June 24, 2016
There Are Obamacare Alternatives and Millions Are Turning To Them
Are you dreading the coming Obamacare premium increases this fall? If you aren’t, you should be. For those buying individual (i.e., non-group) coverage in the Obamacare exchanges, they could be significant. But at least there are a few alternatives out there, and millions of Americans are turning to them.
While the White House continues to dismiss the problem of premium increases, average Americans know better.Texas Blue Cross has asked for 2017 rate hikes of up to nearly 60 percent. And that comes after losing $400 million on its most popular PPO plan—a plan the company canceled last year.
But at least you could move to, say, Arizona and get some affordable coverage, right? Oops. Arizona Blue Cross is asking for rate increases up to 65 percent, after loosing $185 million on individual policies the last two years.
As premiums in the exchanges continue to rise at such phenomenal rates, healthier people will drop out, especially those who don’t get taxpayer subsidies that insulate them from the full cost. That’s what creates the “death spiral,” where every year the healthiest people leave the pool, which then gets smaller, sicker—and more expensive.
If you are ready to abandon Obamacare’s sinking ship, there are some options.
Christian sharing ministries. The problem with abandoning Obamacare is that the president imposes a fine on those who do. However, there’s an exception for those who join one of the Christian health care sharing ministries.
These organizations do not provide health insurance per se. Instead, members pay their monthly sharing amount either to another member facing medical expenses or to the organization, which then distributes the money.
The plans are much more affordable than Obamacare, though they only pay for major medical costs. For example, a family membership in one of the Christian sharing ministries runs about $400 to $500 a month.
And while there is no guaranteed reimbursement for medical expenses—and hence not true insurance—most members seem very happy with what they have received. Indeed, membership has exploded since Obamacare began, with more than 500,000 people enrolled in these types of plans.
Life insurance with critical illness. Another option is a life insurance policy that includes an “accelerated benefit” for critical illness.
These are term life insurance policies; if you die, you get the amount of the policy.
However, they also have an accelerated benefit provision if a policyholder has an accident or major medical condition. The insurer simply writes the beneficiary a check.
I have seen a copy of a letter from one such life insurer giving the beneficiary two options: either full or partial accelerated benefits. If the beneficiary chose the full benefit, the insurer would write a check for $111, 281.78, though choosing that option would cancel the policy.
Or the company would pay $88,975.38 and reduce the life insurance coverage to $50,000, with a reduced premium of $43.98 per month.
So under the second option, the beneficiary would have cash and still have life insurance.
A $1 million life insurance policy for a roughly 50-year-old male and female could cost about $200 each per month. My understanding is that policies are available for up to $2 million.
Unfortunately, having this life insurance option does not exempt a person from the Obamacare penalty, which can be expensive, depending on your income. For 2016, that penalty is the greater of $695 per adult and $347.50 per child or 2.5 percent of household income.
But many people who don’t qualify for subsidies may find the cost of the life insurance plus the penalty less expensive than Obamacare. That is—if you can’t get a penalty exemption.
It turns out that the large majority of people who reject Obamacare are given an exemption. Last year the IRS reported that 7.5 million taxpayers paid the penalty, while 12 million received an exemption. So your chances used to be pretty good. However, the Obama administration has tightened those exemptions to force more people to stay in the system.
And some people are combining a Christian sharing membership with an accelerated benefit life insurance policy.
To be sure, the options for those who dump Obamacare are limited. But if enough Americans want those are other alternatives, they need to put pressure on their elected representatives. If Congress can’t repeal Obamacare, at least give people the option of buying something that’s affordable.