Information on the Affordable Care Act, with a focus on early retirees

[forummm]

MOD NOTE: This thread is for general information/FAQs about the ACA.  It is not for individual questions, which will just lengthen/clutter/confuse.  If you have questions about your individual situation, please start a new thread.  Cheers!

There are many posts from people asking questions about how to get healthcare in early retirement. The topics tend to center around the Affordable Care Act (ACA). The ACA is very complicated, but is an important policy for people--and early retirees in particular--to understand.

The intent for this thread is to provide (whether through linking or discussion) comprehensive information and answers to questions about the ACA. I know the ACA is a contentious topic. For the sake of promoting accurate and actionable information, let's please leave this thread only for information about what the ACA's policies are--and not whether they are a good or bad idea. There are plenty of other threads here that discuss the merits and demerits for the law at length.

Please post any questions you have about the law. This is a policy with so much complexity that it's hard to write out a complete guide. Your questions will help the thread develop into a more complete source of information. I will take responsibility to help answer the questions along with other interested and informed forum members.

Here are two resources developed by two of our fellow forum members that are good starting places for information:
https://seattlecyclone.com/optimizing-the-affordable-care-act/
http://rootofgood.com/affordable-care-act-subsidy/


And here are some threads of Q&As that may be of interest:
http://forum.mrmoneymustache.com/ask-a-mustachian/obamacare-blues-but-i-don't-want-medicaid/
http://forum.mrmoneymustache.com/ask-a-mustachian/aca-question/
http://forum.mrmoneymustache.com/ask-a-mustachian/aca-subsities-and-medicare/

[madamwitty]

Great topic!

I read through both seattlecyclone's and Root of Good's guides. I've seen repeated reference to ACA subsidies not being available below 138% of FPL in states with expanded Medicaid. But the state-by-state table linked from RoG's guide shows Medicaid only covering adults up to 133% of FPL in many states. (I am looking specifically at CA and WA, but others do this too.) Is there a gap?

Link to table: http://www.medicaid.gov/medicaid-chip-program-information/program-information/downloads/medicaid-and-chip-eligibility-levels-table.pdf

[MidWestLove]

My question to people using ACA or exchange purchased plans - how is the pricing and subsidies work in cases where income is actually unknown until the end of the year? i.e. there is a certain base and on the top there are dividends and capital gains that I can not predict directly, how does act of purchasing insurance work?
- it is based on previous year numbers (which may or may not be correct since you are no longer working)
- it is some sort of 'honor' system in which you state income and at the end of the year there is some validation
- something else

Thank you

[seattlecyclone]

Great topic!

I read through both seattlecyclone's and Root of Good's guides. I've seen repeated reference to ACA subsidies not being available below 138% of FPL in states with expanded Medicaid. But the state-by-state table linked from RoG's guide shows Medicaid only covering adults up to 133% of FPL in many states. (I am looking specifically at CA and WA, but others do this too.) Is there a gap?

Link to table: http://www.medicaid.gov/medicaid-chip-program-information/program-information/downloads/medicaid-and-chip-eligibility-levels-table.pdf

This page seems to explain the discrepancy. Apparently the official minimum income cutoff for Medicaid (in states that opted into Medicaid expansion) is 133%, but due to technical reasons they subtract 5% from your real income when calculating your income for the purposes of determining Medicaid eligibility, so the effective cutoff is 138%.

[forummm]

Great topic!

I read through both seattlecyclone's and Root of Good's guides. I've seen repeated reference to ACA subsidies not being available below 138% of FPL in states with expanded Medicaid. But the state-by-state table linked from RoG's guide shows Medicaid only covering adults up to 133% of FPL in many states. (I am looking specifically at CA and WA, but others do this too.) Is there a gap?

Link to table: http://www.medicaid.gov/medicaid-chip-program-information/program-information/downloads/medicaid-and-chip-eligibility-levels-table.pdf

This page seems to explain the discrepancy. Apparently the official minimum income cutoff for Medicaid (in states that opted into Medicaid expansion) is 133%, but due to technical reasons they subtract 5% from your real income when calculating your income for the purposes of determining Medicaid eligibility, so the effective cutoff is 138%.

The way it's phrased is that coverage is officially at 133% but there's a 5% "income disregard". You know, because 133% is just too simple :)

I should mention that the obamacarefacts.com website is not a reliable source of information. I've found incorrect statements there on several occasions.

[forummm]

My question to people using ACA or exchange purchased plans - how is the pricing and subsidies work in cases where income is actually unknown until the end of the year? i.e. there is a certain base and on the top there are dividends and capital gains that I can not predict directly, how does act of purchasing insurance work?
- it is based on previous year numbers (which may or may not be correct since you are no longer working)
- it is some sort of 'honor' system in which you state income and at the end of the year there is some validation
- something else

Thank you

When you sign up for insurance you enter in all your *expected* income information for the coming year. Then the system calculates the projected amount of tax credit available to you (if any) based on the expected income you provided. The system then lets you decide how much of that tax credit you want to have applied to your monthly insurance premiums. You can pick all of it, none of it, or some of it (any dollar amount up to their projection). The Treasury cuts a check (or sends the funds electronically) each month to your insurer for that amount. You pay the rest.

