Gap Year Planning: Many Mediocre Health Insurance Options

If you haven’t heard, Becky and I are planning to quit our jobs and travel around the country (and maybe beyond) for a year or so starting early next year!  We’re currently calling this adventure a “Gap Year” and planning is well under way.  In my last post, I covered our plans for the timing of the trip, how we will handle our house, what will happen to our stuff, and how we plan to fund the trip without touching our existing investments.  It seems like a lot, but I feel like there’s so much more!

As we get further into planning our Gap Year, a big elephant in the room keeps popping up: What are we going to do for health insurance?

I’ve been researching several different options that we can utilize during our trip (as we will no longer be covered by our employers).  Unfortunately, there’s no clear cut winner and all of the options have their respective downsides.  Given the current state of healthcare in the US, this probably doesn’t come as a shocker.

Before I start breaking down our various health care options below, be sure to check both Becky and I out on a recent episode of the Choose FI podcast!  It’s Becky’s podcasting debut and we cover a lot of our FI story so far, up to and including our upcoming Gap Year plans: Episode 40 which can be found HERE.

Now let’s get into the not so fun stuff: Health care options for young, unemployed, full-time travelers!

Our High Level Options

Based on many hours of research, I’ve determined these are the main 4 options we have for getting health insurance and a bonus option that may help supplement the others:

  1. WA Apple Health (Medicaid)
  2. WA Health Plan Marketplace (ACA)
  3. Liberty Health Sharing Ministry (Not Insurance)
  4. Out of State Marketplace Plan (ACA)

Bonus Addition:

  • “Telemedicine” Program

One of the most important factors of qualifying for the first two options (WA Apple Health and WA Marketplace) and determining how much they cost is income, so I think it’s important to touch on that factor first.

The first important income number is 138% of the federal poverty level because if income is below this level you must apply for the Apple Health Medicaid plan.  For 2017, this number comes out to $22,411.20 for a family of 2.

The next important number is 400% of the federal poverty level because staying underneath that level of income allows you to qualify for subsidies when applying for a regular health insurance plan on the marketplace.  For 2017, this number is $64,960 for a family of 2.  Within the range of ~$22k-65k, the exact subsidy depends on where in the spectrum you fall.

The tricky part is that we don’t know exactly what our income will be for next year!  In order to even start the process of applying for one of the WA health insurance options, we need to at least have an estimate of our income.  If we manage to get this number wrong, there could be significant tax penalties when the year is up!

There will be small amount of income from various sources, but we don’t expect them to get near the federal poverty level on their own.  This income will come from:

  • The final paycheck from a current job
  • Rental income from our house while we’re gone
  • Dividends from our taxable brokerage account
  • This blog
  • Miscellaneous sources such as bank account bonuses, odd jobs, or anything else

One power we do have is to manipulate our income upwards (if it would be advantageous to do so) using a couple tricks that should be very familiar to the FIRE crowd.

The Power of Income Manipulation

If we determine it to be within our best interest, there are a couple ways to make our income look much higher on paper than it is in reality.  Both of these methods will be familiar if you know anything about Roth Conversion Ladders or have read any of Go Curry Cracker’s articles on Never Paying Taxes Again.

  • Traditional to Roth conversions show up as regular income in regards to taxes
  • Harvesting Capital Gains also shows up as income, but is taxed at a much more favorable rate

Both of those methods combined (in addition to the various income sources mentioned above) can allow us to control the income amount that shows up on our taxes (specifically in the AGI row) while also minimizing the taxes we will have to pay on that money.

Taking advantage of these tax-saving benefits during our low income year can be very powerful, but it will be important to balance that against keeping our health insurance costs low at the same time.  Let’s take a closer look at the 4 options I laid out above to see what kind of income level would be optimal.

Option #1: WA Apple Health (Medicaid)

This is the option we will have to take if we choose to keep our income below ~$23k next year.  The information available online about this health plan isn’t super clear, but involves choosing one of 5 “health plans” that are offered in the state of Washington, each with their own set of information and policies.  In general, it appears that most all medical care, prescription drugs, and normal procedures are all covered through each of these plans, but you are required (for the most part) to work through a specific primary care provider of your choosing.

