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Does paying for health insurance force you into debt? Does it keep you up at night and keep you from following your dream of retirement?
Well, it is possible to get free health insurance, and I am going to share with you the secret to how I not only get my health insurance for free but actually get paid to have health insurance.
The HSA or Health Savings Account is an account in the US for people that have a High Deductible Health Plan or HDHP. These plans require the deductible to be high to lower the monthly premium of the health care insurance. With the insane skyrocketing costs of health care insurance in the US, the HDHP has become increasingly popular. And for good reason.
The HSA allows you to save pre-tax dollars into the account and spend out of the account with pre-tax dollars. This helps to lower your tax liability for the year and gives you more buying power when it comes to paying for your deductible and health care costs that do occur.
|Minimum Deductible||Maximum Out of Pocket||Max HSA Contribution|
From the table above, we see the requirements and limitations of the HSA. These values are accurate for 2017. The deal to get into the HSA is to have a high enough deductible that the goverment allows you to use this pre-tax account. The protection provided is the maximum out-of-pocket expense which limits the max amount you will have to pay in the year including the deductible, but not including the monthly premiums.
So let’s look at the savings potential of the HSA and HDHP.
First off, we have tax savings from the pre-tax contributions to the HSA. The below table summarizes those savings:
|Tax Rate||Single ($3,400)||Family ($6,750)|
As we can see from the above table, we have a greater potential for tax savings as a family than we do as an individual. My personal situation of a single income family means that the family plans always make the most sense, however, you could each have individual plans and have 2 individual HSAs for a combined savings slightly higher than the family plan.
The second area of savings from the HSA is lower premiums than the standard of so-called Cadillac health plans. When I did the calculations for myself they looked like this:
Monthly premiums ($250) * 12 months + Deductible ($800) = $3,800
This was the total for my old health plan before it would ever pay a dime for healthcare. Living in China where the health care is unbelievably cheap, I felt this was an outrageous cost. Not to mention, I was only paying 25% of the premium. My employer was paying 75% of the premium for a total monthly premium for 2 young healthy adults at $1000. Crazy!!!
Because an HDHP requires a high deductible they lower the premium. For young and healthy people this makes a lot of sense. The chances of me ending up in the hospital for something really expensive are pretty low, so we take the risk associated with lower cost.
I am aware that the premium + deductible costs are pretty good compared to what many people pay for the above plan, however, I wanted more.
How to Get Free Health Insurance
I felt that the $3,000 in premiums was insanely expensive just to have the opportunity to pay an additional $800 before they do anything. My wife was in and out of the hospital last year for a week, where we paid all costs out of pocket. The grand total? $400.
So we paid, $3,000 so that our health insurance would not cover us even for hospitalized surgery.
At this point, I figured the best route was to just forgo health insurance because we can easily self-insure living in China. The cost of health care is really low here for the ailments that afflict young healthy adults. Therefore, I was seriously considering going without it. The US law says if you are in the US for less than 30 days in a year, you are not required to have health insurance by the US. Your destination may have laws requiring health insurance, but the US does not require it.
I also went through the effort last year to roll over my old HSA to a better account where I could invest it in VTI, the VTSAX ETF equivalent and I wanted to continue to add to that account if possible. Talking with my parents, I also felt that having insurance was a good hedge against the worst happening, so I looked into health insurance options in China.
Lo and behold, I found one that met the requirements of the HSA. The requirements for the HSA do not state that the health insurance must be in the US, just that you hold high deductible health insurance with a maximum out of pocket value that fulfills the table above. When I was going through the process of looking for and evaluating the options, I found many that were as expensive or more so than what I was paying. That is not really surprising, as I am not able to read documents tailored for local Chinese. Obviously, I was applying as an American overseas.
Despite that, I found a plan for the equivalent of $1500 for the year! What a steal!
I still wanted more
When I re-confirmed the qualifications for the HSA, I saw that plan allowed me to raise the deductible and thus qualify for the HSA. The new price $890 for all of 2017!
Here is the math:
Annual premium ($890) + Deductible ($2,800) = $3,690 Total
Annual premium ($890) – Tax Savings ($1,688) = ($798)
The first shows that even with paying the full deductible I would still be cheaper than my original plan. However, the kicker is by fully funding my HSA at $6,750 for the year, I am saving taxes at a rate of 25%.
By buying health insurance in China and funding my HSA fully, I MADE $798 this year! It doesn’t get any better than that.
The secret to getting free health insurance is finding a provider that fulfills the requirements for having an HSA account and that costs less than the tax savings of funding the account. This is possible if you live outside the US. If you are going to the US for extended periods of time, you probably need US coverage that costs more.
Just keep it in mind, geographic arbitrage can save you money and even make you money in the long run. Who doesn’t want to save on health insurance?
I thought the solution was to go without, but ended up with health insurance and ahead financially. It’s a win-win.
What’s the least you have ever paid for health insurance? Can others repeat my success? Let me know in the comments.