At the end of the year, you reconcile on your tax return 1) the amount of the tax credit you got with 2) the amount of tax credit you are entitled to based on your actual reported income. So you might have to give some of the prepaid credit back if you took too much, or you might get more money given to you if you took too little.

There is some processing behind the scenes to make sure that your income information matches what they have on file for you. If they aren't pretty sure that it's approximately correct, they will just ask you to send in (by uploading or mail) the relevant financial documents by a certain deadline.

[Greystache]

Regarding the question about estimating your income for purposes of determining your subsidy, here is what i experienced. I retired on Jan. 1st. Our 2014 income AGI was around 170K.  I expected our retirement income to be around 60K. I also had an incentive to keep 2015 income below 62K  in order to qualify for subsidies. You can read other threads about the Obamacare cliff.  Anyway, my state exchange wanted documentation of my income in the form of last year's tax return. Since that would indicate a much higher than expected income, I included a letter showing what my pension income would be and what my wife's income would be for half the year (she retired a couple weeks ago).  To my amazement, they accepted my rationale.  I just need to make sure we manage our income carefully and do not exceed my estimate.  I am using HSA contributions and direct rollover of some of my pension into an IRA to reduce my MAGI and stay within the income limits. 

[Mrs.LC]

My question to people using ACA or exchange purchased plans - how is the pricing and subsidies work in cases where income is actually unknown until the end of the year? i.e. there is a certain base and on the top there are dividends and capital gains that I can not predict directly, how does act of purchasing insurance work?
- it is based on previous year numbers (which may or may not be correct since you are no longer working)
- it is some sort of 'honor' system in which you state income and at the end of the year there is some validation
- something else

Thank you

Income is estimated when applying for ACA insurance. You have your choice of receiving the subsidy monthly as a decrease in the insurance premium or you can "settle up" at the end of the year with your tax return. We estimated our income and had backup plans to increase or decrease it as needed to closely match our estimation. We had to send in income verification in June of last year per request from the government via a letter.

[forummm]

What happens if you over estimate your income and end up with an income level below the ACA subsidy cut off at the end of the year? Do you have to re-pay all the subsidies you received?

Also, in reverse, what if you thought you were low income enough to go on Medicaid, you apply for that and then find that you have a higher income at the end of the year? Are there penalties and/or repayment for any services that you used?

And thirdly, if you are too young (say 50) to receive a pension, SS or get your 401K yet decide to voluntarily quit your job and live on non-taxable income (cash) until 59.5, and thus qualified for Medicaid in an expanded Medicaid state, can they deny you coverage if you voluntarily quit your job rather than getting laid off?

 

1) No. As long as the Marketplace determined the individual to be eligible for tax credits, there's a special provision to not go after people for repayment when their income drops below what was expected. But you should always report changes to your income as soon as you know about them.

2) Medicaid is a state-based program. So whether you apply on the Marketplace or through your state's Medicaid program directly, it's the state that determines eligibility. Once you have Medicaid, you are supposed to notify them when you have changes to your income. I think the way that's handled varies by state. But if in good faith your income goes above the limit, I think you will just be removed from the Medicaid rolls eventually and not be fined. Since there are 51 Medicaid programs I'm uncertain exactly what your situation will be. Your state's Medicaid program would know the answer for you.

3) First, you are never too young to withdraw from your retirement accounts. http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

Medicaid eligibility in an expansion state is based strictly on MAGI, and not based on the nature of your separation from employment. So you can retire voluntarily and receive Medicaid if your MAGI is 138% or below in an expansion state.

[forummm]

A couple more question (asking on behalf of sister who is thinking of FIREing this Jan now that the ACA thing looks like it will be here to stay).

If you quit your job and have the option to go on COBRA can you choose to go on a lower cost ACA plan (or Medicaid if low enough income to qualify for that) instead?

If you quit your job and have the opportunity to get employee retirement medical once old enough, but it's much more expensive then a subsidized ACA plan (or Medicaid if you are low enough income to qualify for that) can you get those or must you take the higher cost employee retirement medical?

1) You do not need to take COBRA. You can instead get coverage through the Marketplace in whatever form you qualify for. If you do not take COBRA then you will be eligible for a Special Enrollment Period, so you can sign up for new coverage within 60 days of your change in employment status. Or you can sign up for Medicaid at anytime.
https://www.healthcare.gov/unemployed/cobra-coverage/

2) I believe that if you are currently uninsured and you are no longer employed, then the option for retirement medical is not job-based coverage, and you can enroll for whatever you qualify for through the Marketplace, including Medicaid if eligible. But I'm not certain on this one.

[jorjor]

2) I believe that if you are currently uninsured and you are no longer employed, then the option for retirement medical is not job-based coverage, and you can enroll for whatever you qualify for through the Marketplace, including Medicaid if eligible. But I'm not certain on this one.

This is correct, with one caveat. If you leave your job and do not take retiree coverage, you qualify for a special enrollment period and tax credits. If you take retiree coverage and want to drop it mid-year in favor of an Exchange plan, then you would not qualify for a special enrollment period and would need to wait until the next open enrollment (at which point you would qualify for tax credits). Source below. Bolded emphasis mine.

https://www.healthcare.gov/retirees/

If you have retiree health benefits

If you have retiree health benefits, you’re considered covered under the health care law. You don’t have to pay the penalty that people without insurance must pay.

