Double-Digit Healthcare Cost Shock Has Budgets On Life Support

Double-Digit Healthcare Cost Shock Has Budgets On Life Support

Mary Johnson, Editor

How many of you under the age of 65 are counting the days until you become eligible for Medicare? Even though Medicare costs are plenty high, it’s far and away a much better deal for many adults under the age of 65 than the new Obamacare - compliant plans.

Consider this typical Obamacare plan cost increase for a 64-year old female who was forced out of her lower-cost non-compliant insurance in 2014 and required to buy insurance through the federal healthcare exchange. In 2014, her non-compliant insurance cost $347 per month, and had a $750 deductible. To get something similar to that plan from the same insurer here’s what she had to pay in 2015 and the price increase for 2016:

2015 2016 Percent change
Premiums $801.20 $924.12 15%
Deductible $750 $750 0
Out-of-Pocket Maximum $3,500 $5,200 49%
Pharmacy Benefits $40 co-pay $50 copay 25%

Even though this individual qualifies for a modest advance premium tax credit of $288.00, which lowers her premium to $636.12 in 2016, her premium will still cost almost as much as her mortgage payment — which is $655. How does one save for retirement with costs like that?

Evidence is growing that many adults under the age of 65 aren’t able to. Leading financial plans and financial advisors are reporting that contributions to IRAs and 401(k)s are down, and they cite rising healthcare costs as a leading culprit in our growing “retirement crisis.”

While this individual switched to a less expensive plan, she was forced to take a $2,600 deductible. And even with a medium level of healthcare services and prescriptions, a deductible that high guarantees that she won’t get much benefit out of the plan unless her health significantly worsens or she’s hospitalized. She hopes she won’t get sick.

The unfortunate reality is that the Affordable Care Act is far from affordable. These are unsustainable cost increases for middle income Americans. A $2,600 deductible is actually one of the lower deductibles available — most health plans are routinely imposing much higher deductibles, some as much as $6,000. With deductibles that expensive, people age 60 through 64 are at high risk of being underinsured.

Once this individual turns 65, and is eligible for Medicare, she will be able to enroll in a Medicare supplement for about $180 a month, and a Part D plan for about $18 per month. And, due to the joint efforts of more than 70 advocacy organizations — including The Senior Citizens League — to roll back an expected Medicare premium spike of 52%, she will pay $121.80 per month on her Medicare Part B premium instead of $159 per month, saving $39, for the rest of 2016.

How much are you spending on healthcare costs? Take TSCL’s 2016 Senior Survey.