Our Choice for 2019

As of January 1, 2019 we will no longer be Liberty Healthshare customers. Our experience in 2018 didn’t instill any confidence that a more complex medical situation would be covered by Liberty. And if it would be “covered” it wouldn’t be covered completely or in a timely manner. With the expansion of short term health insurance options in Ohio we saw this as a viable option. Thus, our 2019 health insurance will be the following plan from United Healthcare (Golden Rule Insurance):

Short Term Medical Plus Elite A - $2M total benefit per person, $5,000 deductible per person, 0% co-insurance and $0 co-pay after deductibles

This plan cost $3,739 for the year, which amounts to about $311 a month. This included a $20 one-time application fee. We felt this met our criteria and the fact our health care providers accept this insurance was a huge benefit. These insurance policies certainly present their own degree of risk so it’s not full proof but we’ll be happy to share our experience with short term insurance.

We still have a few posts to share more information about our Liberty experience. We feel it’s important to share all the details to anyone who may be looking at Liberty in the future. Our goal is to simply present all the facts about our Liberty experience. Whether someone chooses to work with Liberty in the future is a personal decision but at least they’ll have our details as an input.

As for canceling with Liberty? A pretty straightforward experience. You need to notify Liberty by the 20^th of your last month. We did need to report a reason for leaving which we record as follows:

“Reason for Cancellation: The administrative burden of working with a health care provider that does not bill directly to Liberty. Then the subsequent lack of clarity on where our bills stand and delay in reimbursement from Liberty. The administrative burden was extensive for just basic wellness visits so we were not confident a significant medical incident would be adequately covered. “

Interestingly enough we did see a flurry of activity with our outstanding bills after this cancellation. We still have not received our two outstanding “lost in the mail” reimbursements. We hope we’ll still be able to work with Liberty to re-send these checks after the 60 day period is up for “lost” checks.

So what happens to the blog? We still have more work to do to share our full experience and there are more details to share. We’ll also share some details about our short term health insurance experience. Stay tuned and please let us know if you have any questions!

A Check has Arrived

For those following along with our Case of the Missing Reimbursements, we can confirm that we received one of our checks. It looks like the check sent on November 21 successfully worked its way through the postal system to our mailbox. No sign of the other two checks Liberty indicates were sent. It looks like those were truly “lost in the mail”. Although it is certainly a little curious that a check sent by Liberty, to the same address, presumably using the same process, was delivered to us successfully despite the other checks not arriving.

Since I’m a naturally curious person I Googled, “how often do things get lost in the mail”. I could not find a perfect answer but most references cited somewhere south of 1%. Thus, what extremely bad luck that the checks lost in this case are for someone who decided to chronicle their entire experience on a blog (but in fairness, a blog that might not have the most impressive reach)! To be balanced it's possible that 99% of Liberty customers (per the odds) have no issue ever with payments getting lost in the mail. We’ll stay on the case and let you know when we find those missing payments!

Barely Missing Out on ACA Subsidies? This Unique Approach Might Work

I’ll say up front that the approach we’ll describe here doesn’t work for everyone but it’s worth sharing…especially if you are in a situation where you are just over the point of receiving a subsidy! If you’ve stumbled upon this blog you are likely in a situation similar to ours: self-employed and ineligible for ACA subsidies. There are two choices when you find yourself in this situation:

a)    Freak out and Google “self-employed health insurance alternatives” and end up on a blog like this, or

b)    If you are a personal finance nut like me, try to figure out how you might make adjustments to your tax deductions to actually start qualifying for a subsidy

Trust me, we spent a lot of time thinking about (b) before moving on to (a). In fact, prior to becoming self-employed we performed a lot of analysis based on different income situations. As part of this research, we submitted a question to Justin at the Root of Good Financial Independence Blog. It resulted in a much more detailed post on the subject than I’ll describe here. Don’t Fall Off the Affordable Care Act Subsidy Cliffs is a fantastic analysis of how you might control your Modified Adjusted Gross Income (MAGI) on your taxes to qualify for a subsidy (MAGI is the official income line item the subsidies are based on). I was the “Don” (name changed to protect the innocent) who submitted the question and it was because I was thinking of the strategy we’ll highlight here. If you find the summary I’ve posted here interesting please be sure to check out the more detailed post at Root of Good.