If you have retiree coverage and want to buy a Marketplace plan instead, you can. But:

You can’t get premium tax credits and other savings based on your income. This is true only if you’re actually enrolled in retiree coverage. If you’re eligible for but not enrolled in retiree coverage, you may qualify for premium tax credits and lower out-of-pocket costs based on your household size and income.

If you voluntarily drop your retiree coverage, you won’t qualify for a Special Enrollment Period to enroll in a new Marketplace plan. You won’t be able to enroll in health coverage through the Marketplace until the next Open Enrollment period.

[FIence!]

My question has to do with timing after leaving a job. I understand one essentially has a two month grace period before the penalty would apply. From what I have read, ANY coverage in a month counts, so two months truly means two full months. In example, if a person quits on August 5, they have been insured within the month of August, so September would be considered the first uninsured month, and October the second. As I understand it, as long as that person got insurance in November they would not pay a fine. Is this correct?

I also understand that penalty period and special enrollment period are two different things. I have seen two months after losing coverage as the "special enrollment period." Is this the same as the two full months situation to avoid penalties, or is this a 60 day period?

Bottom line: when a person leaves their employment and wants to sign up for marketplace insurance, how long do they have if they want to get special enrollment AND avoid a penalty?

[forummm]

My question has to do with timing after leaving a job. I understand one essentially has a two month grace period before the penalty would apply. From what I have read, ANY coverage in a month counts, so two months truly means two full months. In example, if a person quits on August 5, they have been insured within the month of August, so September would be considered the first uninsured month, and October the second. As I understand it, as long as that person got insurance in November they would not pay a fine. Is this correct?

I also understand that penalty period and special enrollment period are two different things. I have seen two months after losing coverage as the "special enrollment period." Is this the same as the two full months situation to avoid penalties, or is this a 60 day period?

Bottom line: when a person leaves their employment and wants to sign up for marketplace insurance, how long do they have if they want to get special enrollment AND avoid a penalty?

You are correct that having coverage for one day in a calendar month, or being considered exempt from the coverage requirement for one day in a calendar month, counts as satisfying the requirement to be covered for that month. You are also correct that you may (the word the IRS uses--though in practice it appears to be the case that you would be exempt) be exempt from the penalty if you have a gap in coverage of less than 3 consecutive calendar months. Note that if you have multiple gaps in coverage during a calendar year, the exemption only applies to the first coverage gap.

http://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/Individual-Shared-Responsibility-Provision

You may be exempt if you meet one of the following:
•The minimum amount you must pay for the annual premiums is more than eight percent of your household income
•You have a gap in coverage that is less than three consecutive months
•You qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage, or belonging to a group explicitly exempt from the requirement

http://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/Questions-and-Answers-on-the-Individual-Shared-Responsibility-Provision

22. What qualifies as a short coverage gap?

In general, a gap in coverage that lasts less than three months qualifies as a short coverage gap. If an individual has more than one short coverage gap during a year, the short coverage gap exemption only applies to the first gap.

The Marketplace asks

Did you or anyone in your household lose health coverage in the past 60 days OR do you expect anyone in your household to lose coverage in the next 60 days?

If so, you may be considered eligible for a special enrollment period. In certain cases the Marketplace can set a lower duration than 60 days (healthcare.gov doesn't do this and I don't know if any of the state-based Marketplaces do that--my guess is they do not). Certain other rules (such as misconduct) may also apply to limit or eliminate a special enrollment period--but these are rare.

The rules also state that you have 60 days from the triggering event date to select the qualifying health plan. If your selection is made by the 15th of the month, coverage begins the first of the following month.

So if you lose your insurance on date X, you have 60 days from X to have selected a new plan. And that plan starts at most 45 days (if you select it on the 16th) from date X+60. So if you quit on March 17, select a plan on May 16, and have coverage starting July 1, I think that's an example of the longest possible period you could be uninsured (no coverage at all during 3 calendar months, partial coverage during one) and avoid the penalty (without other exemption).

[FIence!]

Thanks so much for that thorough answer forummm, that is very helpful.

[forummm]

Thanks so much for that thorough answer forummm, that is very helpful.

Glad to help! It's pretty complicated policy.

[TomTX]

It would be awesome to see more discussion on what states are best for ACA coverage/subsidies/gotchas - as an early retiree, I expect to choose my state of residence. ACA will be a big influence.

Example: Alaska and Hawaii allow higher incomes when calculating subsidies, because the Federal Poverty Level (FPL) is higher in those states.

[forummm]

It would be awesome to see more discussion on what states are best for ACA coverage/subsidies/gotchas - as an early retiree, I expect to choose my state of residence. ACA will be a big influence.

Example: Alaska and Hawaii allow higher incomes when calculating subsidies, because the Federal Poverty Level (FPL) is higher in those states.

AK (25% higher) and HI (15% higher) have higher FPL levels because the COL is higher there. The other state variable at this point is Medicaid expansion. In some states (like AL) one insurer monopolizes the market, so there is less insurer competition which could lead to higher prices. And many rural areas are similarly much more expensive than urban areas in the same state (for similar competition and provider market power issues). There are some subtle differences in the states beyond this, but not really anything I can think of that would affect my decision to live in one state vs another.

