Author Topic: ACA is so confusing - have some questions  (Read 2834 times)

FernFree

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ACA is so confusing - have some questions
« on: April 10, 2018, 02:32:14 PM »
Hi, all.  FIRE is quickly approaching and after lots of googling around I still can't find some details I need about ACA. 

My main question is:  If I quit my job mid-year and transition to ACA insurance, how do the subsidies work?  Do I declare for annual income:
a) my actual YTD income at the point of transition
b) my estimated 2018 total income which will be much higher than my 2019 FIRE income
c) my "annualized" new income which I will artificially force to the correct level for subsidies by moving cash from IRA to Roth IRA to make up any shortfall.

And then, if I do this step incorrectly and receive subsidies, when I file my tax return do you do a true-up and maybe end up having to return any subsidies gained by doing the step above incorrectly (or by incorrectly forecasting your income in general).

Another way if phrasing this is:  If I FIRE mid-year and I've already earned too much to get the subsidies, am I out of luck for this year, but then can re-adjust to my new normal for next year at open-enrollment which will be in the subsidy range?

And my second question is:  How does it work with the ACA for snow-birders or RV'ers?  Anything I can find looks like all of the insurance is based on your local area and doesn't travel out of state.  I assume there are exceptions for emergencies, but then you run the risk of them deciding your event is not an emergency and refusing coverage after the fact.  Any advice here?

Thanks!


seattlecyclone

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Re: ACA is so confusing - have some questions
« Reply #1 on: April 10, 2018, 03:10:52 PM »
Another way if phrasing this is:  If I FIRE mid-year and I've already earned too much to get the subsidies, am I out of luck for this year, but then can re-adjust to my new normal for next year at open-enrollment which will be in the subsidy range?

Yes to both parts, essentially. Your premium tax credit is based on your income for the whole year. Any difference between the subsidy they give you up front based on your estimated income will be reconciled with what it should be based on your year-end income on your tax paperwork.

secondcor521

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Re: ACA is so confusing - have some questions
« Reply #2 on: April 10, 2018, 03:11:42 PM »
Congratulations on your FIRE!

I'm not a complete expert on the ACA, but I did spend the night at a Holiday Inn last night.  And I switched to the ACA mid-year in 2016 when I FIREd so I can describe how it worked for me and how I think it will work for you.

Assuming you worked the first part of this year and plan to leave your job and its income sometime in the middle of 2018 and you want to switch to ACA at that point:

You will go to your state exchange and apply for coverage to start in the middle of the year.  Usually most employer coverage will go through the end of the calendar month of your last day, so for example if you quit today, April 10, your employer coverage would normally run through April 30th and you'd want ACA coverage starting May 1st.  (There are some games you can play with COBRA if you want to skip May and start ACA on June 1st if you want to.)

So you'll apply for coverage starting May 1st.  Since this is in the middle of the year, you'll have to have a qualifying event, which is the loss of your employer coverage.

If you want to get subsidies, you'll have to provide an income estimate for 2018.  This is whatever you think the income your 2018 tax return will look like.  It, in theory, should include any income you have received plus any income you expect to receive or generate via Roth IRA conversions.  Note that most CSRs at the exchange are not familiar with early retire types and so you may have to explain your plan to them a few times, but eventually they will get it.

Your subsidies will be based on your income estimate and will be paid directly to the insurance company.

Come tax time for 2018 (about a year from now), you'll figure out the subsidy you received vs. the subsidy you should have received, and you'll true things up.  This is done via Form 8962.  If you got less of a subsidy than you should have, you'll receive an additional credit on 1040 line 69.  If you got more of a subsidy than you should have, you'll have to repay some or all of it on 1040 line 46.  Note that there are income-based repayment limitations, so you may not have to repay all of the difference.

And then in the fall of 2018, you'll estimate your 2019 income for your 2019 subsidy, and the process repeats itself.  You'll be able to estimate a lower income.  They may ask for an explanation, and all you have to say is that you don't work any  more and so your income is lower.