Pros:

  • Very cheap (if it costs anything, I’m unclear on that part)
  • Covers emergencies anywhere

Cons:

  • Requires us maintaining a low income (no FIRE tax-saving tricks)
  • Must work through a primary care provider for any type of care
  • Only covers emergency services out of network (no providers out of state)

This is basically our default option if we don’t get creative with our income, location, or health care for next year.  The biggest downside is that it requires you to work with a primary care provider (located in WA) and doesn’t offer any services (aside from emergencies) out of state.  This is a big deal because we don’t plan on spending any time in the state of Washington during our trip!  In fact, we’ll be a long ways away most of the time and couldn’t come back easily for simple care if needed.  It does cover emergencies anywhere which is much better than having no insurance for peace of mind.

Option #2: WA Health Plan Marketplace (ACA)

If we choose to manipulate our income above ~$23k next year, we will be eligible to choose a plan off of the health plan marketplace in Washington.  Depending on our exact level of income, we could qualify for subsidies that will potentially reduce the premiums, deductibles, and maximum out of pocket costs for the various plans.  One thing that is nice is that WA lets you “shop” the various plans by just inputting your income level and age(s), so there is no lengthy application to get an idea of what is available and what it costs.

Link to Shop the WA Health Plan Marketplace

Here are the details for the cheapest “Silver Plan” and the final costs for an income level of $25k (that would cover both of us):

  • Premium: $78.30/month = $939.60/year
  • Deductible: $2,000/individual or $4,000/family
  • Out of Pocket Max: $2,000/individual or $4,000/family
  • Minimum Cost (Premiums + Preventative Care Only) = $939.60
  • Max Cost of yearly plan (Premiums + OOP Max) = $4,939.60

Pros:

  • Potentially easier to use than the Apple Health option because you can skip the Primary Care Provider
  • Allows us to take advantage of a small amount of tax-saving tricks
  • Covers emergencies anywhere

Cons:

  • More expensive than Apple Health
  • Only provides emergency services out of network (no providers out of state)

Just like Apple Health, the biggest problem is that we aren’t able to use this health insurance out of state (except for emergencies)!  That makes the plan mostly useless for us as we don’t plan on spending any time in the state of Washington during our travels.  Again, it does cover emergencies out of state which is important for peace of mind.

Option #3: Liberty HealthShare (Not “Insurance” Insurance)

One health coverage option I’ve heard about previously in early retirement circles is “health sharing ministries” that qualify under the ACA to avoid tax penalties, even though they adamantly state they are not insurance.  I thought I’d look a little further, specifically at one of the biggest ones (Liberty HealthShare).  It’s different to say the least, but could potentially be a good option for some.  That said, it does come with several downsides.

As I mentioned, this definitely isn’t “insurance”, but it does act in a similar way.  Instead of premiums, you make a monthly contribution to a “Sharebox”.  Instead of handing your doctor or other medical provider an insurance card, you hand them your Liberty HealthShare card.  The doctor sends bills to Liberty HealthShare, they calculate what you owe, and then they pull money from other member’s “Shareboxes” to pay for the rest of the cost.  Also, you don’t have a deductible, but there is an “Annual Unshared Amount” for individuals, couples, and families.

Looks like insurance, quacks like insurance, but is definitely not insurance…

In order to join this health sharing program, you do have to agree to their “Shared Beliefs” which have heavy Christian influence without ever saying you have to be Christian:

  • We believe that our personal rights and liberties originate from God and are bestowed on us by God, and are not concessions granted to us by governments or men.
  • We believe every individual has a fundamental religious right to worship the God of the Bible in his or her own way.
  • We believe it is our biblical and ethical obligation to assist our fellow man when they are in need according to our available resources and opportunity.
  • We believe it is our spiritual duty to God and our ethical duty to others to maintain a healthy lifestyle and avoid foods, behaviors or habits that produce sickness or disease.
  • We believe it is our fundamental right of conscience to direct our own healthcare, in consultation with physicians, family or other valued advisors, free from government dictates, restraints and oversight.

