have been a few recently where they talk about how machines can match a doctor in diagnosing illness as good or better than a human. I don’t see this putting doctors out of business, but I do see the machines supplementing doctors in the short run. add to that IOT devices where you could remotely give your vitals to the doctor, and you might have another way to lower costs. People will miss the human touch, but perhaps this could handle the simple things like sore throats and ear infections that many folks deal with freeing doctors to work on the trickier and chronic issues. This might help costs, at least I hope it does.

  40. If you moved to Thailand you could self insure. The amount you would pay for insurance and deductible can be set aside to pay for care out of pocket. We just had a delivery by C-Section at one of the best private hospitals in the country. It was a four night stay in a private suite with all meals and nursing care and immunizations. Total cost was $4600.


  41. This really is the scariest thing I have to account for when I decide to retire early. The time of early retirement until you get to Medicare at age 65 is what I call “the danger zone.”

    I have seen people use health share ministries as what was mentioned above but they have certain stipulations and of course may not be available to people outside of that faith.

    Others plan on getting a catastrophic event insurance policy and then self-insure for health care expenses that don’t meet that criteria.

    Healthcare costs and tuition costs are the two major things that are rising at a rate far beyond anything else and it will come to a point where something will have to give.

    I do think when budgeting for planned retirement spending it would be wise to assume $30k+/yr for healthcare. This is why some people, docs included, have joked about the barista retirement where you work at Starbucks just to get the healthcare subsidy.

  42. We’re using a health sharing program and since we switched in 2013, we’ve saved ~$9k/year (Over $50k to date since we switched from Kaiser). We pay $450/month for the gold plan and we have 5 kids. There are certain things (vaccines, chiro, etcc..) it does not cover, but the amount we save more than makes up for it.

    We pay up to $500 per incident, but any discount we get with the provider goes towards it, so often we’re not paying out of pocket at all. We also pay an extra $30/month which removes any cost limit on an incident (normally the cap is 125k).

    The downside is we have to do some of the admin ourselves and there is a delay in payments (often 4 months). In this case, we’ll set up a payment plan or pay off the discounted amount and get reimbursed. We’ve had numerous incidents and two pregnancies and it’s been great.

    1. Which health share program do you use? I’m surprised it doesn’t cover vaccines, as I’m sure the cost of treating most of the vaccinated diseases would far exceed the cost of the vaccination. I suppose the argument is that the vaccine is just basic health care that everyone should cover themselves rather than something to insure against.

      1. Christian Healthcare Ministries. Yeah, if kids are going to school or daycare, there is no way of getting around vaccines. The other health sharing options might cover it, but I’m not sure.

  43. Christine Minasian

    I was not a democrat in favor of health care for everyone but then I heard Elizabeth Warren state that the insurance companies made $23 BILLION in profits last year!!! I don’t blame the politicians for trying to address this problem- it’s a huge issue for Americans. We pay a high tax rate already AND do not have free education and healthcare like Canadians. Maybe they’re on to something…

    1. $23 billion is less than 1% of health care spending last year in the US. Canadians don’t have free education and health care. They pay for those services through taxes.

    2. Look up Canadian provincial and federal rates (especially Quebec).

      They pay WAY more taxes than us (Americans) and despite high deductibles, many of our employers foot a majority of the cost.

      We as a country have to decide if we want to pay more taxes for the freebies everyone else has or not.

  44. This is what will keep either my wife or me working for a lot longer. I have MS and there’s significant risk in going on our own healthcare. Right now we have a great deal with my work AND a copay assistance program for the MS drug I take which reduces our out of pocket to 5 bucks a year if things work out well. But we cannot plan on that deal existing forever and prices just keep going up at a ridiculous rate so, no retirement until mid 50s for us at the earliest. Still not bad, but knowing that medical insurance is the only reason we have to try to work is just….odd.

  45. Financial Samurari, you say it’s misguided that the government fix the healthcare problem. I suppose that explains why millions of people in other countries are able retire with their savings and not have to worry about going bankrupt during retirement? They pay higher taxes which still is far lower than what people in the U.S are paying in these extortionists healthcare prices.

    They never have to worry about their retirement savings being drained away by medical bills or working forever. Americans need to stop buying in to the “big bad evil government” nonsense. Higher taxes in return for protection from going bankrupt over night is common sense.

    How much longer are we going to continue experimenting with our backward private healthcare system? It does not work and it never will.

    1. What are your specific suggestions? And what are your experiences why you want even bigger government? Are you paying for unsubsidized healthcare to help support the system? Thx

      1. What are my experiences? I lived in Germany for three years. Their system is far more efficient in handling the healthcare demands. No one goes bankrupt. People get the healthcare they need in a timely manner and no one dies for lack of insurance or being under-insured. No one worries about losing their home, their life savings, or their loved ones. Germans don’t have to worry about losing health coverage in between jobs. They never have to worry about if jobs are going to offer good health coverage. That is my reason for bigger government. People pay a higher tax rate in Germany but after deductions they are saving far more money than millions of Americans when you account for how much less in healthcare costs they have to pay. Their standard of living is very good.

