Author Topic: Newly FIREd(ish) health insurance questions  (Read 492 times)

AlanStache

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Newly FIREd(ish) health insurance questions
« on: November 09, 2023, 12:53:37 PM »
I gave my notice at work about a month ago and am burning down vacation till the end of this month (nov) where my official last day of employment will be nov 30th. 

As I understand it I can not have health insurance for Dec, then start up with a market place policy Jan 1.  Starting Jan 1 will get me income based subsidies (I made +100k in 2023) I expect to live on ~40k on 2024 - probably mostly from taxable investment sales and some cash savings.  If something happens in Dec and I need insurance I am able to sign up for COBRA up to 60 days after my last day of employment (Nov 30) and things between Nov 30 and when I signed up for COBRA will still be covered.  (60 days being plenty to get from Nov 30 to Jan 1.) 

There is no longer a tax penalty for not having health insurance (correct?) so going with out in dec should not really be a problem.  I did look at getting a market place plain for Dec but most of the web links formed a closed path all linking to each other and not to a site where I could actually sign up for a plain. 

I am over all very healthy, not on any meds and have no chronic problems. 

As far as Market Place plains, it looks like I should go for a low cost plan with high deductible.  Cheap and expensive plains seem to have about a 9k for the max out of pocket, and mainly differ in deductible and the percent they pay between the deductible and max out of pocket.  Seems best to assume I will continue to not have expensive health issues and if I do then pay the 9k.  Paying an extra 150$/mon so that insurance pays 50% rather than 20% between deductible and max out of pocket strikes me as underwhelming - but have not done the math on it. 

Am I missing anything?  I was with the same employer for 20 years so am new to choosing insurance. 

I am not 100% sure if I will earn money in 2024, dont intend to have a full time big-boy-job, maybe just some short term contracting.  Am aware that I may have to replay income based tax credits if I make to much (there is no penalty or fee for this?). 

Thanks for any insights you may have, will try to answer any questions that come up. 

seattlecyclone

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Re: Newly FIREd(ish) health insurance questions
« Reply #1 on: November 09, 2023, 01:46:02 PM »
A few things to be aware of...

* Medicaid. While the ACA Marketplace plans use your full-year income to compute subsidies, Medicaid looks at your income on a month-to-month basis. For a single person this threshold is $1,677/month this year, will likely increase a bit in 2024 due to inflation. If you have individual months below this level in the recent past you could be put on Medicaid coverage when you go to sign up for insurance through the exchange, even if you expect your income to be higher than that on average over the next 12 months. This fact can take people by surprise! Some people want to be sure to avoid being on Medicaid, while others want to actively pursue it, and others are neutral on the matter. I'll leave it up to you to decide where you fall on that spectrum. If you want to avoid Medicaid you would be wise to generate income above that threshold each and every month. If you want to actively pursue Medicaid the strategy is generally to have income below the threshold most months. If you have an occasional month above the line (perhaps significantly so!) you would only get kicked off if you're above the line for two or more months in a row.
* Cost-sharing subsidies. You mentioned wanting to pursue a low-premium/high-deductible plan. This can often be the best choice for those in good health. However if you expect income above Medicaid thresholds but below double the poverty level (or roughly $29k next year for a single person) you might find that a silver plan with cost-sharing subsidies is the way to go. At that income level they swap out the regular silver plans (and only the silver plans) for ones with much lower deductibles and other out-of-pocket costs, for the same premium as the regular silver plan. You may find these to be a better overall deal than the higher-deductible bronze plans that don't get adjusted like this at lower incomes. The premium may be a bit higher than the cheapest bronze plan but the downside risk from out-of-pocket expenses would be significantly less.

For both of the above when I say "income" I mean the ACA MAGI, which is the adjusted gross income from your tax return plus any excluded foreign income, non-taxable interest, and nontaxable social security benefits you may have. You say you plan to live on $40k, but for taxable accounts in particular the amount you withdraw is not the same as the MAGI you'll recognize from that withdrawal. Any capital gains and dividends from that account will count toward MAGI, but any amount that is just the withdrawal of your cost basis doesn't count toward this number. Furthermore withdrawals from cash checking or savings accounts also don't count toward MAGI. For this reason you could easily withdraw $40k from these sources and have an income that would qualify you for one of the above income levels.

AlanStache

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Re: Newly FIREd(ish) health insurance questions
« Reply #2 on: November 09, 2023, 05:53:30 PM »
thanks seattlecyclone, I think I need to put some more work into what my MAGI could be.  I really have no idea how much I will work or where or what I would be paid.  I at least need a better understanding of MAGI with long term capital gains sales.  Would be funny if I had to buy a dividend etf to get more income even if it was directly reinvested to get up to the ACA income minimum...

Will have to look at the silver plains again.  thanks

secondcor521

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Re: Newly FIREd(ish) health insurance questions
« Reply #3 on: November 09, 2023, 07:24:21 PM »
thanks seattlecyclone, I think I need to put some more work into what my MAGI could be.  I really have no idea how much I will work or where or what I would be paid.  I at least need a better understanding of MAGI with long term capital gains sales.  Would be funny if I had to buy a dividend etf to get more income even if it was directly reinvested to get up to the ACA income minimum...

Will have to look at the silver plains again.  thanks

Roth conversions are often a good way to generate MAGI for ACA.  In addition to generating MAGI, they can also help avoid the higher tax rates some of us face at age 73+ due to RMDs and SS.  They also can serve as a rung on a Roth conversion ladder.

As long as you do the conversion during the year, it will count towards MAGI.  Note that you'll of course pay any applicable federal and state income taxes on the converted amount.  I usually sit down in December, do my tax return to see where I stand, then Roth convert up to some target AGI.