A very important point is that because they aren’t technically insurance, there is No Guarantee they actually pay out for your medical bills.  Even if you follow all of the rules to a T, they are within their legal right to deny your claims and put you in charge of paying your entire medical bill.  While I have no reason to believe they would deny someone for no reason, they have plenty of outs if they ever wanted to.

For starters, pre-existing conditions aren’t covered for the first year and only partially covered for the 2 years after that.  This was a big problem with insurance plans before the ACA because a lot of things can be considered “pre-existing” even if your current illness is only tangentially related.

Next, that long list of “Shared Beliefs” you agreed to has a bunch of non-specific language that could easily be used to exclude just about anyone I can think of.  If you ever drink “in excess”, use drugs, eat unhealthy food(!), fail to exercise regularly, fail to worship regularly with others, or numerous other things described then they have a legitimate reason to deny any of your health claims and leave you completely out to dry.

As I said, this may work for some and possibly works great for many, but I’m very hesitant rely on this hand-wavy “insurance” for any potential very-expensive medical emergencies that may occur in our future.  The standard “Liberty Complete” has a premium suggested monthly share amount for a couple under 30 of $249 plus an annual membership due of $75 ($3,063/year).  The deductible annual unshared amount for a couple is $1,000.

Pros:

  • Works anywhere for pretty much all procedures
  • Low deductible Annual Unshared Amount

Cons:

  • No guarantee they actually pay out
  • Higher premium monthly share amount than the subsidized regular insurance plan above
  • Maximum payout per incident

Definitely do your research before choosing this as your only health insurance, but it is an option of sorts.  I don’t think I would ever feel comfortable using it myself.  Their FAQ is a good read for more information, Question 10 in particular has a gem: “… Such a sharing and caring association does not lend itself well to the mentality of legally enforceable rights.”

Option #4: Out of State Marketplace Plan (ACA)

This option is basically option 2 with a twist: We would legally establish a domicile elsewhere before taking off on our trip and use that location’s health insurance marketplace.  The rules vary by state, but this is actually a pretty common practice in the full-time traveler communities (particularly RV folk) I’ve discovered.  Places like South Dakota and Texas in particular are popular places to establish a “domicile” before hitting the road because of the various tax and vehicle registration costs and benefits.  The process usually goes something like this:

  • Get a mailing address in your desired state (can sometimes simply be a mail-forwarding service)
  • Establish residence of some kind in that state (this varies heavily by state. for South Dakota a one night hotel receipt is sufficient while others can be much more strict)
  • Get a driver’s license in the state (sometimes a special “full-time traveler” license)
  • Register your vehicle(s) in the state
  • Switch all of your insurance and other financial items to your new state/address

Because we don’t plan to be gone for more than a year or two, this would be a decent amount of hassle that we would have to redo upon return to wherever we do want to settle down into new jobs.  The one major benefit I’ve found that may help us is that some states have proper nationwide health insurance on their local marketplaces and one such place is just to the south of us, Oregon.

In fact, if we were able to set up residence there, it would be even cheaper than option #2 above AND will cover regular medical procedures anywhere.  Unfortunately, establishing a domicile in Oregon does not appear to be the easiest of tasks.  This part is still under investigation (well I suppose it all is at this point).

Pros:

  • Nationwide health insurance network
  • Fairly low cost, even if we have an emergency and reach the OOP Max

Cons:

  • Establishing our domicile in a place with a nationwide ACA health plan does not seem simple
  • Changing our domicile after we return will come with extra hassle and costs

I still haven’t worked out all the details if we were to pursue this option, but it definitely intrigues me.

Bonus Option: Telemedicine Program

Another item I stumbled upon during my research was a Telemedicine Program that allows you to have 24/7 access to doctors via your phone and/or computer.  Through a voice or video interaction they can potentially provide care, diagnose, and even prescribe medication to anywhere in the country.

Sample things they could resolve without needing an in person visit: “Cold or Flu, Sinus Infections, Allergies, Respiratory Infections, Bronchitis, Pink Eye, Urinary Tract Infections, Posion Ivy, and more.”

