When we tell people that we took six months off work for our honeymoon in Hawaii, or that we spent seven months on the road visiting every National Park in the US, or that we later retired early at age 29, we often receive an alarmed response: “WHAT ABOUT HEALTH INSURANCE?!”
I’m always taken aback — and a little disheartened — by how many people outright dismiss the idea of an extended travel sabbatical or an early retirement because they think the only way to get healthcare is to work 40 hours a week for 40 years.
The US healthcare system isn’t exactly easy to navigate (actually, it’s pretty broken). But even in its messed up state, there are ways to make it work for you. Don’t let your fear of losing employer-sponsored health insurance coverage stop you from traveling more, retiring early, or becoming self-employed.
Getting health insurance without a job isn’t as complicated as it may seem.
Buying Marketplace Health Insurance Through HealthCare.gov
When you’re young, you probably don’t think much about health insurance. Actually, under the Affordable Care Act (aka “Obamacare”), you can stay on your parents’ health insurance plan until you’re 26 years old. By then, you’re likely to have a full-time job that provides your coverage, and then most people ride that out until they retire at age 65 and qualify for Medicare.
This totally normal sequence of events trains you to believe that health insurance is something bestowed upon you by someone else — your parents, your employer, or the government. But in reality, health insurance is just a product that you can buy.
Think about it: When your work provides insurance benefits, they’re simply buying it on your behalf (whether you chip in some of your paycheck monthly or they cover the premiums for you). If you leave a company to retire, take a sabbatical, or become self-employed, the responsibility to buy health insurance falls to you.
The process to buy health insurance isn’t that difficult. The easiest way is to go to the official US health insurance marketplace, HealthCare.gov. It’s a government-run website that connects citizens to private health insurance providers.
You can get a very quick quote by just entering your zip code. But if you spend ten minutes to register for an account and provide some extra details, you might be pleasantly surprised.
Depending on your income, you may qualify for government assistance paying for your coverage in the form of a “premium tax credit.” Basically, it’s a (sometimes gigantic) discount on your insurance, subsidized by the federal government.
Weirdly, a lot of rich people qualify for this government assistance, since it’s based on income, not assets. If you’re a retired millionaire living off of dividend checks, or a doctor who normally makes $200,000 per year but has decided to take a calendar year off to sail around the world, you might be eligible for subsidized health insurance, too. It’s honestly a pretty dumb system, but it’s what we’ve got, so you might as well use it!
Unfortunately, you can’t buy health insurance through the marketplace any time you want. Once you’ve identified a plan that suits your needs, you can either enroll during an “open enrollment period” (OEP), or any time you experience a “qualifying event” (which are, honestly, pretty easy to trigger).
Most states start open enrollment on November 1st each year for coverage beginning in the following calendar year (January 1st), and enrollment typically continues through January 15th of the coverage year (retroactively covering you from January 1st through the rest of that year). For example, the OEP for 2022 ended on January 15th, 2022, and the OEP for 2023 will be from November 1, 2022 – January 15, 2023.
Note that a few states have their own Affordable Care Act (ACA) exchanges and may have different open enrollment deadlines for health insurance, so it’s important to check if you live in one of those before you begin.
If you need insurance outside the OEP, don’t worry. There are many things that can qualify you for a special enrollment period (SEP). Qualifying events can be anything from a loss of coverage (like quitting a job that provides you health insurance), to getting married, to moving. When you prompt a special enrollment period, you’ll have 60 days to enroll in a plan on the healthcare marketplace. If you miss your SEP window, you’ll have to wait until another open enrollment (unless you have another qualifying event).
Once you’re in the system, you just renew your coverage once per year during open enrollment. Easy. And you can drop out any time you want (even mid-year).
Real-Life Example: Our High-Deductible Health Plan + HSA
I entered into early retirement when I quit my last job in 2019. My employer had been providing health insurance for both Steven and myself, so when I quit, we went to the health insurance marketplace website to buy a plan.
In 2020 and 2021, we paid about $500/month in health insurance premiums, combined. Since we still had significant income from freelance work at that time, we didn’t qualify for a subsidy to make the plan cheaper.
In 2021, the requirements for receiving a subsidy changed due to the passage of the American Rescue Plan (ARP), and our taxable income dropped, too.
With the rule change and our decreased income as early retirees, we now (in 2022) qualify for a premium tax credit. While our insurance premiums actually increased to ~$600/month this year, the tax credit pays for about 2/3 of that, so our out-of-pocket costs have decreased dramatically. We now pay a little over $200/month, combined.
So what kind of health insurance plan do we have for $200/month? A really crappy one, by most standards. But that’s exactly what we need.
We picked a high-deductible health plan (HDHP), which means we pay lower monthly premiums in exchange for a higher deductible (~$7,000 per person, per year). That’s perfect for us, because we’re young and healthy, with enough money in the bank to pay that full deductible dozens of times over in the worst-case scenario.
