Author Topic: ACA subsidies while living off savings?  (Read 2702 times)

Schaefer Light

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ACA subsidies while living off savings?
« on: January 22, 2019, 08:00:31 AM »
I lost my job back in December and I'm trying to decide between COBRA coverage through my old employer and an ACA plan.  The two have roughly the same monthly premiums, but if I can get a government subsidy to help pay for the ACA plan it will obviously be much cheaper.  Here's my problem - I'm currently living off savings and thus have no source of income so there's no way I can provide a "proof of income" that will qualify me for a subsidy (aka premium tax credit).

I called the folks at Healthcare.gov today, and they said I would have to submit a pay stub or W2 form from my old job as proof of income since I didn't have any other income to report.  I said "wouldn't that disqualify me from receiving a subsidy since my income was higher than 400% of the Federal Poverty Level?" and the lady said "yes, that's correct".  I said "but I don't have any income" and she said I needed income of at least 100% of the federal poverty level to get the subsidy.  I told her I understood this, but at the moment I don't have any income and could thus use some help with paying my insurance premiums.  She couldn't provide any advice as to how to make this happen.

Has anyone here had success with getting the premium subsidies without a current source of income?  I realize that at the end of the year I'll have to settle up with the IRS if I end up making too much (or too little) to qualify for them.  I think it's ridiculous that someone could make too little to get the subsidies, but that's a topic for another post.

Peachtea

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Re: ACA subsidies while living off savings?
« Reply #1 on: January 22, 2019, 12:55:31 PM »
Have you applied for unemployment? Unemployment benefits count as income for ACA subsidy calculations and would count for current proof of income. Would it be enough to get you pass the 100% poverty level? The reason less than 100% poverty line doesnít get subsidies is because itís presumed at that income you qualify for Medicaid. Have you looked into that? (I know almost zero about it, so canít tell you if youíre likely to be eligible.)

Curmudgeon

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Re: ACA subsidies while living off savings?
« Reply #2 on: January 22, 2019, 01:25:42 PM »
Savings don't count as income, so you will need something (side-hustle income, dividends/cap gains, unemployment, etc.) to get you above 138% of the Federal Poverty Level (maybe 100% of FPL in some states?) before you qualify for ACA.  Below that, you qualify for Medicaid or other low-income forms of healthcare.

Showing a pay stub -even an old one - won't affect whether, at the end of the year, you were eligible for the premium tax credit (PTC).  Only your tax return determines that.  So, if you think you will be over 138% FPL for the year, show the pay stub, and if you can't get the PTC now, at least know you'll be able to get it as a refund when you do your taxes.  But I think you could be in for some issues if you go on ACA, and then can't show income above 138% FPL at the end of the year.

mozar

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Re: ACA subsidies while living off savings?
« Reply #3 on: January 22, 2019, 01:53:54 PM »
When I lost my job in March 2018 I signed up for ACA. They used my pay stub to get me over the 138% or whatever it is. Since I had already made 20k that year. The paperwork I submitted was my pay stub and an affidavit saying I have no current income. I got a 300 subsidy and paid 60 a month for the rest of 2018. I have had no income since march. In 2019 they forced me to go on Medicaid, which I'm pissed about because I had a great plan. You can't voluntarily pay for health insurance afaik. When I did my paperwork for 2019 I again submitted an affidavit stating no income and on the affidavit itself it asks if you are receiving unemployment and I said yes. In my state (md) it doesn't count as income. Hope that helps.

jim555

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Re: ACA subsidies while living off savings?
« Reply #4 on: January 22, 2019, 02:19:30 PM »
In non-expansion states you need at least 100% FPL to get subsidized coverage, less and you get zilch.  Roth conversions or IRA withdrawals can create income for this.
Your state is to blame for this situation.

Schaefer Light

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Re: ACA subsidies while living off savings?
« Reply #5 on: January 22, 2019, 03:11:17 PM »
Have you applied for unemployment? Unemployment benefits count as income for ACA subsidy calculations and would count for current proof of income. Would it be enough to get you pass the 100% poverty level? The reason less than 100% poverty line doesnít get subsidies is because itís presumed at that income you qualify for Medicaid. Have you looked into that? (I know almost zero about it, so canít tell you if youíre likely to be eligible.)
I won't be eligible to apply for unemployment until the period that my severance package covers has passed, so I won't have any income for several months if I don't land a new job.  In my state, you don't qualify for Medicaid or subsidies if your income is less than 100% of the FPL.

