Real Estate Investors: Are you Getting Screwed By Obama Care?

Kim Tucker here, real estate investor.  I was happily living my life with a Blue Cross group policy in Kansas City that I had for our family for many years.  Obama Care came and I kept my old plan, not sure if it met the requirements or not, but it was all good.

Every year it went up about $100 and in 2016 we were at about $960 a month in premiums.  We moved to the Lake of the Ozarks and they canceled our insurance and when we tried to get new, we had one choice through the that was $1480 a month.  It came with a $5000 deductible each for my husband and myself, didn’t cover a lot of things, but it was insurance.  Fast forward to now and our policy is yet again being canceled, but we are in luck, there is a replacement policy, deductible goes up a bit, premiums go up to $1860 a month and no out of network doctors unless it’s an emergency and where I live, if you want to see a specialist, you have to go to out of network.

I almost forgot the awesome prescription coverage.  I can use my insurance to buy prescriptions, however, they are cheaper if we pay cash.

So now I have to make some decisions and weigh some options to decide what to do and I have been conducting some research on Facebook and I have learned a few things that I thought might help a member or two.

So if you are like me and getting screwed over by Obama Care, here are some things I have learned.  Please note I am not an expert and I don’t speak insurance, so please triple check everything with your own CPA and your own insurance providers.

Go Without and Pay the Penalty

My first option is to skip the insurance altogether and put the $1800 a month into an account to cover my own expenses and hope nothing bad happens.  We can all do that and from what I understand, if you do not get insurance you have to pay a penalty.  This penalty for the tax year 2017 is 2.5% of your total household adjusted gross income or $695 per adult and $347.50 per child up to a maximum of $2,085.  They expect this to increase in 2018, but they have not yet been announced.

I reached out to my CPA and he said based on my income, that if I would have skipped the insurance, I would have to pay a penalty of $695 for me and $695 for my husband for a total penalty of $1390.  I am pretty sure that this year if I would have paid the $1480 into a savings account, paid the penalty and paid cash for all medical expenses, I would have about $10,000 in that account right now.

One of the people providing insurance said to look to the Obama Care guidelines and penalty exemptions.    There is one exemption that I qualify for:  “The lowest-priced coverage available to you, through either a Marketplace or job-based plan, would cost more than 8.165% of your household income.”  If you do the math on an $1860 premium I would need to make more than $273,00 a year to have to pay the premium, at least for 2017.  So I am thinking I would be exempt from having to pay the penalty and maybe you would too, but I could be wrong.

But what if something horrible happened, someone got cancer or needed surgery and then we would be screwed even more!

Health Savings Accounts

I could go out and get a high deductible insurance plan, which I already have and then every year contribute up to the maximum amount of $2,400 for one person or $6,750 for a family in 2017 into this account tax-free.  This is in addition to paying the Health Insurance Premiums.  Then out of this account, we could pay copays and prescriptions and the like.

What would be very financial sound according to my Self Directed Guru Friends would be to open this account where I have my Self Directed IRA and take this money and use it to invest in real estate and mortgage notes and not touch it.  And grow this money tax-free for some future date to use it for medical expenses.  So if at all possible, we need to start one now for that emergency fund for the future. But for now, other than reducing my taxable income, this does not seem to be my solution.  My insurance would still cost $1860 a month.

COOP Plans

In my research, I spoke with several people who offered coop plans that are not quite an insurance.  You can research these but the dumbed down explanation is that is a group of people who have banded together through a company.  Everyone pays their “premiums” into the coop and then when you have a bill, the coop pays the bill in a similar fashion to regular health insurance.

One company that was referred to me here was Liberty Health Share and you can get a free decision guide from their website.

Alternative Plans

I spoke to several people who offer these plans.  I am not an expert and would say talk to these folks, but these are packages of plans from several different sources that do much the same thing as insurance, but they are bundling several different plans to get you the coverage you need.  Quite often these plans pay a specific dollar amount for different items and you or their service will negotiate a cash rate with the Doctor.  And the cash rate might be a bit higher, a bit lower or right at what the plan pays.

I received quoted prices from Kurt Jackson with KF Financial in Liberty that was between $600 and $800 a month depending on if I wanted the extra coverage to make it Obama Care Compliant or if I wanted to go with the bare minimum and possibly pay the $1380 annual penalty.

Regular Non-Obama Care Compliant Plans

Now this one I am still wrapping my head around, but here is how I understand it.  When we go to all those websites to get a quote for insurance, they only provide us quotes that meet Qualified Health Plan guidelines that establish limits about deductibles, copays, out of pockets, as well as no pre-existing conditions, pediatric and birth control and breastfeeding coverage.

As I look at these requirements, I and many of the other men and women reading this do not need all those above items.  And guess what, if you find the right person, they will give you a quote that is WAYYYY cheaper than what you are looking at, but they don’t quite meet the Obama Care Guide Lines.

I received a quote from Laura Peretic, at a private insurance firm here at the lake for United Health Care that was offering similar health care as my Obama Care Plan for $792.50 which after 12 months and my $1380 penalty, would cost me $10,890, you do the math.

So, this week I need to make my choices and cancel my Obama Care Coverage.  I am pretty sure that if I go with one of the last two options costing around $10,000 annually, I could then take the leftover money and contribute to an HSA tax-free.  Then flip one house a year in my HSA or lend it out and not touch it and when that emergency comes up in 5 to 10 years, have tax free money to pay for it.

I would love to get feedback from coverage providers and other small business owners to see what they are doing.

The People I consulted for this article: