"I don't have health insurance"

Author's note: This article is written for CPAs and financial advisers. A similar article and more information about the topics discussed geared for public use is available at FreedomBenefits.net. Neither the author nor Freedom Benefits is qualified as a health insurance agent or navigator but we are paid for referrals to the Members Insurance Exchange.

April 3, 2014 - What do you say to your client who missed out on open enrollment under the Affordable Care Act? While up to 7 million Americans enrolled in the new coverage, many more remain uninsured and about 1 in 3 of the 45 million uninsured Americans actively opposes enrollment in the new insurance program. This short article is meant for accountants and financial advisers who are likely to face this type of question many times over the rest of 2014.

Who is most vulnerable?

The first thing an adviser can do is to reassure that the client is not in this mess alone or through their own fault. Today's Wall Street Journal (4/3/2014) includes an article that shows the impact of the declining insurance premium subsidy and how a person "at the margin" in the $50,000 gross income range could face total after-tax healthcare costs of more than $1,000 per month under the current system. That expense could easily exceed 1/3 of take-home pay. This illustrates why the working class - including most self-employed individuals - make up the group most vulnerable to being uninsured.

Additional risks of being uninsured

U.S. health care institutions have spent much effort studying populations under age 65 and documenting the relationship between being chronically uninsured with an earlier age of death and general lower quality of health. The strong link between medical costs (with or without health insurance) and personal bankruptcy is also well established That's all old news.

But being uninsured in 2014 brings two new additional risks not faced in the past: limited access to critical care and sharply more aggressive actions by third party collection agencies for the unpaid costs of medical care.

Prior to implementation of health care reform, U.S. health care facilities did not deny basic coverage to those without health insurance coverage. Now that coverage is required by law, those who are non-compliant will face increasing difficulty bypassing gatekeepers and accessing medical services when needed. The change will be subtle and gradual, but it is unrealistic to expect that an uninsured person will have as many options for care as in the past.

Consumer protections against overly-aggressive billing and collection processes for medical expenses generally do not apply to those without insurance. Legal collection actions in the future will likely emphasize the tortuous act of being uninsured as a negligent behavior. Law firms that have entered the debt collection business with aggressive tactics (including issuance of arrest warrants for failure to answer information subpoenas) view the medical debt industry as a fertile new area for collections. This may become a "hot button" of political focus over the next year.

As a result of these changes, a client who incurs large medical bills without health insurance coverage needs to understand that this situation immediately becomes the #1 primary threat to their entire household's financial security.

Temporary coverage

Most people are eligible for low cost  short term medical insurance that is specifically designed to bridge the gap until the next start date for Obamacare coverage on January 1 2015. Short term medical insurance is exempt from most ACA coverage changes and does not cover the cost of medical issues that started prior to the beginning of the policy. But it can be issued online in a matter of minutes through a direct online application and provides an  immediate ID card and verification of coverage. This option is not available in a handful of states including New Jersey, New York, Massachusetts, and Vermont.

Non-insurance options

For starters, every uninsured person should have a discount prescription drug card that cuts the cash purchase cost of almost any prescription drug. These cards are available free of charge.

Tele-medicine subscription programs are now available in all 50 states and DC that provide access to basic diagnostic services and access to routine prescriptions.

Local medical facilities that treat patients without insurance do exist, but are not intended or designed to treat working-class individuals and so tend to be overlooked by our uninsured clients.

Alternate insurance

If we take a stance that some coverage is better than none at all, there are a number of alternatives that may allow access to the health care system even for those without the new type of health insurance known as Obamacare:

Accident medical coverage covers unexpected expenses like the cost of a typical emergency room visit.

Mini-med insurance covers routine doctor visits and part of other common medical costs.

Deductible supplement insurance actually works without the intended primary insurance so deductible supplement insurance can actually be used on a stand-alone basis to cover the first $1,000 to $5,000 of medical expenses even for those not enrolled in Obamacare¹.

Exemption from tax penalty

In most cases a person who missed out on enrollment this year will qualify for one of the many hardship exemptions from the federal tax penalty for 2014. The exemptions from the penalty were meant to be liberal, and so it seems likely that most of those who actually intended to comply but did not find suitable health insurance coverage will find relief from the penalty.

Additional resources:

Stop worrying about the health insurance penalty

How to legally bypass Obamacare in 2014

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¹The federal government has proposed new regulations for 2015 that would disallow the use of supplemental coverage without primary qualifying medical insurance.