Since we’re self-employed over here, our family of three shops for plans on the health insurance marketplace (Obamacare) every November. We live in Austin, Texas which has a lot of hospitals and healthcare providers. Thankfully, we are all in good health at this time. We don’t have any monthly prescriptions to pay for.
Our local marketplace had a new insurer join for 2018, bringing us up to four insurance providers in Central Texas: Oscar (new & based out of NY); Sendero Idealcare (local and non-profit); Blue Cross Blue Shield & Ambetter. I had over 30 plans to select from. Before I reviewed the plans I filled out an application at Healthcare.gov that included our best guess for our income in 2018. We haven’t concluded 2017 yet, so it’s definitely a projection. I filled out the application five times switching up the estimated income each time. This year and next (2017 & 2018), we are planning on maxing out our contributions to our IRA’s and Health Savings Account (HSA), plus investing back in our businesses we are launching. So we’re expecting our net income to be very modest. And I expect we will continue to live frugally while reinvesting as much as we can in the business plan next year.
For my first four attempts at filling out the application, I projected our income too low and it wanted our daughter to enroll in CHIP. I really wanted us to all be on the same health insurance plan. Also, I’ve never utilized CHIP before so that made me nervous because I don’t know how that bureaucracy works. Our beloved pediatrician doesn’t accept CHIP but she takes all of the Obamacare plans. So I kept upping our income until we were all eligible to purchase a plan together. At $46,644.01 for a family of three we were eligible for a tax credit of $733. We might net less income, we might net more income but it all gets reconciled when we file our taxes in the Spring of 2019.
So what does this tax credit do for us? Well, if we really wanted to be frugal we could have selected a Bronze Oscar plan for $5 a month after the tax credit. I stuck with the same insurer we had last year, Sendero, and opted for a bronze plan with a $10,000 deductible for the whole family. So we’re paying $27.21 for a plan that covers everything once our out-of-pocket maximum is reached. It also covers preventative care, like our daughter’s well child check ups. It will cover our flu vaccines too.
The Obamacare insurers in our region are accepted at all of the major hospitals, several cancer clinics, one of the biggest regional medical clinics and many providers. The healthcare situation in Austin is one of the reasons we stayed here. A few years ago, when our daughter was a baby, we thought about moving to a more rural area in the Northeast where we have family. We wanted to stay self-employed and so I researched Obamacare plans in the places we were interested in. What we found, was that a lot of rural areas only had one insurer. The cost of insuring our family would have been so great, with so little options for providers, that it was a financial hurdle we could not cross.
I’m starting to get used to our healthcare situation and I can honestly say, I’m even grateful! We get to put our money into an HSA account and invest it and it will be there for us if we need it now or in the future. The money we put into the HSA account lowers our taxable income and increases the tax credit we are entitled to and defray’s the cost of the premiums. We opened our HSA account with Alliant Credit Union. It had no monthly fees and was earning .6% interest. It was too good to be true for long though and they’ve sold their portfolio to HealthEquity. The transfer will be completed in mid November. For balances over $1,000 they have 26 Vanguard plans to choose from. The performance of the plans isn’t exactly transparent on their website. So I still have a lot of research to do.
The federal tax code provides rewards to folks that pay themselves first by saving. It also rewards a lot of entrepreneurial and investment activity. And it rewards being insured. It’s really important to understand that health insurance is a part of an overall strategy to earn and save money. It’s vital to carry coverage to protect your credit and nest egg in the event of a catastrophic health event. But also, it’s a part of your tax strategy. A lot of the people using Obamacare, are using it because they don’t get a W2 from an employer, as in, they are self-employed. If you’re self-employed you may have more flexibility than most to engineer your income. Yes, you can decide how much money is ideal for your family to make taking into account the tax code. If you’re not the creative money planning type and you’re not interested in reading a bunch of tax books like I did, find a tax professional that can help optimize your healthcare and taxes to save you money. Someone who is willing to say, if you earn $20,000 more you will pay $10,000 towards health insurance plus such and such an amount in taxes. Someone who can tell you if you save $10,000 in such and such an account you will pay less for health insurance plus qualify for the earned income tax credit.
This writing is my viewpoint and should be viewed as entertainment and not as financial advice.