Should we bother with an ACA plan?

[MandyT]

I keep feeling like I'm missing out on something by keeping our old insurance.

Right now we pay $450/month for a family of 3, with a deductible of $20,000 and max OOP of $40k/family. It will be going up to around $500/month in 2023. We mostly pay cash for medical care because it ends up being cheaper than running it through insurance. We consider this plan to be a truly catastrophic plan.

We also have a DPC (direct primary care physician) at $180/month for the three of us. It has been money well spent: not only does she handle everything from wellness visits to urgent care, and help us over phone, email, and text...she also arranges discounts with local providers for cheap MRIs, sleep studies, etc. Last MRI was $500 cash pay; the provider would have charged $1,500 otherwise.

We have only hit the deductible twice in the 10 years of having our current insurance plan. We have averaged $350 per month in premiums over the last 10 years because it started at $250 and eventually went up over time to $450. (It will be over $500 in 2023.) We paid out maybe $50,000 out of pocket in that time. For a total of $92k.

One issue is that we have no idea exactly how much we'll earn each year. My husband has pretty steady income from an employer of about $99k before taxes (including annual bonus). He does tend to get an annual raise...but not every single year, and never the same amount.

I'm retired but still get random amounts of (mostly) passive income. For 2022 that will add up to about $29k; I expect it will be substantially lower in 2023 but can never be sure. There is also more from an inherited IRA (about $219,000 right now) that we have to spend down within 10 years.

I dislike the idea of having to worry about keeping our income under a certain amount—that is much too fiddly for me to handle with work incomes, investment income, etc. But if it were really, really worth it I'm sure I could handle it.

So: As a very rough example, if we estimate we'll earn $130,000 before taxes, we can get a premium tax credit of $830/month.

If we want to get our premium lower, we can get a Bronze plan with a $17,500 deductible and $18,200 OOP for $354...so saving about $150/month of our current plan with a slightly lower deductible and much lower OOP. I would want to keep the DPC.

However, I discovered the hard way that if your deductible is over $5k, you can't open an HCA. (At least that was the case a couple years ago when I tried.) If I'm going to go through all this I would at least like that option!

So maybe I want to try a $4,000 deductible. Looks like plans in that range (including our credit) would be around $1,000/month. And OOP maximums would still be around $17k!! This would be a Gold plan, and if we do that we might be able to discontinue the DPC, saving $180/month off of that. So let's say $820/month, which is about $140 more than we're paying now for our insurance + DPC. But for what benefit??

Final consideration is that we don't use much healthcare, but we do have an athletic son who went from ballet to boxing to football. His biggest injury (which cost us about $25k OOP) was from ballet! But he now has a football injury that just might require elbow surgery...which looks like it would be in the $7-8k range. Also, DH and I are in our mid-50s, and while we're pretty healthy now—no major issues, zero meds—I know we can't count on that forever.

So am I a complete face-punchable idiot for continuing to use our cheap non-ACA plan? Is there something obvious I'm missing? Because I don't get it.

Thanks for any insights!

[dandarc]

I'd be surprised if there wasn't an HSA-eligible plan available on the exchange - does your state have its own exchange or is it healthcare.gov? Healthcare.gov has a checkbox to filter for this. Quite often not going to be the very lowest premium, but rare for the premium difference to be so stark that the tax-savings are entirely wiped out.

Healthcare.gov also allows you to enter providers and facilities so you can know with more certainty if they are in or out of network with the various plans fairly easily.

How is your current insurance cheap? Yes it is cheaper than full-price ACA premium, but with your realistic estimate of income, that bronze plan on the face of it is a lower net cost and also you're taking less risk with that policy. Unless the network is really bad or something.

Then with this as another thing stacking up, you're even more incentivized to put money into tIRA or 401K or what have you - $130K might prove a significantly high estimate. You don't actually have to get income "right" for ACA premium tax credits - you settle up at tax time when you know your actual income for the year in question. So to me, it looks like ACA is a good deal for your situation, probably better than your estimate.

Where ACA insurance can become a fantastic deal is if your income is in the 100% to 250% of FPL range and cost sharing reductions kick in (also must pick a silver plan to get these) - but 250% of FPL for a family of three is $57K, so probably out of reach without some drastic tax planning, and you need to be below 150% of FPL for the maximum CSRs which make those silver plans a really good deal usually.

