Author Topic: "Family Glitch" Health Insurance Question  (Read 602 times)

Field123

  • 5 O'Clock Shadow
  • *
  • Posts: 98
"Family Glitch" Health Insurance Question
« on: October 11, 2017, 04:44:22 PM »
Greetings,

Next week I will be starting a new job in a new City and am trying to figure out how to handle health insurance for my fiancee and I. Having done some research, I believe we are getting hit by what is known as the "family glitch". Here is the key info:

-New Salary: $70,000 + bonus (unknown)
-Fiance: $0 (unemployed currently as we just moved. Will likely obtain employment that does not offer any benefits. Thank Nannying/Retail etc)

-We're getting married on October 27th, so let's assume we are married now for the purposes of the discussion.

-The new job has $0 cost for employee medical coverage. The deductible is only $2000 for an individual or $4,000 for family. To add a spouse requires a $316 deduction every pay period (biweekly). So the spousal coverage will cost about $632 a month gross or about $400/month in net cash pay deductions.

-It seems that my fiancee can get a High Deductible plan ($7,100) through the ACA marketplace for about $230 per month. This is unsubsidized as apparently my income of $70,000 is too high to qualify for subsidies. I do not believe that any part of this $230 per month can be used as a tax deduction later when we file?

As we're both healthy and not planning to have kids anytime soon, it seems clear to me that the best path forward is to split our coverage and have her covered on her own unsubsidized individual policy. Is there anything I am missing or should be taking into account?? Is there any reason why I should add her through the work policy and pay the extra cost?

Thanks in advance for any info!

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 2799
  • Location: Emmaus, PA
Re: "Family Glitch" Health Insurance Question
« Reply #1 on: October 11, 2017, 06:30:03 PM »
If you max out an HSA for her it gets even cheaper. I don't see anything wrong with your analysis.

MDM

  • Walrus Stache
  • *******
  • Posts: 7193
Re: "Family Glitch" Health Insurance Question
« Reply #2 on: October 11, 2017, 10:44:19 PM »
If you max out an HSA for her it gets even cheaper. I don't see anything wrong with your analysis.
+1

For that matter, the OP may also qualify for his own HSA.  See 2016 Publication 969 - p969.pdf for other criteria beyond the deductible amount.

triangle

  • Stubble
  • **
  • Posts: 133
  • Location: North Carolina, USA
Re: "Family Glitch" Health Insurance Question
« Reply #3 on: October 12, 2017, 12:26:01 AM »
So your new wife could be added for $632 month and a $2000 yearly deductible. That her ACA plan premiums are cheaper but if serious care were needed to the point where deductibles are met then the cost would be slightly higher than your company plan. The other important thing to consider is what doctors are available as primary care physicians on the two different plans, whether that will make a difference to her or not.

Financially you could wait to get married only after she needs serious medical care, so that there will be a major-life-event that allows coverage to be added. Of course I am joking but maybe some people do try to game the system if there is a big enough financial incentive.

des999

  • 5 O'Clock Shadow
  • *
  • Posts: 96
Re: "Family Glitch" Health Insurance Question
« Reply #4 on: October 12, 2017, 07:30:16 AM »
the subsidies are based on MAGI, not the full 70k.  So, if you are saving a good deal of pre-tax money, you may qualify. 

Field123

  • 5 O'Clock Shadow
  • *
  • Posts: 98
Re: "Family Glitch" Health Insurance Question
« Reply #5 on: October 12, 2017, 10:33:16 AM »
If you max out an HSA for her it gets even cheaper. I don't see anything wrong with your analysis.
+1

For that matter, the OP may also qualify for his own HSA.  See 2016 Publication 969 - p969.pdf for other criteria beyond the deductible amount.

Thank you to everyone who replied for your input! I think I need to study up on HSA's. I had an HSA through my previous employer which I maxed out every year. The new employer does not offer an HSA.

It seems that you are suggesting that I can open new HSA accounts for my wife-to-be and I? I was always under the impression that HSA's had to be through the employer and the contributions were payroll deductions.

How does it work if you establish you own HSA? You contribute after-tax money and then write it off when you file like an IRA?

Field123

  • 5 O'Clock Shadow
  • *
  • Posts: 98
Re: "Family Glitch" Health Insurance Question
« Reply #6 on: October 12, 2017, 10:34:15 AM »
And for those of you who say it can be even cheaper with an HSA... what exactly do you mean?

Is the idea that we establish an HSA as I noted above, then pay the premiums out of the HSA account thereby capturing a tax deduction?

MDM

  • Walrus Stache
  • *******
  • Posts: 7193
Re: "Family Glitch" Health Insurance Question
« Reply #7 on: October 12, 2017, 11:02:05 AM »
It seems that you are suggesting that I can open new HSA accounts for my wife-to-be and I?
Yes, that may be the case.  You will treat each of you as a separate case.  Looking at each situation in turn, if one has a High Deductible Health Plan as defined in Pub. 969 (and doesn't participate in a Flexible Spending Account, etc.) that person may open and contribute to an HSA.

Quote
I was always under the impression that HSA's had to be through the employer and the contributions were payroll deductions.
How does it work if you establish you own HSA? You contribute after-tax money and then write it off when you file like an IRA?
Exactly.

You don't get to avoid FICA taxes as you do with an employer-sponsored plan but you do get the reduction in federal and (in most cases) state income tax.

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 2799
  • Location: Emmaus, PA
Re: "Family Glitch" Health Insurance Question
« Reply #8 on: October 12, 2017, 11:21:02 AM »
And for those of you who say it can be even cheaper with an HSA... what exactly do you mean?

Is the idea that we establish an HSA as I noted above, then pay the premiums out of the HSA account thereby capturing a tax deduction?

I don't think you can pay the premiums with the HSA, but you could pay for medical expenses that do come up.

But, what I've started doing after seeing recommendations here is to simply invest my HSA funds over a certain amount and pay medical expenses out of pocket.

I keep $2000 in cash in my HSA and the rest I invest in VTI, the best fund available through my HSA, every paycheck.