Our 3 Best Money Choices—#2

Jun 11, 2013 by

maple leafThe U.S. has “progressed” to the point that literally every topic on which opinions differ becomes, at least in part and often wholly, a political “debate.” I put the word debate in quotes because the exchange of arguments typically more closely resembles an ideology driven mixed martial arts cage match than something like the 1858 Lincoln-Douglas series of enlightened, and enlightening, discourses.

What’s the point of this preface? This post has no political element, folks. A beauty of pure numbers is that, at least to those who don’t subscribe to willful ignorance, numbers are apolitical, and this post is a presentation of numbers.

In short: Peace, brother (and sister).

Our 3 Best Money Choices: #2—Moving to Canada

One of the main reasons we relocated to Canada from the U.S. is the availability of guaranteed, affordable health insurance.

In the U.S., if you don’t mind working until you’re eligible for Medicare for an employer that offers health insurance benefits—and if you’re fortunate enough to always have such an option—you may not need to worry about the direct cost of health insurance on your finances. But if your employer doesn’t offer a health insurance benefit or you choose to become self-employed or you’re laid off and jobless for a while, you’ll quickly learn of the high cost of private health insurance in the U.S.

Our U.S. Health Insurance History

In early 2005, with my full support, Ms. Money Counselor scaled back her work with her employer to the point that she no longer qualified for health insurance benefits. The health insurance plan through my employer covered only me, so we went to the private sector to purchase health insurance for my wife. We chose a policy with BlueCross/BlueShield. To hold down the cost of the premium and qualify for a Health Savings Account, we chose a high-deductible policy. Our monthly premium was $107.50. I can’t find a record of the initial annual deductible, but as I recollect it was in the neighborhood of $3,000.

In early 2007 I chose to become self-employed, so we added me to the BlueCross/BlueShield policy. By this time my wife’s monthly premium had risen to $162—a 51% jump over two years. With me on the policy, our monthly premium became $276. Two months later, and solely because I reached an “age milestone,” the premium rocketed to $360.50 per month, a 31% leap. (I received the letter announcing the premium increase on my birthday. Nice.)

You see where this is heading. By the time we moved to Canada in August 2009, our BlueCross/BlueShield monthly premium had grown to $466.50, a 69% increase over two years. And our annual deductible had roughly been doubled by BlueCrosss/BlueShield to $6,000. So if either of us had gotten seriously ill, we’d have spent $11,598 out-of-pocket before any benefits kicked in. Then we would have had possibly significant co-pays and other uninsured medical expenses. And for a chronic or extended illness, we may have been out-of-pocket the annually re-set $6,000 (and growing) deductible each and every year.

Were we ill? No. Except for the cost of an annual physical for each of us—toward which the policy paid $300 even if our deductible hadn’t been reached—we never made a claim. Both of our health histories were stellar—no chronic illnesses or health challenges.

In 2009 I calculated that if the 19% average annual premium increases we’d seen during our tenure with BlueCross/BlueShield persisted, our annual premium would reach $45,144 by the time I became eligible for Medicare. I couldn’t begin to guess what the deductible might have been. $25,000? $50,000?

A $45,144 annual premium may sound ludicrous, like it couldn’t possibly happen. Well, so does a 19% average annual premium increase, but that’s precisely what we experienced while insured by BlueCross/BlueShield.

Our Canadian Health Insurance History

As Permanent Residents of Canada, we qualify for British Columbia’s Medical Services Plan (MSP). Health plans in Canada differ among the Provinces. Each Province runs its own plan. I don’t know any details of other Provinces; this is about our experience in British Columbia.

When we first became eligible for MSP—after three months of residency in October 2009—our first monthly MSP premium was $96, with no deductible and no co-pays. Premiums are scaled based on income. We paid the highest premium on the scale; at some low income level, the premium would be reduced to $0.

After several years of no MSP premium increase, the Provincial government has been increasing premiums annually since we moved here. (Canada faces the same challenge as the U.S. of paying for healthcare for an aging population.) Our current monthly premium is $120.50, or $1,446 per year. This covers both of us.

In comparison, had our most recent U.S. insurance premium of $466.50 increased by only 10% per year (about half the rate of increase we’d been experiencing), our premium today would be about $700 per month, or $8,400 per year. And our annual deductible would likely be in the vicinity of $10,000.