[forummm]

It would be awesome to see more discussion on what states are best for ACA coverage/subsidies/gotchas - as an early retiree, I expect to choose my state of residence. ACA will be a big influence.

Example: Alaska and Hawaii allow higher incomes when calculating subsidies, because the Federal Poverty Level (FPL) is higher in those states.

AK (25% higher) and HI (15% higher) have higher FPL levels because the COL is higher there. The other state variable at this point is Medicaid expansion. In some states (like AL) one insurer monopolizes the market, so there is less insurer competition which could lead to higher prices. And many rural areas are similarly much more expensive than urban areas in the same state (for similar competition and provider market power issues). There are some subtle differences in the states beyond this, but not really anything I can think of that would affect my decision to live in one state vs another.

I should also point out that the price differentials between states and urban and rural areas are unlikely to have much, if any, effect on most mustachian early retirees. Due to the way the tax credits are calculated, they are set up to cap the amount the family pays for health insurance (relative to the 2nd lowest cost silver plan) as a percentage of their income. And that percentage doesn't vary by state. So if your premiums are lower than the designated percentage of your income, you would see a difference (likely very small). But as you get older, it's more and more unlikely your premiums would be below the designated percentage, as long as you had a mustachian level of retirement income. If you have a very large income, and over 400% FPL in particular, the differences could be substantial.

[forummm]

http://forum.mrmoneymustache.com/welcome-to-the-forum/medicaid-in-fire-due-to-'low-income'/msg756595/#msg756595

This last sentence is important to remember. You cannot qualify for ACA subsidies if your taxable income (MAGI)falls below a certain level and ONLY have the option for Medicaid (if you are in a state that has expanded Medicaid) or have to pay the full premium amount for a health insurance policy without subsidies.

Yep, and it's important to remember that MAGI is calculated on an annual basis.  If at the end of December you suddenly discover that your MAGI for that year fell below the cutoff even though you had purchased coverage in reliance on assumptions projecting income that would put your MAGI above the cutoff, then you're not eligible for the subsidies for which you thought you were eligible (and you can't go back in time to receive any Medicaid coverage for which you thought you were ineligible but for which you were in fact eligible).  For early retirees with Roth conversion pipelines or other ways of managing their reported income, this is pretty easy to control as long as you're paying attention.

For additional info on this scenario:
http://forum.mrmoneymustache.com/welcome-to-the-forum/information-on-the-affordable-care-act-with-a-focus-on-early-retirees/

What happens if you over estimate your income and end up with an income level below the ACA subsidy cut off at the end of the year? Do you have to re-pay all the subsidies you received?

 No. As long as the Marketplace determined the individual to be eligible for tax credits, there's a special provision to not go after people for repayment when their income drops below what was expected. But you should always report changes to your income as soon as you know about them.

Also I read somewhere that those who have low incomes (below the ACA minimum cut off) are exempt from having to purchase medical insurance (or get on Medicaid if qualified) and don't have to pay any penalty. Of course the whole point is for people to get medical insurance so I can't imagine anyone who is low income going without health insurance even if it's Medicaid or accepting high subsidies.

Technically you are only exempt because of your low income if 1) your income is below 138% FPL and you live in a non-expansion state (even though in the 100-138% range you can still get tax credits, they are being very lenient), 2) your income is below the tax filing threshold (~$10k for individual, ~$20k for couple), or 3) you did not have access to coverage that was considered affordable (premiums from work plan or bronze plan less than 8% of your income).

http://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/ACA-Individual-Shared-Responsibility-Provision-Exemptions

[NCGal]

Jeremy at Go Curry Cracker has 2 recent articles on ACA that might be added to the resource list:
http://www.gocurrycracker.com/obamacare-optimization-vs-tax-minimization/
http://www.gocurrycracker.com/obamacare-optimization-early-retirement/

[AgentCooper]

Q&A with Healthcare.gov 11/12/15:

AgentCooper:  Is this true or false?  If you are eligible for employer-sponsored "affordable" coverage which provides "minimum essential coverage," then you are NOT eligible for any premium subsidy or other savings through healthcare.gov?
Healthcare.gov Rep Alma:  True.

AgentCooper:  And "affordable," under the Affordable Care Act, refers ONLY to what it costs for employee-only coverage, and it does not care - and does not look at - what employee + spouse, or employee+family coverage costs?
Healthcare.gov Rep Alma:  (Laughs).  Do you really want me to answer that?
[Several minutes worth of dodging the question ensued.]

AgentCooper:  So the definition of "affordable" refers to employee-only coverage.
Healthcare.gov Rep Alma:  Yes.
AgentCooper:  Family coverage premium amounts will not be asked of me, when determining whether I qualify for a subsidy.
Healthcare.gov Rep Alma:  Correct.
[Several attempts at providing irrelevant but supposedly helpful information followed; the gist of it was that I should be wary of the financial impact of leaving employer-sponsored coverage for something on healthcare.gov.]

AgentCooper:  Whenever they reform this in the future, can you pass along the suggestion that the health care insurance companies not be allowed to write the law?
Healthcare.gov Rep Alma:  Yes, but please direct that suggestion to your Congressman as well.

