Your Questions Answered: Health Insurance for the Perpetual Traveler

Health Insurance and the Perpetual Traveler

It is perhaps the biggest mistake we see long-term travelers make. Foregoing or ignoring health insurance.

We understand the reasons. Budget travelers are, almost by definition, short on both time and money; the very two things most needed to tackle the complicated and expensive health insurance market. But it wasn’t until we stirred up a hornet’s nest last week by diving into the politics of U.S. health insurance reform that we realized how long overdue this article really was. We received so many questions from our readers that we thought it worthwhile to dedicate an entire post to the subject of health insurance. 

Here are some of the most frequent questions we received along with our opinions and some resources to help answer them.

I’m young and healthy, do I really need health insurance?

Absolutely. Even young and healthy people get sick or have accidents. And in the U.S. the cost of treating those things can be devastating. How devastating? A recent study into common emergency room bills found that treating a sprained ankle can cost as much as $24,000. Got a kidney stone? That might run you $39,000. There goes your around-the-world travel budget.

Can’t I just get by with travelers’ health insurance?

Not in our view. Travelers’ insurance serves a useful roll, but it is not a replacement for a regular insurance plan. What travelers’ insurance does well is protect you for routine medical expenses while outside the country. It may also cover important things like medical evacuation services.

What travelers’ insurance does not do is protect against the cost of treating chronic disease. If, for example, you were diagnosed with cancer the expense of your treatment might quickly exhaust your policy’s coverage limit. It may also limit the amount of time you can spend in the U.S., which could negatively impact your care. And your travelers’ insurance policy almost certainly lacks a guarantee of renewal.

What that means is that your insurance company is free to drop you after your policy expires. If you’ve become sick within the last twelve months and have been submitting lots of medical bills, you can bet your travelers’ insurance company will not renew your policy.

What you want is a policy with high maximum coverage levels and guaranteed renewability. No travelers’ insurance we’ve ever seen has these features.

I thought Obamacare prevented insurers from rejecting me because of pre-existing conditions? Can’t I just wait until I get sick and get health insurance then?

You can try, but we wouldn’t recommend it for two reasons.

The first is that the law mandates that you obtain health insurance or pay a penalty. In 2014, the penalties start at $95 per adult or 1% of income and increase in subsequent years to $695 per adult or 2.5% of income. There’s a good info graphic that explains this in more detail here

Hold on a minute. Those penalties are tiny compared with the cost of insurance. Doesn’t it still make sense for me to pay the penalty and just buy insurance when I need it?

You can, but not without incurring a large amount of financial risk. And that brings us to the second reason why we wouldn’t recommend going without health insurance.

The trouble with trying to buy health insurance only after you get sick is that Obamacare is specifically designed to deter that kind of gamesmanship. Under the new law you can only purchase insurance during specific “Open Enrollment” periods. Open Enrollment for 2014 coverage is pretty generous and runs from October 1, 2013 until March 31, 2014. But that generosity goes away the following year. Open enrollment to buy 2015 coverage only runs from October 7 until December 31, 2014. 

If you didn’t buy insurance within those dates, you’ll have to pay the penalty AND wait until the following year’s Open Enrollment to buy a plan. If you sprain your ankle in the interim, that $24,000 emergency bill is all yours.

You mentioned a mandate earlier. Why is the government forcing me to buy insurance?

The government wants you to buy insurance for the same reason they have open enrollment restrictions: so that you don’t game the system.

Think about it this way. If you already have a medical condition that costs $20,000 per year to treat, the only way an insurance company can sell you insurance and still stay in business is by charging you more than $20,000 per year. If everyone waited until they incurred a $20,000 per year illness before getting insurance, then the annual cost of any policy covering pre-existing conditions would exceed $20K.

But if just one healthy person joins you in getting insurance, that would cause prices to fall by roughly half. Add another person and prices could come down to under $4,000 annually. All of a sudden health insurance begins to look like a good deal for the sick and the healthy alike.