[dandarc]

"I dislike the idea of having to worry about keeping our income under a certain amount—that is much too fiddly for me to handle with work incomes, investment income, etc. But if it were really, really worth it I'm sure I could handle it."

Wanted to say a little more about this specifically - you actually don't have to worry about managing your income. The way ACA and the Premium Tax Credits that make it a good deal work is that when you sign up, you make best guess and you'll get that PTC in advance to lower what you pay every month, but if your income comes in higher or lower than your estimate then when you file your tax return and obviously have actual income vs. just estimates, your tax bill winds up adjusted accordingly.

The main gotcha is if your income winds up below 100% of FPL - at that point you are supposed to go onto medicaid and all ACA subsidies go away.  But with what you've shared here about your income, that seems very unlikely to happen for you. There is no cliff due to pandemic legislation and the inflation reduction act through 2025, so at least for a few years, you cannot have too high an income for PTCs - that is a pre-2021 problem.

[sisto]

I suspect you weren't previously able to get an HSA because your catastrophic plan wasn't a qualifying HDHP plan. You should definitely be able to get one through the ACA. And as was previously mentioned you probably don't need to worry about the income numbers in your situation and can deal with it at tax time. You will likely get better coverage for less money.

[MandyT]

Thank you for the insights!

You're right...when I filter by HCA-allowable plans, I get some with pretty high deductibles.

I don't need to worry about whether our doctors are included in the network as right now our doc is a DPC physician who doesn't accept insurance. If we were to go to a plan where it makes sense to not have the DPC, I would choose someone who is included.

Am I the only one, though, who dislikes the idea of not knowing whether you'll be hit with a big bill come tax time? I'm more of the "I'd rather pay a knowable amount now and potentially pay more than be unsure" camp. That's why we paid off our mortgage, and why I self-pay on most medical bills rather than put them through insurance! :D

Though...the very max we would be hit with is $830 x 12, and that is unlikely. We could handle an $8k tax bill even if we wouldn't like it...and the upside would be potentially saving on insurance and getting better coverage.

Also, something I forgot...we'll be getting $175k in cash from my MIL's estate in 2023. (From the sale of her house.) I believe inheritances don't incur taxes, but that would count as income, right?

[bacchi]

Am I the only one, though, who dislikes the idea of not knowing whether you'll be hit with a big bill come tax time? I'm more of the "I'd rather pay a knowable amount now and potentially pay more than be unsure" camp. That's why we paid off our mortgage, and why I self-pay on most medical bills rather than put them through insurance! :D

Though...the very max we would be hit with is $830 x 12, and that is unlikely. We could handle an $8k tax bill even if we wouldn't like it...and the upside would be potentially saving on insurance and getting better coverage.

Also, something I forgot...we'll be getting $175k in cash from my MIL's estate in 2023. (From the sale of her house.) I believe inheritances don't incur taxes, but that would count as income, right?

When you apply for an ACA plan, you can adjust how much you want in allowable subsidies each month. Set it to $0, set it to $100, or set it to the maximum subsidy per month. It'll true up at tax time.

An inheritance that isn't federally taxed does not affect ACA MAGI.

[jim555]

The main gotcha is if your income winds up below 100% of FPL - at that point you are supposed to go onto medicaid and all ACA subsidies go away.  But with what you've shared here about your income, that seems very unlikely to happen for you. There is no cliff due to pandemic legislation and the inflation reduction act through 2025, so at least for a few years, you cannot have too high an income for PTCs - that is a pre-2021 problem.

Just a correction, monthly income under 138% FPL is the Medicaid zone, not 100% FPL.

[dandarc]

The main gotcha is if your income winds up below 100% of FPL - at that point you are supposed to go onto medicaid and all ACA subsidies go away.  But with what you've shared here about your income, that seems very unlikely to happen for you. There is no cliff due to pandemic legislation and the inflation reduction act through 2025, so at least for a few years, you cannot have too high an income for PTCs - that is a pre-2021 problem.

Just a correction, monthly income under 138% FPL is the Medicaid zone, not 100% FPL.

Depends on your state - and feds fixed even bigger issue for the non expansion states where substitute go away at 138 fpl even though Medicaid eligibility might not kick in until 100 fpl. Of course non expansion states also often have criteria other than income for eligibility - childless households without any disability are often not able to get Medicaid even at extremely low incomes.