[TomTX]

It would be awesome to see more discussion on what states are best for ACA coverage/subsidies/gotchas - as an early retiree, I expect to choose my state of residence. ACA will be a big influence.

Example: Alaska and Hawaii allow higher incomes when calculating subsidies, because the Federal Poverty Level (FPL) is higher in those states.

AK (25% higher) and HI (15% higher) have higher FPL levels because the COL is higher there. The other state variable at this point is Medicaid expansion. In some states (like AL) one insurer monopolizes the market, so there is less insurer competition which could lead to higher prices. And many rural areas are similarly much more expensive than urban areas in the same state (for similar competition and provider market power issues). There are some subtle differences in the states beyond this, but not really anything I can think of that would affect my decision to live in one state vs another.

CoL is higher in Hawaii, particularly if you want to live a consumerist mainland lifestyle in Honolulu. If you pick the right areas of the Big Island, and live the Mustachian lifestyle (ie, you no longer need heat/AC at all, you eat local foods, you don't drive a lot or use a lot of electricity) - CoL is not a big deal

[jim555]

New York has a really good set up for those under 200% FPL.  0-138 Medicaid, 138-150 Essential Plan - Both are free and are almost identical, but Essential Plan does not count as Medicaid for estate recovery.  150-200 Essential Plan $20 a month premium, very reasonable co-pays, $2,000 Max OOP.

[cacaoheart]

Q&A with Healthcare.gov 11/12/15:
AgentCooper:  And "affordable," under the Affordable Care Act, refers ONLY to what it costs for employee-only coverage, and it does not care - and does not look at - what employee + spouse, or employee+family coverage costs?

In that case might it make sense for the employee to use employer coverage while the spouse+family apply for ACA care? I know at my last place of employment employee insurance was free but family insurance was $700 per month.

[forummm]

Q&A with Healthcare.gov 11/12/15:
AgentCooper:  And "affordable," under the Affordable Care Act, refers ONLY to what it costs for employee-only coverage, and it does not care - and does not look at - what employee + spouse, or employee+family coverage costs?

In that case might it make sense for the employee to use employer coverage while the spouse+family apply for ACA care? I know at my last place of employment employee insurance was free but family insurance was $700 per month.

Yes, it might. It depends on what options the employee has.

[El_Viajero]

Q&A with Healthcare.gov 11/12/15:
AgentCooper:  And "affordable," under the Affordable Care Act, refers ONLY to what it costs for employee-only coverage, and it does not care - and does not look at - what employee + spouse, or employee+family coverage costs?

In that case might it make sense for the employee to use employer coverage while the spouse+family apply for ACA care? I know at my last place of employment employee insurance was free but family insurance was $700 per month.

Yes, it might. It depends on what options the employee has.

This touches on my current conundrum. Ahem...

My wife's new employer offers health insurance to employees and families. The employee premium is negligible – anywhere from $0 to $95/month depending on the chosen plan.

The family plan (spouse + kids) is a different story. $520/month is the absolute lowest family premium available.

Why is this a problem for us? I am self-employed. Our total 2016 household income is about $60,000. If we all applied for a plan through the health insurance marketplace, I'd get a subsidy and could insure my entire family for $260/month in a high deductible plan. High deductible plans, in case you didn't know, aren't that bad in the post-ACA/Obamacare world. The highest individual deductible allowed by law is < $7K. Young, healthy mustachians like us would definitely prefer the $260/month plan to the $520/month plan offered through my wife's employer.

But it looks like we won't qualify for the subsidy since we're "eligible" for coverage through my wife's employer – even though our household income is within the window of qualification for ACA subsidies.

Thoughts? Is there any way we can legally forgo the insurance offered by my wife's employer and take the subsidized HDHP through the health insurance marketplace?

If not, this would seem to be an enormous flaw in the law.

[El_Viajero]

This touches on my current conundrum. Ahem...

My wife's new employer offers health insurance to employees and families. The employee premium is negligible – anywhere from $0 to $95/month depending on the chosen plan.

The family plan (spouse + kids) is a different story. $520/month is the absolute lowest family premium available.

Why is this a problem for us? I am self-employed. Our total 2016 household income is about $60,000. If we all applied for a plan through the health insurance marketplace, I'd get a subsidy and could insure my entire family for $260/month in a high deductible plan. High deductible plans, in case you didn't know, aren't that bad in the post-ACA/Obamacare world. The highest individual deductible allowed by law is < $7K. Young, healthy mustachians like us would definitely prefer the $260/month plan to the $520/month plan offered through my wife's employer.

But it looks like we won't qualify for the subsidy since we're "eligible" for coverage through my wife's employer – even though our household income is within the window of qualification for ACA subsidies.

Thoughts? Is there any way we can legally forgo the insurance offered by my wife's employer and take the subsidized HDHP through the health insurance marketplace?

If not, this would seem to be an enormous flaw in the law.

I'm going to answer my own question. A little research yields this:

http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=129

It's the so-called "family glitch." Eligibility for subsidies is determined based on the cost of employee-only coverage and doesn't account for the significantly higher cost of family coverage.

So I'm basically shit out of luck unless I lie about our eligibility for employer coverage on my Marketplace application.