        My suggestion? We in America finally admit the private healthcare system does not work and that our system is inferior. It is not designed to work for the sick and needy. It is designed solely to work for the healthy, wealthy, flat out lucky people who didn’t get cancer or other chronic sicknesses, and finally it is designed to make absurd profits at the expense of every day people. I suggest we look to other countries with a universal healthcare model and adapt the best one. They have adapted these systems for decades. Their governments use their negotiating power to bring prices down. America doesn’t do everything better.

        You are never going to have a private healthcare system that includes sick people and has low prices. The only way to keep our current system to keep prices low is to throw sick people off of insurance. We cannot go backward. Bigger government in this case will help millions of Americans obtain a better a standard of living.

        I like to read your blogs because it has many great tips to create wealth, but this issue is near and dear because as much as I try my best to save and dream of retiring, our current healthcare system is what is more than likely going to destroy that dream. I would gladly pay more of my income in taxes (eliminating high premiums and deductibles) in order to protect my overall wealth.

        1. Interesting. Our family has lived in Germany for over 20 years. We pay 7.5% wage tax for health care (which our employer also matches), and up to 2% of our gross income on out of pocket items.

          The current tax rate for Medicare in the US is 1.45% (which employers also match). As such, you could pay up to 3 times the out of pocket costs in the US as you do in Germany and still be at “break-even”.

          1. One important place to look if that’s your argument is the rate of home ownership in Germany. It’s a country of renters. So much for getting to keep their money.

      2. Christian what was Obamacare suppose to do? I voted for Obama because of his promise for affordable healthcare, what we got was something not remotely close to affordable. Our govt cant run anything. Hand it back to the private sector, I was on a private policy before Obamacare and it was better in every way.

        We are not Europe, so you need to learn to live in reality. If you like Europe healthcare, move there.

        1. Christian takes the time to share his experiences regarding an alternate healthcare system and your response is “love it or leave it”? I’m not hopeful about changing the system in the US due to inertia in politicians and inertia in people’s attitudes, but certainly if someone presents a better mousetrap, my attitude wouldn’t be love it or leave it.
          As an US Citizen, I have the absolute right to advocate for change and so does Christian. Most US Citizens want change, but can’t agree on what that is. My wife has worked in the health insurance industry her entire career so we have a unique perspective on the complexities.
          Obamacare is a water-downed version of what was originally intended and then systematically dismantled by the Republicans. I’m not taking sides; I’m just stating that there was strong opposition so it could never have worked as intended. Even if we had gotten 100% Obamacare, I’m not sure it would have worked or would have been cost effective.
          I don’t think its fair to blame one President or Party for the healthcare system we have today. I can’t even blame big healthcare companies since as Americans we believe in a free market system. If they are a for profit company, then it is their duty to maximize profit, not necessarily to save lives, unfortunately. If we want a non-profit health insurance, then some charitable organization with deep pockets or the government (with associated waste) will need to step in. Believe it or not, Blue Shield is not-for-profit, not be confused with Blue Cross. It does not appear to me that one has cheaper premiums than the other.

          Based on my understanding of healthcare economics in this country and others, if we want more affordable premiums, there are only a few solutions available–none of them palatable. 1. Increase government subsidies and therefore taxes. 2. Reduce drug costs through government mandate/negotiation thereby reducing Big Pharma’s profits and willingness to invest in new drugs. 3. Reduce malpractice suits against doctors which might also lower the quality of care.

          This is why I am not hopeful of change because in America, we like low taxes, we like a free market, and we like are right to sue. Nothing wrong with that but understand the consequences.

  46. I’m not going to defend ACA because I think it’s a terrible law that is horribly expensive for the country, but I don’t understand why people think they need to be under 200% of FPL to get substantial subsidies. I went onto the site for my state (Nebraska). Entered family of 3 with 2 parents age 51 and college student son age 20. I put in $83,000 for annual income (just under 400% of FPL for family of 3), and it says I’m eligible for subsidy of $2,336/month. Unfortunately there is only one provider on the exchange for Nebraska (next year there will be 2), but there are a variety of plans available at the gold, silver and bronze level. Perhaps it’s a quirk of only having one provider and having only 2 high cost silver plans, but all the plans would be $0/month except the 2 Silver plans which range from $199.12 to $681.98/month after subsidy ($2535.07 and $3017.93, respectively, before subsidies). Not sure why the Gold plans are cheaper than the silver. I can get a Gold plan with a $1500 family deductible for free after subsidy. It does have a $13,000 maximum out of pocket, but let’s face it, if you can’t risk a black swan year of OOP costs, you shouldn’t be retired. Personally my family of five has never come close to reaching the OOP maximum on any plan we’ve ever had.