As far as your question about RV'ers, I'm not as certain on that.  My understanding is that most ACA policies are as you suspect:  There is decent coverage if you get health care locally, and they'll cover emergency care if you're out of area.  You can either call and get a preauthorization for the coverage, or if it's a super-duper emergency then you can go to the ER and argue with the insurance company after the fact if they don't approve the care for some reason.  There is also special traveling insurance for RVers that I think I've seen mentioned.  @arebelspy has RVed around and so he might have a comment.

DreamFIRE

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Re: ACA is so confusing - have some questions
« Reply #3 on: April 10, 2018, 05:38:00 PM »
The PCT is one thing, but the CSR subsides do not need to be paid back if your income ends up higher than estimated.

ePalmtrees

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Re: ACA is so confusing - have some questions
« Reply #4 on: April 11, 2018, 10:13:03 AM »
I don't think you can adjust your income for subsidies by moving your IRA to a Roth IRA. I'm not sure how that would work anyway, but regardless, I'm pretty sure you'll pay based on your income before any kind of IRA contributions. If that's not true, I'd definitely like to know.

In other words, they aren't going to let you get a subsidy because you decided to put money away for retirement.

To answer your other question, if you over or underestimate your income, you reconcile it at tax time and either get money back if you over paid, or owe money if you got subsidies you shouldn't have.

secondcor521

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Re: ACA is so confusing - have some questions
« Reply #5 on: April 11, 2018, 11:47:22 AM »
I don't think you can adjust your income for subsidies by moving your IRA to a Roth IRA. I'm not sure how that would work anyway, but regardless, I'm pretty sure you'll pay based on your income before any kind of IRA contributions. If that's not true, I'd definitely like to know.

In other words, they aren't going to let you get a subsidy because you decided to put money away for retirement.

Both the above are inaccurate.

Converting money from a traditional IRA to a Roth IRA creates taxable income, which adds to AGI and ultimately reduces the ACA PTC one receives.  (I think OP was thinking of adjusting income up, not down as ePalmtrees appears to have interpreted.)  A Roth conversion must be done by the end of the tax year in question, and as of the new tax law (i.e., now) cannot be undone.

Contributing to a traditional IRA can reduce taxable income if it is a deductible contribution, which reduces AGI and ultimately increases the ACA PTC that one receives.  And contributions can be made up until the tax filing deadline for the year in question.

DreamFIRE

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Re: ACA is so confusing - have some questions
« Reply #6 on: April 11, 2018, 04:25:54 PM »
To answer your other question, if you over or underestimate your income, you reconcile it at tax time and either get money back if you over paid, or owe money if you got subsidies you shouldn't have.
This comment isn't completely true.  It's true for the PCT, but not CSR subsidies, as I mentioned in my previous statement in this thread.

ePalmtrees

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Re: ACA is so confusing - have some questions
« Reply #7 on: April 12, 2018, 04:22:09 PM »
I don't think you can adjust your income for subsidies by moving your IRA to a Roth IRA. I'm not sure how that would work anyway, but regardless, I'm pretty sure you'll pay based on your income before any kind of IRA contributions. If that's not true, I'd definitely like to know.

In other words, they aren't going to let you get a subsidy because you decided to put money away for retirement.

Both the above are inaccurate.

Converting money from a traditional IRA to a Roth IRA creates taxable income, which adds to AGI and ultimately reduces the ACA PTC one receives.  (I think OP was thinking of adjusting income up, not down as ePalmtrees appears to have interpreted.)  A Roth conversion must be done by the end of the tax year in question, and as of the new tax law (i.e., now) cannot be undone.

Contributing to a traditional IRA can reduce taxable income if it is a deductible contribution, which reduces AGI and ultimately increases the ACA PTC that one receives.  And contributions can be made up until the tax filing deadline for the year in question.

As for the first part, why did the original poster want to adjust their income up?

As for the second, are you kidding me? I was sure it was otherwise. I guess that's what happens when you assume. That's really annoying that I didn't know that. I might have taken advantage of that. Paying ACA premiums are the bane of my existence.

