Today I’m going to talk about something I absolutely LOATH talking about: health insurance. Specifically, expat insurance.
Ugh, This Bullshit Again?
I know, I know. I don’t like it any more than you do, but it’s an issue that comes up over and over at Chautauqua, Fincon, and just our own exploding inboxes: If I retire, what the HELL do I do about health insurance?
Here’s the frustrating part: Every time we write about it and say “here’s the current situation, do this,” Trump does something and everything we wrote gets completely invalidated a day later. I HATE writing about health insurance. It’s like being on a ferris wheel of stupidity.
So why am I writing about this now?
And the answer is: Mr. Money Mustache.
You may have heard of him. He writes about money. And early retirement. I hear he’s pretty good.
ANYHOO. Recently he, along with most of America, had to renew his health insurance and was shocked to discover his premiums doubled in price. Naturally annoyed, he reached out to us asking for advice, since we had talked at the last Chautauqua about how cheap and easy health coverage was as a nomadic person and he was curious as to how exactly it works. Ultimately, he decided that our nomadic lifestyle wouldn’t really work for him and just decided to pay the higher premiums, but our discussion generated some interesting ideas and I thought I would share those with you.
Why is this an issue, you ask?
In one word: Trump.
His executive order to end the cost-sharing subsidies that were a key pillar of Obamacare sent shockwaves through the health insurance market, and as a result has caused the cost of insurance to skyrocket. In Mr. Money Mustache’s case, the increase was 100%.
But here’s the fun part. The ending of those cost-sharing subsidies hurt the insurance companies. And that caused those insurance companies to increase their insurance premiums. But for whatever reason, Trump’s executive orders couldn’t change the mandate of Obamacare that the federal government would provide subsidies to make health insurance affordable to people earning below 400% of the Federal Poverty Level. So as a result, even though the price of health insurance increased under Trump’s changes, the Obamacare subsidies were forced to increase to cover the difference. As a result, under the new rules, early retirees like the ones who read this blog end up paying the exact same amount, but a bigger part of their insurance bill gets subsidized by the federal government.
But yet, Mr. Money Mustache’s premiums doubled! What gives?
Well, as it turns out, there ARE losers in this new Trumpian government when it comes to health insurance costs: Self-Employed People and Small Business Owners.
Because the primary customers of the Obamacare Exchanges are Self-Employed people and Small Business Owners, with early retirees like us as an unintended passenger. And if you’re an early retiree that makes too much from their investments to qualify for Medicaid, Obamacare and its associated subsidies is how you make health insurance work for your family.
Only problem is, if you’re self employed (like MMM) and make too much money (like MMM), you get hit with the premium increase due to Trump’s killing of the CSR yet don’t benefit from the associated increase in the federal Obamacare subsidies.
Great. What now?
Well, if you’re MMM, you just accept the higher premium. And that’s totally fine, TOTAL respect to MMM for his decision because it was the best for him and his family. He loves Colorado, and Colorado is where he shall stay.
But for us? What would we do?
Well, as it turns out, it’s not just a hypothetical. We had to make this decision as well.
In Canada (or at least in Ontario), if you leave the country for 2 years you are considered a non-resident. And with that, your gold-plated Canadian health insurance goes away. So we were faced with an uncomfortable decision. Stay in Canada for the health insurance, or keep traveling.
Naturally, we wanted to keep traveling.
So as part of our research, we looked into expat insurance, which is health insurance that covers you if you were to leave your home country and settle somewhere else. Would you like to know what we found?
This was what Cigna quoted for the two of us for a year of insurance coverage. For the purposes of this quote, I made up a date of birth, and pretended to be an American planning to live in Europe.
Click here to get your own quote: https://www.cigna.com/international/individual-plans
So $2400-$3000 USD for a year of coverage. For comparison, MMM’s insurance plan was $12k per year! That’s 4x the cost for expat insurance! Here’s the catch though, these plans are for EXPATS. The reason that these plans are (relatively) cheap is because health care doesn’t cost the insane amount that it costs inside the US of A. These companies are depending on the fact that if their clients get sick, it won’t be in the US of A. That’s why there are limits in their policies for how much time they’re allowed to spend in the States.
Not convinced? I recently asked for a quote from another expat health insurance company and in the spirit of transparency, here’s the link: https://purchase.imglobal.com/Quote/GLOBAL_MEDICAL/pre-quote?imgac=52542
And I would like to point out, these policies actually cover health care inside the US. But there are limits on how much time you can spend in the US. In fact, this policy has a rather weird clause stating:
As part of that commitment, IMG offers a Medical Concierge program, an unparalleled service that saves you on out-of-pocket medical expenses. We also offer a cash incentive and to waive 50% of your deductible for choosing to receive treatment from some of the best medical facilities outside the U.S.
So as it turns out, expat insurance companies will actually pay you to seek treatment outside of the US!
So What Should I Do?
I presented this all to MMM, but to be realistic, he’s not moving his family to Mexico any time soon to save on health insurance premiums. But it might be a good strategy for YOU, the early retiree that’s nomadic like us.
The truth is, health insurance is something that only Americans worry about. And that’s because your health care system is so insanely expensive that you can’t afford to NOT deal with it. That’s a unique problem that no other developed country in the world has to deal with.
So what should our readers do who want to to retire early? Well, a lot. But, in short:
- Lower their income so they qualify for federal subsidies
- If that doesn’t work, make enough money in side hustles so they can afford insurance
- If that doesn’t work, evacuate and rely on expat insurance
Simple, right? Easy, right? And I’m sure this article will be in no way controversial, but in the off chance that it is, let us hear it in the comments! After all, it’s just health care. Who gets mad about that?