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How To Opt Out Of Obamacare

Anybody considering opting out of Obamacare should take the time to know their options and become savvy self-pay patients.

December has arrived, and the deadline to apply for health insurance through the Affordable Care Act that will be effective January 1 is looming large. Recent press accounts suggest the online exchanges are working somewhat better than before, although there are still problems with the federal site and several of the state sites as well.

At the same time that people are being urged to sign up for health insurance by the Obama administration and its allies, others are urging people to ‘opt out’ of Obamacare, particularly the young who are generally being asked to pay much higher premiums than before. A few of the groups urging people not to sign up for health insurance under Obamacare include Generation Opportunity, FreedomWorks, and the Citizens Council for Health Freedom.

I won’t bother repeating the arguments of either side here, I’ll simply note that it’s likely tens of millions of Americans will chose to ‘opt out’ of Obamacare for a variety of reasons. These reasons include not being able to afford health insurance, not finding value in health insurance, and political or ideological opposition to Obamacare. To cite just one source, the Congressional Budget Office estimates that about 30 million people will remain uninsured under Obamacare.

The one thing that is missing from most of the arguments urging people to opt out of Obamacare is what they should do instead. Since most of these messages are aimed primarily at the young, I thought I’d share a bit of info on three individuals I know who fell into the ‘young invincible’ category at one point:

This isn’t meant to say that young people considering opting out of Obamacare should reconsider. But it does explain, I hope, why I tell people that in my opinion everyone should have some form of coverage against catastrophic medical bills, which isn’t the same as saying everyone should have health insurance.

So, in my view, there’s a right way to opt out of Obamacare and there’s a wrong way to opt out of Obamacare.

Let’s start with the wrong way to opt out of Obamacare. This would be declining to buy health insurance, failing to make other arrangements to pay for catastrophic medical expenses, not shopping for care and paying the ‘list’ price for doctor’s visits and prescription drugs, and simply relying on the emergency room to get needed care in the event of a major injury or illness.

This approach leaves people who opt out vulnerable to sky-high medical expenses at inflated ‘list’ or ‘chargemaster’ rates, and can result in an inability to obtain needed care because of cost. Definitely the wrong way to opt out of Obamacare.

Now for the right way to opt out of Obamacare. Or rather, several of the different right ways to opt out of Obamacare, because there are multiple options to choose from according to your own personal needs and preferences.

First up, protection from major medical bills and getting needed funds to pay for care. Here are a couple of the best options:

There are a handful of other options for funding major medical expenses, things like charity care, medical fundraising, or personal savings, retirement accounts and home equity loans. But none of these should be anyone’s first choice unless they’re a multi-millionaire who doesn’t mind dipping into their bank account to pay for needed treatment.

Once somebody opting out of Obamacare has gotten their alternative coverage arranged, it’s time to shop for health care providers and medical treatment in the event you need it. The first thing to remember is that nearly every price in health care is essentially fake. Insurance companies don’t pay ‘list’ prices, and neither should the self-pay patient. Here are the leading ways to find affordable health care at real prices:

There is also the matter of the tax for being uninsured. Two things to keep in mind: there are a couple of exemptions you may qualify for, and the tax is for many people going to be less than the cost of paying premiums for conventional health insurance.

The first exemption, mentioned briefly above, is for members of health care sharing organizations. Even though they aren’t technically insurance, they do provide coverage and Congress chose to exempt members from having to pay the tax for being uninsured.

There’s also an exemption for people who find that premiums are unaffordable, at least by the government’s definition. If the least-expensive Bronze plan in your area costs more than 8% of your adjusted gross income, you’re exempt from the tax.

Otherwise, you’ll be taxed 1 percent of your adjusted gross income in 2014 if you’re uninsured, rising to 2.5% by 2016. So someone with an $80,000 income in 2014 will owe an $800 tax, even if they have a fixed-benefit policy, short-term policy, or some other alternative that isn’t membership in a health care sharing organization.

One caveat, however: the IRS can only collect the tax by reducing your tax refund. So, no refund equals no tax. I’m not necessarily suggesting this as a tax strategy (irritating the IRS just seems like a bad idea on a number of levels), and it won’t surprise me at all to see Congress one day try to ‘fix’ this little loophole. But as the law stands right now, and as the IRS itself has posted, the only way they have to collect the tax is by taking it from your refund, so if you don’t have a refund coming back to you there is no way the IRS can force you to pay the tax.

There are a lot more options for anybody opting out of Obamacare and needing access to affordable health care, which I write about regularly here at The Self-Pay Patient blog and that fill my soon-to-be-released book (naturally, titled The Self-Pay Patient, coming out later this month). But hopefully the information here can help people see that there are plenty of options for affordable health care and financial protection from catastrophic medical expenses if they decide to opt out of Obamacare.

Deciding to opt out of Obamacare is a fairly serious decision. But there’s another decision that people who want to opt out need to make, and that is whether they want to do it the right way by doing a little planning and knowing their options, or the wrong way which would be just to opt out and not give the matter any more thought until they’re on the way to the hospital with a busted leg or notice a lump in their breast.

Hopefully anybody considering opting out of Obamacare will take the time to know their options and become savvy self-pay patients, instead of patients who are completely unprepared to find the affordable healthcare they are likely to need at some point.

Sean Parnell blogs on affordable health care options for people who pay directly for treatment at The Self-Pay Patient. This blog post originally appeared there in modified form on December 3, 2013.

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