[jim555]

The main gotcha is if your income winds up below 100% of FPL - at that point you are supposed to go onto medicaid and all ACA subsidies go away.  But with what you've shared here about your income, that seems very unlikely to happen for you. There is no cliff due to pandemic legislation and the inflation reduction act through 2025, so at least for a few years, you cannot have too high an income for PTCs - that is a pre-2021 problem.

Just a correction, monthly income under 138% FPL is the Medicaid zone, not 100% FPL.

Depends on your state - and feds fixed even bigger issue for the non expansion states where substitute go away at 138 fpl even though Medicaid eligibility might not kick in until 100 fpl. Of course non expansion states also often have criteria other than income for eligibility - childless households without any disability are often not able to get Medicaid even at extremely low incomes.

Medicaid kicks in at 0% up to 138%.  Non expansion states have a gap from 0% to 100% where you get no subsidies and no Medicaid. 

[reeshau]

I don't need to worry about whether our doctors are included in the network as right now our doc is a DPC physician who doesn't accept insurance. If we were to go to a plan where it makes sense to not have the DPC, I would choose someone who is included.

What you would want to look for is that the hospital, and perhaps other specialists your DPC might refer you to, are in-network.  You also want to see what the new plan's rules are for referrals: again, it may force you to have a point of entry to the network.  At some point there will be a crossover where cash pay won't be feasible / tenable, and you don't want to have to restart with an in-network primary care doctor to get there.

Am I the only one, though, who dislikes the idea of not knowing whether you'll be hit with a big bill come tax time?

Just as an income tax refund is an interest-free loan to the government, the ACA adjustment, if you have to pay it, is an interest-free loan from the government to you.  I am not advocating knowingly entering false information in your ACA form:  this is illegal, and on a lesser scale could trigger the need for supporting documentation.  But if you have made your best guess and it comes up short, don't sweat it.  Make a new estimate, and put the money aside in an interest-bearing sinking fund.  Then you can thank Uncle Sam for the loan come April!

[MandyT]

This is all making sense now, thank you! An insurance agent I talked to a couple of years ago gave me the impression that if you underestimated your income, you would have to pay back ALL of the subsidy. Of course, that scared the crap out of me.

Also, I just realized that our current insurance is going up to $525, not $500. So we could be paying $354/month instead of $525.

The Bronze plan I'm looking at does include two of our local big hospitals that I checked (there are more but I didn't check them all yet). However, it has a 50% coinsurance after the $17,600 deductible, and our current insurance has a 0% coinsurance after a $20,000 deductible. So if something bad were to happen, we could be really screwed paying 50%—though I understand that I could potentially switch plans if that were to happen?

Thanks so much for walking me through all this. I haven't had to think about this stuff in a long time!

[geekette]

I'm a bit confused - per Healthcare.gov, your yearly out of pocket max (deductibles, copays and coinsurance combined) can't be more than $9,100 per individual and $18,200 for your whole family.  After that, the plan should pay 100% of covered care.

[seattlecyclone]

The Bronze plan I'm looking at does include two of our local big hospitals that I checked (there are more but I didn't check them all yet). However, it has a 50% coinsurance after the $17,600 deductible, and our current insurance has a 0% coinsurance after a $20,000 deductible. So if something bad were to happen, we could be really screwed paying 50%—though I understand that I could potentially switch plans if that were to happen?

The coinsurance only applies until you hit the out-of-pocket max. How much is that? I would think you're already getting pretty close paying a $17.6k deductible. You can switch plans at the year-end open enrollment. Outside of that window you're pretty much stuck with what you have. You can cancel your existing plan at any time, but nobody (except Medicaid if you qualify based on income changes) has to take you on mid-year without some qualifying life event.

[MandyT]

I'm a bit confused - per Healthcare.gov, your yearly out of pocket max (deductibles, copays and coinsurance combined) can't be more than $9,100 per individual and $18,200 for your whole family.  After that, the plan should pay 100% of covered care.

Oh, interesting! Yes, the plans I'm looking at comply. So if, say, we had a $17,000 deductible and an $18,000 OOP max and a 50% coinsurance, we would only need to pay the 50% between the $17k and $18k marks? (So half of $2,000—$1,000—max?)

The coinsurance only applies until you hit the out-of-pocket max.

