Change always happens…whether we like it or not. Besides death and taxes, change is the only real constant in life. The seasons change, the weather changes, people change, and (of course) politics change.
This post is about adapting our financial independence plan to change. Specifically healthcare changes. Changes we can’t control, but we can plan for…
The Wacky Shit-Show Called Healthcare
Let me start off by saying that healthcare in the United States is terrible. Really terrible.
I’ve had my eye’s opened to this reality by actual personal experience.
Unlike many, I’ve actually had the opportunity to visit an emergency room in a foreign country . It wasn’t a planned visit either…this was a middle of the night “I’m vomiting my guts out in the middle of a train station, and can no longer walk” kind of visit.
It’s the kind of hospital visit where you don’t give a damn what things cost…you just want to survive. That kind of situation.
Some of the details are hazy (I blame the drugs), but I remember getting IV’s, a hospital bed, a lot of pain killers, abdominal X-rays, and of course there were doctors and nurses to provide care. The whole 9-yards.
Sure, it wasn’t a nice hospital, but it was clean. The doctors and nurses seemed to know their business.
As I lay on that hospital bed (pumped full of drugs), I couldn’t help but create my own mental nightmares over what this tourist outing was going to cost.
(Clearly, I was feeling lot better at this point, because I was thinking about money again)
In the United States, when you step into the emergency room it can costs thousands of dollars even with health insurance … and here I was in a foreign country with no insurance.
What did this experience in foreign healthcare cost me? A mere $150 … for all of it. No insurance at all, and we paid with cash at the front desk.
Here’s the real kicker folks: This was in Japan. A country known for being one of the most expensive in the world. Yet, in my experience, the cost of medical care was a mere fraction of the cost I would have paid at home.
Have a few experiences like that, and you come to realize just how messed up the U.S. “for profit” healthcare system really is.
Post Employment Healthcare
Back in 2015, before I started this blog, I had a variety of jobs — some with healthcare benefits, and some without. When I did have health benefits, they weren’t anything great. They weren’t terrible either. Everything had co-pays and coinsurance and cost a lot…the same as everybody else.
All that changed the day I got laid-off. As I was already financially independent, I decided to be a stay-at-home dad instead. Depending upon who you ask, this could be called an unpaid full-time job. Whatever!
Regardless of how you define my “vocation”, I needed post-employment healthcare and a plan that would fit within our family’s limited dividend income budget.
What I came up with was actually two plans…
Luckily, this first year of early retirement has been a breeze as far as healthcare goes. Mrs. Tako is still working, so I’m covered under her health insurance plan (along with the kids).
But her work sponsored healthcare plan isn’t going to last forever. Eventually we’ll need to purchase our own health insurance. This is our Plan A.
If Mrs. Tako quit her job today, we’d purchase health insurance off our state exchange. (That’s how it works for the moment anyway)
How much does a qualified ACA insurance policy for a family of four cost? With our annual dividend income just shy of $50,000, the Washington State healthcare plan finder gives us a few options….
We want to keep our same doctors and pediatrician; given that constraint, the exchange provides us with three silver level options:
* All numbers are monthly.
For my money, if I had to choose one policy today, I would pick the Bridgespan plan. It’s the most expensive on a monthly basis, but it’s also the most flexible plan offered.
The exchange does offer other plans, but we would need to change doctors (and drive further to see a doctor). That’s probably not in the cards for now.
So can we afford it?
Yes, we absolutely can. We’d pull the kids out of their language immersive daycare and have nearly $1,200 per month of extra dividend cash flow from which we intend to pay for this plan. The cost of a HDHP with tax credits is affordable compared to daycare.
Having a big income buffer makes life a lot easier. (Yet one more reason why financial independence is awesome)
If you intend to set-up a Plan A similar to ours…give yourself plenty of breathing room for expense growth (more on this later).
Plan B is our backup plan when life trumps all our other plans. It’s the plan we use when healthcare really goes to shit in the U.S. When low income families like ourselves can no longer afford healthcare — Plan B is what we’re going to use. If the cost of healthcare continues to rise at rates greater than 10% a year, this is our backup plan.
Plan B means we move to another country (legally).
For most people, a plan like this means finding work in another country…which isn’t an easy proposition. Teaching English in a foreign country is probably the easiest option for most … but not an especially good one if your intention isn’t to work at a job.
Thankfully, our family doesn’t need to go the “immigration-through-work” route. We have other options…
Mrs. Tako just happens to be a citizen of another country, and one that just happens to have an affordable “not for profit” healthcare system. We decided it would give us the most flexibility if she did not become a U.S. citizen.
Rather than tie ourselves down to one country, we each maintain citizenship in our respective birth countries. I can apply for a spousal visa (if we need to move), and approval is almost certain. (I would enter the country on a 90-day visitor visa and then apply).
For our children, we’ve made certain that both of boys have dual citizenship. They can live in either country legally.
Adapting To Change
I’d be foolish if I thought our original Plan A was going to survive unmodified under this newly elected administration. It won’t.
It’s a fair bet that the ACA will be demolished or modified within a few short months.
Any tax credits we might have received under the ACA are going to disappear like money on the sidewalk.
I can’t guess what will replace the ACA, but it’s a fair bet that whatever replaces it will cost more than Plan A with tax credits.
With tax credits Plan A consumes 12% of our monthly dividend income. Without credits, that jumps to 17%.
Could we still afford Plan A with no tax credits? Yes, we could … for now.
When Plan A Breaks…
Absent any real fixes to the healthcare situation in the United States, it’s logical to conclude that healthcare costs will continue to rise.
Costs could almost double from today and we’d still manage. We’ve built enough buffer into our budget to deal with problems like this….but we would need to cut back on luxuries like trips to Hawaii, and expensive sushi dinners.
After costs rise above $1200 per month, that’s when things start to break down and get unaffordable for our family. We’d need to find work just to pay for healthcare!!
Work for health care benefits, or execute Plan B?….hmmm.
Personally I’d prefer Plan B over going back to work — there’s absolutely no reason healthcare should consume more than 25% of a family’s budget when we’re healthy and only visit the doctor a few times a year.
Assuming health expenses grow 10% annually, this is only 7 years away….plenty of time for system improvements to be made. Cross your fingers and wish on a lucky star everybody.
Hopefully these problems will get resolved before they truly come to a head…but I wouldn’t bet on it.
Plan B isn’t necessary yet, but I’m keeping the option open…
[Image Credit: Flickr]