There’s also a larger point here that seldom gets mentioned. The U.S. government already requires hospitals to treat anyone needing emergency care regardless of their ability to pay. As a country we don’t let folks die in the streets for lack of medical attention, and that is a good thing. But the cost of providing that care is paid by those of us who have insurance.

Folks who argue that they have a right to go without insurance are really arguing that they have the right to mooch off the system. They don’t want to pay for insurance today, but the rest of society is required to pay for their expensive medical treatment if they ever need it. And while these “rugged individualists” won’t see themselves as freeloaders, that is exactly what they are.

The sole purpose of the mandate is to reduce the number of these moochers and ease the burden on the rest of us.

So how much coverage should I have?

That is a more difficult question to answer with any specificity. How much insurance is right for you depends a lot on your own personal financial situation and individual risk aversion. I can’t tell you how much insurance you need, but I will tell you our approach to deciding how much is right for us.

As a rule we only carry insurance to cover losses we couldn’t otherwise handle. For example, we can afford to repair or replace our car in the event of an automobile accident. Therefore we don’t think it’s necessary to pay an insurance company a premium for collision insurance. We save the premium and self-insure that risk. We do, however, carry automobile liability insurance.

Our reasons for getting liability insurance are similar to why we want health insurance. First it is required by law (just like Obamacare). Second, tort law is as out of control in the U.S. as are medical costs. We don’t feel like we can self insure the hundreds of thousands of dollars in civil liabilities that could arise because of an automobile accident. Therefore, we have insurance to cover that. 

Healthcare is another category of expense that is so high in the U.S. that very few people are wealthy enough to self insure. But that doesn’t mean you need every doctor visit covered by insurance. If you’re healthy and can bear some financial risk consider opting for a “Bronze Plan” that has lower premiums and lower coverage.

I already have an individual insurance plan; what happens to me under Obamacare?

That depends upon when you bought or changed your existing plan. Plans existing prior to March 23, 2010 are “grandfathered” and are basically allowed to keep operating as normal. If you bought your plan after that date, it will have to meet new minimum coverage levels or you may have to pay the penalty mentioned above. You can find out more about grandfathered plans here

How much will health insurance cost under Obamacare?

Prices vary widely by insurer, individual, state, and even city. The best way to discover how much insurance will cost you is to shop for a plan on your state’s exchange. Scroll down this linked page for a list of state health care exchanges

If your exchange isn’t up and running yet, you can try out this nifty little calculator that not only estimates insurance premiums but also any subsidy you might be eligible for.

Can I use my insurance  in other states?

That depends on your specific insurance plan. While there is not yet a national insurance provider, many large insurance companies have networks that span multiple states. Depending on your insurer, and your policy, you may have access to doctors throughout the country. The only way to know is to check with your insurer.

Does it cover me when I travel overseas?

Insurance companies are not required to cover medical expenses incurred overseas and therefore most likely won’t. Some polices may differ, so check with your insurer.

This is an area where travelers’ insurance can be a helpful addition to your U.S. health insurance policy. Personally, we’ve never carried travelers’ insurance before, largely for the same reason we don’t carry collision on our automobile. Medical care is pretty reasonably priced outside the U.S. Most of the medical expenses we expect to encounter on the road will be for minor things. For more serious, and expensive, medical procedures we’d almost certainly want to return home if we could and would then rely on our U.S. insurance.

But even in the extreme case where one of us suffered a surprise heart attack and needed emergency bypass surgery, the International Federation of Health Plans tells us that procedure might cost $17,000 in Spain versus $150,000 in the U.S. The former cost is one we might want to insure where the latter is one we definitely will insure.

I live overseas. Do I still need U.S. insurance?

The only reason to buy insurance is because you expect it to cover some potential loss. If you don’t expect to incur medical expenses in the U.S., there is no reason to have a U.S. medical policy. Fortunately, Obamacare agrees and has exempted U.S. citizens living in foreign countries from the insurance mandate.

Before Obamacare, we’d have argued that U.S. citizens living abroad should still buy a catastrophic U.S. plan if they ever expected to come back to the states. Why? Because if you developed a pre-existing condition while outside the U.S. that condition may have made you uninsurable inside the U.S. Obamacare fixes that problem for you.