SKL-HOU

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Re: ACA subsidies while living off savings?
« Reply #6 on: January 22, 2019, 03:16:26 PM »
Have you applied for unemployment? Unemployment benefits count as income for ACA subsidy calculations and would count for current proof of income. Would it be enough to get you pass the 100% poverty level? The reason less than 100% poverty line doesnít get subsidies is because itís presumed at that income you qualify for Medicaid. Have you looked into that? (I know almost zero about it, so canít tell you if youíre likely to be eligible.)
I won't be eligible to apply for unemployment until the period that my severance package covers has passed, so I won't have any income for several months if I don't land a new job.  In my state, you don't qualify for Medicaid or subsidies if your income is less than 100% of the FPL.

Are you sure? If you received a lump sum, I believe you should be able to collect unemployment (not sure if it depends on the state).

Schaefer Light

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Re: ACA subsidies while living off savings?
« Reply #7 on: January 22, 2019, 03:23:25 PM »
Showing a pay stub -even an old one - won't affect whether, at the end of the year, you were eligible for the premium tax credit (PTC).  Only your tax return determines that.  So, if you think you will be over 138% FPL for the year, show the pay stub, and if you can't get the PTC now, at least know you'll be able to get it as a refund when you do your taxes.
That's true, but I could really benefit from the premium subsidies now.  I expect to have a new job a year from now, so it won't be nearly as beneficial (from a cash flow perspective) to get a tax credit when I file my 2019 taxes. 

I guess my options are:
1) Sign up for a marketplace plan costing roughly $600 per month with a possible tax credit next year or,
2) Sign up for COBRA costing roughly $600 per month and get no tax credit.

At least there's a chance I'll get a tax credit if I choose the marketplace plan.  I just wish I could get some help up front with the premium payments.
« Last Edit: January 22, 2019, 03:25:24 PM by Schaefer Light »

Schaefer Light

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Re: ACA subsidies while living off savings?
« Reply #8 on: January 22, 2019, 03:24:25 PM »
Have you applied for unemployment? Unemployment benefits count as income for ACA subsidy calculations and would count for current proof of income. Would it be enough to get you pass the 100% poverty level? The reason less than 100% poverty line doesnít get subsidies is because itís presumed at that income you qualify for Medicaid. Have you looked into that? (I know almost zero about it, so canít tell you if youíre likely to be eligible.)
I won't be eligible to apply for unemployment until the period that my severance package covers has passed, so I won't have any income for several months if I don't land a new job.  In my state, you don't qualify for Medicaid or subsidies if your income is less than 100% of the FPL.

Are you sure? If you received a lump sum, I believe you should be able to collect unemployment (not sure if it depends on the state).
Yeah.  I verified that with a lawyer.  He said I could apply now, but I wouldn't be eligible to receive benefits until the severance runs out.

electriceagle

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Re: ACA subsidies while living off savings?
« Reply #9 on: January 22, 2019, 11:15:45 PM »
Savings is not income, but it does produce the stuff. Particularly interest and dividends.

You could also rebalance profitable funds in your taxable brokerage accounts or do a traditional-to-roth IRA conversion.

Schaefer Light

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Re: ACA subsidies while living off savings?
« Reply #10 on: January 23, 2019, 08:57:53 AM »
When I lost my job in March 2018 I signed up for ACA. They used my pay stub to get me over the 138% or whatever it is. Since I had already made 20k that year. The paperwork I submitted was my pay stub and an affidavit saying I have no current income. I got a 300 subsidy and paid 60 a month for the rest of 2018. I have had no income since march. In 2019 they forced me to go on Medicaid, which I'm pissed about because I had a great plan. You can't voluntarily pay for health insurance afaik. When I did my paperwork for 2019 I again submitted an affidavit stating no income and on the affidavit itself it asks if you are receiving unemployment and I said yes. In my state (md) it doesn't count as income. Hope that helps.
Thanks for the info.  Unemployment counts as income here, and it would actually help in my situation as I need enough income to get to 100% of the FPL to get any assistance in paying the premiums for a marketplace plan.

Schaefer Light

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Re: ACA subsidies while living off savings?
« Reply #11 on: January 23, 2019, 08:59:29 AM »
Savings is not income, but it does produce the stuff. Particularly interest and dividends.

You could also rebalance profitable funds in your taxable brokerage accounts or do a traditional-to-roth IRA conversion.
Good advice, but that's not really an option for me.  All of my assets are either in savings, a 401k, or a Roth IRA, and I'm not going to touch the 401k or Roth IRA unless I run out of savings.

Peachtea

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Re: ACA subsidies while living off savings?
« Reply #12 on: January 23, 2019, 10:55:19 AM »
Wow, $600 for an individual? For my state, the cheapest individual ACA plan is $287 (without any subsidy). Iíd probably compare the coverage in your COBRA v ACA plans and if they are similar go with ACA plan for the possible tax refund. Also, less pain later switching to an ACA plan if you donít get another job before your COBRA runs out.

