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Would You Choose To Go Without Health Insurance?

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health insurance

If you’ve been a long time reader of Frugal Rules then you know the challenges we’ve been facing with our health care coverage lately. Unfortunately, I know we’re not in the minority as health care has been an absolute mess for years, with the ACA, while good intentioned, only making it worse on a number of levels.

Well folks, if you’ve started to work on your taxes for this year then you’ve likely noticed part of what Obamacare introduced – the box to check to indicate whether or not you had health care coverage in 2014. As you probably know not checking that little box comes with a repercussion – a penalty.

The Choice Becomes Even More of a Financial One

 

Living without health insurance, especially if you’ve gone through it yourself, is not an enviable position to be in. I was in that very situation for about a year after I graduated from college. I was in debt, did not have a steady job and thus it was one of the first things I axed. I was a single guy, relatively healthy and thus took a measured risk that I would be fine and thankfully I was.

With that being the case it wasn’t a true direct financial choice, on one level, because I didn’t face the idea of a penalty; however, I still faced the possibility of getting sick or injured and not being able to pay for it. Now that individuals are facing penalties for not having coverage it becomes an even bigger financial decision, as they know they’ll be paying up for not choosing coverage.

While there may be some who choose to completely abstain from getting health insurance, my concern is that far too many people are going to be in that spot because either their employer doesn’t offer it or they can’t afford it on their own. I fear that the uncomfortable situation of choosing whether or not to get health insurance will become an unfortunate reality for some families and individuals this year.

Personal Responsibility Goes Up Another Notch…Or Two

 

Much like the shift from the traditional Pension to the employer sponsored 401(k) plan revolutionized how people save for retirement, I believe the ACA will shift the burden of responsibility for providing health care onto individuals. In short, we are now more personally responsible for what we’ll receive. I recognize that the ACA was some sort of step towards socialized medical care (though it falls far short of that in my opinion). In actuality, it requires us to think through our decision making about health care more as consumers.

What does this mean? This means we’re forced to look at our finances and manage them according to what our priorities are. It means, assuming you do want coverage, making the decisions necessary to afford that coverage. It means that if you can’t afford health coverage then to plan accordingly as it will impact your future tax returns. If your situation is like mine then you know how much of a challenge that affordability aspect is going to be.

The Penalty For Not Having Health Insurance Is Only Going to Get Worse

 

According to Healthcare.gov, the penalty for not having health insurance in 2014 is going to be a relatively meager one. It’ll be either $95 or 1 percent of your annual household income (above the filing threshold) – whichever is greater. So, for many this might not be much at all and could be as low as $95. However, it’s only going to ramp up year over year and if you’re hoping to be exempt you likely didn’t have a very good year.

Just out of curiosity, I wanted to see what my family and I might face in future years if we were forced out of having health care coverage. To find out, I checked out this handy calculator from the Tax Policy Center. Based off some conservative figures it shows that the Frugal Rules’ family would be on the hook for roughly $3,500 in penalties for not having health insurance by 2016! I realize the intent behind this is to help others, but it would come at a steep price.

Like it or not, the rubber is meeting the road. While I applaud many of the changes the ACA has brought it is far from perfect. In fact, my family and I are seriously considering leaving health insurance behind us altogether and pursuing a Health Care Sharing Ministry that would get us around the penalty.

We do not take this decision lightly by any means. Having young children, I’d hate to leave health care coverage behind. It honestly scares me slightly and is a decision that would be much easier if I was just on my own. But, that’s not the case and facing a situation where we might have to take somewhat drastic action for the sake of our family has us questioning why we should pay so much for something that brings us little to no value.

 

Are you going to have to pay a penalty for not having health insurance this year? If you used the calculator, what would your penalty be rising to in future years? Do you have an issue with paying a penalty knowing it will go to help others? What would you hold on to before health insurance?

 

 

Photo courtesy of: 401kCalculator

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I'm the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. I'm passionate about helping people learn from my mistakes so that they can enjoy the freedom that comes from living frugally. I'm also a freelance writer, and regularly contribute to GoBankingRates, Investopedia, Lending Tree and more. If you're wanting to learn how to monetize your blog, check out my blog coaching services to see how I can help you take your site to the next level.

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39 Comments

  • I qualified for Medicaid under the expanded ACA last year, but now, for the first time, it looks like I’m not going to be quite so broke anymore, and I’m terrified of what I’ll have to pay each month when my coverage runs out in June.

  • Kalie says:

    We had a high deductible HSA plan through my husband’s last employee that was the best of both worlds for us. Unfortunately we don’t have this option anymore. I can’t imagine we’ll leave insurance behind altogether but the Heath Care Sharing Ministry is an interesting option.

    • John Schmoll says:

      Sorry to hear it’s not an option for you any longer Kalie. The more we look at it, the more a HCSM is an option for us. We’re planning on having a discussion with our tax person after they’re done with our taxes to see what exactly it’ll cost us to give up the tax deductibility aspect.

