Author Topic: ACA and Quitting Job  (Read 2418 times)

Farmgirl

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ACA and Quitting Job
« on: June 17, 2019, 01:39:41 PM »
I am thinking about quitting my job at the end of this year to FIRE (although I will be 61).

I have insurance through my current job but do not want to give notice until after December 15 (I am due for a discretionary bonus around that time).   At that point, if they want me to stay on for awhile, I would request to be placed as a 1099 contractor, otherwise, I walk.

My plan was to sign up for ACA during open enrollment (although I know I don't have to do it that way because of a life status change), and have coverage start in January, 2020.

Our MAGI is low enough that I could get a plan for around $250 per month according to the website.  My employer is small and offers a "mini-COBRA" for 3 months, at $650 per month.

1.  Does ACA force you to do COBRA?


2.  If I apply during Open Enrollment and say my last day of work is December 31, 2019, what documents do I have to show them to make sure I get coverage in January?

Looking for MMM folks who have been through this kind of thing, and I'm not sure I'm planning correctly.

Any help is appreciated.
« Last Edit: June 17, 2019, 01:41:53 PM by Farmgirl »

secondcor521

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Re: ACA and Quitting Job
« Reply #1 on: June 17, 2019, 02:23:52 PM »
1.  It does not.  You can skip COBRA if you want.  If you go on COBRA you will not be eligible for ACA.  If you go on COBRA, I believe you will have to wait for your 18 months to run out before you would be eligible for ACA - you can't just quit COBRA and go on ACA.

That above is for real COBRA.  I have no idea what your employer means by mini-COBRA.  My understanding is that real COBRA is generally required to allow you to stay on it for 18 months.  If your employer just lets you stay on their coverage and you pay the premium but only for three months, I don't know how that would work with the ACA.  (My *guess* would be you would be able to sign up on ACA at the end of the three months, whenever that happens.  See answer to next question.)

2.  I don't think you'll be able to apply for ACA until you actually lose your coverage, which wouldn't happen until you resign.  Since it looks like you will be resigning after the close of Open Enrollment, you'll just enroll whenever that happens because you'll have a qualifying event (loss of your existing coverage).  I gave my 2 week notice on February 5th (2016), my official retirement date was February 19th, my employer coverage ended at the end of February, and I was able to enroll me and my kids on ACA just fine starting March 1st.  I didn't have to provide any documentation, but I live in a state that is pretty relaxed about the whole thing.  You will want to contact your state exchange and ask them what they need - I'd guess at most it would be a copy of your resignation letter.

Although it may take a little bit longer to actually get all of the paperwork done, if you retire on, say, December 17th, they'll make it work so that the insurance is actually effective January 1st.  (In other words, you may pay your January premium on January 9th or something, but as long as your application is put in in a timely manner, the coverage will be retroactive.)

To minimize the amount of time delay, I'd suggest you shop and compare your various ACA plan options ahead of time so you know which plan you want - make sure you're happy with the doctors/networks/prescription coverage/etc.  You also may need a copy of your latest income tax return so you can answer income questions.  But again, if you submit your ACA application the day after you submit your resignation letter to your employer, you should be just fine.

Actually, I guess you should probably check to make sure your employer coverage is good through the end of the month in which you retire.  That's how it often works, because employers pay premiums monthly.  But it'd be good to check.

Another thought is that depending on how any vacation pay works, you might want to use vacation pay to have your last day be January 1st.  That way you'd (probably) get employer coverage through January 31st and you'd have all of January to get your ACA stuff done.

HTH.

Frankies Girl

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Re: ACA and Quitting Job
« Reply #2 on: June 17, 2019, 02:29:48 PM »
1. Most companies will cover you through the last day of the month in which you serve out your final notice. So if you give notice on December 15, that means they don't have to cover you for longer than the month of December anyway.

If you give them notice that your last day would end up say January 6 however, most of the time you'd be covered for the entire month of January. So don't rob yourself of an extra month's subsidized coverage if possible.

2. You do not have to do COBRA - no one can force you to do it, but a few things about it: you obviously know you'd pay full price (the company stops kicking in the lion's share) so way more expensive. But COBRA is also retroactive; you can wait to decide if you NEED coverage and go in and pay for it to have you covered from your last day of company coverage even a month after the fact. I believe it is 60 days from the last day worked, but you'll need to confirm this. And if you do decide to activate it, it will need ALL the previous time paid for before the 60th day to be valid. So you could wait on coverage, end up needing a doc visit or have an emergency visit two weeks after you left company coverage, activate and pay in full on the COBRA and then have all billers resubmit their bills to the now active COBRA.

