With an Obamacare repeal in the works, you may feel that the best option is simply to drop your health insurance once the coverage requirement disappears. However, going without health insurance can have serious financial drawbacks. While it's true that the tax penalty for not having health insurance will almost certainly go away once the AHCA passes, there are other penalties that won't.
No help with medical emergencies
If you're a healthy person with no prescriptions and no medical conditions, the idea of cutting out your health insurance bill might be tempting -- especially if you don't have an employer-provided plan. However, if a medical crisis ensues, you could end up with an enormous bill, or perhaps even have to go without treatment. For example, I've always chosen the least-expensive health insurance option available, including one plan with a health savings account. Once my HSA had a few thousand dollars in it, I left it alone. That account had been sitting untouched for almost a decade when an unfortunate dog-versus-bicycle collision resulted in my breaking my left shoulder and arm. When I got a $2,500 bill from the hospital just for the emergency room treatment, I was sure glad I had that HSA money. And my health insurance policy, meager though it was, saved me thousands of dollars on the shoulder surgery and physical therapy that followed.
Coverage gap penalty
The AHCA might not penalize you directly for not having insurance, but it does try to motivate you to keep coverage. If you let your insurance coverage lapse for more than 63 days and then later get another health insurance policy, the insurer can add a 30% penalty to your premiums for the first year. If you're buying private health insurance, that could easily price a policy right out of your reach.
Pre-existing condition concerns
Let's say that you've decided not to renew your health insurance because you never seem to use it, and then a few years later you're diagnosed with a serious condition: perhaps diabetes or even cancer. The AHCA allows individual states to decree that insurance plans within that state can deny coverage for people with pre-existing conditions, or charge an inflated premium. This waiver affects both private and employer-provided health plans. If your state chooses to offer such a waiver, you may find it impossible to get health insurance just when you need it most.
How to make health insurance more affordable
If you're forced to seek private insurance, the cost of health insurance can get extremely high -- and once the AHCA becomes law, both premiums and medical expenses will likely rise for many groups, especially seniors. One approach that can keep your expenses low while still providing reasonable coverage is to seek out an HSA-enabled plan. Because these plans have high deductibles, they are generally more affordable than the average health insurance policy. And contributions you make to the HSA will save you both now and in the future: immediate savings come in the form of a tax deduction, while future savings come when you tap into those funds to pay for a medical emergency. The AHCA makes the perks of an HSA even nicer, by increasing the contribution limit and also changing the rules to allow HSA funds to be spent on nonprescription drugs without penalty.
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