  • I think the penalty is hardly the most important financial variable when it comes to not paying for insurance. The real variable is the risk of having something completely unexpected happen to you and being on the hook for tens of thousands of dollars of doctors bills. It could easily be enough of a financial blow to cause most people to go bankrupt. I think the idea of being “young and healthy” is foolish because so many expensive health conditions can happen randomly and are outside of our control. So I say getting insurance isn’t a question of whether you should or not – it’s a necessity from a financial perspective.

    • John Schmoll says:

      I agree DC, you never know what’s going to happen and thus why insurance is such an important thing to consider. However, my point wasn’t that the penalty was the most important thing to consider – it’s that people are not able to afford coverage and then they’re hit with the fine. The issue goes back to the affordability aspect, which really isn’t there in most cases.

  • Interesting. When I was involved in the political world, I knew several people who chose not to have insurance because they were healthy and wealthy too, willing to pay in cash for anything that might happen. I’ll bet they’re not happy now about being forced to have a plan.

  • Craig Bean says:

    I retired early at 48 in 2011. I’ve had privately purchased health insurance ever since. It was about the same price as my company plan, with a higher deductible, which was fine with me, since we almost never go to the doctor.
    I switched to a plan through the exchange last year, and with our post-retirement income, was eligible for some subsidy money, and it ended up costing less for the same basic coverage.
    Most all insurance sucks, but overall, this shouldn’t be a product that you look to measure value on in the same way you might a newer car. It’s a protection product, designed to keep you from financial ruin in the case of something like cancer. I don’t think of life insurance as a rip off, hoping I can finally collect this year. Same with homeowners insurance or auto. Still need to find the best price/value you can, but in the long run, you should expect and hope that you pay more in than you get back out, otherwise, you were likely terribly unhealthy, thus not fully enjoying life.

    • John Schmoll says:

      Glad to hear you’ve been able to navigate getting coverage for relatively the same amount as prior to retirement.

      Agreed, it’s not the same valuation. And, if you’re getting more than you’re paying in then you’re likely not enjoying life very much.

  • Kathy says:

    I would always try to have some sort of coverage and my husband and I have been fortunate that as retired government employees, we have access to the same healthcare that we had when we were working. I’m truly afraid that some day the legislators will declare that we have to go into the exchanges which will be a huge disadvantage for us.

    • John Schmoll says:

      That’s great you’re able to still stay on with the same plans. I can definitely understand that fear and hope it’s not something you have to face though who knows with our politicians.

  • I guess it depends on how much of a gambler you are. One in four people get cancer and I’m not sure of how many people have a hospital worthy accident, but I bet it’s even higher. With the ACA, you still can enroll with a pre-existing condition, so you could get insurance after the fact if something could wait, but I’m not going to do that if I’m bleeding out or need chemotherapy.

    I might consider self insuring if our costs were to get to something truly crazy like $1500 or $2000 per month, but only if I had at least $100K in our HSA. We have a long way to go before that happens, and I’d hate to lose it all because I didn’t buy insurance.

    Another thing that bothers me about subsidies is that they really kill any desire to make more money. If your family is right on the edge for a subsidy, you aren’t going to try and add an extra $5K or $10K to your yearly income if it’s all going toward buying insurance.

    ACA, good for poor people, irrelevant to very wealthy people, harmful to much of the middle class.

    • John Schmoll says:

      That’s an excellent point about killing the desire to earn more Kim. For those on the edge, they have to think long and hard about whether or not they really want to earn that extra money. At the end of the day, that money likely would only be going to the government so at what point do you just throw your hands up and say “screw it?”

  • I know that it’s tempting to go without health insurance, especially with the steep costs of even basic plans in some states, but it’s important for people to remember that there are penalties and the $95 headline number is absolutely misleading as you pointed out. It’s tough to have to pay for it all year and hope you get a decent credit back during tax time; however, I would much rather deal with the costs throughout the year than be surprised by a massive tax bill.

  • While I hate that my premium is high and so is my deductible, I still would not take the risk of not having health insurance. My brother didn’t have HI about 8 years ago when he got cancer, so you can imagine how much that cost. You just do not know when something might happen. I do think it should be renamed the NAHCA (not affordable health care act)…and this is coming from someone who is liberal.

  • I’m fairly healthy and hardly ever need to go to the doctor but I still get the catastrophic plan through the marketplace. It’s affordable enough for me as a single person. Tax implications aside, you just never know what could happen.

  • I’m a grad student who is turning 26 this month (and, like many other commenters here, I’m in perfectly good health and see no pressing need for an expensive plan with low/no deductible).

    Thanks to my age, though, I’m no longer eligible to be on my parents’ health insurance after this month. Understandably, my parents dropped me at the end of the year, so had to deal with this crap myself a couple months ago! A couple observations:

    1) I applied for Medicaid, for which I’m eligible based on my below-poverty *annual* income, BUT I was denied based on my *monthly* income (not factoring in that I’m not paid over the summer–even though I made that very clear on my application)!

