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October 08, 2013


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new at this

Deegee - Does it not bother you at all that some other American had to go to work today to pay for the subsidy that you "qualified" for...?



Syd: It appears that we do fully agree. I'll go on to say that giving patients more information could help. They need to know what the total costs will be on a procedure, what their share will be and how well various doctors perform. As a former Quality Program Manager in the Aerospace/Defense industry I will attest that high costs are no guarantee of high quality.

With regard to my earlier tax proposal, I omitted a key point. While I would transfer my assets to my wife, then divorce her purely for tax financial reasons. I would not leave her. Then having no assets, I should obtain full subsidy correct?

Furthermore, since we live in a high personal income tax state, we would get MV licenses from a no/low tax state such as FL, SD, or NV. We would declare ourselves RV'ers and live on the road. Meanwhile we would keep the current house as our vacation house. How would anyone know how many days we are in the RV or house? Would this not be compliant to current laws?

Retired Syd

New: Another way to view it is, that American that is going to work today that has health insurance, is getting welfare from you and me and deegee in the form of the tax subsidy provided to him and his employer-- that subsidy in the form of a tax-deductible/tax-free benefit? According to the Brookings Institute, 160 million people have health insurance through their employers. Each enjoying the tax boondoggle at their tax rate (both sides, employer and employee). That's a lot of dollars. If even half of the 45 million uninsured individuals qualify for the subsidy, I'm willing to bet it doesn't add up to the "welfare" going to the working people. But I'll bet you don't see that as welfare, do you?

Retired Syd

Maverick: Well that whole divorce tax proposal would have saved you a small fortune in taxes even before this whole tax credit/subsidy came up. If you were really looking to make money on tax savings all these years, you could have divorced, avoided the marriage penalty, and saved enough to retire early. I think now it will cost you more in legal fees than the subsidy would cover. Those attorneys are expensive.

As to saying that you live somewhere that you don't really live, well that's called tax fraud. I advise against it.

Retired Syd

Kathy: Was that Guaranteed Issue policy expensive? I didn't stay on COBRA as it was really expensive--I found an individual policy on my own. Through Aetna as well.

I'm surprised you had so much trouble on the exchange yesterday--it's been working fine for me this week (well for the application and browsing parts--I still haven't been able to purchase my plan yet. I called today and got right through with no waiting--I was very surprised about that!)

I'm volunteering at an event with Covered California today, so maybe I'll get some inside scoop there.


New: Besides what Syd wrote, the average tax savings according to a 2007 Joint Committee on Taxation report from the employer subsidy for health insurance was $2,886. (That will be about $2,000 more than the subsidy I will get next year.) That's a lot of "welfare," don't you think?

See page 4 of this report:


Furthermore, the employee contribution of employer-based health insurance can be made with totally pretax dollars, regardless of income or amount of itemized deductions (you can even claim the Standard Deduction). Those of us not in employer-based plans can at best deduct some of our premiums, subject to the 10%-of-AGI exclusion.

I will be paying income taxes on my investment income, more than I will get back with the subsidy.

I am subsidizing you, New-at-this. Once again, "You're welcome."

New at this

That's funny, Syd! Nice try....


Syd: I enjoy your blog for the many insights into retirement. I retired in 2011 from UC at age 60 and worked part-time at my “old job” until July 2013. So, I’m in retirement 2.0. My wife still works, so the numbers below are only for me. My 2011 retirement was only possible, because with 15 years of service at UC I was able to continue my coverage at Kaiser in 2012 at a cost of $175/mo (i.e., I paid the usual employee co-pay + 25% of UC’s portion + includes Delta Dental). In 2013 I switched to my wife’s coverage at UCSF, so the additional cost for including me was reduced to $57/mo (i.e. I messed up in my 2012 open enrollment!).

The cost to UC (2013 values) for including me = $507 + my wife’s portion ($57) = $564/mo (actual cost of the coverage).
With the UC coverage I run about $250 co-pay/yr for my 3 prescriptions, and average about 1 office visit/yr. So, out of pocket is about $300/yr. Total cost for me is = $57 x 12 + $300 = $984.