Also, if you do COBRA for a few months, you can't get the subsidies from the ACA until the next open enrollment period as you won't have a qualifying event to get coverage through the ACA. You have to either pay full COBRA, or pay full cost on ACA, or get insurance through a broker in the open market - no subsides or cost sharing since they deem you able to get coverage through COBRA or other means. So you'd need to decide how much different and good the savings and coverages are for what you'd be losing out on if you forego ACA right off the bat.

Again, this is how I understood it to work, so do your own confirming before trusting some stranger on the internets. ;)

3. You can have no insurance at all or really cheap but low coverages now since they've killed the penalty for not having coverage/minimum standards for coverage. It used to be you could go 3 months before they'd assess a penalty, but as it stands, you could just self insure, get some very basic "for emergency" coverage, OR get ACA coverage (even bronze level can be good).

4. If you miss the window for open enrollment, then your coverages on ACA would need to be enrolled/paid up by the 15th of month 1 to get coverage on the first day of month 2. So you can't apply on say the 17th of month 1, and expect coverage to begin in month 2; that would occur on month 3.


5. As far as documents - all you need usually is to tell them you retired/no longer are working/earning a paycheck. I think I had to send an explanation letter the first year due to the drop in reported income and no tax return yet to prove, but all I did was create a word doc/pdf stating "retired from work, income derived from investments/retirement accounts, estimate yearly income to be roughly $XX,XXX in 2016." and that was all they needed to approve. I have had no issues in the time after that renewing my insurance on the ACA with estimating my salary as it's always been easy to monitor and control the amounts that count towards reportable income.


EXTRA INFO: keep in mind that most companies pay their matching/bonuses in the first month or two of the new year, so if you seperate before they pay into your retirement accounts or before any earned bonuses are in your account, they don't have to follow through. Some may have it stated in their employee paperwork, but in general, things like matches/bonuses are for RETENTION, not folks that are leaving and unless they are a really, really generous company or it is explicitly stated in legally enforceable text you can take to court, they don't have to pay you for that stuff. If it is a smaller business, I would make sure to get all that is coming to you before giving ANY notice.

« Last Edit: June 17, 2019, 02:31:38 PM by Frankies Girl »

Aggie1999

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Re: ACA and Quitting Job
« Reply #3 on: June 17, 2019, 03:27:31 PM »
https://www.healthcare.gov/unemployed/cobra-coverage/

Has a nice chart on the different COBRA/ACA scenarios.

FIREstache

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Re: ACA and Quitting Job
« Reply #4 on: June 17, 2019, 04:57:50 PM »
Also, if you do COBRA for a few months, you can't get the subsidies from the ACA until the next open enrollment period as you won't have a qualifying event to get coverage through the ACA.

At least one person on this forum has stated that they were told that they would not qualify for subsidies for ACA during open enrollment if they canceled COBRA.  They had to wait a few months longer until COBRA ran out, which was a qualifying event.

https://forum.mrmoneymustache.com/post-fire/getting-aca-coverage/msg2199501/#msg2199501
https://forum.mrmoneymustache.com/post-fire/getting-aca-coverage/msg2197864/#msg2197864
https://forum.mrmoneymustache.com/post-fire/pre-fire-checklist/msg2373257/#msg2373257

Info I had read elsewhere had let me to believe otherwise:

https://forum.mrmoneymustache.com/post-fire/pre-fire-checklist/msg2376977/#msg2376977

seattlecyclone

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Re: ACA and Quitting Job
« Reply #5 on: June 17, 2019, 05:21:54 PM »
Also, if you do COBRA for a few months, you can't get the subsidies from the ACA until the next open enrollment period as you won't have a qualifying event to get coverage through the ACA.

At least one person on this forum has stated that they were told that they would not qualify for subsidies for ACA during open enrollment if they canceled COBRA.  They had to wait a few months longer until COBRA ran out, which was a qualifying event.

https://forum.mrmoneymustache.com/post-fire/getting-aca-coverage/msg2199501/#msg2199501
https://forum.mrmoneymustache.com/post-fire/getting-aca-coverage/msg2197864/#msg2197864
https://forum.mrmoneymustache.com/post-fire/pre-fire-checklist/msg2373257/#msg2373257

Info I had read elsewhere had let me to believe otherwise:

https://forum.mrmoneymustache.com/post-fire/pre-fire-checklist/msg2376977/#msg2376977

Per Publication 974, after you leave your employment you're considered eligible for employment-based coverage for Premium Tax Credit purposes only for the months you're actually enrolled in that coverage. Being ineligible for employer-based coverage is one of the requirements for Premium Tax Credit eligibility. This is saying that if you drop COBRA you're no longer considered eligible for COBRA, which should then pave the way for ACA subsidies. Whether you can convince your state exchange to front you that subsidy could vary from place to place, but I'd definitely feel comfortable claiming it on my year-end tax return based on this documentation.