Letter of the law vs. spirit of the law? Anybody? It is the AFFORDABLE care act, right?

[seattlecyclone]

I wouldn't recommend lying. Pay the full premium (either on your wife's plan or a marketplace plan) and keep the cost of family coverage in mind the next time you or she switches jobs.

[El_Viajero]

I wouldn't recommend lying. Pay the full premium (either on your wife's plan or a marketplace plan) and keep the cost of family coverage in mind the next time you or she switches jobs.

I agree. I was only kidding. I suppose it might qualify as civil disobedience, depending on your perspective.

[MidWestLove]

advice/comments sought to confirm ACA understanding (which also may be useful to others).

laid off with insurance expiring this month, currently family is on that insurance.
see three options
1) pay for cobra for current insurance until the end of the month
2) switch to spouse's family insurance (part time worker $800 a month)
3) go for ACA special enrollment period due to loss of job , get insurance through marketplace.

Considerations
1) my understanding is that if we use either option (1) or (2) above (COBRA or wife's family plan) it does not disqualify us from using ACA during open enrollment in October, correct?
2) during open enrollment, can part of the family be on ACA (i.e. me and kids) or is it all or nothing deal? I know I can not enroll/receive credit a spouse who is eligible for her own affordable plan but am I myself unenrollable if she is eligible? How does that work?

Thank you

[forummm]

advice/comments sought to confirm ACA understanding (which also may be useful to others).

laid off with insurance expiring this month, currently family is on that insurance.
see three options
1) pay for cobra for current insurance until the end of the month
2) switch to spouse's family insurance (part time worker $800 a month)
3) go for ACA special enrollment period due to loss of job , get insurance through marketplace.

Considerations
1) my understanding is that if we use either option (1) or (2) above (COBRA or wife's family plan) it does not disqualify us from using ACA during open enrollment in October, correct?
2) during open enrollment, can part of the family be on ACA (i.e. me and kids) or is it all or nothing deal? I know I can not enroll/receive credit a spouse who is eligible for her own affordable plan but am I myself unenrollable if she is eligible? How does that work?

Thank you

Yes, if you mean a plan starting in January*

Yes**

* Open enrollment lets you enroll in a plan that takes effect as early as January 1--not October. If you have a qualifying life event (like losing your job or losing your coverage or having a family status change) then you can have a special enrollment period that lets you enroll in the middle of the year. If your wife's plan offers family coverage you might be required to either take it or forgo a tax credit for a Marketplace plan.

**You can have some people on a Marketplace plan and some on other coverage. You can even decline your own work plan (or your spouse's) to enroll in a Marketplace plan. You could even sign up for both a work plan and a Marketplace plan (although that would probably be wasteful).

[cacaoheart]

It's the so-called "family glitch." Eligibility for subsidies is determined based on the cost of employee-only coverage and doesn't account for the significantly higher cost of family coverage.

I wonder how this works with employers that provide health insurance to former employees as a retirement benefit. Two local major employers provide health insurance at a discounted or free rate if someone retires after having worked with them for 5-20 years. The discount is only given to the former employee, though family members are eligible to pay the full price. Would this mean that if someone worked at such a place for 5+ years their family would never be eligible for ACA subsidies?

[seattlecyclone]

It's the so-called "family glitch." Eligibility for subsidies is determined based on the cost of employee-only coverage and doesn't account for the significantly higher cost of family coverage.

I wonder how this works with employers that provide health insurance to former employees as a retirement benefit. Two local major employers provide health insurance at a discounted or free rate if someone retires after having worked with them for 5-20 years. The discount is only given to the former employee, though family members are eligible to pay the full price. Would this mean that if someone worked at such a place for 5+ years their family would never be eligible for ACA subsidies?

According to healthcare.gov, people who have retiree health coverage can't get subsidized health care through the exchange, but people who are eligible but choose not to enroll in retiree health coverage can get subsidies.

[cacaoheart]

people who are eligible but choose not to enroll in retiree health coverage can get subsidies.

Excellent, thank you :-)

[seattlecyclone]

I imagine that would depend on your specific employer's policies. I'm not aware of any law requiring them to keep the offer available if you turn them down at first, nor am I aware of a law requiring them not to.

[Exflyboy]

I was under the impression that you could still make Traditional IRA contributions (and thus dial your income down to the perfect number after the end of the year) even if your not working.

Sadly that is not the case and passive income such as rent and divs/cap gains distributions only means that you cannot make Traditional IRA contributions.

Sadly (kind of) the lowest we could get our MAGI to is about $28k (about $100/month for a silver plan). We can't live on $28k but we will have about $40k in cash when we are both quit next year so we could make it for about 4 years before we liquidate some assets.

I did a check at $35k income and the monthly premium was about $180.. Still not bad and allows some frivolity in our spending..:)

[darknight]

advice/comments sought to confirm ACA understanding (which also may be useful to others).

laid off with insurance expiring this month, currently family is on that insurance.
see three options
1) pay for cobra for current insurance until the end of the month
2) switch to spouse's family insurance (part time worker $800 a month)
3) go for ACA special enrollment period due to loss of job , get insurance through marketplace.

