I have a renewed appreciation for what I consider a mandatory risk management tool that I hope everyone utilizes. And the risk management tool I am referring to is some form of health insurance. With the passage and maintenance of the Affordable Healthcare Act, or as it is commonly known, Obama Care, health insurance is now available to more Americans. Since the passage of the healthcare act in President Obama’s first term, the percentage of uninsured Americans has gone from a high of 15.5 % in 2010 to a low of 7.9% in 2017 and in 2021 stood at 8.3%. In 2021 the 8.3% represents approximately 30 million uninsured Americans per the latest data available. Now that we know 30 million Americans are without health insurance, how do the remaining Americans get their coverage? 66% of Americans have private insurance plans, including employment plans, and those who purchased their coverage on the healthcare exchange platform. Then 35.7% of Americans are covered by a plan that is considered a public plan, such as Medicare or Medicaid. This statistic will continue to shift from private to public policies as more people turn 65, retire and shift their insurance needs to Medicare. Here is a good article on how Americans are insured, Uninsured.
So, what caused my renewed interest in healthcare and how people approach the risk management aspect of that insurance? I was admitted to a local hospital on February 5th and was not discharged until February 22nd. I am extremely lucky and have amazing insurance through my employer, yet I will still have “sticker” shock when I see the detailed bill that my insurance will cover for my 17-day stay. The average 3-day stay in your typical hospital is around $30,000 or roughly $10,000 per day. I am not sure about most of you, but paying cash for this type of bill, and the amounts we are looking at are not practical for most of us. This is a major reason healthcare costs are a leading factor for personal bankruptcies, as in years past. For more on the average cost, visit Average Costs.
So if you are self-employed and cannot access private employer-sponsored healthcare, what is your option? With the passage of the healthcare act, you have roughly two good sources or choices for your insurance needs. One is to go on to the healthcare exchange and purchase your insurance there, as you may be eligible for subsidies based on various factors. Or you may contact a private insurance company and have them issue you a policy you pay them directly for. So, how much does a policy for someone who is the self-employed cost? The average premium for an individual is $484 per month, and the average deductible for these policies is $4,394 per year. For a family, the monthly premium is $1,230 per month and a $7,800 annual deductible. But if you are self-employed, you may be eligible for some tax breaks for paying 100% of your monthly premiums, so check with a tax advisor to verify this for your situation. And as you may have noticed, the deductibles are fairly significant. There is a way to save for your medical expenses and reduce your taxes by having and funding a High-Deductible Health Savings Account. These accounts are limited to a certain annual contribution and grow tax-deferred. Any proceeds are tax-free, provided you use the funds on a qualified medical expense. And once you turn 65, these accounts can be used for anything the account owner wants to use them for, as Medicare will cover you from that point forward. Here is an old post on reducing your healthcare costs, Reduce Healthcare Costs.
Between out-of-pocket expenses for the insured and uninsured, paying premiums, and meeting deductibles, things can and often get complicated quickly. Then to make matters even more complicated, we introduce tax issues and savings accounts. It is no wonder that for some people who are younger or may not have the means to buy their own health insurance policy that 8.3% of Americans are uninsured. Health insurance is vital to your overall risk management program and to protect you financially if something were to occur and you ended up as I did for a two-week plus stay in the hospital.
If you require help, speak to an insurance representative at a reputable company that provides insurance in your area or ask a fee-only financial advisor who charges an hourly rate. Also, feel free to contact me directly if you are in or near the middle Tennessee area.