We just got home from another hospital stay. Bam got RSV. In case this all seems a little deja vu, this is exactly what Minion almost died from at the same age. One of the boys brought it home from school at the beginning of winter break, but fortunately we caught it early and our hospital stay was less lengthy this time around.
Beyond that, I'm really not in the mood to talk about it. We're home, we're fine, and I'm going to go sob into a bowl of chicken noodle soup now.
In the midst of all this health cruddiness that we've gone through over the last couple years, we've learned a lot about healthcare and talked openly about our experiences here on the blog. One thing that people have asked us about time and time again is how creative workers like ourselves can afford good insurance for our family. To be fair, Nate has maintained a day job that provided full coverage for awhile. That's recently taken a turn, though, and left us shouldering more cost than we're used to.
For a photographer-writer duo with a family of six, it's a lot to juggle. And a lot to pay for.
So let's talk numbers.
One year of healthcare for a married couple with four children in Southern California shakes out to about $20-25K. That's all in, including premiums and deductibles, through pretty much any provider. We've run it on paper and in real life repeatedly. We can skimp on coverage to get monthly fees down, but we wind up paying on the other end with higher supplemental costs. It evens out in the end. Going uninsured isn't an option with ongoing healthcare issues. We're also not willing to risk getting slapped with a $50-100K+ bill for the inevitable broken bones or emergency appendectomy.
With those numbers in mind, most people who make the jump from comfortable desk job to a creative self-employed lifestyle have to make serious cuts somewhere. One of the first things to go is retirement savings.
But there is sort of a way to save for retirement while also covering your medical needs. Enter the Health Savings Account, or HSA for short. An HSA is a personal bank account that helps you save and pay for medical expenses. You put tax-advantaged money into it and pair it with a high deductible health care plan that covers all preventive care and has a maximum out-of-pocket limit. If you need to see the doctor outside of preventive care purposes, money comes straight out of your HSA to cover deductibles. So you're always covered and won't get hit with a shocking amount of money coming out of your personal account. Any money that you don't wind up spending on medical needs rolls over year-after-year, earning interest tax-free, and is yours to spend on anything you'd like with no penalty (except for regular income tax) once you turn 65.
So instead of spending $1,700 per month on a plan with broad coverage, we spend $850 per month on a high deductible plan and put $560 per month in an HSA for a savings of about $300 monthly. If we have a “healthy year,” most of our HSA account money rolls over for the future and we come out on top with an extra $5K or $6K for future medical expenses or retirement. If we have an “unhealthy year,” we spend a maximum out-of-pocket amount that is currently limited by law to $13,100 annually. Worst case scenario, that could potentially bring our total for the year to a little over $23K in an HSA situation compared to $20K with a standard low-deductible plan. Best case scenario with the HSA, we've spent just over $10K on healthcare for the year and put the rest toward our future. It's a gamble – but one that families who are proactive about their health can easily come out on top of if they don't have year after year after year of catastrophes.
Since health plans now must include preventive care without a copay or additional cost and don't have preexisting condition upcharges, the existence of HSAs puts all the power in the hands of the insured to judge their health and decide how much risk they're willing to accept.
As an added bonus for self-employed people, if you're paying 130 hours or more per month to workers other than yourself or partners or family members, you may qualify for a small business healthcare plan and be able to funnel money into your HSA on the employer side. This means you could potentially qualify for business tax credits on top of healthcare subsidies you may receive on the personal side, giving you several flexible tax filing options that could really work to your advantage.
I'll admit that it's all a little overwhelming, so I'll leave you with the advice I always give to people who ask me about transitioning to self-employment: save before you leap. Scrimp, scrimp and scrimp some more. Before I left my day job, I made sure we had enough money in the bank to pay our bills for over six months in case things went wrong. It's so much easier to make wise decisions from a place of power, as opposed feeling like you're in free-fall mode and scrambling to find a sense of security.
How does your family handle healthcare?