Now, when you come back to the states you can buy a new policy on an exchange regardless of your medical condition. You don’t even have to wait for the Open Enrollment period mentioned above. Returning citizens are given a special window to buy insurance on the exchange once they get back.

Where can I get more information?

Healthcare.gov is a good resource and should help answer any remaining questions you have.

One final question: Will I be subject to death panels?

LOL!

 

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22 Comments on “Your Questions Answered: Health Insurance for the Perpetual Traveler”

  1. Animalcouriers September 30, 2013 at 9:07 am #

    Wonderfully thorough post.

    Like

  2. B September 30, 2013 at 9:37 am #

    This is less about the US insurance market and more about travel insurance in general, but a few extra points:

    – Just want to second that travel insurance is meant to be emergency insurance only and your insurance company will repatriate you once your condition gets too expensive and send you home to fend for yourself. Example: friend’s parents were in a nasty car accident in India. The insurance company sat on the edges of their seats paying hospital bills until the earliest time they could get them medivac-ed home. This was long before full recovery!

    – Pregnancy travel insurance may not exist. Read the fine print.

    – Volunteer workers beware. I almost got insurance for volunteer work with a company earlier this year, and at the last minute found out they had a ridiculous definition of “manual labour”. (I found a different policy.)

    – One way trips – your company will want to repatriate you to your point of origin (not destination). If you buy insurance from your point of destination you may not be insured at all.

    I wrote more at the link below but the above were the big ones to me.
    http://fantasyholidays.wordpress.com/2013/08/10/travel-insurance-the-devil-in-the-detail/

    Like

    • Brian September 30, 2013 at 9:39 am #

      Great points. Thanks for adding to our Q&A.

      We’re surprised by how many people use travelers insurance as their primary health insurance. Like you say: read the fine print.

      Like

  3. Tom September 30, 2013 at 9:47 am #

    I had brain surgery followed by a heart attack while in Spain. Total cost $21,000 US. I am using a Blue Cross Medicare supplement program that does cover overseas expenses for “life – threatening” events, although the claim is now five months old without reimbursement. One thing I learned from all this: have enough money in the bank (or have enough ready credit) to pay for overseas medical expenses up front, then deal with the insurance company yourself. Hospitals overseas are loathe to do that themselves, and rightly so.

    Like

    • Brian September 30, 2013 at 9:53 am #

      More good points: International health providers may not take your insurance for payment even if you think they should.

      Also, when reading the “fine print” of your insurance coverage be wary of “weasel words” and vaguely defined terms. Coverage for “life threatening events” may sound clear enough, but who gets to decide what counts as “life threatening?” The policy may even explicitly define that term far more narrowly than you’d think possible.

      Like

  4. Patricia Awapara September 30, 2013 at 11:22 am #

    This is great info!!! thanks for sharing it with us! 😀

    Like

    • Brian September 30, 2013 at 11:30 am #

      My pleasure. Thanks for reading.

      Like

  5. globetrottingdoll September 30, 2013 at 12:21 pm #

    Another great post on such an important issue for travelers like us, or any independent contractor and/or freelance-anything living in the US without health insurance. Thanks for posting!

    Like

  6. Gunta September 30, 2013 at 2:25 pm #

    Best, most rational explanation of Obamacare I’ve seen yet!

    Like

  7. Lauren @ Peaks and Passports September 30, 2013 at 5:31 pm #

    Great thorough, straight-forward explanation of a complex issue! As someone who works in insurance (P&C, not health insurance), I know how difficult it can be to cut through the insurance-ese and explain coverage in plain English.

    Like

  8. Stuart M. October 1, 2013 at 12:55 am #

    How can anyone possibly be against Obamacare????

    Like

    • Brian October 1, 2013 at 10:36 am #

      There are good, honest, arguments against aspects of the bill. We’re not hearing those advanced, though. Because to debate the law honestly would be to discover that there is common ground to implement fixes.