On it’s own, this isn’t insurance at all which is why I listed it as a bonus option, but it does solve at least part of the problem with options 1 and 2: Needing very basic medical care outside of Washington state.  Plus it only costs $149/year for a couple and that includes unlimited consultations.

Pros:

  • Cheap
  • Works Anywhere

Cons:

  • Won’t help for 100% of medical needs

As far as I can remember, all of the times Becky and I have visited a doctor in the past several years shows up in that list above.  One of the things that worried me about going with a WA plan and traveling out of state was being able to get a simple diagnosis and prescription for problems that pop up occasionally.  In today’s health environment, I imagine we could end up paying hundreds of dollars (or more!) just for a doctor to diagnose us with a bad cold.

Not so Final Verdict

Given the options above, the one I’m currently leaning towards the most is a combination of either Option 1 or 2 (WA Apple Health or WA Marketplace Plan) in addition to a subscription to the Telemedicine program.  The Telemedicine will cover us for any unexpected minor reasons to visit a doctor anywhere while the WA plan still covers us for any larger emergencies that happen out of state.

If something large and unexpected happens, we will first be able to take care of it under our insurance, out of state, as an emergency.  Then we can make the decision of whether or not to travel back to Washington (ending the trip or at least putting it on hold) if we need continue to receive non-emergency care.

Between the Medicaid and ACA options within Washington, I’m not sure which would be better to go with.  I’m pretty sure we won’t eclipse the $23k mark in income accidentally, but there’s always a chance (especially if a bunch of you sign up for Personal Capital through my link *wink* *wink*).  Deliberately going above that threshold does allow us to move some money around to eliminate future taxes, but I’m not sure if the savings from that will outweigh the cost difference between the plans.

Still debating between Option 1 and 2, but I really like the bonus option at only $149/year.  If past health performance is any indication of the future, we shouldn’t need anything beyond that.  *knocks on wood!*  Regardless, we do remain covered in the event of an emergency medical situation which is very important.

Overall, the ministry health sharing seems sketchy to me and I don’t think I’d even feel comfortable if that was the only insurance covering us.  Pre-existing conditions, maximum coverage amounts, and a list of vague “rules” to follow seem like a recipe for disaster in the event something serious happened to us during our trip.

What do you think?  Am I missing any other viable options to cover our health insurance needs for our Gap Year?  What would you choose if you were in our place?

 


27 thoughts on “Gap Year Planning: Many Mediocre Health Insurance Options

    1. I haven’t seen this one before, but at quick glance it doesn’t qualify under the ACA to avoid paying the tax penalty every year. It would require more research, but it specifically calls itself “short-term” insurance which appears to work best for time-frames less than 3 months.

      1. Damn, I didn’t see that buried at the bottom of the page. I just assumed you could do it for as many months as you needed/wanted. But it’s crazy how cheap these plans are compared to the bloated ACA plans. There’s no way I’m paying $500/month for a plan that doesn’t cover a dime until I reach my $5,000 deductible, and that’s on top of the $6,000 a year in monthly premiums. I guess it does cover a yearly physical that would cost me less than $200 if I just walked into a doctor’s office. It’s the price you pay for socialized healthcare, because somebody has to pay for it. Being self employed in the US has really sucked in the past few years. Luckily once we make it overseas there are tons of affordable health plans that just reimburse you for incurred medical costs. Plus we’ll be able to exclude up to $101k in annual income thanks to the overseas tax rules. Just spend less than 30 days in the US and you’re good to go, and you’re also not subject to the ACA penalty/tax either. This country has burnt us out and we’re ready for a change.

        1. Totally agree that getting out of the US for some world travel is actually one of the best options! Weird how that works, but I know a couple who take advantage of it by spending very little time in the US each year.

          If you want to stay in the US, the only way to keep costs reasonable is to not make any money. So, save aggressively while you’re covered by an employer’s plan then switch to making almost nothing until age 65 I suppose.

          I imagine health care will continue to change in the next 5-10 years, hopefully for the better at some point.