See the image below...it says the coinsurance applies after you hit your deductible?

You know, I am an educated person with time and resources, and I cannot believe how confusing this is! I can't imagine doing this with less of any of the above.

[seattlecyclone]

I don't see an image. The out-of-pocket max includes amounts you paid toward your deductible, coinsurance, copays, anything you have to pay toward covered services. Coinsurance is charged between the deductible and the out-of-pocket max. Looks like there's not a lot of room between the two numbers in your case.

[secondcor521]

Am I the only one, though, who dislikes the idea of not knowing whether you'll be hit with a big bill come tax time? I'm more of the "I'd rather pay a knowable amount now and potentially pay more than be unsure" camp. That's why we paid off our mortgage, and why I self-pay on most medical bills rather than put them through insurance! :D

Though...the very max we would be hit with is $830 x 12, and that is unlikely. We could handle an $8k tax bill even if we wouldn't like it...and the upside would be potentially saving on insurance and getting better coverage.

You might be interested in taking a look at line 28 of Form 8962 and the related instructions.

Generally, as long as your AGI is below 400% of FPL, your repayment would be capped to a certain, lower dollar amount.  For 2022, it looks like this number is $2,800, or even lower if your AGI is lower.

For a family of 3 for next year in the lower 48, 400% of FPL is around $92K.  You've mentioned a somewhat higher income, but it sounds like you're talking gross income.  What matters for ACA stuff is (ACA modified) AGI, which you can find on line 11 of your Form 1040 from 2021 or 2022, and a similar line on your 2023 Form 1040.

Also, something I forgot...we'll be getting $175k in cash from my MIL's estate in 2023. (From the sale of her house.) I believe inheritances don't incur taxes, but that would count as income, right?

Generally not, as a previous poster said.  Check with your tax preparer for details.

[jim555]

Am I the only one, though, who dislikes the idea of not knowing whether you'll be hit with a big bill come tax time? I'm more of the "I'd rather pay a knowable amount now and potentially pay more than be unsure" camp. That's why we paid off our mortgage, and why I self-pay on most medical bills rather than put them through insurance! :D

Though...the very max we would be hit with is $830 x 12, and that is unlikely. We could handle an $8k tax bill even if we wouldn't like it...and the upside would be potentially saving on insurance and getting better coverage.

You might be interested in taking a look at line 28 of Form 8962 and the related instructions.

Generally, as long as your AGI is below 400% of FPL, your repayment would be capped to a certain, lower dollar amount.  For 2022, it looks like this number is $2,800, or even lower if your AGI is lower.

For a family of 3 for next year in the lower 48, 400% of FPL is around $92K.  You've mentioned a somewhat higher income, but it sounds like you're talking gross income.  What matters for ACA stuff is (ACA modified) AGI, which you can find on line 11 of your Form 1040 from 2021 or 2022, and a similar line on your 2023 Form 1040.

Also, something I forgot...we'll be getting $175k in cash from my MIL's estate in 2023. (From the sale of her house.) I believe inheritances don't incur taxes, but that would count as income, right?

Generally not, as a previous poster said.  Check with your tax preparer for details.

The 400% FPL subsidy cap (the cliff) is removed through 2025 by the Inflation Reduction Act.  Also inheritances are not income for ACA/Medicaid purposes.

[secondcor521]

The 400% FPL subsidy cap (the cliff) is removed through 2025 by the Inflation Reduction Act.

Yes, one can receive subsidies above 400% of FPL.  However, if one's AGI exceeds 400% of FPL, there is no limit on the amount of subsidies that might need to be repaid.  See the instructions for Form 8962 Line 28.

Also inheritances are not income for ACA/Medicaid purposes.

I agree that the inheritance itself is almost certainly not income.  However, OP mentioned it was proceeds from the parent's house.  While uncommon, there are cases where capital gains taxes might be owed.  Those capital gains would likely count towards ACA/Medicaid income if the gains were distributed to the beneficiaries via a K-1.  That's why I said OP should check with their tax preparer.

[jim555]

The 400% FPL subsidy cap (the cliff) is removed through 2025 by the Inflation Reduction Act.

Yes, one can receive subsidies above 400% of FPL.  However, if one's AGI exceeds 400% of FPL, there is no limit on the amount of subsidies that might need to be repaid.  See the instructions for Form 8962 Line 28.