We invest the money we save on premiums instead of forking it over to an insurance company, pairing our HDHP with a Health Savings Account (HSA) for additional tax savings. Each year, we max out our HSA, and put that money to work in index funds.
Our HSA contributions decrease our taxable income for the year and grow tax-free. And, unlike a Flexible Spending Account (FSA), the unspent money we contribute to our HSA rolls over year after year, turning it into a powerful tax shelter.
How? Well, you can access the money in your HSA two ways. The first (and best) is to use it to pay for qualified medical expenses (including hospital visits and even little stuff, like sunscreen purchases), income tax-free.
For maximum benefit, you can just save the receipts for those medical expenses without taking money out of your HSA, and reimburse yourself for them at any time in the future, income tax-free. This hack allows the money to grow under the HSA tax shelter even longer. That’s what we do.
The other way to access your HSA money is to wait until age 65 to tap the account for any non-medical purpose. If you choose this method, you will pay income tax on the distributions.
Only certain HDHPs qualify you for an HSA, so make sure you check that before enrolling in your health insurance plan or opening an HSA. By the way, the best brokerage firm to open an HSA with is currently Fidelity. As of 2022, a lot of the other HSA providers actually really suck.
Health Insurance Alternatives to Obamacare
Buying health insurance through the healthcare exchange website is probably the easiest way to ensure coverage in the US, but there are a few alternatives to getting a healthcare plan from the marketplace.
Self-insurance, which is basically exactly what it sounds like, means you pay out of pocket for every healthcare expense, with no help from a third-party insurance provider. If you plan to self-insure, you need to have a large amount of money set aside, because you’ll be on the hook for every charge from an ordinary wellness visit to a cancer diagnosis and its subsequent treatment.
This approach might make sense for someone with a high risk tolerance and a net worth of several million dollars (or more), but we personally prefer to mix in a high-deductible insurance plan so that there’s some stopgap in place for catastrophic (i.e. very expensive) care.
If you pay your own way via self-insurance, you may also be able to benefit from a direct primary care (DPC) healthcare provider. Basically, the DPC model is a healthcare subscription for out-of-pocket payers.
With DPC, you pay a flat rate for access to participating physicians, and it tends to be more affordable because all the billing overhead from third-party insurance folks is removed from the equation. Unfortunately, this model hasn’t caught on everywhere yet.
Another alternative to health insurance that’s become more popular recently is health share programs. These programs consist of groups of people who have banded together to pool resources and cover the healthcare costs of their members collectively.
A lot of health share programs are tied to a religious group as a form of ministry, and some may have restrictions on the types of procedures and care they’ll cover. They’re not as heavily regulated as traditional health insurance, so make sure you really read the fine print if you choose one of these.
Aside from that, direct government health insurance is provided to low-income adults in some states via expanded Medicaid. If you qualify, it’s really cheap, or even free. While Medicaid programs have existed for a while, mostly geared toward providing coverage for children and extremely impoverished adults, states with expanded Medicaid have broader definitions of low-income to cover more people.
Of course, one of the most common ways to make health insurance more affordable is just to get added as a dependent to someone else’s insurance plan. If you’re under 26, you can still get coverage through a parent’s plan. And if your spouse has insurance through their work, you may find that it’s cheaper to get coverage through that plan than to go through the marketplace yourself.
Finally, if you’re worried about healthcare coverage because you want to take time away from work to travel, you could opt for medical travel insurance. Not to be confused with the type of travel insurance that reimburses you for missed flights or canceled excursions, medical travel insurance helps fill in gaps in coverage abroad when you no longer have health insurance in the States, or when your plan only covers trips to US facilities.
Don’t Let Health Insurance Hold You Back
Lots of people have heard horror stories about surprise medical bills and think that healthcare costs could add up to a staggering number that bankrupts them. Because of that, they worry that there’s no amount of money they could ever save to cover their future medical needs.
But that’s just not how it works.
Even with our crappy, high-deductible health plan, our maximum out-of-pocket cost is about $14,000/year for both of us combined. Even if we both came down with a lifelong disease, our absolute maximum healthcare costs would be our premiums (at about $600/month) + our $14,000/yr combined deductible every year forever (indexed upward for inflation because prices always go up).
While that’s a ton of money, it’s not unlimited, or impossible to save for, as many people believe. And you’re very unlikely to wind up in that situation anyway. So, don’t let fear keep you at an office desk your entire life.
The peace of mind that our healthcare plan provides — that all our hard work toward financial independence can’t get instantly erased by a bad health outcome — is worth the cost. But trying to avoid all risk by staying at full-time jobs until we qualify for Medicare at age 65 would be silly.
There are a lot of things that make healthcare in the US complicated, but getting health insurance without a job is doable. Plan, save, and get yourself some coverage — without working your entire life away.