          1. This works well for my wife since she’s a school teacher and has great benefits, but unfortunately they don’t extend to me and I have to pay out the nose come tax time. I just discovered the Solo 401k a few months ago, so at least that will reduce my tax burden substantially. If only I’d found out about it 10 years ago when I started out on my own.

            Just don’t make any money. It’s simple 😉

            I’d like to think that things will change for the better, but our government is such a disaster and nobody can agree on anything anymore. I assume we’ll return to the states once our investments can replace our earnings and we’re basically making nothing as far as Uncle Sam is concerned. That way we’d qualify for all of the social programs that we’re paying for currently. Now all we need to do is figure out how to make a ton while living overseas. The million dollar question, literally.

            I’ll definitely be following this series, as I’d love to find some kind of insurance that I could actually afford that isn’t just flushing money down the drain.

  1. I have to admit that it bugged me when my brother who early retired at the same time I did with about the same resources, several million invested, was able to manipulate his “income” to the point that he got medical insurance subsidies. I wanted to keep my hand in the work world so I set up a few side gigs that let me earn six figures for two or less days of work per week. So I have to pay $13,000 per year for a catastrophic only medical plan while my equally wealthy brother gets most of his paid for. It doesn’t really seem fair. Honestly I’m not complaining that I’m paying, that part is fine, it is small money to me, but when people can loophole out of a tax by choosing to be less productive? Just seems broken, but of course like you said the system is pretty busted up right now. I’m not judging you guys, or my brother, in fact he failed to achieve his plan so he is paying big bucks for coverage now too, yeah maybe that made me smile a little. Isn’t it kind of non-intuitive that people who have invested enough that they never have to work again get free money from the government that was intended for poor destitute people? Hey, I use every legal means to minimize taxes, that’s essentially the same thing. But still, hope this doesn’t sound like a slam, I really admire the FIRE community, I only retired slightly early so I feel like a slacker compared to most of you guys.

    1. This country is full of people who don’t have jobs, but they have an army of kids. They get everything for free without lifting a finger. It’s the American way. Also, if you’re getting all of your income via qualified dividends or capital gains and you’re in the 15% bracket you will pay $0 in taxes on that income.

    2. Thanks for commenting Steveark,

      It definitely appears to be controversial for “rich” unemployed people to take advantage of government subsidies, but they specifically chose not to means-test the benefit. I can’t say why exactly they did that, but I also think it’s misleading to say the program was set up only for “poor destitute people”. That seems like more of a personal belief for how you think government programs should work.

      As you mentioned, I look at it the same way I look at other tax optimization such as maxing out HSAs just to invest them, maxing out pre-tax accounts now so we can avoid tax on them completely in early retirement, backdoor Roth contributions, and several other tax “loopholes” that exist today.

      You could even call signing up for credit cards just for the signup bonus morally questionable if you chose to! We try to focus on playing within the rules for everything we do, however those rules happen to be set up. If the rules change and they decide to means-test health benefits, then we will adjust and plan accordingly. For now, I don’t feel bad about utilizing the tax subsidies for our unique situation.

      Also, for your own situation, aren’t there more health care options for someone like you that is self-employed? I haven’t researched it, but I heard there were even more tax incentives if you get the health insurance through your own business.

    1. Yeah, some people swear by it but I can’t get on board. I feel like it’s something that works great right up until it doesn’t and you could be left with a million dollar bill.

  2. I’m curious what states would be best to move to for this. The state I currently live in has high state income taxes. I am in a similar situation as you in regards to planning a gap year.

    1. The 2 most popular in the RV communities are South Dakota and Texas because of no state income tax, cheap vehicle registration, and it’s easy to establish your domicile there. Based on one source I found, they do not have any ACA health plans with nationwide coverage though.

      I found this article useful, there are many different aspects to consider:
      http://www.technomadia.com/2012/07/chapter-9-nomadic-logistics-domicile-mail-taxes-banking-and-voting/

      We’re lucky to already live in one with no state income tax, although our planned low income makes that a minor point for now.