I don't see that as a big deal, it will just reconcile to the proper number.  Table 5 repayment limitations limits the repays under 400%.  But with no cliff it isn't like you go over $1 and have to pay back ALL the subsides like how it used to be.

[MandyT]

However, if one's AGI exceeds 400% of FPL, there is no limit on the amount of subsidies that might need to be repaid.  See the instructions for Form 8962 Line 28.

Thanks for all the great info!

So typically you would pay back the extra subsidy amount, right? Meaning if our income went up to X and our subsidy would have been $600 instead of $800 per month, we would have to pay back $2,400? We wouldn't have to pay it all back.

[MandyT]

I don't see that as a big deal, it will just reconcile to the proper number.  Table 5 repayment limitations limits the repays under 400%.  But with no cliff it isn't like you go over $1 and have to pay back ALL the subsides like how it used to be.

Haha, we were posting at the same time! That answers my question and is a big relief.

[secondcor521]

The 400% FPL subsidy cap (the cliff) is removed through 2025 by the Inflation Reduction Act.

Yes, one can receive subsidies above 400% of FPL.  However, if one's AGI exceeds 400% of FPL, there is no limit on the amount of subsidies that might need to be repaid.  See the instructions for Form 8962 Line 28.

I don't see that as a big deal, it will just reconcile to the proper number.  Table 5 repayment limitations limits the repays under 400%.  But with no cliff it isn't like you go over $1 and have to pay back ALL the subsides like how it used to be.

I didn't say it was a big deal.  I was just clarifying that you and I were talking about two different things.

[secondcor521]

However, if one's AGI exceeds 400% of FPL, there is no limit on the amount of subsidies that might need to be repaid.  See the instructions for Form 8962 Line 28.

Thanks for all the great info!

So typically you would pay back the extra subsidy amount, right? Meaning if our income went up to X and our subsidy would have been $600 instead of $800 per month, we would have to pay back $2,400? We wouldn't have to pay it all back.

Correct.  And if your AGI were low enough, you might not even need to pay back all of the difference.  Using your numbers, if you were filing MFJ and your income were between 200% and 300% of your FPL, you'd only need to repay $1,650, not $2,400.

[MandyT]

Thanks! I actually started the application and it looks like our MAGI would be about $123k...which is well over 4x the FLP.

I plugged in other incomes to see what might happen if we were to make more than $123. If we had a MAGI of $150, for example, our subsidy would be $678 instead of $860 per month...so I'm assuming that means we would have to "pay back" $182 per month.

This is all kind of scary. We can't get back our current insurance so we don't want to make any mistakes that would have us regretting our decision.

[MandyT]

While we're here...I see lots of ACA plans from Ambetter. The latest episode of the Arm and a Leg podcast digs into what a scam this company is and all the problems it's causing for members. Avoid!

[MandyT]

Annnddd...one more question. If you self pay for healthcare—because it's often cheaper, especially if you have a high-deductible plan you're not likely to meet—can you then send the receipts to your health insurance company so it will go toward your deductible?

[dandarc]

Yep. You would have to submit claims yourself if doctor won't

[MandyT]

Yep. You would have to submit claims yourself if doctor won't

Wow, that seems like a weird loophole! I'll try it out soon...DS is getting physical therapy and we're self-paying. I'll see what happens if I then submit the receipts to insurance.

[reeshau]

Why is it a loophole?  It's the same for your insurance company, no matter who turns in the paperwork.  For the provider, you are saving the work for the billing department.  There was a story on US Healthcare some years ago, and it said the average square footage of then-new health care facilities dedicated to billing was about 40%.

For sure, it is not often utilized, because people leave their best consumer brains behind when getting healthcare, or are too intimidated by the terminology to ask.

[MandyT]

Why is it a loophole?  It's the same for your insurance company, no matter who turns in the paperwork.

True...I guess it feels "cheaty" but I get that it's actually not. I mean, not only is it easier for the medical provider, but the amount I'm submitting to the insurance company is likely less that what the medical provider would charge them.

BTW, I pulled the trigger on an ACA plan yesterday! It's a Bronze Aetna HMO that will save us $100/month over our old BCBS plan...and it has a much lower deductible ($8,600 per person vs. $20,000 per person) and max OOP. It starts on Feb. 1, and I'll cancel the BCBS plan after I pay for January. Thanks for all the advice!