Some Basic Background

Your eligibility to achieve a subsidy under the Affordable Care Act (ACA) is based on your income…but what income? If you’ve ever looked at a 1040 tax form it can be complicated. There’s the gross income you received as a self-employed individual, then the income after your business deductions, then income after the standard deduction and other non-business deductions. For example, on the Health Insurance websites it will ask you, “What is your Income?” If you are entering your gross income you are entering too much. Your subsidy is based on your Modified Adjusted Gross Income (MAGI), which for most people is just your Adjusted Gross Income (AGI) – line 7 on the updated 2018 1040. Here’s the link from Healthcare.gov to learn more about AGI.

The other part of the subsidy formula is the number of individuals in your household. Simply put, the more individuals in your household the higher your income can be to qualify for a subsidy.

So What if My AGI is a Little Too High for a Subsidy?

The first thing you may be wondering after reading the above is, “Great, but how do I know what my AGI needs to be to qualify for a subsidy?” This comprehensive article at Healthinsurance.org includes an updated table showing the levels of subsidy by income and size of household (it’s the same type of table referenced in the Root of Good blog post I mentioned above but it is updated for the current year).

If you find yourself teetering on the “ACA cliff” and need to reduce your AGI without actually reducing what you earn that’s where the Health Savings Account (HSA) and Self-Employed 401K can help! Both of these accounts allow you to contribute pre-tax dollars to pay for medical expenses (in the case of the HSA) or retirement (Self-Employed 401K). So let’s illustrate this in a simplified example:

Let’s say you and your wife are both self-employed and earn $85,000 (after business expenses). According to the chart I referenced at Healthinsurance.org, subsidies officially phase out at an AGI of $65,840 for a household of two. Your initial reaction is to start Googling alternatives. But wait, let’s say you are a saver, open to getting creative and do the following: (a) contribute to an HSA and (b) contribute to a Self-Employed 401K enough to qualify for a subsidy. For clear demonstration purposes let’s assume you max out each of these contributions. Here’s what this looks like:

• $85,000 Initial Adjusted Gross Income
• Less: $6,900 Health Savings Account Contribution (this is the maximum 2018 contribution)
• Less: $55,000 Self-Employed 401K Contribution (this is the maximum 2018 contribution per person)
• $23,000 New Adjusted Gross Income for Calculating Subsidy

In this example we’ve gone to the extreme – we are now clearly in subsidy territory according to our chart. Of course, it might not be realistic for many people to make this type of contribution (on this level of income) but even if you just reduced AGI by $20,00 in this example your ACA plan would at least include some subsidy.

But This Just Isn’t Practical!

We’ll fully admit this might not be achievable for many people. However, if you spend less money than what you make (a practice we’d recommend!) you are a prime candidate. If you earn $85,000 and spend $85,000 then putting aside any money to reduce AGI is probably unrealistic. However, even if you earn close to what you spend, but have savings, you might be able to make this work. For example, if you reduce your AGI by $20,000 using these techniques you have $20,000 tied up in a retirement account or HSA (not bad places but not accessible for your daily expenses). If you had $20,000 in savings you could re-purpose those savings for your routine spending while the $20,000 you used to reduce AGI starts growing in an HSA or 401K account.

Of course, another reason this might not be practical is if you simply earn too much income. A nice problem to have and it’s possible even maxing out these deductions to AGI wouldn’t get you into the subsidy threshold.

In Closing

Our purpose in posting this is to make sure you are considering all options during annual enrollment. There are some fantastic calculators out there to estimate your subsidy under different levels of AGI. We understand it may not be practical for everyone but it’s an interesting approach for the savers out there! The links in the article should be great resources to get you started in your research!

The linked resources in this article are far more detailed than what we’ve provided here. Nonetheless, hopefully it helps a few people think more creatively (financial and tax planning pays off!). If you have any questions on this strategy, the accounts described, etc. please let us know!

The Case of the Missing Liberty Reimbursements

Well, we called Liberty again to check in on two checks that, according to our ShareBox, had been issued to us on November 1. We verified our address with the woman we spoke to and everything matched perfectly. At the time of our call, we were about 3 weeks out from when Liberty (according to their own records) issued the check. Naturally, the US Postal Service was blamed for the delay. It must’ve gotten lost in the mail is becoming the equivalent of the dog ate my homework. The good news is it looks like our call on November 20 triggered activity on a third payment, which was sent on November 21, per our ShareBox. Thus, we’re set up for an interesting experiment – which reimbursement will arrive first? Will either arrive at all? These are the same payments we had to call about just to get processed (so it took a while to just get the checks issued…assuming they actually were).