  3. Great Article and comments.
    I have a slightly unrelated question that probably you can answer. I need to create a domicile in Washington state for less than a year. What all will I need to do. I will really appreciate your answer.

    1. I’m not familiar with the rules of establishing a domicile in Washington, we did it by physically moving to the state. If you don’t plan on actually living in WA at all, then I’m not sure what the rules are.

  4. Nice overview! I’ve been through this same process twice, though it was for 4-5 month thru hikes rather than a full year off. I considered the first 3 options you listed, plus the option of travel insurance and taking the ACA penalty. I quickly decided that I was not comfortable with a healthshare and because I’d have a decent income from working part of the year the ACA penalty would be cost prohibitive. If not for that, short term/travel insurance for the duration of the hike would actually have been my best bet.

    I went with a bronze level ACA marketplace plan both times. I had a PPO with a nationwide network in 2015. This year,there were no PPOs, no plans that would cover non-emergency out of state care and the premium was almost double for less coverage. So it goes. This was also the year that I had actual medical expenses as I broke my arm during the hike. The initial emergency room visit was processed through my insurance but paid out of pocket since I hadn’t met the deductible. Follow ups for getting a cast and recheck radiographs were out of pocket since I was out of state. The providers offered substantial discounts for paying at the time of service. Given the limited options I had, I still think I chose the best one. I’d been maxing an HSA for several years beforehand, and knowing I had enough money to cover any medical expenses separate from my saved travel funds gave me some peace of mind.

    1. Thanks for commenting Lauren!

      Sounds like you’ve been a very similar situation to us and ended up with a similar conclusion. We will also probably end up with a low end plan to cover emergencies and end up paying for smaller stuff out of pocket to returning to Washington if something extreme happens.

      Broken bones are definitely an item I thought about that was non-emergency (sometimes) but couldn’t be helped via the Telemedicine thing. So far, Becky and I are bone-break free, but we’ll be knocking on wood. It certainly doesn’t help that we plan to do some obstacle course racing during our trip!

  5. I have a bit of experience with these options, although it isn’t particularly relevant to your situation! We lived in Seattle for most of 2016, and had near-0 income for the year (bootstrapping a startup). I was on Apple Health administered by Molina, and my wife as a non-citizen got on one of the Silver-level exchange plans. I found that a lot of doctors I called didn’t accept our insurance, but the Swedish network did, and since they’ve got a center for just about anything that was never a real limitation. We had our first baby and a few other minor medical needs over the year and with no trouble and no bills. There was definitely a stigma from our friends when I told them I was on Medicaid, but in the FI community we’re used to that. 🙂

    Obviously this was all in-state and local. Can’t speak to the unique challenges you’ll have while traveling full-time — good luck figuring it all out!

    1. Thanks Corbt!

      That’s great that you were able to make Apple Health work, Swedish is actually where Becky worked for the past few years. In Labor and Delivery no less, so there’s a chance you crossed paths if that first baby was in the past few years and you happened to deliver at the First Hill campus. Small world.

      I imagine we might get some stigma as well, but I’ll be comfortable explaining why we’re on it. Plus, it’s not like we really have another option if we’re not making money. They won’t even let you shop on the exchange if you put an income in less that ~$23k if you wanted to.

  6. Here’s a healthshare alternative. https://www.libertyhealthshare.org.
    I don’t know about the one you mentioned but to call healthsharing sketchy in relation to the predatory health insurance companies seems ridiculous to me. Health Sharing is how the insurance system should work if it weren’t trying to snatch every dime from its customers.

    1. This is literally the exact same one I mentioned as option #3 above. Please see above for why I feel health sharing without any guarantees (such as Liberty) is risky and potentially bankrupting if something goes wrong. Despite its problems, the current ACA marketplace does at least offer guaranteed protection.

      1. Sorry. The ministry thing threw me off. Anyway, I have friends that have had success with this health sharing program in the past.

  7. Part of the healthcare reforms is to allow the temporary health insurance that I mentioned earlier (1st reply!!), so if it passes there will be some cheaper alternatives to the regular ACA plans. Congress can’t agree on anything though, so who knows if that’ll ever happen.

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