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Obamacare and early retirement
Old 10-01-2014, 09:10 AM   #1
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Obamacare and early retirement

It seems to me that Obamacare may encourage folks to retire early. In our case, I would have to provide my own health insurance until Medicare. I would probably qualify for a heavily subsidized plan from Healthcare.gov. We could spend down non-retirement assets that don't create a tax event (basicly cash) and only show taxable income from dividends and interest on other non-retirement accounts until age 65. This will be relatively low amount as most of our assets are in retirement accounts. It strikes me as a bit odd that you can actually have a substantial amount of money and still get hefty Obamacare subsides. Anyone using Healthcare.gov for health insurance and getting a hefty subsidy?
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Old 10-01-2014, 09:19 AM   #2
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I am using my state's exchange to buy health insurance. Insurance through the exchange is already a lot cheaper than what would have paid for a decent policy, or else I would have been buying a vastly inadequate policy. I still qualify for a subsidy although it is not a huge one, maybe 20% of the premium (still good).

I ERed before the ACA became law, in fact it was just days before Obama got elected, and am living off dividends and interest from my non-retirement assets. I do agree that the ACA loosens the attachment (grip?) one has to his or her job to maintain health insurance coverage, thereby enabling many people below Medicare age who can't get coverage through a retiree plan or through his or her spouse to be able to buy affordable health insurance on their own.
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Old 10-01-2014, 09:21 AM   #3
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Yes. I make sure our income is above the Medicaid cutoff by doing Roth conversions. This law was designed with early retirees in mind. There are a lot of folks on this board doing the same thing. Search for ACA subsidies or Obamacare subsidies.
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Old 10-01-2014, 09:22 AM   #4
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Or others, like me, who are on the other side of the coin where Obamacare has caused me to lose my high-deductible plan, that I was happy with, and alternatives are at least double the cost and having an income that cannot be reasonably adjusted and fall just outside of the range of the subsidy.
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Old 10-01-2014, 01:48 PM   #5
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I looked at some plans on health sherpa and they all seemed to be HMO or EPO. I didn't see any PPO plans although this was just a summary page, so I'm sure there were more offerings. I've had a PPO plan for years that I like and I'm hesitant to switch to an EPO. I need to look at the plans on the private exchange my company uses for retirees to see if they offer PPO plans there. If so, that would be one incentive for me to keep working until I can officially "retire" despite some of the benefits of ACA.
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Old 10-01-2014, 02:04 PM   #6
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I looked at some plans on health sherpa and they all seemed to be HMO or EPO. I didn't see any PPO plans although this was just a summary page, so I'm sure there were more offerings. I've had a PPO plan for years that I like and I'm hesitant to switch to an EPO. I need to look at the plans on the private exchange my company uses for retirees to see if they offer PPO plans there. If so, that would be one incentive for me to keep working until I can officially "retire" despite some of the benefits of ACA.
The Florida BCBS and Humana PPO plans are all classified as EPO on the health websites. Many phone calls last year finally clarified this, the PPO becomes an EPO with the inclusion of child dental coverage. This may not be the case for the policies you are seeing in NY, but if they have large or national networks they are probably PPO.
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Old 10-01-2014, 02:13 PM   #7
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It seems to me that Obamacare may encourage folks to retire early. In our case, I would have to provide my own health insurance until Medicare. I would probably qualify for a heavily subsidized plan from Healthcare.gov. We could spend down non-retirement assets that don't create a tax event (basicly cash) and only show taxable income from dividends and interest on other non-retirement accounts until age 65. This will be relatively low amount as most of our assets are in retirement accounts.
Absolutely Obamacare has let us retire early and resolved a huge stumbling block for us. Prior to Obamacare and the guaranteed issue, we were never sure if DW would qualify for individual insurance due to pre-existing conditions. The mere act of applying for healthcare (to see if you could get it) was fraught with peril because if you were declined you might have to report this to other insurers in later applications.

Even if we could both qualify for insurance on the individual market, there's always a chance that one of us could develop serious condition and then be unable to buy any new insurance. Given that we are ERing in our 40s I think this is a substantial risk that guaranteed issue resolves.

This is our first year of FIRE and we purchased insurance on the state exchange. We do not qualify for a subsidy due to our income (we worked at the beginning of the year) but next year our income should drop enough so that we could claim one. Dividends in taxable accounts should take us just below the 1.33xpoverty level limit and from there we can take as much in roth conversions and capital gains as we desire. We haven't yet figured out exactly what we want our income level to be.


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It strikes me as a bit odd that you can actually have a substantial amount of money and still get hefty Obamacare subsides. Anyone using Healthcare.gov for health insurance and getting a hefty subsidy?
I thought similarly at first but then I realized that while working my tax benefit from employeer based insurance is probably just as large (or even bigger) than the subsidy.
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Old 10-01-2014, 02:18 PM   #8
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Or others, like me, who are on the other side of the coin where Obamacare has caused me to lose my high-deductible plan, that I was happy with, and alternatives are at least double the cost and having an income that cannot be reasonably adjusted and fall just outside of the range of the subsidy.
Have you looked into catastrophic plans? They are similar to high-deductible plans but the deductibles are a bit higher (mine is $6,350). However the premium is 62% of the premium of a bronze plan from the same carrier and same network.