When we asked if they could just cancel the checks and re-issue new checks we were told that the policy is to wait 60 days before new checks could be issued. Naturally, that policy couldn’t be adjusted in this situation (it is, after all, a “policy”) so we continue our wait. If they weren’t issued, and it’s a way to conserve cash, we were hoping our call might have triggered some action.

On a side note, according to Google Maps, we are exactly 50 miles from Liberty Healthshare’s HQ’s – these aren’t being sent cross country. Of course, we pride ourselves on trying to be balanced…it’s possible the checks did get lost in the mail so we’ll keep you updated.

Our 2019 Liberty Option

Despite the fact we started with Liberty Healthshare, and most of our earliest posts provide a tremendous amount of detail on Liberty, it’s worth rehashing the highlights as we head into 2019 (as a formality at least!). The main thing that’s changed is the cost so let’s compare last year to where things currently stand:

Year	Monthly Share Amount (Comparable to the Monthly Premium)	Annual Unshared Amount (AUA – Comparable to the Deductible)
2018	$450 for a family with parents 30-64 years old	$1,500 for a family
2019	$529 for a family with parents 30-64 years old	$2,250 for a family

Note: There is a $75 annual renewal fee as well.

Beyond the change in price there aren’t many changes for 2019:

• $1M per incident is eligible for sharing

• Pre-existing conditions are not covered in the first year but coverage can be phased in over multiple years (see guidelines)

• Prescription drug coverage is not included (although the SaveNet program offers a discount we found less competitive than programs already offered by name brand pharmacies and GoodRx.com.

This is a quick recap of the plan that we would go with from Liberty Healthshare. If you are an individual, couple, or interested in plans from Liberty you can find a lot more details by visiting Liberty’s website.

Are you considering Liberty in 2019? If so, do you have any questions or concerns you’d like feedback on? If so, leave a question and we’ll try to answer it (and if we can’t I’m sure someone else will)! 

Are Short Term Insurance Premiums Deductible for the Self-Employed?

As we’ve mentioned, there were recent changes in the duration in which short term health insurance plans could cover individuals or families. Prior to these changes, they were meant to bridge participants between employment and were only available for 30-90 days. Thus, we never really considered these plans prior to this year and certainly never considered whether premiums for these plans would be deductible for self-employed individuals. Given we are self-employed and now considering these plans we figured it was a good time to answer this question and confirm premiums are deductible.

So let’s go to Publication 502, Medical and Dental Expenses (admittedly the 2017 version). Here is what it says regarding insurance premiums you can’t include in your deduction for the self-employed:

Insurance Premiums You Can't Include

You can't include premiums you pay for:

• Life insurance policies,
• Policies providing payment for loss of earnings,
• Policies for loss of life, limb, sight, etc.,
• Policies that pay you a guaranteed amount each week for a stated number of weeks if you are hospitalized for sickness or injury,
• The part of your car insurance that provides medical insurance coverage for all persons injured in or by your car because the part of the premium providing insurance for you, your spouse, and your dependents isn't stated separately from the part of the premium providing insurance for medical care for others, or
• Health or long-term care insurance if you elected to pay these premiums with tax-free distributions from a retirement plan made directly to the insurance provider and these distributions would otherwise have been included in income.
• Taxes imposed by any governmental unit, such as Medicare taxes, aren't insurance premiums.

Coverage for nondependents

Generally, you can't deduct any additional premium you pay as the result of including on your policy someone who isn't your spouse or dependent, even if that person is your child under age 27. However, you can deduct the additional premium if that person is:

Your child whom you don't claim as a dependent because of the rules for children of divorced or separated parents,

Any person you could have claimed as a dependent on your return except that person received $4,050 or more of gross income or filed a joint return, or

Any person you could have claimed as a dependent except that you, or your spouse if filing jointly, can be claimed as a dependent on someone else's 2017 return.

We see nothing in this publication regarding short term health insurance premiums. Of course, we see nothing about healthshares either but I think it’s clear that this is not insurance. We’ll continue to research but our initial research indicates we could make the deduction. Anyone out there finding anything different (or even caring)?

