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What To Do About Insurance When You Retire Early

I retired at age 48.  The most frequently asked question I get about retiring early is “What do you do about insurance?”  It was a huge consideration before I quit and my solutions have evolved over the years and are about to go through another evolution.  I can’t say I have the perfect answer, just what is working for me right now and how my thinking has evolved as I have had more years in early retirement and have gotten older.

Related:  How To Retire Early (& What To Do After)

Where I Started

Like most people, I was trained to believe that I should get a good job with good benefits.  That my job should provide health insurance was assumed.  That worked for me for a long time.  But as I started to think about retiring early, that solution wasn’t going to work.  I would be too young for Medicare for more than a decade.  It was suggested that it would be a huge risk to opt out of the corporate world and try to go it alone with my health insurance.  Why didn’t I just wait until I qualified for early retirement benefits which included access to retiree health insurance?

Why I Didn’t Opt For Retiree Health Insurance

Waiting to qualify for retiree health insurance was a no go for the following reasons:

  1. I WOULDN’T QUALIFY FOR 7 MORE YEARS!!!!  I wouldn’t make it that long in the job.  And the stress of the job was negatively impacting my health.
  2. Retiree health insurance isn’t a protected benefit.  This means that the company could remove the option at any time.  I could have worked another 6 years only to have it yanked from me at the end.  What actually happened is that after I left, my division was sold to another company and everything changed……so there you go.
  3. Access isn’t the same as affordability.  Who knows what the premiums would be or whether the coverage would be what I wanted.  The options would be dictated by the company.  It’s important to me to have freedom of choice and options.  If I opted into their system I would only have the options they dictated.

Health Care And Health Insurance Aren’t The Same Thing

This is a hot button issue for me.  It makes me crazy when people conflate these two issues.  Health insurance can help you protect your assets from unexpected medical expenses.  Health care is products and services that improve your health.  Yes, insurance can help cover some costs of health care.  But there are also ways to benefit your health that aren’t covered by insurance and may be more cost effective, like lifestyle changes.

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Why You Don’t Want Your Insurance To Pay For Everything

The more things insurance covers, the more expensive it will be.  All insurance has a negative expectancy (yes that is an article on poker that I am linking to – it’s relevant).   That is how insurance exists as a business.  They spread their risk over a large number of people and play the odds.  I don’t advocate playing craps with your health care, but the more you are able to self insure, the odds are, over time in your favor.  What is important is covering risks that you can’t afford to take.  And that totally depends on your current situation.  As a broke single mom, I couldn’t take much risk.  Now, I can cover pretty much anything except truly catastrophic situations.

Why I Like High Deductible Plans

Prior to leaving my corporate job, I had the option to choose a high deductible plan.  Unless you have serious and/or chronic health issues, the high deductible plan can be your most cost effective solution.  If you couple the high deductible plan with a Health Savings Account (HSA) you can create a backstop for covering the expenses you will have to pay out of pocket.  These funds can be used as additional retirement savings if you don’t need them to cover medical expenses.

When You Pay Out Of Pocket, You Think Differently About What You Spend

Paying out of pocket for most of your medical expenses shifts the conversation from “what will my insurance cover?” to “what is the best solution for me?”.  In a perfect world the answer to these questions would be the same.  But in the real world, they aren’t…….at least that has been my experience.  Paying for all most all of my expenses out of pocket has shifted my thinking to what I can change with lifestyle choices.  It may be a result of getting older too, but I am way more focused now on prevention than I was in the past.

Your Health Is Your Biggest Asset And Worth Protecting

Your ability to earn money is one of your biggest assets.  Your health, or lack there of, impacts that ability.  Health and wealth therefore and intertwined.  Poor health not only costs you in medical expenses, but also in your ability to continue to earn.  Poor health has a double impact on your wealth.  Dollars spent on prevention can be a great investment.  Insurance, to me, is the back up system.  Sometimes you just have bad luck and need to protect yourself financially from things that you may not have control over.

Related :  Why Health Is Your First Wealth

Is Health Insurance A Place To Be Frugal????

If health is so important, is this the place to be frugal?  YES!  Frugal has gotten a bad rap.  I blame marketers for making frugal synonymous with the word cheap.  They are NOT the same thing.  Frugal is spending based on value and your values.  How much value are you getting for the money you spend and is that spending in line with your values.  I place a high value on my health.  But am I getting the most value for my insurance dollars?

Getting The Best Value For Money Spent

In the past, the traditional high deductible insurance plan coupled with the HSA gave me decent value.  Premiums were tolerable and I was covered for the big risks.  As premiums have risen, the value equation has shifted.  Our best options this year were more or less $1,000 per month with a $10,000 deductible for my husband and myself.  So unless we had a big event, we would pay for everything out of pocket in addition to paying $12,000.  This seems like a crazy amount for what I am getting.  And every dollar I spend on insurance is a dollar I don’t have to spend on actual health care.

An Ounce Of Prevention

Prevention of major diseases becomes more and more important.  Over the last few years this has been my main focus.  But most of the steps I have taken have nothing to do with insurance.  Eating better, getting sufficient sleep, reducing stress, are all specific things that directly impact my health but are unrelated to insurance.  I have used the services of health coaches and other health related providers (like massage therapy) that have provided great benefits but would never be covered services under most insurance plans.  Keeping my insurance expenses low, gives me more money to spend on things that have greater impact.

No One Cares About My Health More Than Me

Freedom of choice and having options are two of my most important values.  Most insurance plans limit both.  And no matter what option I choose, no one is going to care more about my health outcome than me.  Having freedom of choice about my doctors and the services I use is one of the most important criteria.  I don’t want to make decisions based on who is in my network of authorized providers.

The Bottom Line

This has been a long winded way of saying that traditional insurance no longer provides us with decent value but I still want protection from catastrophic events.  I am more than willing to spend my own money, and make my own decisions and be responsible for my own health out comes.  I want freedom to choose the health care providers who will best help me achieve my health goals.  This has lead us to explore the health sharing ministries.  After looking at the options we have boiled it down to these two contenders:

Christian Health Ministries

Liberty Health Share

The Downside To Health Sharing Ministries

This isn’t an option for everyone.  In fact, you may not be accepted by them.  They don’t have to accept everyone.  They set the rules and don’t pay for anything and everything.  I’m ok with that.  Currently, it is my understanding that, these plans are not qualifying plans that would allow contribution to an HSA account.  The premiums also may not be deductible as would insurance premiums for self-employed individuals.  The cost savings difference more than makes up for both of these negatives.

What Is Right For You?

Everyone’s situation is different.  If you have health issues or you qualify for subsidies, your analysis of the value you receive for the cost will be completely different from mine.  The key principle is obtaining the most value for the money you spend.  What choice will that be for you?  How will you allocate your dollars between insurance and health care?

For us, we will apply to one of the health sharing ministries and hope we are accepted.  If not, I guess we will pay the ridiculous premiums so that we have coverage.  I hope it doesn’t come to that.

How will you evaluate your choices?

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