FIRE 20/20

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Re: ACA and Quitting Job
« Reply #6 on: June 17, 2019, 09:50:19 PM »
1. Most companies will cover you through the last day of the month in which you serve out your final notice. So if you give notice on December 15, that means they don't have to cover you for longer than the month of December anyway.

If you give them notice that your last day would end up say January 6 however, most of the time you'd be covered for the entire month of January. So don't rob yourself of an extra month's subsidized coverage if possible.

This is true in most cases, but I found out that it is not true for my employer, and it's a fairly large company with ~100k employees.  My health insurance runs out at midnight of my last day.  This is a problem because, at least in my state, you can only sign up for an ACA plan on the first of the month.  I decided to use COBRA until either the end of the year or until it runs out. 

2.  I don't think you'll be able to apply for ACA until you actually lose your coverage, which wouldn't happen until you resign. 

This is not true in my state.  You can submit a form that says when your last day of coverage will be, and that allows you to sign up during the special enrollment period.  Your company needs to either create or sign the form.  This is important because coverage doesn't start immediately.  For me, my last day was going to be April 26 so I was going to be uninsured starting April 27.  I would have needed to sign up during special enrollment between March 15 and April 15 to have an ACA plan starting May 1.  In order to do so I would have needed the form to be completed by my employer.  I actually didn't do this for other reasons that don't apply to this thread. 

OP - my suggestion is to get a definitive answer from your employer on when your insurance will run out.  I assumed it would go through the end of the month, but that was not the case for me.  I also assumed I could relatively quickly sign up for an ACA plan, but there is a lag.  I think things will be easier for you because you'll be signing up during open enrollment, but I'd still check into everything on your state's ACA website.  Don't assume anything - I did and it almost cost me. 

Paul der Krake

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Re: ACA and Quitting Job
« Reply #7 on: June 17, 2019, 10:36:27 PM »
Also, if you do COBRA for a few months, you can't get the subsidies from the ACA until the next open enrollment period as you won't have a qualifying event to get coverage through the ACA.

At least one person on this forum has stated that they were told that they would not qualify for subsidies for ACA during open enrollment if they canceled COBRA.  They had to wait a few months longer until COBRA ran out, which was a qualifying event.

https://forum.mrmoneymustache.com/post-fire/getting-aca-coverage/msg2199501/#msg2199501
https://forum.mrmoneymustache.com/post-fire/getting-aca-coverage/msg2197864/#msg2197864
https://forum.mrmoneymustache.com/post-fire/pre-fire-checklist/msg2373257/#msg2373257

Info I had read elsewhere had let me to believe otherwise:

https://forum.mrmoneymustache.com/post-fire/pre-fire-checklist/msg2376977/#msg2376977

Per Publication 974, after you leave your employment you're considered eligible for employment-based coverage for Premium Tax Credit purposes only for the months you're actually enrolled in that coverage. Being ineligible for employer-based coverage is one of the requirements for Premium Tax Credit eligibility. This is saying that if you drop COBRA you're no longer considered eligible for COBRA, which should then pave the way for ACA subsidies. Whether you can convince your state exchange to front you that subsidy could vary from place to place, but I'd definitely feel comfortable claiming it on my year-end tax return based on this documentation.
I really want you to be right because I reached the same conclusion, but that vague language isn't inspiring a lot of confidence.

I would really want to get to the bottom of what @Threshkin experienced. It seems like many of the ACA navigators aren't very good at navigating the ACA. Note to self: maybe I should do that as a part-time gig in FIRE...

Farmgirl

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Re: ACA and Quitting Job
« Reply #8 on: June 18, 2019, 05:36:18 AM »
Did find out one thing...  My insurance would run out at the end of the month that I would resign.  I would have a little buffer.  In that case it would seem that turning in my resignation at the beginning of a month would have some benefit of several extra weeks coverage to iron out the ACA kinks.

Also....thank you, thank you MMM'ers.  I knew I could come here for some insight.  At my tender age, I wouldn't want to mess this up!

seattlecyclone

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Re: ACA and Quitting Job
« Reply #9 on: June 18, 2019, 10:20:29 AM »
Also, if you do COBRA for a few months, you can't get the subsidies from the ACA until the next open enrollment period as you won't have a qualifying event to get coverage through the ACA.