FIFoFum

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Re: ACA is so confusing - have some questions
« Reply #8 on: April 12, 2018, 04:43:25 PM »
This blogger has done a good job keeping up with the changes over time in being able to find an ACA plan that is actually useful in multiple states: https://wheelingit.us/2017/10/31/health-insurance-time-2018-considerations-for-pre-medicare-rvers/

(The short version is that there is at most one plan now that allows for this; it requires that RVers select and establish a Florida domicile.)

seattlecyclone

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Re: ACA is so confusing - have some questions
« Reply #9 on: April 12, 2018, 05:48:07 PM »
As for the first part, why did the original poster want to adjust their income up?

There's a lower bound on income for the ACA subsidies (either 100% of FPL or 138% depending on whether or not your state expanded Medicaid). Below that, your choices are to pay full price for an exchange plan, or go on Medicaid. Someone who doesn't want to do either of those things could do some Roth conversions to get their income within the range where they're eligible for premium subsidies.

chasesfish

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Re: ACA is so confusing - have some questions
« Reply #10 on: April 13, 2018, 05:58:09 AM »
Replying to the RV/ Full Time Travel question - I've been researching this a lot, especially since my wife may need follow up or recurring care at a couple specialty hospitals on different sides of the country:

Some counties have more robust plans than others.  The starting point is finding a Big 4 carrier, then picking a bigger network plan.

I'm immensely frustrated because one of our plans was to domicile our address at my in-laws, but there is one small network plan provided by the local hospital that doesn't provide us with anything we need.  There have been some good options in states with Anthem, but its still an interesting deal.

FernFree

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Re: ACA is so confusing - have some questions
« Reply #11 on: April 23, 2018, 01:07:37 PM »
@secondcor521 Ė thanks for the congrats, but I havenít actually pulled the plug yet.  Have some loose ends to tie up and understanding this is one of them.  Given that my monthly premiums will probably be $1000+ for the remainder of this year, (think I already blew past the 400% FPL limit) I think Iíll try to wait until fall to FIRE and then for 2019 Iíll qualify for subsidies.

@DreamFIRE Ė thanks for the clarification around the CSR subsidies.  Thatís a surprise.  And to clarify Ė in order to receive those CSR subsidies you have to be below 138% of FPL and buy a silver plan? Iím not sure my income will be that low, but if you donít have to pay it back anyway.....

@ePalmtrees Ė
Quote
As for the first part, why did the original poster want to adjust their income up?
I live in Texas and they didnít expand medicare, so I have to make sure my income is high enough to qualify for subsidies or I fall into the black hole where I couldnít get medicare or Obamacare.  This is usually referred to as the ďcoverage gapĒ, caused by the Republicans suing that forcing states to expand medicare was unconstitutional and then not amending the law to correct for this new problem they caused.

@seattlecyclone Ė
Quote
There's a lower bound on income for the ACA subsidies (either 100% of FPL or 138% depending on whether or not your state expanded Medicaid)
Which is it if your state did not expand Medicaid?  From my research Iím assuming Iím good if Iím 100% or above?

@chasesfish Ė what is a big 4 carrier?  I read somewhere that there are zero national plans available from Texas, so Iím assuming Iím out of luck.  However, I might have some level of VA coverage available.  Iíll wait til I pull the plug and have more time to research to figure that part out.

Honestly, this healthcare maze is just so ridiculous.  I want to just tell the U.S. to take their shitty healthcare and shove it!!!!  Unfortunately my children both live in Texas, so it would be hard to leave them.  I really canít see getting another job just for the ability to get affordable insurance.  I would much rather move to a third-world country and just pay my affordable medical bills as they come without even needing insurance.

seattlecyclone

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Re: ACA is so confusing - have some questions
« Reply #12 on: April 23, 2018, 01:13:44 PM »
@seattlecyclone Ė
Quote
There's a lower bound on income for the ACA subsidies (either 100% of FPL or 138% depending on whether or not your state expanded Medicaid)
Which is it if your state did not expand Medicaid?  From my research Iím assuming Iím good if Iím 100% or above?