I already rec’d a letter from UC telling me “not to worry”, because no Obamacare changes will impact me in 2014. Lucky me.

OK, considering the alternative scenario…….say I retired in 2014 at age 60 w/o the UC coverage. The Kaiser Silver 70 HMO plan would be $743/mo in zip 94598 with my 1040, line 37 = approx $75K (no subsidy). Then, I’d be liable for co-pays (I estimate $1K/yr) with a yearly max = $6,350.

So, with Covered CA exchange system the annual cost is: $743 x 12 + $1,000 = $9,916.

The difference (Covered CA vs. UC) for me, then, is $8,932/yr or $744/mo.

From the employers perspective Covered CA is $2148/yr more expensive. And, this does not consider the co-pay, out-of-pocket max, etc. This is interesting, since UC will cover an “additional adult” on an employee’s plan w/o respect to pre-existing conditions, age, etc.

For sure, I think very few people in my income range ($7-8K/mo gross pre-retirement salary) could readily handle amount w/o substantial discretionary spending changes. Even ignoring the yearly max + 20-30% typical co-pay issues with Covered CA, it would be a real challenge for anyone in the 55-65 yo range to swing an early retirement under Obamacare in CA. The age-dependent differentials for the identical coverage are too steep. I understand your logic of staying healthy over a period of 20-30 yrs and setting aside funds or using HSA to defer expected and future costs, but I think a vanishing small percentage of people will be able to follow this advice.

For sure, Obamacare is a complex system, but each person needs to compare the costs vs. their current situation. Given the topic of your blog (early retirement), then my analysis might be of interest to you. Surely, there are many issues driving the cost of healthcare, but I'm skeptical that manipulating the cost of insurance with the goal of subsidizing low-income inclusion and adding those 40+M w/o coverage is doomed from an economic perspective. If we want a system to work like Canada or Europe, then much more drastic changes would be needed.


I vote that New at this start his own blog, rather than continually attempting to hijack Syd's. All those in favor?

Brandon Curtis

Great post, Syd!

I'm not on the market for health insurance at the moment (still on my parents' plan), but this was fascinating. With all of the ongoing discussion of Obamacare, I still didn't have a very good idea of the practical implications for someone actually shopping for insurance. Thanks for sharing your personal perspective.

Retired Syd

Larry: Well, health insurance has always been a biggie for people retiring before Medicare, that was already true before the new health law. When I was working, I paid ZERO for health insurance. When I retired, I paid for COBRA coverage--for my plan, which was very comprehensive, I paid a small fortune. I was able to find a very high deductible HSA compatible plan on the individual market that saved me thousands a year. That worked out well for us because we don't use much health services at this point in our lives.

The cost of that plan has increased between 10 and 15% per year, even before Obamacare was passed. Last year my individual policy for a very high deductible plan was almost $9k/per year, and it covered nothing. Almost everything went against my deductible. But I was afraid to change carriers (although, I don't think I could have gotten it for any cheaper) because they could deny us for any reason.

That carrier, Aetna, dropped us effective 1/1/14 as they are no longer writing individual policies in CA. I could get a Kaiser plan on the exchange for about the same price, but we want our same doctors, so will pay for a more expensive policy to get the network we want. But since most things we used to pay for are covered, even with the Bronze plan, we'll still be in the same place.

I guess the point I'm trying to make, is anyone retiring before the age of Medicare needs to know health care on the individual market is extremely expensive and very likely much more than what you were paying when you were in a group plan with your employer. You definitely have to build that extra expense into your budget when you retire before Medicare age. It's the second highest line item in my budget besides property taxes. The new healthcare law didn't really make that better or worse for someone in my income level. It just is. (But at least I have the guarantee of coverage now.)