At least one person on this forum has stated that they were told that they would not qualify for subsidies for ACA during open enrollment if they canceled COBRA.  They had to wait a few months longer until COBRA ran out, which was a qualifying event.

https://forum.mrmoneymustache.com/post-fire/getting-aca-coverage/msg2199501/#msg2199501
https://forum.mrmoneymustache.com/post-fire/getting-aca-coverage/msg2197864/#msg2197864
https://forum.mrmoneymustache.com/post-fire/pre-fire-checklist/msg2373257/#msg2373257

Info I had read elsewhere had let me to believe otherwise:

https://forum.mrmoneymustache.com/post-fire/pre-fire-checklist/msg2376977/#msg2376977

Per Publication 974, after you leave your employment you're considered eligible for employment-based coverage for Premium Tax Credit purposes only for the months you're actually enrolled in that coverage. Being ineligible for employer-based coverage is one of the requirements for Premium Tax Credit eligibility. This is saying that if you drop COBRA you're no longer considered eligible for COBRA, which should then pave the way for ACA subsidies. Whether you can convince your state exchange to front you that subsidy could vary from place to place, but I'd definitely feel comfortable claiming it on my year-end tax return based on this documentation.
I really want you to be right because I reached the same conclusion, but that vague language isn't inspiring a lot of confidence.

I would really want to get to the bottom of what @Threshkin experienced. It seems like many of the ACA navigators aren't very good at navigating the ACA. Note to self: maybe I should do that as a part-time gig in FIRE...

From the three posts linked above, it sounds like they inquired as to whether they could get ACA subsidies after quitting COBRA. A local ACA advisor "double-checked" and told them it wasn't an option, and they accepted that as an answer. I would very much like to see what source the advisor was quoting in making this determination.

The advice that subsidies would be unavailable for the whole year, even after COBRA would have expired anyway, seems especially fishy to me. These subsidies are awarded on a month-to-month basis that changes depending on the facts and circumstances that apply to that month's insurance coverage.

BicycleB

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Re: ACA and Quitting Job
« Reply #10 on: June 18, 2019, 10:38:46 AM »
Keep researching!

Have been happily on ACA for years. Didn't understand the details at the time I FIREd, wish I had; would have skipped COBRA entirely. ACA is much cheaper for me. If I had known at the start what the options were, it would have saved me over $2000.

Enigma

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Re: ACA and Quitting Job
« Reply #11 on: June 18, 2019, 01:17:10 PM »
I didn't understand the ACA/marketplace when I tried to RE.  I will say I know more now.  But then again I got back into the workforce and cancelled my marketplace insurance.  I wanted the Platinum ($900+) but ended up settling for the Bronze ($350+) then added dental on top of that (+$50).  The prices used to be half in 2014.  Maybe they will start going down.

Metal Tier - Consumer Pays - Insurer Pays
Bronze - 40% - 60%
Silver - 30% - 70%
Gold - 20% - 80%
Platinum - 10% - 90%

Note that all plans need to adhere to the maximum out-of-pocket limit as set by the federal government ($7,900 for individual plans and $15,800 for family plans in 2017).

rantk81

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Re: ACA and Quitting Job
« Reply #12 on: June 18, 2019, 01:49:11 PM »
Aside from either 1) estimating based on last year's W-2 Box 12 Code DD, or 2) talking with an employee who recently left the company who was on the same medical plan/tier as you -- Is there any way to know how much the COBRA rates would be for your current employer?  (Also, without tipping off your employer that you are thinking of leaving soon?)  Are there any compliance/forms that companies have to file that are publicly available?  Or reach out to HR via anonymous email?

secondcor521

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Re: ACA and Quitting Job
« Reply #13 on: June 18, 2019, 02:07:32 PM »
Aside from either 1) estimating based on last year's W-2 Box 12 Code DD, or 2) talking with an employee who recently left the company who was on the same medical plan/tier as you -- Is there any way to know how much the COBRA rates would be for your current employer?  (Also, without tipping off your employer that you are thinking of leaving soon?)  Are there any compliance/forms that companies have to file that are publicly available?  Or reach out to HR via anonymous email?

If you're at a big company, you can walk into HR without your badge on and ask.  Even if they do find out who you are, my experience was that HR is good at keeping your secret.

If you're at a big company, a rough rule of thumb is that you pay 20% as an employee.  So take whatever is being deducted from your paycheck and multiply by 5.

Paul der Krake

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Re: ACA and Quitting Job
« Reply #14 on: June 18, 2019, 02:59:17 PM »
Aside from either 1) estimating based on last year's W-2 Box 12 Code DD, or 2) talking with an employee who recently left the company who was on the same medical plan/tier as you -- Is there any way to know how much the COBRA rates would be for your current employer?  (Also, without tipping off your employer that you are thinking of leaving soon?)  Are there any compliance/forms that companies have to file that are publicly available?  Or reach out to HR via anonymous email?

