Now that Obamacare is going into full effect in 2014, people need to make a decision: should I try to get health insurance (if the Obamacare website ever starts working) or should I just pay the fine for not having insurance?
If you are young and healthy, it might make sense to just pay the fine.
Let me clarify. I’m getting health insurance because my employer subsidizes the cost and it’s actually cheaper for me to have health insurance than it is to pay the fine. If this is an option for you then it’s pretty much a no-brainer.
But say your employer doesn’t subsidize your insurance costs, or maybe you are self employed or unemployed. Should you pay for health insurance?
The answer is different for everyone, but Obamacare actually makes it very appealing to go without insurance.
Health Care Becomes Very Expensive for the Young and Healthy
There’s one thing I doubt anyone will disagree with: health care for young healthy people is going to get more expensive. Here is an article suggesting it could rise an average of 260 percent. I don’t know if that number is accurate, but it makes sense.
If you want to insure more people (the uninsured and the expensive people who used to be denied due to pre-existing conditions), you need more money. To get more money, you have to raise prices.
But you can’t raise prices on sick people. That’s illegal now. Insurance companies cannot charge different rates based on health status or gender.
Hence, people who are sick or have a history of poor health will likely see price drops, which are being paid for by price increases on the healthy people.
Cost Comparison: Health Insurance vs. Uninsured Penalty
Let’s look at the cost comparison for health insurance in 2014.
If you don’t get coverage in 2014 you have to pay 1% of annual income or $95, whichever is greater. If you make $50k a year, your penalty will be $500.
Compare that to monthly insurance costs of about $187 a month, or $2,244 a year, and it’s obvious that the penalty is cheaper.
Of course, you’ll have to check the premiums yourself. As a 28 year old male in Dallas, I can get a plan at $158.39 a month, or $1,900 a year. This plan has a $6,000 deductible, so basically I’d have to spend $7,900 of my own money on my health care before this plan covers anything. Also, this is over twice as expensive as my penalty would be.
But the penalty doesn’t give you health insurance. So what happens if you get sick?
Sign up for Health Insurance After you Get Sick
Before Obamacare became law, an insurance company could refuse to insure you based on your medical history or current medical conditions. Not anymore.
If you are uninsured and get diagnosed with cancer, don’t worry. Go find some private health insurance company and sign up for coverage tomorrow. Pick the coverage option that is best for someone with cancer, and in the next 1-15 business days, you’ll have health insurance to cover your expenses.
They can’t deny you (thanks to Obamacare) and they can’t charge you more than anyone else because of the cancer (thanks to Obamacare).
Not only have you avoided paying expensive insurance premiums up until this point, but you’ve also given yourself the opportunity to sign up for the best plan to address your cancer treatment costs. Thanks to Obamacare being uninsured has never been more appealing.
Understand the Risks of the 1-15 Day Waiting Period
There is one issue with waiting to get health insurance: the waiting period. You can wait 15 days to start your cancer treatment in most cases. However, you can’t wait 15 days when you’ve gotten in a car accident, chopped off your finger while using a saw, or need an emergency appendectomy.
If you aren’t insured and you need immediate, emergency medical treatment, it can absolutely destroy your personal finance situation. You can’t get insured fast enough to cover the costs and will either have to drain your savings, pay off the debt over many years, or declare bankruptcy.
Secondly, you can get private insurance any day of the year but the Obamacare marketplace is only open between October 1, 2013 and March 31, 2014. It is possible that plans in this marketplace are cheaper since they are supposed to be subsidized for some people, but you’ll never know unless the federal government fixes the website and you can sign up to see prices. There is a risk you might pay too much by not using the marketplace.
Being Uninsured is Less Risky Thanks to Obamacare
Before Obamacare, any expensive medical issue could bankrupt and uninsured individual. Now, only emergency medical treatment can bankrupt an uninsured individual.
The individual mandate (a penalty for not getting insurance) was supposed to make everyone sign up. However, the additional provisions of Obamacare (companies can’t adjust pricing or deny coverage based on health history or current health status) have made going uninsured much less risky than before.
In the end, it’s up to you if you feel more financially secure with or without health insurance. However, don’t just buy it because Obamacare tells you to. Paying the penalty could be your best option.
Readers: Are you getting insurance or paying the penalty in 2014?
Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
Agreed! However…
What I would love to see happen is to make it illegal to file for bankruptcy due to uninsured emergency medical hardships.
If you don’t buy insurance, and you pay the penalty, that’s your choice. If you get into an accident and/or need life saving emergency treatment, don’t come crying back to the government when you can’t afford your $50,000 medical bills. You made a choice, and should own it.
That would certainly be interesting. The more personal responsibility people take the better. I don’t like how you can just declare bankruptcy and be free from all your bad financial choices (except student loans).
I also think Obamacare is stupid and that we should either have a true free market of healthcare, or just go all the way with a single payer option. This “halfway” garbage isn’t very good in my opinion.
Great synopsis Kev. I’ll be honest, at this point I’ve given up on trying to decipher all the nuances and provisions of Obamacare. There’s just simply too much information out there, and who knows what’s accurate or not. I don’t think the average American can gauge how this law will specifically impact them personally. Having said that, one of my biggest issues with the law, based on what I’ve read, is that it doesn’t get to the heart of the matter. A commentator who I trust was using hip surgeries as an example. A hip replacement part that costs $350 to manufacture. It gets sold to hospitals for roughly $15,000. They then in turn charge insurance companies $30,000. And of course insurance companies off set that cost by raising premiums across the board. So at the end of the day everyone stuffs their pockets, and we’re all helpless to stop them. The manufacturer doesn’t care of course b/c he makes an enormous profit. The hospital doesn’t care b/c they have their own nice mark-up which the insurers pay. And the insurers seem not to care so long as they can push if off on us. How do you fix this problem? I have no idea, Thoughts?
