Transition from high income to much lower income

[frugalor]

I got laid off and will get a severance in 2024.  With everything calculated, including all income sources and all retirement plan contributions, our household income will be around 80K in 2024.  And in 2025, the income will be around $30K.

For year 2023 though, our household income is more than $350K.

In terms of getting ACA medicaid, will there be any trouble showing the current income level after the layoff?  I think this might be a common situation for some folks who chose to FIRE.  How did you manage this transition?

[bacchi]

You'll need to upload documents stating why your income will be lower next year. In your case, you could upload a screen shot or PDF of your layoff email or severance package and also an explanatory PDF.

[eyesonthehorizon]

They may not ask for documentation, though it is strongly recommended to have that on hand in case. They may only ask for the reason for the decrease. At time of enrollment it also asks you for your total income that month and if that income is likely to be an accurate projection of the coverage period.

Enrollment in ACA will also request authorization for access to the next five years of tax records from the IRS so they can compare notes on your income; you don't have to consent, but in theory it reduces the odds you'll need to provide supplemental documentation.

[frugalor]

Enrollment in ACA will also request authorization for access to the next five years of tax records ...

Is it next five years or previous five years?

[eyesonthehorizon]

If I recall correctly it asked for the next (forward-looking) five years. I seem to remember the consent can be revoked (be sure to read the terms before you consent, but honestly it's all the same government....)

This is during the ACA application or subsidy process. Medicaid varies by state & I am not eligible, so I have no knowledge of that process.

[jim555]

They don't care about what you made last year when it comes to Medicaid.  They care about your current monthly income only. 

Your numbers sound too high for Medicaid.

[RWTL]

I got laid off and will get a severance in 2024.  With everything calculated, including all income sources and all retirement plan contributions, our household income will be around 80K in 2024.  And in 2025, the income will be around $30K.

For year 2023 though, our household income is more than $350K.

In terms of getting ACA medicaid, will there be any trouble showing the current income level after the layoff?  I think this might be a common situation for some folks who chose to FIRE.  How did you manage this transition?

Are you confusing ACA with Medicaid?  I'm not sure why you would qualify for Medicaid at those income levels in 2024 especially. 

My income dropped substantially from this year to next year due to retirement.  Healthcare.gov (ACA site) didn't ask for any proof - just to verify I had input the numbers correctly.  Pretty straightforward.  You could be asked to provide documentation though which you could probably get from your employer via a letter of termination/layoff.

[BlueHouse]

what state are you in?  Each state has a different Medicaid cutoff. 
 Search for healthcare subsidy calculator to estimate if you'll be eligible for Medicaid or if you'll get a subsidy. $80K sounds high for medicaid, but low enough for a partial subsidy on ACA.  Depends on state though.  I'm in DC, with expanded Medicaid, which I think is the reason why I have to manufacture income by converting tIRA to Roth to escape the Medicaid range and into the ACA range. 

[RedmondStash]

When my household income dropped by more than half, I just input the new income on the ACA site and waited to see if they'd ask for documentation or an explanation. They didn't.

Probably YMMV.

[chasesfish]

Medicaid won't come into play in 2024 due to your income.   You'll go on to Healthcare.gov, say you have a qualifying event (loss of job), estimate your income, then you buy coverage and choose whether or not to take the "subsidy", which is really just an advance of a refundable tax credit.

Personally, I never take the "subsidy" up front, I pay the full price on a rewards credit card monthly and depending on how my income falls, I may or may not qualify for any of the tax credits.

In 2025 you can figure out if you want to attempt Medicare or generate just enough taxable income to be in the world of full coverage through the ACA

[seattlecyclone]

Your numbers sound too high for Medicaid.

Depends on their family size and how steady the 2024 income will be. At least in my state a one-time payment such as a lump-sum severance payment is not considered at all for the purpose of determining Medicaid eligibility. If you get severance in the form of ongoing salary payments for a period of time, or unemployment compensation, those would count.

[RedmondStash]

Personally, I never take the "subsidy" up front, I pay the full price on a rewards credit card monthly and depending on how my income falls, I may or may not qualify for any of the tax credits.

Oooh. That's clever.

[jim555]

Personally, I never take the "subsidy" up front, I pay the full price on a rewards credit card monthly and depending on how my income falls, I may or may not qualify for any of the tax credits.

If they accept your estimate and you come in under 100% at tax time no one is forced to pay anything back.  Currently there is no 400% FPL income cap due to the Inflation Reduction Act so the cliff isn't a thing now.

[rantk81]

Isn't it better to err on the side of under-estimating income, in order to maximizing the "cost sharing reductions" if you're eligible for them?  (e.g. lower deductibles, co-pays, out-of-pocket-maximums)  As far as I know, those don't need to get paid back at tax-time if your "income estimate" was inaccurate.

[jim555]

Isn't it better to err on the side of under-estimating income, in order to maximizing the "cost sharing reductions" if you're eligible for them?  (e.g. lower deductibles, co-pays, out-of-pocket-maximums)  As far as I know, those don't need to get paid back at tax-time if your "income estimate" was inaccurate.

True, no recon for the CSRs.

[FIREin2018]

Isn't it better to err on the side of under-estimating income, in order to maximizing the "cost sharing reductions" if you're eligible for them?  (e.g. lower deductibles, co-pays, out-of-pocket-maximums)  As far as I know, those don't need to get paid back at tax-time if your "income estimate" was inaccurate.

My state rolled out it's own version of Obamacare.
healthcare.gov says i got to apply at my State's version.
That website wants me to upload docs to verify the low income i put down by Feb 2024. (healthcare.gov did not ask for verification, presumably they already have access to my 1040 since it's a Federal website.)

So in Feb 2024, i'm going to upload the 1st page of my 1040 and see what happens.
(it's not going to match the low # i put down)

[jim555]

what state are you in?  Each state has a different Medicaid cutoff. 

Actually only AK and HI are different for expansion Medicaid.  All others are the same $1,677 a month.

[BlueHouse]

what state are you in?  Each state has a different Medicaid cutoff. 

Actually only AK and HI are different for expansion Medicaid.  All others are the same $1,677 a month.

I'm in DC.  Mine was higher.  Below $32K income is forced onto medicaid. 

[jim555]

what state are you in?  Each state has a different Medicaid cutoff. 

Actually only AK and HI are different for expansion Medicaid.  All others are the same $1,677 a month.

I'm in DC.  Mine was higher.  Below $32K income is forced onto medicaid.

DC has a higher number, I learned something new today.      

210% + 5% disregard

https://dhcf.dc.gov/node/892172