Schaefer Light

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Re: ACA subsidies while living off savings?
« Reply #13 on: January 23, 2019, 12:35:23 PM »
Wow, $600 for an individual? For my state, the cheapest individual ACA plan is $287 (without any subsidy). Iíd probably compare the coverage in your COBRA v ACA plans and if they are similar go with ACA plan for the possible tax refund. Also, less pain later switching to an ACA plan if you donít get another job before your COBRA runs out.
There is a catastrophic plan available for roughly that cost, but I'd need a hardship exemption to sign up and I don't qualify for the exemption.  All of the other plans are between $500 and $750.

Peachtea

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Re: ACA subsidies while living off savings?
« Reply #14 on: January 23, 2019, 01:04:51 PM »
Wow, $600 for an individual? For my state, the cheapest individual ACA plan is $287 (without any subsidy). Iíd probably compare the coverage in your COBRA v ACA plans and if they are similar go with ACA plan for the possible tax refund. Also, less pain later switching to an ACA plan if you donít get another job before your COBRA runs out.
There is a catastrophic plan available for roughly that cost, but I'd need a hardship exemption to sign up and I don't qualify for the exemption.  All of the other plans are between $500 and $750.

Yikes - that cheapest plan for us is an HMO bronze. We have nine plans available under $350, mostly bronze or silver HMOs, only one is catastrophic. 17 plans are under $400, including a gold HMO plan (BCBS). The highest gold plan is $511. Itís crazy what a difference the state youíre in makes.

Schaefer Light

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Re: ACA subsidies while living off savings?
« Reply #15 on: January 23, 2019, 01:17:57 PM »
Yikes - that cheapest plan for us is an HMO bronze. We have nine plans available under $350, mostly bronze or silver HMOs, only one is catastrophic. 17 plans are under $400, including a gold HMO plan (BCBS). The highest gold plan is $511. Itís crazy what a difference the state youíre in makes.
Yep.  It even depends on what county you live in.  Even though I'm in one of the most urban parts of NC, there are only nine total plans to choose from and they're all from the same provider (BCBSNC).  Other parts of NC have at least two providers to choose from.

Penelope Vandergast

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Re: ACA subsidies while living off savings?
« Reply #16 on: January 23, 2019, 06:46:34 PM »
Was Medicaid expanded in your state to cover single adults with no kids (assuming that is what you are)? If so, and you really have zero income right now, that is likely what you would qualify for. There is usually a name for it besides Medicaid -- in Massachusetts it's called MassHealth, in Wisconsin it's called Badgercare, etc.

The coverage can be very good, better than many ACA plans. Typically you would get into the same HMOs that are available via the ACA but you would pay no or very little premium. Copays and so on are also either very low or free. It's about as close as you are going to get to living in Canada or Europe or anywhere with actual national health insurance. Usually they do not count your assets, only your income, when deciding whether you qualify.

Of course this all varies by state -- if you live in a state with a horrible Medicaid plan (many red states refused extra federal funding through the ACA on principle) the above may not apply. Red states are also talking about requiring, or actually now require, drug testing and work requirements for Medicaid. If you are in, say, Massachusetts on the other hand, you will have great health care and no one from the state will try to punish you for having it.


mozar

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Re: ACA subsidies while living off savings?
« Reply #17 on: January 23, 2019, 10:27:36 PM »
Ah! I remember what I did one year. One year I had a bout of unemployment and I forgot to get health insurance from cobra or ACA within the time period (I know, I know). I went without healthcare for three months. When I settled up with the irs I wasn't penalized because it was only three months. That might have just been the law for just that year though.
There was another year where I went 6 months without health insurance (finally got on anti-depressants and I can now do things like sign up for health insurance on time). When I settled up with the IRS I was penalized maybe 400 dollars?
So another option is to figure out if the penalty is less than your premium payments for the year. I can't believe it's come to this but here we are.

BicycleB

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Re: ACA subsidies while living off savings?
« Reply #18 on: January 23, 2019, 10:50:20 PM »
I have used ACA for several years, receiving subsidies. However, I purposely draw income by converting retirement account (401k or similar source) to income. I think I did qualify while using income from savings, but I think that was from selling stock; the appreciation of the stock meant the sale produced income.

Since you have no other income, can you spread out the income from the severance across the entire year, producing a total amount for the year that is within the ACA qualification range? If so, why not submit the severance amount with an explanation letter and qualify for ACA?