      Like

  9. ch October 1, 2013 at 9:19 pm #

    So the open question is: If I am a perpetual traveler, what state should I buy a catastrophic plan under? My “domicile” state, where I receive my mail and have license plates from? And, what specific references are there in the bill are there that guarantee that the insurance company is required to keep the policy even though I don’t live in the state? Has Obamacare really changed this core “state regulated” issue?

    Like

    • Brian October 1, 2013 at 10:17 pm #

      I believe so, for several reasons.

      The big problem of becoming uninsurable under the existing insurance scheme disappears under Obamacare. The worse case scenario for us now is that we rent an apartment and move to Austin where there’s no question about where we live. More likely, if one insurer tries to drop us we can just go get another policy off the exchange. That’s something we couldn’t do under the old system if we developed a pre-existing condition. Now we can.

      We also think that the huge effort insurers currently put toward winnowing sick people from their rolls largely goes away under Obamacare. Resources currently directed to combing through 10-page applications and checking medical histories looking for errors mostly goes away because the applications go away.

      Like

      • ch October 1, 2013 at 10:53 pm #

        So what state do I apply in? I’m a full-time RV’er with SD license plates and a Washington state drivers license… Mail goes to a SD mail forwarding service.

        Like

        • Brian October 1, 2013 at 11:42 pm #

          Yours is more a question of getting your domicle right. We talk about that some here: https://everywhereonce.com/2011/11/14/how-to-become-a-global-citizen/

          My advice to you would be to get all your affairs organized in one state. Because, after all, if even you don’t know where you live, how do you expect to defend your residency status to some bureaucrat looking to deny you benefits?

          Like

          • ch October 1, 2013 at 11:50 pm #

            Thanks for the reply – so Obamacare really does nothing officially for full-time travelers. Same as it was, it seems with having to “defend” your residency…

            Like

            • Brian October 2, 2013 at 12:00 am #

              I think full-time travelers have to accept that we’re such a small minority that rules will almost never be written with us in mind. It’s the price we pay for living an unconventional lifestyle.

              So yes, I’d say we still need to take steps to make sure our residency is as bulletproof as possible. But that isn’t the same thing as saying “Obamacare does nothing for full time travelers.” I, for one, am sleeping far easier knowing that the health reform law gives me a whole host of protections and options that I never had before. Those things are pretty far from nothing.

              Like

  10. Kings On the Road October 1, 2013 at 11:37 pm #

    Thanks for illuminating what Obamacare is really all about. Best most readable explanation I’ve seen. Its a huge change and there will be growing pains but we finally have a President do something about an out of control health care crisis. Good things have happened already and it will get better.

    Now lets all call our congressional representatives to fund our government and not default on our debts. CALL EVERYDAY. We have too many friends sitting at the gates to our national parks. And we have visitors from all over the world who have come to see our parks and support the economies of our states. OPEN OUR PARKS!

    Like

  11. Blah blah May 28, 2014 at 5:39 am #

    This has nothing to do with international health insurance for the perpetual traveler. Wasted my time reading it.

    Like

    • Brian May 28, 2014 at 9:43 am #

      Hmm, that’s funny. The title clearly says “Health Insurance for the Perpetual Traveler” not “International Health Insurance.” So maybe reading a bit more carefully from the start would be a good way for you to save some time. But if you’d bothered to read a little further the article does talk about traveler’s insurance (a.k.a. international health insurance) and why we feel it offers insufficient coverage for U.S. citizens. You may disagree, which is your prerogative, but it’s not accurate to say the article “has nothing to do with international health insurance.”

      Like

  12. Ashlea April 25, 2016 at 4:14 pm #

    My husband and I are quitting our jobs for a month’s vacation in Europe. Called to get medical travelers insurance and since I had my first kidney stone within the past year, they will not affirm that it will be covered, even in a sudden recurrent medical problem plan where the pre existing condition exemption had been waived. They will not give specifics on how they decide whether or not to cover. I hesitate to purchase because it sounds like they will use whatever reason not to cover it they can find. This is the main reason I would like to have medical insurance while there, besides it being illegal not to have it and all. What can I do from here?

    Like

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