How’s Obamacare working for you? Here’s Darnell’s experience…
If you remember our friend Darnell, you know he’s had his financial ups and downs. His credit score has gone up recently – he pinged me and told me his number is a 610, which means at least a little celebration, since that’s an uptick from earlier this year – and he also just filed his taxes. Darnell also shared his back of the envelope Obamacare math, and…at the very least, it’s a little interesting.
We’re not going to get into the political ramifications here. Doesn’t matter which side you’re on, frankly – this reporter thinks that 59 times trying to repeal the same legislation means that it’s likely not going anywhere. (Are you listening, GOP?)
What we will share here are some numbers you can put to good use as you’re planning your own health care strategies – for tax purposes, financial planning purposes, savings purposes, or any other reason that makes sense for you. Again, all trying to put another $10,000 in your pocket per year. Here goes.
First, though, the disclaimer: we’re not financial planners, tax advisors, accountants, or attorneys here. And, if we share links anywhere on this site that are marked as “ADVERTISEMENT,” these are affiliate links, which are ones that will compensate us if you make a purchase. Now, here goes.
Ten Percent, Not Seven!
We mentioned that before, and we’ll say it again – a recent change to the tax law (2014’s taxes mark the first year that we noticed this) means that the amount of out-of-pocket health care expenses must exceed ten percent, not seven percent, of your adjusted gross income in order to be deductible. We wanted to mention this up front because, if you’re like Darnell and your year 2014 wasn’t the greatest, these extra few hundred bucks would have been nice. But you won’t see them.
Time for back of the envelope calculation #1:
- Darnell’s Family AGI: $82,000
- Darnell’s Out-of-pocket health care expenses: $7,000
- Deductible under old tax rules: $1,260 (amount that exceeds 7% of AGI)
- Additional refund under old tax rules: $189 (15% of amount above)
- Deductible under new tax rules: $0
Why is this a big deal?
High-Deductible Plans Are Everywhere
Darnell only paid a few hundred bucks a month for his health care plan. His employer paid in excess of $15,000 for the family plan. AND…he had a Health Savings Account (HSA) to cover things like copays and prescriptions. But that was only a few thousand dollars. Once it was gone, guess who paid?
Now we’re into the personal savings territory, and this is where the sticker shock comes in. It wasn’t fun for Darnell, and it may not have been fun for you, either. Yes, you have to pay from your personal savings once you have met your deductible.
Darnell tells me that every single number went up from 2013 to 2014. (Including his family’s AGI, so that’s a good thing.) But he paid more out of pocket, and wasn’t able to potentially take advantage of more tax savings.
Again, we’re not drawing a political line in the sand here. But we do think some number crunching is in order – on both sides of the political aisle.
“Is It Covered By Insurance?” Doesn’t Mean You Should Do It
That’s right, just because it’s covered by insurance doesn’t necessarily mean that you should be getting the procedure. That is something I learned long ago, when I was working in PR in the employee benefits consulting industry. Back then, the idea with these new-fangled “Consumer-driven healthcare” (CDH) plans was pretty simple: if you act as if the money is yours, you will spend it more wisely. (Early CDH plans would give you incentives to have money left over at the end of the year: you could carry it over into the next year, and that’s less out of your own pocket you would have to spend. We’re not that lucky with Obamacare.)
Now, the same premise exists: spend wisely because every dollar counts. Gone are the “Cadillac” plans (well, they do exist, but readers of this blog aren’t likely to have one), so it pays to shop around. And, while you’re shopping around, why not consider other options…ones that Darnell did actually employ last year with his family:
“Doc in the box.”
There is nothing wrong with seeing a Nurse Practitioner at the Minute Clinic. NOTHING. In fact, if you’re certain you have a sinus infection and you’ve had it for a week, and you’re certain that the best course is going to be antibiotics, then the best route could be the Minute Clinic. (Or its competitor at Walgreens, or your local Urgent Care facility.) Word on the street is that “Doctors hate these places.” Not entirely true, since, if your doctor is overworked anyway, you’re a low-level visit that would just be eating into his day – plus there’s all that insurance and billing and paperwork. In some cases, maybe your doctor would rather not have you come in – they wouldn’t mind focusing on higher-priced patients. Maybe. (I might be rationalizing here.)
Another no-brainer, but worth a reminder. The generic will save you money. The doctor can and most often will prescribe the generic for you – rarely is the name brand the only option to fix what ails you. Ask. No, INSIST.
Darnell had one medicine that, with insurance, was still going to be $97 for a one-month supply – because it was a name brand. Generic? TEN BUCKS.
Time, dear friends, for one final reminder…
We have Excel spreadsheets for this stuff – and so does Darnell. He knows what works and what doesn’t and he’s not afraid to ask for an edge where he can find one.
Go get ’em, tiger. Make it a healthy year.