Our Short Term Insurance Plan Options from United Healthcare

The short term health insurance plans we will describe below are all from United Healthcare (www.uhone.com). Actually, they are from Golden Rule Insurance Company which is a United Healthcare subsidiary. We are also reviewing plans designed for Ohio, and as mentioned, your state may have different options available. We reviewed short term plans on www.ehealthinsurance.com and kept coming back to the plans from United Healthcare primarily because our health provider is in network, but also because their plans offered flexible options including deductibles and co-insurance. You can build a bit more robust plan than most short term plans we saw available.

Choosing a Maximum Benefit

The first choice is to consider the maximum benefit you’d like covered. United Healthcare offers two options: $600,000 per individual or $2,000,000 per individual. In our situation, we’d prefer more robust coverage so we’ve only looked at $2M benefit plans. This means that any costs about $2M (per person) would not be covered.

Selecting Coinsurance

The next thing you have the option of choosing is your coinsurance. Coinsurance is the amount of money you’ll pay out of pocket after your deductible. United Healthcare offers the following options:

Plan Name	Coinsurance	Coinsurance out-of-pocket maximum
Value Select	30% or 40%	$5,000 or $10,000
Plus Select	20% or 40%	$2,000 or $5,000 or $10,000
Copay Select	20%	$5,000
Plus Elite	0%	$0

The coinsurance out-of-pocket maximum is the max you could pay, per person, in co-insurance. Thus, if your per person deductible is $5,000, and your coinsurance out-of-pocket maximum is $5,000, the max you could pay is $10,000 per person (assuming you do not exceed the $2M maximum benefit). Obviously, the price of the plan is dependent on the coinsurance chosen. 0% coinsurance would be more expensive than a plan with the same deductible but 30% coinsurance.

We are leaning towards a 0% coinsurance plan. In theory, since we don’t think we’d even use our deductible we should gravitate towards a higher coinsurance (since you don’t pay it until you hit your deductible). However, we’d also like to maintain some conservatism and we love the simplicity of not having to deal with coinsurance once we hit our deductible.

Deductibles

Plans have the following deductible options per person:  $1,000, $2,500, $5,000, $10,000, $12,000. Since these are per person we’d need to multiply our deductible times 5 to determine our total out-of-pocket cost assuming we had 0% coinsurance. You can mix and match these deductibles with the coinsurance options described above. If we compare these deductible amounts to what we paid for medical costs in the current year we would not even reach the $1,000 deductible per person. Assuming that’s the case again in 2019 (you know what happens when you make assumptions though...) you could argue that we should just choose the $12,000 per person deductible since it’s unlikely we’d hit any deductible amount. We are still uncertain what deductible we’d choose so we’ll run the costs for multiple options in this post and understand whether the savings is worth the risk.

Copays

Copays are popular in many insurance plans for routine doctor visits. Some plans cover “preventative wellness visits” for free while others might charge a copay. The United Healthcare Copay Select Plan offers 3 $50 copays for “history and exam” visits. Thus, we could take each of our boys for their annual check-ups and pay just $50. The copay plans require 20% coinsurance and a $2,000 out-of-pocket coinsurance maximum. This plan is best for families who would need multiple wellness visits and are comfortable assuming the coinsurance. This is an option we’ll include in our analysis.

Comparing the Cost of the Plans we are Considering

Below are the plans we are considering, all have a $2M maximum benefit per person and 360-day duration (maximum allowed in state of Ohio):

Deductible	Coinsurance	Copays	Annual / Monthly Cost
$12,500	0%	None	$2,382 / $198
$5,000	0%	None	$3,545 / $295
$2,500	0%	None	$4,459 / $372
$12,500	40%, $10,000 out of pocket max	None	$1,648 / $137
$5,000	40%, $10,000 out of pocket max	None	$2,455 / $205
$2,500	40%, $10,000 out of pocket max	None	$3,085 / $257
$12,500	20%, $5,000 out of pocket max	3 Exam and History Only	$2,097 / $175
$5,000	20%, $5,000 out of pocket max	3 Exam and History Only	$3,122 / $260
$2,500	20%, $5,000 out of pocket max	3 Exam and History Only	$3,925 / $327

You can see there is a wide variety of plans available (we’ve only considered a small subset above). We evaluate the following when thinking through a deductible amount: (a) out of pocket cost we could afford in a worst-case scenario (and by “afford” we mean pay for and not have a panic attack) (b) likelihood that a severe illness or injury would occur given our history.