Considerations
1) my understanding is that if we use either option (1) or (2) above (COBRA or wife's family plan) it does not disqualify us from using ACA during open enrollment in October, correct?
2) during open enrollment, can part of the family be on ACA (i.e. me and kids) or is it all or nothing deal? I know I can not enroll/receive credit a spouse who is eligible for her own affordable plan but am I myself unenrollable if she is eligible? How does that work?

Thank you

Yes, if you mean a plan starting in January*

Yes**

* Open enrollment lets you enroll in a plan that takes effect as early as January 1--not October. If you have a qualifying life event (like losing your job or losing your coverage or having a family status change) then you can have a special enrollment period that lets you enroll in the middle of the year. If your wife's plan offers family coverage you might be required to either take it or forgo a tax credit for a Marketplace plan.

**You can have some people on a Marketplace plan and some on other coverage. You can even decline your own work plan (or your spouse's) to enroll in a Marketplace plan. You could even sign up for both a work plan and a Marketplace plan (although that would probably be wasteful).

I work in enrollment for a major med insurance carrier and can answer some questions if anybody has them..
You can enroll through the marketplace if you decline employer coverage, however this will void you from qualifying for any tax credit. If you give partial information and take the tax credit you may be subject to repay at tax time.

[codycat]

I'm planning to escape work next year, the year I turn 55, allowing penalty free withdrawals from 401K and plan to signup for ACA.  I'll funnel all earned income into 401K and IRA for the few weeks I'll work at the start of the year, thus no affect on MAGI.  I have sufficient cash to live on for the year.

I've done quite a bit of research on premium subsidies and cost sharing subsidies (which lower deductibles and max out of pocket).  In particular there are limits on how much of the premium subsidies must be repaid based on your final MAGI vs your original estimated MAGI.

For example, assume I originally estimate my MAGI at 100% FPL giving me the best possible premium subsidy (I don't live in an expanded medicare state) and best cost sharing subsidy (in the 94% actuarial value).  My only income will be dividends and capital gain distributions from a post-tax brokerage account and a little bank interest, probably around 15K total.  Then in December, after I get the final numbers for brokerage account distributions (estimating final dividends for muni-bonds on December 31st), I plan to make a 401K withdrawal bringing my MAGI up to 199% of FPL.  This will replenish my cash supply for the next year and I will invest any excess in the post-tax brokerage account.

When I file taxes for 2017, my understanding is that payback of the premium subsidy (~1.7K) will be capped at $600 based on being below 200% of FPL.  There is no requirement or mechanism for paying back the cost sharing subsidy.

Is this legal?  Is there anything preventing me from doing this every year?

[Exflyboy]

Don't know on the ACA but you seem to be assuming you can make small withdrawals from your 401k based on the age 55 rule.

While technically this is allowable, not all plans allow this, in fact all three of my 401k accounts require the entire amount to be withdrawn between age 55 and 59.5... Which of course would be murderous to both ACA subsidies and taxes.

Might want to double check this.

[jim555]

Is this legal?  Is there anything preventing me from doing this every year?

They might consider intentional understatement of the estimate to be tax fraud.  I would be careful with such a plan.

[CanuckExpat]

Questions, hopefully general, about how one handles being pregnant during ACA open enrollment period and the options available.

i.e. if a woman is pregnant during 2016 open enrollment and expecting 2017, would she enter information only for current household size, not the current + 1 and then re-sign up for healthcare after birth (life event)? Having an extra family member but same income seems like it could affect subsidy and cost sharing eligibility a lot, not sure how one factors that into planning.

Follow up, being pregnant seems to greatly increase the income levels at which a woman is eligible for medicaid. If you are eligible for medicaid you lose ACA subsidies right? This also seems to create situation where pregnant family member would be medicaid eligible, but non-pregnant adults in family are not. If one wanted to avoid medicaid for any reason, do you have to disclose the pregnancy, and at what point (ie are you not pregnant until a certain date, until confirmed by a medical professional, etc)?

[Exflyboy]

I am assuming at this point the ACA is history.. Unless the blue States run their own HC exchanges, but I guess we are in for major changes in how we fund (or not) healthcare at this point.

Very sad.

[Lucky Girl]

Move to Massachusetts.  We have Romneycare.

[Exflyboy]

Move to Massachusetts.  We have Romneycare.

Exactly my point.. thats where the ACA came from after all.

Another thought (although this only works if your HC needs are light) is that perhaps one could buy a catastrophic plan.. If the pre-existing condition deal does not come back as DT has implied in recent days, then in theory you could buy a policy with a $25,000 deductable, then save an extra $25 to 50k before retiring.

You then in effect have say 1 or 2 years HC needs met and if something really bad happened it wouldn't wipe you out. If something bad happened 5 or 10 years into retirement then in theory your stash should be bigger anyway.

Thoughts?

[Miranda]

Questions, hopefully general, about how one handles being pregnant during ACA open enrollment period and the options available.

i.e. if a woman is pregnant during 2016 open enrollment and expecting 2017, would she enter information only for current household size, not the current + 1 and then re-sign up for healthcare after birth (life event)? Having an extra family member but same income seems like it could affect subsidy and cost sharing eligibility a lot, not sure how one factors that into planning.

