I budgeted $1,000 a month for family health insurance when I planned my escape from full-time work. The amount was based on a few Internet searches, but I did not spend a lot of time looking into how we would shop for and obtain this necessity after I dropped down to half-time. We previously had a fully funded employer-provided HMO policy. It was free. That’s right, free. My prior employer had carved out part-time employees under another entity that offered no benefits, so I had to go shopping for coverage.
When I initially looked at ACA policies, they counted “total household income.” Our daughter, who was still living with us at the time, made over the filing limit in 2022 and 2023, making her income count in the household. I made too much to get the subsidies, anyway. In the first year of my newfound freedom in 2022, we purchased a family policy, an individual policy for our daughter who was working for a year before graduate school, and a “limited benefit policy” for me. These were sold by an insurance broker. I was told that my daughter “who would not be in school for more than half the year could not be on our policy.”
Because I had a stage 1A melanoma removed in 2021, it was hard to find any non-ACA full coverage that didn’t carve me out also. I was told an individual ACA policy for me alone would cost $10,000. That first year, we paid about $14,000 for this mixed bag of policies. There was no coverage for my pre-existing condition for a year (thank goodness I did not need surgery that year).
That was the best I could do, and I tried again after six months with another insurance broker who told me he could not do any better.
The coverage was not very comprehensive, but none of us were sick. My limited benefit policy had a $50 “for any radiographic exam” benefit, such that when I got a gallbladder ultrasound to follow up on a 4mm polyp, it paid $50 . . . and I paid the other $750. Some medications were not routinely covered by the restrictive formulary. We spent several thousand dollars from our HSA for co-pays and deductibles. I got my Nexium from Sam’s Club.
Our first-year cost for almost no care (with the added HSA drawdowns) was about $20,000. So much for $1,000 a month.
The Frustration of Buying Healthcare in Early Semi-Retirement
It was a frustrating experience in comparison to the decades of always being covered by a relatively high-quality healthcare plan that had been paid for by my employers. I wished for the days of old when we had Blue Cross Blue Shield that was free and covered most of our costs. I specifically remember when this changed. The BCBS policy that had been free from 2001-2005 eventually came with an ever-increasing premium via a paycheck deduction. By 2011, this had become about $400 per month unless one opted for more restrictive HMO plans.
My last employer, for whom I still work part-time, gives each employee $2,500 as an HSA contribution to cover the family deductible, but over the past few years, the gap between the employer’s HSA “seed money” and the family deductible has widened to more than $1,000, due to the increasing family deductible needed for group policy affordability. I do not lose sleep over the insurance landscape, but I did not think it would become like needing to know the tax code for retiring white coat investors.
Thankfully, by Year 2, my prior employer was no longer using the W-2 pass-through company and offered me a half-time employee position. This included access to its insurance, with dental and vision coverage for the whole family. The yearly unsubsidized premium cost was $17,000 for a half-time employee. My prior melanoma diagnosis was not an issue since they take you as you come with employer-based group insurance. Everyone immediately got their preventative dental care up to date and a new pair of glasses or contacts with the attendant co-pays and deductibles paid via our HSA.
More information here:
I’ve Been Semi-Retired for a Quarter Decade: Do We Have Enough Money? Am I Bored? Are We Happy?
A New Way of Doing Business (and Saving Tons of Money) in My Retirement
Do We Actually Need Health Insurance?
Fast forward two more years, and we are all still covered on this policy. It is a High Deductible Health Plan, which allows HSA contributions of the pre-tax maximum (I still contribute the maximum amount, minus the $2,500 contribution from my employer). The balance in the HSA has remained stable since 2023, suggesting we still spend several thousand dollars per year on co-pays, deductibles, and non-covered care. My budgeted $1,000 per month was never correct, and it should have been double that amount. With the insurance premiums and the HSA contribution and use, the “off the top” cost per year has been about $23,000. Currently, if we purchased an ACA policy for the family, it seems it would be $3,000 a month.
I started thinking, “Couldn’t one just take the premiums and some post-tax money and self-insure?” Again, none of us are sick, and the only chronic costs among us all are any needed post-menopausal care, birth control, general preventative screenings and care, GERD, and “post melanoma excision.” One has to cover what I call “accidents, shark bites, and cancer.” These types of claims can burn dollars quickly. After his mountain climbing accident in 2024, Dr. Jim Dahle mentioned burning through a quarter million dollars worth just for helicopter evacuation and ICU care. About seven years ago, my son needed evaluations, imaging, hospitalization, knee surgery, and aftercare for which our insurance paid out about $40,000. It is clear that one must have some type of insurance for catastrophic costs. If my melanoma had a recurrence (under 5% chance across a decade), we would be hurting.
This family health insurance need has played a part in extending my part-time work years from an initial plan of age 58-61 . . . to possibly age 65. As I write this, I’ll be 62 years old soon. My wife retired at age 50 back in about 2016, and she has only had volunteer positions since. I was looking into using the ACA site again (in the context of the expiring ACA subsidies), and based on a recent search there, I am sure we do not qualify for any subsidies anyway, based on our MAGI. Our eldest fully launched daughter has her own Bronze ACA policy, but we thought that if her premiums doubled in 2026, she might have to instead pick a catastrophic care policy. The next eldest will fall off our insurance this June at age 26, but she will be getting a job, likely with healthcare benefits, at about that time. We’ll still have children under age 26 until 2031.