British Columbia also has a prescription coverage plan called PharmaCare. This plan does have a deductible, adjusted annually based on income. Currently our annual deductible is $1,700.

MSP does not cover everything, and many British Columbians buy a private, supplementary health insurance policy. We buy such a policy because the premium will almost entirely be offset by policy benefits covering our planned medication, dental, and eye care costs that we’d otherwise pay out-of-pocket. If much of anything unplanned comes up that the policy covers, we’ll come out ahead, financially. Our most recent annual premium for this supplementary policy was $1,482.

Also, many Canadians buy travel health insurance because the benefits of government-financed plans outside of Canada may be limited or zero. For 2013 we paid $213.40 for travel health insurance that covers both of us.

But We’re Paying Through the Nose for Taxes, Right?

Yep, in Canada a part of the taxes we pay help finance the health insurance system. Since per capita healthcare expenditures in Canada are one-half of those in the U.S., and since , as a group, Canadians rank above Americans by virtually every measure of healthfulness, I’m guessing we’ll come out ahead, money-wise and longevity-wise. Again: Only numbers my friends, not politics.

The Bottom Line

A fair comparison of the cost of our health insurance + care in the U.S. vs. Canada must include the portion of our taxes that goes toward financing the healthcare system. Candidly, I don’t know that piece of the calculation nor how to estimate it. I do know that our total tax bill since moving to British Columbia is not noticeably different from our total tax bill the last year we lived in Minnesota. Some taxes are higher where we live now (sales tax, for example), and some are lower (property tax).

With that said, I’m very comfortable asserting that we’re saving many thousands of dollars annually on health insurance and health care. The longer we live in Canada, and the more healthcare we need, the greater our savings will be. If we live here the rest of our lives, I expect savings to be well into six figures.

Intangibles

Perhaps even more beneficial to us than the direct dollars & cents effect of our choice to relocate to Canada is the tremendous peace-of-mind that accompanies guaranteed, affordable health insurance.

Medical expenses are—by far—the #1 reason for personal bankruptcy in the U.S. Even those with medical insurance can be driven to bankruptcy by uninsured costs.

And when you have an individual (as opposed to group) private health insurance policy as we did, if you become sick or injured, you suddenly become a source of expense, not profit, for the insurer. Private sector insurers regard benefits as they do any other corporate cost, which means they seek to minimize benefits, naturally. Once you’re seriously ill and looking darn costly to the insurer, trained investigators will scrutinize the medically complex and lengthy application you completed when applying for coverage. If they discover a question you answered with an “untruth”—which is what they’re paid to do—your benefits may disappear entirely. This can and does happen, even after many years of paying premiums.

In British Columbia there are no connections between and among a) the past or current state of your health, b) your Medical Services Plan premium, and c) your eligibility for health insurance. Coming from America, this is mind blowing at first. And there is a connection between a) your ability to pay, and b) your MSP premium. For me, the psychological benefits of this sort of system are huge: Unless we misbehave so badly that we’re kicked out of Canada, we don’t have to worry about access to healthcare, huge deductibles, or premiums we can’t afford, period, ever.

“Get a Job, Loser!”

Of course instead of relocating, Ms. Money Counselor or I could have gotten a job with health insurance benefits for both of us. I could write another post or two in response to this sentiment, but I’ll keep it brief.

First, health insurance isn’t the sole reason we relocated.

Second, no job and no job benefit is secure. Our coverage now is independent of prevailing economic conditions or the success or failure or whims of an employer.

Third, get seriously ill while you have group coverage through your employer, and you better pray you’re never jobless again until Medicare eligibility age because no private insurer will cover you at any cost—except for illnesses you don’t have and aren’t likely to get. (And COBRA’s a sad joke, as everyone who’s been faced with it as their sole option knows very well.)

Fourth, the prospect of having to be the dutiful, obedient employee sucking up whatever poop might roll downhill my way because I’m terrified of losing my job—actually of losing my health insurance—sickens me (so I’d need that health insurance!).

Fifth, I thought America was the land of entrepreneurs? Something’s wrong if I’m too spooked by the specter of becoming uninsured to try self-employment.