Follow up, being pregnant seems to greatly increase the income levels at which a woman is eligible for medicaid. If you are eligible for medicaid you lose ACA subsidies right? This also seems to create situation where pregnant family member would be medicaid eligible, but non-pregnant adults in family are not. If one wanted to avoid medicaid for any reason, do you have to disclose the pregnancy, and at what point (ie are you not pregnant until a certain date, until confirmed by a medical professional, etc)?

I have helped many people sign up for insurance through Healthcare.gov, and that's where I get mine.  It asks you 3 times if you or anyone in your household is pregnant.  So you do not count the baby as part of the household, but you are required to report the pregnancy.  And yes, once you have the baby you sign up again as a life event.  In my state you are also required to report it when you apply for Medicaid.  My state did not expand Medicaid, so the income limits for a pregnant woman are still very low, so it's not an issue with subsidies. You would need to check for your state.

[Roadrunner53]

I need some information on Obamacare. The first year Hub and I were on O-Care our income exceeded the amount to get a subsidy however, they have a special rule for first year and base income on FUTURE income when a special event occurs like retirement. That was year 2015. This year (2017) Hub went off O-Care in March to go to Medicare and they still base my O-Care on our current income. We have stayed just under the 400% poverty level to continue to get the subsidy for me. Now, Next year (2018) I will be going off to Medicare starting August 1. My question is, might there be a special rule for the year you leave O-Care so I can increase my income without paying back the subsidy? I cannot find any information in regard to this situation. It is basically the reverse situation as when we started O-Care. Next year I will only be on O-Care for a partial year (7 months).

Thanks!

[mathstach]

For self-employed beneficiaries of the ACA, is it correct that there is no "subsidy cliff"?

For instance, if I thought I would be "over the cliff," household income > 4xFPL, but my government exchange health insurance costs were higher than expected, then the self-employed health insurance deduction might bring me back below 4xFPL. And then I could take a subsidy, as long as
I didn't take so much that I exceeded 4xFPL for my MAGI. Is that correct? So in terms of earned self-employment income, the subsidy has no cliffs?

[seattlecyclone]

For self-employed beneficiaries of the ACA, is it correct that there is no "subsidy cliff"?

For instance, if I thought I would be "over the cliff," household income > 4xFPL, but my government exchange health insurance costs were higher than expected, then the self-employed health insurance deduction might bring me back below 4xFPL. And then I could take a subsidy, as long as
I didn't take so much that I exceeded 4xFPL for my MAGI. Is that correct? So in terms of earned self-employment income, the subsidy has no cliffs?

I think the cliff is a little bit fuzzier in this case. You can certainly envision an income high enough that deducting your net premiums would still leave your income too high for any subsidy, and having an income a little bit lower would mean you do get a subsidy.

[honeyfill]

What is the income calculation regarding subsidies for including a child who is between 21 and 26 on your ACA  health care ?  If they are working but do not have health care  coverage or choose not to take advantage of their companies health care, do you count their income in your household income ? what if they are not working for a few months and then get a job later in the year?  I've looked at a lot of sites but no one seems to cover this.  Are their any good sites where they answer odd questions like this? 

[mathstach]

Self-employed? Find your premium tax credit with this calculator; the IRS says it's the only one that always works, and it's my first website:

https://cims.nyu.edu/~ferguson/Calculator%20SE%20ACA.html

The story:
I heard seattlecyclone saying that "the cliff is a little bit fuzzier" for the self-employed.
Curious to learn more, I engaged in a mathematics research project to investigate this in detail, and just finished.

If your income (MAGI with Line 29 self-employment health insurance deduction excluded) is in the appropriate range, you can take both a net health insurance cost deduction on the front page of your 1040 and get the ACA premium tax credit on the back (or advance premium tax credits).

The only issue is that you can't double dip; you can't get a $1 deduction and a $1 credit on the same dollar you spend.

But how to split up the cost between the deduction and the credit?

According to the IRS, Turbo Tax, H & R Block, etc., for the past three years, there has been no calculation method that consistently and accurately tells how much premium tax credit you can take in this case; in Publication 978, the IRS has an old method that works for many, but not all, people.

Again, I've made an online calculator to help the half million or so people adversely affected by the old method:
https://cims.nyu.edu/~ferguson/Calculator%20SE%20ACA.html

Just finished this on Friday; a Google engineer helped me make it.

The IRS says that the new method my calculator employs is the first method to solve the problem.

Brandon, the Mad Fientist, has expressed interest; it helps those planning a self-employed semi-retirement.

Eg., anybody not eligible for Medicaid whose income (before the Line 29 health insurance deduction) is < (4 times the federal poverty line) + (unsubsidized health insurance cost) will now receive some premium tax credit (if they have enough SE income to take the Line 29 deduction).

Please share this, especially if you know any self-employed beneficiaries of the Affordable Care Act. I'm very excited about this, and plan to publish what I've done as my first research publication in a peer-reviewed journal. Hopefully, I can also get a blurb in the NYTimes about it.

One consequence of this work is that there are no subsidy cliffs for the self-employed. This is unlike the employed, who have to deal with the subsidy suddenly decreasing at 133% and 400% of the federal poverty line. Making an extra dollar of self-employment income can never lower the subsidy by more than a dollar; it cannot decrease MAGI. Consider trying the calculator, provided you read the caveats, and sharing.