US health insurance as we approach FIRE

[caracarn]

I searched the forums and found nothing popping up so posting a new thread here.   Sorry if I was unable to find some old one and this is rehashing.

I was surprised a ton of things did not pop up but perhaps it is because currently in the US the option would be ACA as with a lower income level (we are targeting $40-48K in RE that we pull from our investments).   Is that the choice most people make (asides from rolling the dice and trying to go with no insurance which seems like a wrong choice to me)? 

We are on track to hit our FIRE number in 2-3 years so I'm trying to start to figure out if when we hit that can we really pull the trigger and health care seems to be the biggest part that is confusing me.    I'm 51 and my wife is 48 so we will still have many years before Medicare is available to be accessed.   Not sure if any other info is needed to provide some advice.

[SailingOnASmallSailboat]

You can get an idea of current costs by going on the ACA website and plugging in numbers. It won't help you with 2-3 years from now, but will give you an idea of what that picture is now. Check your current insurance company and the plan you have, looking at total costs (not just the ones you pay but the company contribution). Obviously there are lots of other companies, but you'd at least have a comparison.

If we were not using the ACA plan (in Vermont it's through the state health exchange), our costs would be on the order of an additional $1000+ a month for our family of 4 (our kids are 20 and 22 so still eligible to be on our insurance).

[yachi]

Definitely get on the ACA website and look at plans.  Part of the benefit of it is that health care companies have a place to market their health insurance plans, so even if you aren't qualifying for tax incentives, you can see what type of plans are available.

Now, what is everyone doing for dental and eye care?

[Morning Glory]

I just signed up for aca for myself and spouse, to start January 1 and I was impressed by the ease of the process. My projected income qualifies my kids for medicaid so they can't be on aca. Not that I have anything against medicaid but the application was a little more complicated and frustrating,  and the approval process takes longer.

[Glenstache]

I signed up for a plan concurrent with coasting as of Jan 1. Ot was very easy in WA... but that is a state with a political base that wants it to succeed. Other states have, um, less friendly sign up process. For dental I just added on delta.

[lhamo]

If you are in an expanded Medicaid state with good ACA options (such as Washington, noted by Glenstache above) and with somewhat predictable healthcare needs you can also consider alternating between years when you manufacture higher income (through Roth conversions and/or capital gains harvesting) and try to minimize your healthcare expenditures and years when you drop your income to below Medicaid and/or more heavily subsidized ACA cutoff levels and get a lot of your medical maintainence stuff done while you have very low copays and deductibles.  For me the sweet spot for maximum ACA subsidies is around 24k in income.  I have enough of a cash stash that I can easily stay within that for quite a few years before I shift to Medicare.  I will do smaller Roth conversions between now and age 65, and then bigger conversions from 65-72.

[chasesfish]

@caracarn - What exactly are you trying to figure out?

Healthcare expenses is a moderate to high income problem in the US.  If you can get to 250% or below of FPL, you qualify for both significantly reduced premiums through the ACA tax credit and cost sharing reductions.  If you're above that amount, it's just a financial cost.

I can't navigate our income below that, so I budget the $8700/year for insurance premiums then another $6,000 - $8,000 for our out of pocket costs between stuff that insurance never intends on covering and the stuff it counts towards the deductible.   You can readily get plans that are in the $6,500/person cap, so work with the premium and max out of pocket to figure out what to budget. 

As others have pointed out, if you can manufacture your income high and low by alternating years, you can do better than budgeting $15,000/year.   

Healthcare is expensive, the folks in other countries pay as they go with higher taxes for a decade or two while US Citizens keep more of their earnings but have to hit a bigger FIRE number to support that heatlhcare expense.

I also think those going without are taking a risk I can't stomach.

[stoaX]

I signed up for a plan concurrent with coasting as of Jan 1. Ot was very easy in WA... but that is a state with a political base that wants it to succeed. Other states have, um, less friendly sign up process. For dental I just added on delta.

I thought the states that didn't want the ACA to succeed didn't set up their own sign up process and just defaulted to the federal process through healthcare.gov.   

Are you saying the federal website is "unfriendly"?

[chasesfish]

I signed up for a plan concurrent with coasting as of Jan 1. Ot was very easy in WA... but that is a state with a political base that wants it to succeed. Other states have, um, less friendly sign up process. For dental I just added on delta.

I thought the states that didn't want the ACA to succeed didn't set up their own sign up process and just defaulted to the federal process through healthcare.gov.   

Are you saying the federal website is "unfriendly"?

I also don't understand this.  In South Carolina, the easiest part is the signup.

Actually getting the insurance to cover stuff?  That's a different argument.

[caracarn]

So sorry all was not checking here during the holidays but thanks for the responses.