The only way to bring costs down is to eliminate the incentive to overcharge. The only way to do that is to make sure the costs aren’t hidden from the consumer.
If you had a market where people actually had to pay for their medical expenses, then people would shop around for the best price. Have you ever called a hospital and asked for the price on a specific procedure? I have, and in many cases nobody even had an answer. I was told I had to have the procedure done first and then they would charge my insurance and see how much they would pay, and I’d get my bill (if anything) later.
The answer is to get rid of regulation, let people buy as little (or as much) coverage as they want, and pay the rest out of pocket. I personally would get something with a deductible around $5-10k that pays 100% after the deductible is met, and then I’d shop around like crazy to find the best price.
That’s actually what I do now. My deductible is over $2,000, so when I do use the hospital I always shop for the best price because I know it’s gonna come out of my pocket.
Insurance being the middle man is the problem, and the lack of competition. How many health insurance companies are there in each state? I’d say very few. Open up state lines to competition, then I suspect you will see insurance premiums fall.
Look at auto insurance, as long as you have state (federal for health) required minimums, you are good to go and if you aren’t happy with your insurance rates, you can shop around. By switching to GEICO, you might even save 15%!
I couldn’t survive without health insurance so going without wouldn’t be an option for me. I’m really surprised anyone would want to go without life insurance, especially in the US. Healthcare is so expensive almost any health problem you have will destroy you financially.
“You can wait 15 days to start your cancer treatment in most cases.” This strikes me as a pretty irresponsible tatement. I would recommend avoiding giving medical advice.
Both my mother and my father have had serious bouts with cancer. My mom is currently in remission, and my dad passed away from it. In both cases, 15 days wouldn’t have made any difference.
Here’s a statement from the American Cancer Society:
Different types of cancer grow at different rates. Certain types of leukemias and lymphomas tend to grow faster than solid tumors. But most cancers do not grow very quickly, so there is usually plenty of time to get information about your cancer, see specialists, and make decisions about which treatment is best for you. Keep in mind that the information gathered during this time is key to planning the best treatment for you. If you’re worried that treatment is not starting right away, discuss your concerns with your cancer care team and be sure that any delays will not cause more problems.
http://www.cancer.org/acs/groups/cid/documents/webcontent/002813-pdf.pdf
Bottom line: usually 15 days won’t kill you. Most cancers don’t grow very fast. Also, I’m not a doctor, so get your own medical advice elsewhere.
Guys, you are missing the larger point. I was trying to be succinct, but apparently crossed to snarky and realize I need to be a bit more detailed. I have no dispute with laying out the economic differences between being insured and paying a penalty. What is problematic is the this post puts medical issues into two categories, emergencies, like injuries, and long term care conditions, such as the cancer.
Now I’ll lay out my bias up front. Kevin, with all due respect to your parents, it’s just not always so. A friend of mine is recovering right now from brain surgery due to an aggressive tumor. He experienced some light dizziness and decided to get himself checked out, something it is all too easy to imagine people could ignore if they don’t have insurance. And even if he had, waiting 15 days could have put him at risk for seizures and resulting brain damage. This is just one story, but one that happens every day. “Hmm, my left arm is kinda tingly…probably nothing.” Lack of insurance often prevents people from seeking treatment during early warning signs that can be a precursor to more significant medical concerns, and your position does not take this into account in weighing the decision about whether or not to purchase insurance.
Morever, this arguement is all the stronger for regular check-ups, something the uninsured consistantly skip. Appropriate developmental screening at any age is an important tool in preventing the larger health issues. Particularly problematic economcially as well, because not utilizing this ounce of prevention for the uninsured results in much higher costs to treat the larger health problems that develop, which will result in deeper costs to us all. An underpinning to all of this is the idea that we should not pay our fair share until our fair share is less than what it should be. I’m not going to help anyone else, but when I get sick, I expect all of you to help me out. I’m not going to pay for a fire department or schools or military or….
Again, no dispute with a discussion of the economics. But if you are going to look at the medical implications then you need to consider the greater scope and perhaps bring in some expertise that goes beyond your own experiences. And personally, I think there are some morality issues with your suggestion that one can ‘wait until you need it’ to sign up.
Hang on a second, RC. Dude, I think you’re missing the point that Kevin is trying to make. It’s obvious that Kevin is not advocating against people having health insurance. What he’s doing is simply pointing out that Obamacare INCREASES the incentive for people to abdicate their personal responsibility for their own health care. Providing for your medical care and health insurance coverage is your own responsibility, NOT the responsibility of your friends, family, neighbors, community, or the government. And despite the popular misconception, there is no binding social contract that we all signed upon emerging from our mothers’ wombs…yet another non-existent, fanciful liberal naivete by which they explain their Utopian dreams… Anyway, by illuminating some of the absurdities of the new ‘health care’ law, Kevin is demonstrating how just one of many unintended consequences stemming from the affordable care act.
Good Blog entry, Kevin. I appreciate and respect your libertarian principles.
Sincerely,
A Reasonable Human Being
P.S. So far, 1.5 Million Americans have been told that they are no longer permitted to keep their current health coverage. This represents a stunning loss of freedom…do any of you care???
Sure, if you place high value on things other people say and/or get highly offended by others’ opinions. The rest of us like to discuss things openly and candidly.
“If you like your plan…you can keep it!” -King Barry the 1st
“You can only keep your plan if the bureaucrats say you can” -Reality