    So, either the bureaucrat who denied my application has no brains and can’t read, or the laws have an absurd double-standard. I’m going with the latter.

    2) I therefore had to get Marketplace insurance, which is obscenely expensive. The cheapest plan available was over $120/month; an outrageous amount for awful coverage with a $6600 deductible!

    However, my income DID qualify me for a “tax credit,” in which the government pays the vast majority of my monthly premium.

    3) My experience shows that the system is a totally mixed-up stew of awfulness. If the government is going to nationalize healthcare, then nationalize it and be done with it!

    They can’t do that, though, because health care is an enormous industry in this country, and it would be political suicide to take over and thus consolidate all those companies (and the jobs that go with them). So they should have left the private companies duke out the pricing, and maybe expand Medicaid or mandate the option of a very low-cost, high-deductible option for the uninsured.

    That said, I expect things to get more streamlined in the future, as problems are discovered and eliminated.

    And then the government wonders why people don’t like them…

    • John Schmoll says:

      Great comment Froogal Student! Glad you were able to find coverage, albeit not very good as you said.

      You’re dead on about it being a massive industry here. I was watching John Oliver talk about that very thing last night. It’s far too messed up as it is right now and have the same hope as you that they streamline and discover fixes in the near future.

      • Thanks, I’m glad I could find coverage as well! It certainly took a while, though!

        I wish I were more optimistic about the future of health coverage in this country…it wasn’t very good before, and it’s not very good now. Guess we’ll all have to wait and see how this experiment turns out.

        • John Schmoll says:

          I’m sure it did. I know it did for us prior to the ACA and looking at the site just gave me a headache.

          I wish I could say I was optimistic as well, though it’s a tough pill to swallow by saying that. I’ve read there is a fairly big case going to the Supreme Court within the next few months that’s taking on some big provisions of the ACA. If it goes askew that’ll only mess things up even more.

  • I think there are a lot of people going the “no insurance” route due to costs. The fee is really quite low and if you aren’t sick often and have a low risk lifestyle, it’s sad to say, it might be worth it to for-go insurance…

  • We’re fortunate that we are covered under Chris’ work plan so our rates are overall decent and it’s excellent coverage. If, for some reason, that was no longer an option, I would definitely self-insure and like you said, it would mean shifting some priorities because health insurance is more important than vacations, etc. With two small children (okay, small may be an exaggeration, but I am in denial) and two aging parents (also in denial), it’s far too risky.

    • John Schmoll says:

      Agreed Shannon, the kids make it a different ballgame completely. Glad you and the family have coverage through Chris’ employer – that’s the biggest thing I miss about my day job…it’s also likely the only thing. 🙂

  • Mrs. Maroon says:

    Having children changes the game. We have insurance through our jobs for now. But once we reach FIRE, all of that changes. I’d like to think we will carry insurance even then. Though I am confident that the whole environment will have changed within the next five years…

    • John Schmoll says:

      I agree Mrs. Maroon, having kiddos does change the game a lot. If it were just me then it would be a much easier decision. I hope you’re right on things changing…they can only go up!

  • Ben Luthi says:

    I don’t think I would ever go without some form of health insurance, at worst catastrophic insurance. That being said, I’m glad I’m not self-employed yet because it makes me sick to consider how much it would cost.

  • Tricia says:

    As a nurse and parent of 4, I HATE what Obamacare is doing. So many of my (middle aged, middle class) friends have chosen to pay the penalty b/c they were priced out of the private insurance plans that they had. We moved to Hong Kong 3 years ago, and thankfully our kids are still all covered for the time being (up through college) through private insurance by our employer, but this honestly makes me never want to move back to the US. I will not work as a nurse under this system b/c it was already bad enough and now it is getting worse, with the government determining what treatments can and cannot be done. I also will not force anyone else to pay for my healthcare through some second rate subsidized plan. It’s all just pure evil. What a mess.

  • Zee says:

    I don’t think I would ever go without health insurance. I don’t care about the expenses for sicknesses or other smaller issues, it’s for the big unexpected things that I would care about. I’ve had many close people to me have major accidents or health problems which racked up hundreds and hundreds of thousands of dollars in medical bills. Luckily their insurance covered a large chunk of it, but if they weren’t covered it would take most of a lifetime to cover the bill.

    I don’t expect an accident to happen, but if something does I don’t want to be starting out below zero.

  • We couldn’t go without health insurance any more than we could go without food or shelter. Both my wife and I have health issues, so much so that nearly 30% of our budget is spent on insurance and medical expenses. It’s simply not a choice for us. I worry about all those who choose not to be insured, cannot afford to be insured, or are underinsured because all it takes is one bad accident or illness to throw your life into chaos.

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