So yes, to answer @chasefish and others, I am trying to figure out how to those that FIRE cover healthcare in US before you get to 65 and can get on Medicare.  As with you chasefish, no way I would take that risk with the healthcare situation in US where one unexpected injury while uninsured could wipe away your entire stache in a year or less.  To me it's not a risk, it's willful foolishness.   Assuming you are young and healthy can change in a heartbeat and I have several friends and relatives as examples.  One I'll share if 48 year old friend at the time, the picture of health.   Woke up babbling incoherently on his sleep while he and his wife were at a hotel for New Year's Eve.  Was a brain tumor and in two years he was dead, but the cost of treatment in between would have been crippling (I'd say impossible) without insurance.   As I said, just foolishness to assume this could not happen to you.

So if I understand correctly would need to get an ACA plan (in Ohio now, but we are thinking of moving to TN when we FIRE, but I feel that is a less ACA friendly state so would love to hear that or how I find that out) to cover the gap and likely will be around $1,000/month.   So we had our FIRE number at $40K but targeting $48K to give us a cushion but seems that that cushion would be eaten up by insurance costs right now and then some so our min number now moves to $52K ($12K to cover insurance) correct? 

That's what I am trying to figure out as when we were working out our FIRE number we are just estimating our expenses but I knew I had a gap of some sort in healthcare, but not aware it would be that large.   Sadness as I realize that likely adds several years to what was looking like a near term reach of FIRE target.

[lhamo]

Here is a useful overview of health insurance in Tennessee:

https://www.healthinsurance.org/health-insurance-marketplaces/tennessee/

Looks like they use the healthcare.gov website to manage their enrollment.  I've never used it because my state has its own exchange.  But it should be pretty simple to do a dummy application -- just go to the site and put in a target zip code (based on where you intend to live -- though if you want a better chance of a good research hospital like Vanderbilt included then you might want to try with that area, too) and your basic information, including estimated income.  I would price out silver plans first -- that will help you narrow down what company has reasonable rates for a good network.  The plans tend to be in similar pricing bands across the three tiers, so a moderate cost silver plan will probably also be a moderate cost bronze plan.

If the prices you see look unaffordable, try playing around with your income.  Under 200% of federal poverty level is the sweet spot for the biggest subsidies.  If you have the ability to live off savings or do some random harvesting of capital gains, that is one way to bring your costs down for a year or more and get great coverage.  You can do a bunch of medical stuff one year on a low cost plan, then take a year off and bump down to a lower cost bronze plan while you harvest more capital gains or do more Roth conversions.

[caracarn]

OK, so since we will FIRE first in OH, I went ahead and just filled out the application for 2022 using our estimated $48K annually we would FIRE at.   It says in Ohio that makes us eligible for coverage are reduced rated through Medicaid and next steps are to wait for a decision from the state and then does not even take me to plans, so it seems we may be covered at that income level outside the ACA, and perhaps at no or very low premiums?

[chasesfish]

OK, so since we will FIRE first in OH, I went ahead and just filled out the application for 2022 using our estimated $48K annually we would FIRE at.   It says in Ohio that makes us eligible for coverage are reduced rated through Medicaid and next steps are to wait for a decision from the state and then does not even take me to plans, so it seems we may be covered at that income level outside the ACA, and perhaps at no or very low premiums?

The next step is you will get an eligibility notice.  Unless you have three kids, it's unlikely 48k in income gives you medicare.  How many dependents do you have?

The best resource I've found is to lookup the Kaiser Family Foundation cost estimate.  Your premiums will likely be ~$350 or so after the impact of the healthcare tax credit.   You'll still be responsible for the deductible.

[terran]

To qualify for medicaid you need to have income under 138% of the Federal Poverty Level (FPL), which by my math would require you to have at least a 6 person household 6 kids to happen at $48k income anywhere but Alaska or Hawaii, so if that's not the case I'm thinking something might have gone wrong with your application.

If you do qualify for medicaid then you don't qualify for ACA subsidies. There's also an ugly loophole in states that didn't expand medicaid (including TN) that requires income over 100% FPL to get ACA subsidies, and below that I guess you're just out of luck.

[seattlecyclone]

To qualify for medicaid you need to have income under 138% of the Federal Poverty Level (FPL), which by my math would require you to have at least 6 kids to happen at $48k income anywhere but Alaska or Hawaii, so if that's not the case I'm thinking something might have gone wrong with your application.

6-person household, not six kids.

[terran]

To qualify for medicaid you need to have income under 138% of the Federal Poverty Level (FPL), which by my math would require you to have at least 6 kids to happen at $48k income anywhere but Alaska or Hawaii, so if that's not the case I'm thinking something might have gone wrong with your application.

6-person household, not six kids.

Duh, right.

[Dictionary Time]

I have a question on household composition-

Let’s say I have a 20 year old child that I’m paying to send to college, so they are my dependent. They add to my total household count, but their income is also going to my household total, correct?

What if that same child isn’t going to college, but is living with me. I’m not providing over half of their support, just letting them stay at home. So I can’t claim them tax-wise. Now they don’t add to my aca household, and their income doesn’t count for my income. And they can apply to aca or Medicaid on their own merits?

And how does the age fit in? If they are 26 and I’m supporting them, do we all go in together? Or does that age threshold apply to aca as well as employee care?