  47. On the bare bones corporate plan myself. Essentially means the insurance doesn’t kick in anything until we spend 13k out of pocket. Honestly I think you are over thinking it with the platinum plan unless the little one already has a condition. You can always change to a better plan if something comes up under the current law. You can afford to self insure the difference for the one year it takes to switch over and the down side is capped.

  48. It’s time to start looking at catastrophic insurance if you’re healthy. I was in the same situation paying 1400/month when I finally said that’s enough. I got a plan that was less than half that amount and instead of paying the insurance company every month I put the difference in my bank account.

      1. I was on a plan myself because my husband was already retired and I wasn’t working outside the house. Not sure what’s out there for kids.
        But anyway, the money sure added up and we did likewise for dental.

  49. Wait, I thought Obamacare was going to fix everything, and give families $2,500 back! Is ‘free healthcare for illegals’ still a thing?;-)

    Seriously, we are a household of two 60-ish adults and we self-insure unless there is a hospital stay or surgery. We pay $9,600 a year in premiums for a bare-bones policy that kicks in after we hit $9,000 (each) in costs per year. So, we try to eat right, avoid all infectious-disease scenarios, and stay off ladders.

    Lastly, we are self-insuring for Long-Term Care. A 24/7 caregiver in-home can cost $10,000/month. The dementia tsunami is real and approaching.

    1. Yeah, trust in the government to fix our health insurance cost problem is misguided.

      Regarding dementia, I hear writing a blog 2-3X a week will help keep it at bay. Time to start formally imparting more of your wisdom into guest posts on FS! Y

      1. Sam, I’m 56 and have been doing COBRA @ $1100 (Silver, another 25% subsidized by previous employer) since retiring 16 months ago. For 2020 I’ll go into a retiree medical plan ($1600 for silver + 20% which is subsidized by employer until 12/20). For 2021, no more employer subsidies, and no ACA subsidy eligibility. May look at Christian Healthshares, but their ability to deny any claim is concerning. Will likely just pay up, have $25k/yr in our retirement cash flow model.

      2. Yes, regarding healthcare , the government have proven based on studies to have done a better job than private insurers though it isn’t perfect. The government run MEDICARE is better than any of the private insurers based on satisfaction ratings . I understand the natural skepticism associated with government run programs however regarding healthcare , the government have proven based on Medicare and healthcare systems in other countries, to be the better entity to run the health insurance program .

        The reason being that healthcare by its very nature cannot be run as a purely capitalist model because anyone , including the uninsured can receive care in emergent cases and such care may end up costing over a million dollars . As a physician , I have seen many uninsured patients brought to the ER for heart attack, stroke or trauma and they end up racking up more than a million dollars in costs after surgery and rehab . Can you imagine any other industry where anyone can legally receive such amounts prior without having to go through any approval process? So the government , not private insurers , is the only entity that can enforce a law mandating every citizen to contribute some form of payment, i.e premiums , to ensure that we all have some skin in the game .

        Our premiums will be much less if paychecks have automatic deductions for premiums , like we do with social security and MEDICARE. It shouldn’t be a choice as it is now where employees can elect not to sign up for health insurance .

        Moreover government run insurance may serve as a check against health insurance monopoly which is the prevailing trend in most parts of the US. Most regions in US are served by 1-3 main hospital systems and insurance company and they primarily determine cost and access to care . With a govt run insurance , it will serve as a fall safe option for those individuals who are unable to afford private insurance .

        Finally, I am by no means advocating for a Govt ONLY option, rather the private insurance should also be provided as an option for those individuals who do not wish to sign up for govt run insurance .

  50. Sam – I think you have raised a great point about factoring in healthcare cost into the retirement calculation.

    I’ve asked someone I know who is currently FIRE about healthcare cost just so that I can factor it into my own budget in calculating my FI number.

    He said to expect to pay around $30,000 a year for a family.

    That is a significant number and healthcare cost increases at a faster pace than inflation.

    Hopefully, Washington D.C. can get its act together to tackle the rising cost of healthcare.

  51. Although I’m independent generally, I have committed to voting democrat for now, because they’re the party that seems most committed to solving this problem. I will enroll for a class at my local community college next semester which makes me eligible for a super affordable PPO. Student healthcare seems to be the answer for me. I have MS, so I can’t only buy off the exchange otherwise, which limits me to an HMO which is not accepted by one of the major hospitals near me

  52. Oh man it is outrageous how much healthcare insurance has risen in comparison to inflation and incomes. It’s unsustainable. I was just talking to a friend of mine a couple weeks ago who is taking some time off in between jobs. She’s savoring her break because she doesn’t expect to be able to retire for a long time and largely due to healthcare costs. She could move back to Canada where her extended family is, but she doesn’t want to uproot her kids until they head off to college.

    We do a lot of great things in the US but controlling healthcare costs and insurance affordability are not one of them.

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