Yes, I believe so.

secondcor521

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Re: ACA is so confusing - have some questions
« Reply #13 on: April 23, 2018, 01:23:10 PM »
@DreamFIRE Ė thanks for the clarification around the CSR subsidies.  Thatís a surprise.  And to clarify Ė in order to receive those CSR subsidies you have to be below 138% of FPL and buy a silver plan? Iím not sure my income will be that low, but if you donít have to pay it back anyway.....

To get CSRs you need to buy a silver level plan and have an AGI below 250% of FPL.  There are three levels of CSR and three income bands relative to FPL to get them (AV = actuarial value):

100% to 150% of FPL, AV is increased to 94% (better than a Platinum plan)
150% to 200% of FPL, AV is increased to 87% (nearly as good as a Platinum plan)
200% to 250% of FPL, AV is increased to 73% (better than the normal 70% for a regular Silver plan)

Note that receiving CSRs, which can be quite beneficial, is based on your estimated income that you report to the exchange, not your actual income on your tax return later.  Also, there is no reconciliation at tax time, so if you estimate 199% of FPL and receive CSR 87 level benefits, and then your AGI turns out to be 255% of FPL, there is no payback, clawback, or any other impact on your taxes.

honeyfill

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Re: ACA is so confusing - have some questions
« Reply #14 on: April 23, 2018, 03:38:07 PM »
If you know you are already over the subsidy income limit for 2018, you may want to look at  taking COBRA  for the rest of 2018.  any money you have spent on HC will count toward your deductible and you can continue the vision and dental as well.  The COBRA cost may be very similar to some of the plans under ACA.  Once you start COBRA , don't forget to  switch to ACA at the end of the year during normal enrollment for 2019. Other wise you have to stay on COBRA for 2019.
 

FernFree

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Re: ACA is so confusing - have some questions
« Reply #15 on: April 26, 2018, 09:29:25 AM »
Great suggestion, Honeyfill.  My other complication is that I have an 18-year-old on my healthcare, but she's no longer a dependent for 2018.  I'm worried that if/when I go to sign up for ACA, they'll say that she has to sign up on her own, and her income is probably in medicare range which, in Texas, equals SOL, no healthcare.  COBRA would at least ensure continuity for her for the rest of this year, but I thought it was much more expensive.  It looks like our ACA w/o subsidies will be around $600/month.

I've done some modelling on the ACA website and on healthsherpa.com, but to add an 18-year-old you don't have an option to even say that they are non-dependent under 26 yrs old.  The written guidance though says that if they are on your plan at your employer, they can be on your ACA plan. 

Why is everything so complicated!!!??!!  haha  You need a PhD to navigate our dang system.

chasesfish

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Re: ACA is so confusing - have some questions
« Reply #16 on: April 26, 2018, 10:48:49 AM »
Big 4 is Blue Cross/Anthem, Cigna, Aenta, United Healthcare.

Austin has BCBS of Texas with the full range of plans.

You'll still have to deal with the hassle of in-network/out of network coverage if you go outside the state of Texas, but its more than likely BCBS/Anthem will have a contract with the provider(s) once you get the approvals.

Altons Bobs

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Re: ACA is so confusing - have some questions
« Reply #17 on: April 26, 2018, 11:14:10 AM »
I'm in Texas, BlueCross BlueShield only sells HMO Individual plans in TX, no coverage outside of TX except for emergencies.

chasesfish

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Re: ACA is so confusing - have some questions
« Reply #18 on: April 29, 2018, 03:18:54 PM »
I'm in Texas, BlueCross BlueShield only sells HMO Individual plans in TX, no coverage outside of TX except for emergencies.

Ah, so I'd get to have the fun of the local HMO doc approving the out of network procedure.

My hometown has no big 4 carrier and an HMO with about a 30 mile radius network, I guess Texas seems luxurious compared to that