I am not arguing with the lawyer, just asking. If the lawyer can quote specific guidance disallowing the suggestion above, obviously I'd defer to the lawyer.

Schaefer Light

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Re: ACA subsidies while living off savings?
« Reply #19 on: January 24, 2019, 08:29:36 AM »
I have used ACA for several years, receiving subsidies. However, I purposely draw income by converting retirement account (401k or similar source) to income. I think I did qualify while using income from savings, but I think that was from selling stock; the appreciation of the stock meant the sale produced income.

Since you have no other income, can you spread out the income from the severance across the entire year, producing a total amount for the year that is within the ACA qualification range? If so, why not submit the severance amount with an explanation letter and qualify for ACA?

I am not arguing with the lawyer, just asking. If the lawyer can quote specific guidance disallowing the suggestion above, obviously I'd defer to the lawyer.
I can't count the severance as 2019 income because I received the severance pay as a lump sum at the end of 2018.  You bring up a good point about the 401k, though.  I'd have to pay a 10% penalty and I'd be hesitant to do this if the market is way down, but if the math works out I may consider a 401k withdrawal to get my income where it needs to be to receive the premium tax credit.  I'd probably hold off on doing this until the end of the year, though.  What should ultimately matter is whether my 2019 income falls between 100% and 400% of the Federal Poverty Level.  If it does, then I qualify for the tax credit.

I'm not in a state where I can go on Medicaid.  The only ways to get on Medicaid here are being very poor (something like $3000 or less in total assets) or having a disability.

Schaefer Light

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Re: ACA subsidies while living off savings?
« Reply #20 on: January 24, 2019, 08:35:16 AM »
Well, I did enroll in a silver plan on the healthcare.gov marketplace.  At the end of the enrollment, it took me to a page that showed the amount I owe for my first premium payment.  The amount it showed indicates that I will be receiving the subsidy, but I'm curious to see if this gets adjusted once I turn in my "proof of income".  I have until the middle of April to turn it in, and I plan to wait until the last minute to do so.  I want to make sure I get my subsidy for as long as I can.

BicycleB

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Re: ACA subsidies while living off savings?
« Reply #21 on: January 24, 2019, 10:59:44 AM »

You bring up a good point about the 401k, though.  I'd have to pay a 10% penalty

Instead of paying the penalty, can't you roll your 401k money into a traditional IRA, then convert the amount of your choosing from the traditional IRA into a Roth IRA, after which you can withdraw your Roth contributions penalty free?

https://www.schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/roth_ira/withdrawal_rules
https://www.nerdwallet.com/article/what-is-a-roth-ira
https://www.madfientist.com/retire-even-earlier/
« Last Edit: January 24, 2019, 11:09:29 AM by BicycleB »

geekette

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Re: ACA subsidies while living off savings?
« Reply #22 on: January 24, 2019, 11:19:36 AM »
I have used ACA for several years, receiving subsidies. However, I purposely draw income by converting retirement account (401k or similar source) to income. I think I did qualify while using income from savings, but I think that was from selling stock; the appreciation of the stock meant the sale produced income.

Since you have no other income, can you spread out the income from the severance across the entire year, producing a total amount for the year that is within the ACA qualification range? If so, why not submit the severance amount with an explanation letter and qualify for ACA?

I am not arguing with the lawyer, just asking. If the lawyer can quote specific guidance disallowing the suggestion above, obviously I'd defer to the lawyer.
I can't count the severance as 2019 income because I received the severance pay as a lump sum at the end of 2018.  You bring up a good point about the 401k, though.  I'd have to pay a 10% penalty and I'd be hesitant to do this if the market is way down, but if the math works out I may consider a 401k withdrawal to get my income where it needs to be to receive the premium tax credit.  I'd probably hold off on doing this until the end of the year, though.  What should ultimately matter is whether my 2019 income falls between 100% and 400% of the Federal Poverty Level.  If it does, then I qualify for the tax credit.

I'm not in a state where I can go on Medicaid.  The only ways to get on Medicaid here are being very poor (something like $3000 or less in total assets) or having a disability.

Yup, NC refused to expand Medicare.

Roll your 401k into a Traditional IRA, then do a Roth conversion of a portion of it (enough to get you over the FPL).  There's no penalty for doing a Roth conversion.  Your retirement savings will still be in your Roth, earning tax free gains over time (we hope!).  You can live off your other savings, and still qualify for subsidies.

Schaefer Light

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Re: ACA subsidies while living off savings?
« Reply #23 on: January 28, 2019, 11:20:18 AM »
BicycleB and geekette, thanks for the ideas on the Traditional to Roth conversions.