A silver plan would cover A lot more than what I had on our old individual policy. To get the same network, it would run me another $2,500/year over the Bronze. That's more than we have ever spent on out-of-pocket expenses in the last 6 years, so I'll keep banking that difference for someday when we actually get sick and need the money. (Plus we can change at open enrollment if our health situation starts to change over the years.)

But if you have a lot of medical expenses, it can definitely be worth the extra dollars to buy a more expensive plan--you just have to sit down and do the math for your situation.

You have a GREAT deal with your wife's policy--even on your old coverage. You are very lucky!

Other than this, I hope you are enjoying your new retired life--congratulations!

New at this

Syd. So I signed on to the govt. HC site. They only included 3 carriers (all "blue" related) and the cheapest was twice what I'm currently paying through Humana. Did you find it competitive to what you could buy outside the exchange - if not being subsidized? One difference is that I'm in Florida but their pricing feels more like what I was offered through Cobra.


Sydney - I had a serious health problem 8 years ago and had very good insurance at the time through my employer (still do for that matter) - but wanted to share that the out of pocket max isn't as clear as it should be - that year I hit my out of pocket max - but still had to pay my percentage on some items - I always that that the out of pocket max meant that once you'd spent that amount in the coverage year that everything else would be fully covered by insurance - that wasn't the case ... I called and asked for an explanation - and only some items apply - I wish I could remember the specifics - It's something I'm planning to investigate further so I can factor it in to my planning.

I'm a new reader of your blog - you've got some really good information and lots of things to think about - I'm planning to retire early - in my early 50's - I'm currently 52 and I can't wait to retire!

Retired Syd

Doreen: Well welcome! Thanks for your comment and congratulations on your early retirement plans.

What might have been the case in your situation is that certain charges may have been out-of-network. Usually the deductibles and maxes operate separately in and out of network (in that you have to meet the each separately.)

Several years ago, I went in for out-patient fibroid surgery and wound up with a perforated uterus from the surgery, landing me in the hospital for another surgery to repair the resulting hole in my intestine and a week-long stay in the hospital. The upshot was that even in an in-network hospital, many of the charges were out-of-netowork (my recollection is that one was the anesthesiologist).

But on another note, I did get a bill for $30,000 that time (at the time I was on really good employer coverage). I called the insurance company, and after the usual several attempts and long hold times they told me sorry, that was a mistake, I owed nothing. That kind of thing was very common with my policy when I was working.

Retired Syd

New: Well that's interesting--all the plans on the individual carriers websites that are writing policies in California were identical to the plans on the exchange. Same with the on-line brokers. I assumed that was by design. I didn't realize that was different in different states.

Are you comparing individual plans or group plans available through COBRA? Those would be different because COBRA are group plans. I'm not eligible for COBRA anymore as I gave that up 6 years ago. My COBRA plan through my employer was a $250 deductible and therefore REALLY expensive. I switched to an HSA-compatible plan when I retired and pocketed the difference in premiums each year to fund my HSA. Never touched it so far.

Is your Humana plan COBRA or an individual policy you bought yourself?

New at this

My wife and I's Humana policy costs $332/m with a $10k deductible. Not Cobra related, we just bought it a year ago on the open market along with home and auto insurance.

Humana was not available on govt site for Florida. Nor were several others that have much better pricing than the blue cross related plans. I hope people realize that they can shop beyond the govt choices....Scary to think people who want the subsidy can only choose from a couple of the most expensive options. But maybe after the subsidy it's more competitive. Looks like our tax dollars will just flow directly to Blue Cross, et al. Sigh.

New at this

P.S. The best price we were quoted on govt site was $672/m (vs $332/m for Humana) And this is for a higher deductible than Humana ($12,000 vs $10,000)

Would be interested to hear what other peoples experience are from different states. I've seen articles saying how great the govt pricing is but that doesn't square with my real life experience.

Retired Syd

New: So you are able to keep your individual Humana policy into 2014? I had a plan like you describe through Aetna. But Aetna is no longer writing individual policies in CA, so we can't keep it.