If you're at a big company, you can walk into HR without your badge on and ask.  Even if they do find out who you are, my experience was that HR is good at keeping your secret.

If you're at a big company, a rough rule of thumb is that you pay 20% as an employee.  So take whatever is being deducted from your paycheck and multiply by 5.
There's no need to do that math, Box 12 code DD shows exactly the amount of the employer contribution:
https://www.irs.gov/newsroom/reporting-employer-provided-health-coverage-on-form-w-2

By law, the COBRA amount can be anywhere from 0% to 102% of the cost while employed. In practice, almost every company chooses to charge around 100% because hey, this person's left us, why would we continue to pay.

So for all intents and purposes, add employee premiums (found on your paystub) and Box 12 code DD and this is what COBRA will cost, give or take a couple percentage points.

stoaX

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Re: ACA and Quitting Job
« Reply #15 on: June 18, 2019, 03:44:58 PM »
https://www.healthcare.gov/unemployed/cobra-coverage/

Has a nice chart on the different COBRA/ACA scenarios.

I never came across this chart on healthcare.gov - thanks for linking it here.  For early retirees in the US this is, of course, a big issue that you gotta figure out.

seattlecyclone

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Re: ACA and Quitting Job
« Reply #16 on: June 18, 2019, 04:00:22 PM »
This chart unfortunately only addresses the topic of when you can purchase Marketplace insurance, and is silent on the question of whether you would receive subsidies for that insurance if your income otherwise qualifies. However, given the continued absence of authoritative documentation to the contrary, I'm still pretty satisfied with the answer in the IRS publication I linked above.

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Re: ACA and Quitting Job
« Reply #17 on: June 18, 2019, 06:29:43 PM »
Also, if you do COBRA for a few months, you can't get the subsidies from the ACA until the next open enrollment period as you won't have a qualifying event to get coverage through the ACA.

At least one person on this forum has stated that they were told that they would not qualify for subsidies for ACA during open enrollment if they canceled COBRA.  They had to wait a few months longer until COBRA ran out, which was a qualifying event.

https://forum.mrmoneymustache.com/post-fire/getting-aca-coverage/msg2199501/#msg2199501
https://forum.mrmoneymustache.com/post-fire/getting-aca-coverage/msg2197864/#msg2197864
https://forum.mrmoneymustache.com/post-fire/pre-fire-checklist/msg2373257/#msg2373257

Info I had read elsewhere had let me to believe otherwise:

https://forum.mrmoneymustache.com/post-fire/pre-fire-checklist/msg2376977/#msg2376977

Per Publication 974, after you leave your employment you're considered eligible for employment-based coverage for Premium Tax Credit purposes only for the months you're actually enrolled in that coverage. Being ineligible for employer-based coverage is one of the requirements for Premium Tax Credit eligibility. This is saying that if you drop COBRA you're no longer considered eligible for COBRA, which should then pave the way for ACA subsidies. Whether you can convince your state exchange to front you that subsidy could vary from place to place, but I'd definitely feel comfortable claiming it on my year-end tax return based on this documentation.
I really want you to be right because I reached the same conclusion, but that vague language isn't inspiring a lot of confidence.

I would really want to get to the bottom of what @Threshkin experienced. It seems like many of the ACA navigators aren't very good at navigating the ACA. Note to self: maybe I should do that as a part-time gig in FIRE...

I am in the same boat. Itís clarification on whether I can start COBRA now and transition to ACA with PTCs in January 2020 that has me in limbo.

herbgeek

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Re: ACA and Quitting Job
« Reply #18 on: June 18, 2019, 06:56:31 PM »
I just went through this process last month.  I started my application in April for coverage beginning June 1- my last day was May 31. This was intentional as my employer insurance terminated on the last day of employment.  I did have to send in an affavadit explaining my situation (my entire year salary was too high for subsidies, but since I only have 5/12 of a year, I do qualify).  Since I worked for a  very large company that outsourced benefits to a 3rd party, I was able to find out the cost of COBRA on that website.  ACA with subsidy was substantially cheaper than COBRA, so I skipped it.

Farmgirl

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Re: ACA and Quitting Job
« Reply #19 on: June 19, 2019, 05:45:35 AM »
Again, thank you everyone for all of the good info.

Our company has 16 employees.  "HR" department is the owner's daughter (who is also my boss). 

I'll keep researching, but must be prepared to walk if necessary.