In September of 2009 a new client called me with news you never wish upon an enemy let alone a friend. His wife had been diagnosed with breast cancer. Not more than six months prior to that we had met to write their health insurance.
They had gone uninsured for a few months after the employer plan available to Gary had become unaffordable for them. Financial times were tough and he was now on a new path as a self employed consultant.
With a limited budget, I suggested that he buy a high deductible plan that was on the lower end of his price range but would provide major medical benefits and allow him to use pre tax dollars to pay his expenses. The initial plan was a $2500 CDHP with embedded deductible. It carried a monthly premium of $480 per month.
When Gary called that day his first question was about pre-existing conditions. He was worried that since the policy hadn't been in force for very long that the insurance company was going to look back and cancel the policy. He was also worried that the insurance company was going to increase his rates to a point he couldn't afford it.
All of this coincided with the time when President Obama was pushing his new health care reform proposals. Gary's nervousness was a direct correlation to the false propaganda being pushed by the mainstream media and Democrats in congress. They were screaming about medical bankruptcy, people being dropped from insurance, and profit mongering insurance companies who would rather see you die than pay your claims.
I assured him that in Ohio there were laws in place that protected him from these things as long as he paid his premiums on time and wasn't fraudulent on the application. While this put him at ease his second question was very simple: we want Pam to see the very best doctors. Will my plan cover that? I assured him that it was and that the plan we had chosen was from one of the best and easiest to work with insurers. From this point forward Gary was at ease.
Fast forward to October 10, 2013. Pam has been cancer free for three years. Their oldest daughter is in grad school and their boys are busy playing high school sports. Gary's business is thriving and he employs a part time administrative assistant. Life is good.
Their insurance program now is a $5000 CDHP with embedded deductible and it carries a monthly premium of $648 per month. They understand that health care costs continue to rise and are concerned with how they will pay for insurance in the future. What prompted the discussion this time is Obamacare. Last week we began the process of sending out notices to clients about renewing early to avoid some of the unintended consequences of the law. Their policy renews April 1st so we wanted to take advantage of an opportunity to lock them in at a lower rate. It was also possible that they might qualify for a subsidy and that they could get a new plan through the Exchange although that wasn't very likely. In either event it is my professional responsibility to give clients all of their options and make recommendations based on their circumstances.
This is what we found. To early renew their current plan early will increase their premiums to $683 per month. Gary and Pam's household income is too high for them to qualify for a subsidy in the exchange but we ran rates with a January effective date for them to compare. The results were astounding. A plan with the same deductible that included coinsurance with a higher out of pocket maximum is going to cost $1180 per month!
Renewing early is a great strategy, but is essentially like putting a Band-Aid on a severed jugular. It successfully helps Gary and Pam's situation in the short term. Come next December when they are forced to play in the Obamacare sandbox who knows what will happen.