Sixth,… naaahh, that’s enough, I’m ranting now. 🙂

Have You Ventured Into the U.S. Private Health Insurance Market?

For those of you buying your own health insurance, what’s your experience been? Have you seen your premiums and deductible growing at an alarming rate? Will the Affordable Care Act (which I know little about) affect the growth of health insurance costs?

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  • Greg

    Wow, I didn’t expect this to be one of the top 3. That is a serious decision to make (moving out of the country), but as you lay out, health insurance is very expensive and certainly a consideration.

    I have not been in a position of needing an individual policy, but I work in health insurance and know how expensive it is. Your story reminds me of my brother. He is very matter-of-fact in stating he does the bare minimum at his corporate job and only stays for the health benefits. His primary focus is on his e-marketing business. He recently commented that he got a peek at what his employer policy will be next year and it looks significantly reduced. I think depending on how the exchanges pan out and if individual coverage becomes more affordable because of it, he may take the plunge and focus on his other business full time.

    I wonder if this is the scenario for many people and if it could change the landscape of the work world at all. As you mention, in today’s world, an entrepreneurial spirit is needed and if people are able to branch off because they have other insurance options, will there be a number of people fleeing their corporate jobs?

    • Greg, thanks much for your thoughtful comment.

      It’s a complex question to say the least, but I’ve always thought the U.S. system of employers being the main conduit for health insurance is good for neither the employer or the employee. As a cost, group health insurance premiums ultimately are passed on to customers by businesses. With respect to productivity, neither party benefits from employees hanging on to jobs purely to secure health insurance. As you bring up, will be interesting to see the effect of the Affordable Care Act on this long-standing and I would say contrived arrangement.

  • Healthcare is ridiculous. If I didn’t have a great plan through work, my wife and I would be paying through the nose. I know for a fact that my parents (both self-employed) pay about $1,600 per month for their health insurance. That is just out of control. If I didn’t have a job and needed coverage, I would pay so much money because of a pre-existing condition. The new healthcare law would allow me to get coverage, but boy would I pay for it.

    • Thanks Grayson. As I mentioned, I’ve stayed mostly ignorant of the Affordable Care Act since we’re not affected. As I understand it though, and you seem to be saying too, at some point in time everyone everyone would be able to buy health insurance regardless of their health history or status. (Is that accurate?) The part I don’t get though and to which you allude is, at what cost? Offering a policy to someone with heart disease for $5,000 per month (for example) would be, for most people, the same as not offering insurance at all. So how is this going to work?

      • I think everyone is on a wait and see with this issue. We have all heard things, but once politics and lobbyists get in the way, who knows what will happen.

  • John S @ Frugal Rules

    Love your thoughts here Kurt! I think the healthcare system here in the States is beyond broke and is so for numerous reasons. We bought our insurance for the first time a little over a year ago when we started our business and was surprised actually at how we were able to keep it at only $40 more per month than what we had through my employer. Granted, it’s a HDHP, but we’re generally healthy and all the well baby checkups are covered for us. However, we did get a letter in the mail last week saying our rates were going up something like 4% over the next year. It definitely is a racket.
    I don’t know if ObamaCare is the answer or not. I will say though at least it’s trying to do something, though I question how effective it will be. Anytime you get the lobbyists and the government working on something it usually ends up in a massive mess and worse than before. All that said, something does need to happen to improve the healthcare system. I believe it’s going to require REAL change to make that improvement possible and we all know that is difficult, if not impossible, to come by when the politics get in the way of it.

    • A 4% premium increase is a bargain in my limited experience!

      Yes, I agree, effecting a real solution–or even significant steps toward a solution–will prove an enormous challenge. The fundamental problem in my opinion (and this IS political!) is that Supreme Court rulings effectively mean political campaign spending can literally be unlimited. With an industry as massive as healthcare, a solution means there will be big time winners and losers, and the potential losers in any real change to the system can justify spending massive piles of cash promoting politicians who will support the status quo. I think the solution to health insurance–and other national challenges of similar scope–has to start with a Constitutional amendment that somehow disconnects national policymaking and corporate, PAC, et al cash. I’m not smart enough to suggest precisely how that’s best done, but until it is, those with the most money to spend will persevere.

      Maybe that’s how it should be in capitalism’s mecca?

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