Elderly parents that you’re supporting seem like another conundrum. Luckily I don’t have that situation.

[SailingOnASmallSailboat]

If they're living with you, how is that not providing half support?

Yes, for ACA you have to include the income they make if you're putting them on your insurance. If they are NOT a dependent, then yes, I believe they can apply on their own for ACA. One of the first questions asked (IIRC - my state is on its own exchange) is if anyone can claim you as a dependent on their taxes; if yes, then you can't do your own policy.

I *think* (still sorting it out) that there are 2 separate categories. There's tax family (so dependents and the like) and there's ACA family. You can keep your under 26-year-old kid, even if they are not a dependent tax-wise, on your ACA plan. Don't ask me (yet) how this works with forms - this will be our first time dealing with this.

The 26 year old cap applies regardless of whether you've got an employer sponsored plan or are on an ACA one.

[seattlecyclone]

I have a question on household composition-

Let’s say I have a 20 year old child that I’m paying to send to college, so they are my dependent. They add to my total household count, but their income is also going to my household total, correct?

Yes.

What if that same child isn’t going to college, but is living with me. I’m not providing over half of their support, just letting them stay at home. So I can’t claim them tax-wise. Now they don’t add to my aca household, and their income doesn’t count for my income. And they can apply to aca or Medicaid on their own merits?

Under 26 you can choose between enrolling a non-dependent child in your family's plan or they can enroll in their own plan. Either way, because they're not your dependent they're not part of your "tax family" or "coverage family" for the purpose of calculating premium tax credits. They'll get their own premium subsidies based on their own income, as will you. If you choose to go in on a family plan together you'll need to figure out how to properly allocate the premiums between you/spouse/dependents and your non-dependent child. For that reason it may be simpler to sign them up for their own plan, but for various other reasons you may find it beneficial to all go in on one deductible together and deal with the complications at tax time.

If they're living with you, how is that not providing half support?

Depends on how much of their own living expenses they're providing, I think. Shelter is but one portion of a person's "life support" needs. If the kid is paying for some or all of their own food/clothing/health care/transportation/utilities/etc., a live-in adult child could easily be paying more than half their support on their own.

Furthermore a 20-year-old is too old to be claimed as a "qualifying child" dependent, unless they're a full-time student or "permanently and totally disabled." The "qualifying relative" standard would be used instead. Someone needs a gross income under $4,300 to be a qualifying relative dependent, even if someone else is paying the majority of their support.

[terran]

There's lots of good information on household composition and what/who's income to include at https://www.healthcare.gov/income-and-household-information/income/ and the links therein.

[Glenstache]

I signed up for a plan concurrent with coasting as of Jan 1. Ot was very easy in WA... but that is a state with a political base that wants it to succeed. Other states have, um, less friendly sign up process. For dental I just added on delta.

I thought the states that didn't want the ACA to succeed didn't set up their own sign up process and just defaulted to the federal process through healthcare.gov.   

Are you saying the federal website is "unfriendly"?

I also don't understand this.  In South Carolina, the easiest part is the signup.

Actually getting the insurance to cover stuff?  That's a different argument.

This has improved since last I looked at it. I did go look at the Alabama page and it had a number of broken links, including the one to the federal page. It felt like "we're doing as little as we can." That said, I have no opinion on the fed page as WA has an easy to use portal.

[DaMa]

Funny you mention Alabama.  The Blue Cross plan there is shockingly horrible.  My coverage ended 12/31 and they shut off my access to their web app.   I have December claims that haven't even processed yet.  Which is hopefully the last in a long list of problems with them.

I enrolled in the ACA in Michigan as of 1/1.  I am living off of savings and controlling my income level using Roth conversions.  I'm targeting $19320 with is 150% FPL (single).  That gives me maximum subsidy and minimum cost sharing.  I went with a Silver plan for $100 a month with a $750 OOP maximum with a Blue Cross Michigan HMO. The PPO option with national coverage was $400 per month with $1300 OOP maximum.

I have $1000 per month in my expense modeling for ONE person, and I don't expect it to go away when I turn 65.  Medicare doesn't cover everything.  I'm 53.

[caracarn]

OK, so since we will FIRE first in OH, I went ahead and just filled out the application for 2022 using our estimated $48K annually we would FIRE at.   It says in Ohio that makes us eligible for coverage are reduced rated through Medicaid and next steps are to wait for a decision from the state and then does not even take me to plans, so it seems we may be covered at that income level outside the ACA, and perhaps at no or very low premiums?

The next step is you will get an eligibility notice.  Unless you have three kids, it's unlikely 48k in income gives you medicare.  How many dependents do you have?

The best resource I've found is to lookup the Kaiser Family Foundation cost estimate.  Your premiums will likely be ~$350 or so after the impact of the healthcare tax credit.   You'll still be responsible for the deductible.

Yes, that is what the site said would happen.  Assume that takes weeks, not seen anything yet.  I am looking for a paper letter as I assume it is government and it will not be automated and attached to my ACA application.