We haven’t made a choice for 2019 yet but we will share the short term plan(s) that made our final evaluation when we unveil our final decision!

NOTE: All of the annual costs listed above are based on making a single annual payment. The monthly costs are based on dividing that number by 12. There is a nice cost savings if you make a single annual payment as opposed to paying monthly. Thus, your monthly costs will be a bit higher if you don’t make the annual single payment as we’ve represented. 

Our ACA Compliant Options for 2019 (and the benefits of an HSA illustrated!)

Although it is unlikely we will purchase insurance through the ACA exchange this year (www.healthcare.gov), we still like to understand the options available there. Over the next few posts we’ll explain each of our options for 2019, a cost comparison of those options, then ultimately the choice we are making and why. 

A key criteria for any option is that it provides coverage for our primary providers. Thus, the plans from Oscar Health (www.oscarhealth.com) and the Cleveland Clinic are the best ACA options for us. Without the subsidy our cheapest available plan is as follows:

To provide perspective, our mortgage, plus property taxes, was about $768/month. Of course, that’s not a luxury home but health insurance that is roughly the cost of two mortgages is not an appealing option. Our cheapest option, however, did not include a Health Savings Account (HSA) so we next looked for the cheapest option that would also include an HSA:

So for an extra $90 a month you get a lower deductible and the option to contribute to an HSA plan. It is highly frustrating that more high deductible plans do not have the HSA option. We can pay $1,316 a month for health insurance and still not have access to save in an HSA! This is a problem.

In 2019, HSAs allow you to contribute up to $7,000 for a family (up $100 from 2018) or $3,500 for an individual (up $50 from 2018). You are permitted to make these contributions “before taxes” meaning the $7,000 a family might contribute won’t be taxed. This means $7,000 less of your income will be taxed. To illustrate the point let’s compare the cost of these two options:

Option	Monthly Cost	Yearly Cash  Cost	HSA  Contribution	Tax  Savings	Actual Yearly  Cost
Oscar with no HSA	$1,316	$15,792	$-	$4,127	$11,665
Oscar with HSA	$1,406	$16,872	$7,000	$6,238	$10,634

Wait, if I contribute the max to an HSA I can actually get a plan with a much lower deductible for a lower yearly cost? Yes, because of the tax savings. To understand the tax savings you’ll need to understand two deductions:

Self-employment insurance premium deductible – Since my wife and I are self-employed we are permitted to deduct the cost of our yearly premiums from our income. This makes up the majority of the deduction.

Health Savings Account (HSA) – As mentioned, we would also be able to deduct the full $7,000 HSA from our income.

If you have greater deductions then you have less income to report…and if you have less income to report you will pay less tax! So, although we likely won’t be purchasing one of these plans, hopefully this lesson in the benefits of an HSA was valuable!

Please note the Tax Savings column was calculated based on our specific tax situation (i.e. self-employed, certain income tax rate based on income, etc.). Your tax rate and situation will be different than ours and the tax savings may not be high enough to justify the higher premium! Please consult a tax professional if you have uncertainty.

The Latest Status of our Liberty Reimbursements

As we mentioned in our October updates we are still waiting for reimbursement for a few medical bills that were related to wellness visits. Liberty reimburses these visits up to $400, per person, per year. Just a quick update to let you know as of November 7 we are still waiting for reimbursement (the physical check). When we called Liberty they were surprised our bills were still sitting there without movement and promised to move quickly. For at least one of the bills, they indicated a check for reimbursement was sent on October 25. The problem is we haven’t even received that reimbursement.

We did receive a couple more ambiguous e-mails indicating bills are being “processed” but, as mentioned before, the status of bills in your ShareBox don’t tell you much. Coincidentally, during our last call our representative seemed to indicate that the official “clock” for reimbursement begins once your bill is “Processed”. Thus, the status Liberty shares may be a bit misleading because, at least in our case, it took a long time to even get to the “Processed” state. Hopefully we’ll receive our checks soon but to give you a sense of how long you may have to wait, these were for Summer visits and we are approaching Thanksgiving!

Liberty has made it clear they are working hard to improve their reimbursement turnaround and everyone we spoke to was very nice! We don’t doubt they are working hard, but trying is different than making it happen. Of course, this is our unique experience, others may have had better luck! We are hopeful Liberty turns their hard work into reality soon!