What is perplexing me is that you are able to buy an individual policy in Florida through a carrier not offering plans through the exchange. I've been to all the insurers' websites that are offering individual plans on the California exchange and am finding only the same plans as on the exchange. When I search for other carriers, like Humana and Cigna, they all say they are not writing individual policies in my state at all.

I just didn't realize that in some states you can buy individual policies from carriers that are not participating in the exchange for that state. I would love to comparison shop outside of the exchange as well, but can't find a single insurer that is offering individual policies in my zip code other than those 5 carriers offering on the exchange. And when I comparison shop on ehealthinsurance.com I get only the same 5 insurers as I can on the exchange.

If you go directly on Humana's website and pretend to buy a new policy for 2014 by typing in your Florida zip code--are you able to get the same plan you now have?

Are any other readers out there finding it possible to buy insurance through carriers in your state that are not participating in your state's exchange? I'd love to hear on this.

new at this

I just called my Insurance company (Humana) to ask if our policy would be impacted by Obamacare. They informed me that a letter would go out shortly to let me know that because of the "Affordable Care Act" they would no longer be offering our current plan and we would need to sign up for one of the governments "metallic" plans. The impact of this is that our premiums will be increasing from $332/m to $670/m for the same coverage. They apologized but said there is nothing they could do as the government was making this happen.

new at this

Syd - So here's a question..., why buy any insurance? Under Obamacare, a Bronze plan will cost us ~$8000 per year. And that's for a $12,000 deductible. That means we will pay $20,000 for medical before anything is covered. Why wouldn't we just pay the penalty for not having insurance..., pay our own medical costs along the way..., and if we get some terrible medical condition, THEN buy the insurance at that point...????

Since you can't be turned down for pre-existing conditions, why not wait to buy it until you need it....???? I suspect there is something I'm missing, but I sure don't see it....

Retired Syd

New: Well that plan works unless you get a heart attack or cancer or something in April--or any time before the next open enrollment. You can't enroll until the next open enrollment period, so you may go bankrupt before the following January if you actually got sick. It's not like you can just sign up for insurance the day after you get sick.

Retired Syd

New: I suspected as much. That's how I thought it worked, that all insurers offering individual coverage had to offer their plans on the exchange, but could also offer the same plans directly. I didn't think there was another market out there on the side, because all individual plans must now conform to the new laws minimums, etc.

(But Humana is offering on the exchange in Florida in several counties, so it isn't entirely true what you were told. It's not that they were not allowed to offer it, but they opted out of it for your county--as did Aetna for mine).

Each state's exchange negotiated with insurers, although I think Florida declined to set up their own exchange and defaulted to the Federal Exchange, as did 26 other states. So I'm not sure who did the negotiating for that. California did set up their own, which may account for the broader range of choices. I'm not sure how that went down for states not setting up their own exchange.

new at this

So who was it that said about a thousand times, "if you like your current plan you can keep it..."

It's going to be really interesting at the polls next November.


Sydney - I just looked up the spreadsheet I'd created for all of my insurance claims that year - insurance paid very close to $175,000 and I paid $4,340 - $590 over my out of pocket max - I have a vague recollection that the overage was that copays for some doctor visits didn't count toward the max out of pocket - all charges were in-network and If I remember correctly I was responsible for 20% of the UCR - I did not have any out of network coverage that year.

I personally would not feel comfortable with a bronze plan - this is a very personal decision for each person to make - based on their history, health, and tolerance for risk - a freak accident would be very expensive w/ a bronze plan - I know of too many situations with friends/family where an accident (auto, fall while hiking, bike accident, etc) changed things in a second.

new at this

One tiny piece of good news....In case you have any readers that aren't mooching off the rest of us, I just talked to my insurance company again...They said I can rewrite my current plan before the end of this calendar year to last through Oct 2014....This way you can avoid government insurance for a few extra months and save $1000's of dollars in the interim.....And then who knows what will happen, there's another election in November 2014 and maybe the only big govt liberal left will be Obama....So maybe we can get rid of this thing....

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