Another caveat: if your employer’s plan meets “affordability and minimum value” requirements, you cannot qualify for premium tax subsidies under the ACA. Even if the subsidies had been extended into 2026, we might have only qualified for a meager subsidy if an ACA plan for all of us cost $25,000, based on our MAGI. As I said, a recent ACA site search suggested a PPO plan for a family of five in North Carolina would cost $36,000 per year (with no subsidies) and would have a family deductible of $15,000 and an overall cost cap of $20,000. This is essentially a catastrophic care plan that’s triple the price of a catastrophic plan. For now, the non-subsidized healthcare HDHP plan from my part-time employer covers us and is deductible and HSA-approved. That seems to be the best deal we can get at present, and with the ACA subsidies (which we don’t get anyway) now gone, this is unlikely to change under the current administration.
There is a tax situation that can be advantageous for employees whose employer contributes nothing to their premiums. If your employer offers a plan but pays nothing toward your premiums and you buy the plan with your own money and you have net profit from your 1099 work, then you can deduct the premiums—not on Schedule C but as an above-the-line deduction on your 1040, reducing your AGI. This self-employed health insurance deduction is then offsetting taxable income.
The last time I wrote about this topic for WCI, people mentioned healthcare cooperatives. These programs are generally NOT insurance products, and many don’t cover pre-existing conditions for 1-3 years. They may have no mental health or substance use disorder treatments (not that we currently need those), and many have coverage limits and exclusions as well as caps on plan payments. If one of your children or spouse develops cancer, needs a surgery over $250,000, or requires biologic meds ($50,000-$150,000 per year), a co-op could leave you responsible for the entire bill. If you feel well, have no chronic illness, and have a higher risk tolerance (and can pay for your own care if needed), these might make sense.
More information here:
Healthcare in Retirement Could Cost You $500,000; Here’s How to Plan for It
How Much Money Does a Doctor Need to Retire?
Is There Another Way?
Right now, the US healthcare system is not very friendly to early retirement or those on the FIRE pathway. Outside of quality employer coverage, one can end up in the hodgepodge Wild West of coverage that does not help you sleep well at night.
I suppose we could carve out the youngest two kids and buy the quality coverage that their college provides. This used to be $1,700 per year per child, but it has now gone up to $2,700 per year per child. Another consideration is that our youngest has decided NOT to go to college straight out of high school and has gotten a job with no benefits instead, and our next youngest is going to take a gap year and work before applying to graduate school. They will both still need to be on our policy.
I never thought that putting together decent family health insurance coverage from age 58 to Medicare eligibility (that’s about 2030 for both my wife and me) would be this expensive, complicated, and ever-changing. No matter your solution, the premiums, co-pays, care limits, deductibles, and other parameters can be daunting. I think some folks with the best insurance deals have SSD with Medicare plus Medicaid. But you have to be disabled or have cancer or something similar, so that’s not quite the boon of good fortune it seems.
At the present time, my “one more year” has become several more years, partly due to needing decent family health insurance. It only takes a motor vehicle accident, a cancer diagnosis, or some other high-cost snafu to potentially ruin your financial peace of mind. Here is something to consider: boost your “number” by $500,000; put it in a high-yield savings account or short-term Treasuries; use half the 4% yield to pay for routine care and the other half to offset inflation of 2%; keep the chunk available for a shark bite, accident, or cancer; and go bare until Medicare.
I asked the internet about that idea, and here was the reply:
A single medical event can exceed:
- $1.5 million for a traumatic car accident
- $750,000 for certain cancers
- $2 million+ for premature birth
- $500,000-$800,000 per year for biologic medications
- $250,000-$500,000 for organ failure or a transplant
- $1 million-$3 million for a spinal injury
- $300,000-$1 million for severe burns
In other words: $500,000 is a strong safety net for 90% of catastrophes, but it’s a dangerously thin one for the top 10%. And it’s the top 10% that insurance exists to cover.
I floated one more idea. In this one, I suggested that a pre-Medicare retiree with 4-5 years left to wait until Medicare put $500,000 in a high-dividend ETF like SCHD and assume an 8% total return. I called this the “Self-Insurance + Private (Non-ACA) Catastrophic Plan.” That cost would be about $12,000 a year for the catastrophic policy, and the “routine care” would be $5,000 a year—or about $68,000 over five years. The Bronze ACA plan cost at $36,000 per year would be $180,000 for the same time frame. Meanwhile, the portfolio would grow to $650,000. One would preserve over $100,000 more wealth in this scenario.
Things that make you say “Hmmm.”
Either way, I’m likely to work a couple more years. My two-day-a-week gig from home is not very taxing. But our biggest monthly expense is still . . . taxes.
If you retired early, how did you deal with health insurance? How much did it cost you? What other plans could you have made to reduce those costs?
