Posted 3/15/16 (Tue)
By Sydney Glasoe Caraballo
If you buy your own health insurance, it pays to know your options. Cost sharing alternatives, telemedicine, health savings accounts, tax deductions and penalties can all impact your bottom line.
Steve and Corrine Melberg, who farm and ranch near Powers Lake, were paying more than $1,000 a month for their health insurance premiums in 2014. A pair of healthy empty nesters, the Melbergs had a policy with Assurant Health. After the Affordable Care Act was implemented, Assurant continued to raise its premiums as the company suffered financial losses.
In 2015, Assurant shut down its individual health insurance business and stopped providing coverage for individual payers after losing more than $148 million on individual policies in 15 months.
Lucas Schumacher of Farmers Union Insurance says he has clients who needed to purchase new policies with Blue Cross Blue Shield or Sanford Health after Assurant left the market here.
“The great majority of customers are still seeking the best coverage they can find,” says Schumacher.
The Melbergs didn’t like the cost of premium coverage provided by BCBS or Sanford Health.
They heard from a friend about a cost-sharing alternative called Christian Healthcare Ministries (CHM), which is a nonprofit ministry where members share each other’s medical bills.
CHM is “an affordable, faith-based solution for Christians to the problems of rising healthcare costs and expensive health insurance policies,” according to the company’s website, chminsitries.org.
“It’s a Biblical solution to healthcare costs,” says Corrine, who signed up with CHM in 2014. “It’s unbelievable.”
The Melbergs, who pay $300 a month to have gold level coverage, quickly had to test their faith in the CHM system when Corrine found out she needed shoulder surgery. Her bill was $27,000 for the surgery and $1,500 for physical therapy.
“CHM went in, negotiated the cost and got it down for us. Then they wrote us a check to pay the bills,” says Corrine. “We can’t say enough good about them.”
Steve says they simply sent copies of their medical bills to the company in order to be reimbursed. Their gold level cost-sharing plan determined that they were responsible for paying only the first $500 of the surgery.
Gold members have a $500 responsibility per medical incident, whereas silver members have a $1,000 responsibility and bronze members have a $5,000 responsibility. A single individual would pay $45 a month for bronze coverage, $85 a month for silver and $150 a month for gold coverage. A family of four would pay $135, $255 or $450 each month for the varying levels of coverage.
CHM, which is ACA compliant, is also advantageous because individuals can sign up throughout the year (there is no restricted open enrollment period). CHM has members in all 50 states and also provides a catastrophic illness cost sharing program called Brother’s Keeper, which assists members who have medical bills exceeding $125,000. Members pay $40 annually for the extra safeguard and $25 to $75 each quarter, depending on whether the membership is for a single person, married couple or family.
The nonprofit requests on its website that individuals participating in the cost-sharing alternative be Christians living by biblical principles and abstain from using tobacco and illegal drugs.
“It was scary to let our traditional health insurance go,” says Steve. “But we’re happy with our choice.”
Other Christian cost-sharing alternatives available include Liberty HealthShare and Samaritan Ministries International.
Harry Braddock, who sells traditional individual and group policies in the region, recommends telemedicine as a cost-saving supplement. He utilizes HealthiestYou for his family. For $15 a month, members and their family have 24-7 access via phone or video to board-certified doctors who provide consultation, diagnosis, treatment and call-in prescriptions to local pharmacies.
“They can tell you what is wrong about 80 percent of the time over the phone,” says Braddock, who used the service five times in one month when he, his wife and children were sick. “Those calls saved us five co-pays and doctor visits.”
Braddock also recommends opening a health savings account (HSA). An HSA is a tax-exempt medical savings account that an individual can open and contribute to each year. Funds placed in the account can pay medical expenses, are tax exempt and roll over each year to pay for future medical costs. After an individual reaches retirement age, the accumulated funds can also be withdrawn for non-medical expenses and are treated similarly to IRA tax advantages.
Individuals who qualify to set up an HSA must have a high deductible health plan (employee-sponsored plans also qualify). The IRS qualifies plans for which there is a minimum annual deductible of $1,300 for an individual and $2,600 for a family. The individual must also have a maximum annual deductible and out-of-pocket expenses set at least $6,550 and at least $13,100 for a family.
Darcy Hanson of Hanson Insurance Agency in Wildrose says qualifying individuals can still contribute for 2015 as long as they deposit that money into an HSA before April 15. Maximum contributions are up to $3,350 for an individual and $6,650 for a family in 2015. In 2016 the family maximum increases to $6,650. Hanson adds that for individuals and families with adults aged 55 and older, the eligible contribution amount increases.
“It takes a lot of financial management and discipline to contribute to an HSA each year,” says Kurt Kocher of Kocher Financial in Crosby. “But more people should be using HSAs.”
Kocher adds that the premiums for individual policies can qualify as a deduction on tax returns, and if an individual or family spends more than 10 percent of their income on medical costs, those costs also may qualify as a deduction.
Hanson says if an individual is 65 or older, they qualify to deduct costs when they spend 7.5 percent or higher of their adjusted gross income. Hanson and Kocher also help clients take advantage of AgriPlanNOW and BizplanNOW – medical reimbursement plans available to farmers, limited liability companies, partnerships, corporations and sole proprietors. The plans, which are ideal for husband and wife business teams, increase tax deductions and allow businesses to deduct 100 percent of their family health insurance premiums, to include medical, dental, optical, Medicare Part B and D and long term care.
Hanson and Kocher also have clients who have chosen to pay the tax penalty instead of purchasing health insurance coverage. While Kocher’s clients are in the young, single demographic, Hanson says he has middle-aged clients choosing to forgo health insurance coverage. This year the ACA implements the full penalty for that choice.
An individual in 2016 will pay a minimum of $695 or 2.5 percent of his or her income above the filing threshold – whichever is higher. A family will pay $695 per adult and $347.50 per child, capping at $2,085 since a third child or more is exempt, or 2.5 percent of the family income above the filing threshold – whichever is higher. In 2015 it is calculated at two percent of income above the filing threshold or $325 per adult and $162.50 per child with a family maximum of $975.
Simple math: a family of four with an adjusted gross income of $100,000 without health insurance will pay $1,594 in penalties on their 2015 return and $2,085 on their 2016 return.
While the income penalty percentage won’t change after 2016, penalty amounts per adult and child will continue to increase annually based on cost of living but cannot exceed the national average premium for bronze coverage, according to the IRS.
Those exempt from the tax penalty include uninsured individuals below the income threshold to file a tax return, members of Indian tribes, individuals with religious beliefs against health insurance, incarcerated citizens and undocumented migrants.