You can buy a cat plan even if you are over 30 if you lost your insurance due to ACA or if the premium for the lowest cost bronze plan exceeds 8% of your income.

We have them and have been quite happy but we are healthy and really haven't had any claims.
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Old 10-01-2014, 02:25 PM   #9
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I have recently been shopping for a ACA plan in California. For the 2 of us, the premiums would be less than $6K a year for a HSA-compatible bronze plan ($9K family deductible). Additional out-of-pocket expenses could reach a maximum of $25,400 a year (up to $12,700 for medical plus up to $12,700 for drugs). Even if we manage to keep our income below the subsidy cutoff, the "savings" only apply to the rather reasonable premiums so we could still be on the hook for some major out-of-pocket expenses. For example, even with a retirement income of $40K, the annual out-of-pocket maximum is still over $26,000. So Obamacare is not that attractive for us.
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Old 10-01-2014, 02:31 PM   #10
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It seems to me that Obamacare may encourage folks to retire early.
The PPACA was instrumental in my decision to retire. Of course, many other things had to be right, but the fact that I could get HI with a huge discount (subsidy), made it a slam-dunk.

Back in September of 2013, I figured we'd see an increase in people leaving the workforce to get on the HI gravy train (Hey! Get off my lawn), but "they" blamed the bad jobs report on the weather
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Old 10-01-2014, 02:41 PM   #11
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I have recently been shopping for a ACA plan in California. For the 2 of us, the premiums would be less than $6K a year for a HSA-compatible bronze plan ($9K family deductible). Additional out-of-pocket expenses could reach a maximum of $25,400 a year (up to $12,700 for medical plus up to $12,700 for drugs). Even if we manage to keep our income below the subsidy cutoff, the "savings" only apply to the rather reasonable premiums so we could still be on the hook for some major out-of-pocket expenses. For example, even with a retirement income of $40K, the annual out-of-pocket maximum is still over $26,000. So Obamacare is not that attractive for us.
We found we were better off with two separate policies. We each have a $6,350 deductible and pay the same per person premium we would for a policy on us as a couple (the deductible for us as a couple would be $12,700). Since we are both healthy and have had minimal claims I figure the chance of both of us having a health event in the same year are less likely. So if one of us has an issue and a $12,000 medical bill, the insurance will pay $5,650 with two separate policies where if we had a policy as a couple it would pay nothing.
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Old 10-01-2014, 02:42 PM   #12
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For example, even with a retirement income of $40K, the annual out-of-pocket maximum is still over $26,000. So Obamacare is not that attractive for us.
Some of the enhanced silver plans have greatly reduced max OOP (e.g. silver 94 is just $2250 for one) but the income limits are even stricter. I think the enhanced silver starts at $39k and below.

Assuming employer based healthcare is not available, what other alternatives are you considering?
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Old 10-01-2014, 02:48 PM   #13
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If your state did not extend Medicaid m,ake sure your income is high enough to qualify for an exchange plan and not leave you in the limbo gap.
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Old 10-01-2014, 02:57 PM   #14
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We found we were better off with two separate policies. We each have a $6,350 deductible and pay the same per person premium we would for a policy on us as a couple (the deductible for us as a couple would be $12,700). Since we are both healthy and have had minimal claims I figure the chance of both of us having a health event in the same year are less likely. So if one of us has an issue and a $12,000 medical bill, the insurance will pay $5,650 with two separate policies where if we had a policy as a couple it would pay nothing.
Thanks, I will have to look into this.
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Old 10-01-2014, 03:09 PM   #15
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I have recently been shopping for a ACA plan in California. For the 2 of us, the premiums would be less than $6K a year for a HSA-compatible bronze plan ($9K family deductible). Additional out-of-pocket expenses could reach a maximum of $25,400 a year (up to $12,700 for medical plus up to $12,700 for drugs). Even if we manage to keep our income below the subsidy cutoff, the "savings" only apply to the rather reasonable premiums so we could still be on the hook for some major out-of-pocket expenses. For example, even with a retirement income of $40K, the annual out-of-pocket maximum is still over $26,000. So Obamacare is not that attractive for us.
The TOOP is combined for medical and pharmaceutical, exception made only for certain grandfathered employer plans. The bronze plan must cover 60% of the total actuarial value, so an average plan should have around around $6k or so of TOOP for each of you.
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Old 10-01-2014, 03:13 PM   #16
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Some of the enhanced silver plans have greatly reduced max OOP (e.g. silver 94 is just $2250 for one) but the income limits are even stricter. I think the enhanced silver starts at $39k and below.

Assuming employer based healthcare is not available, what other alternatives are you considering?
Yep, I see those silver plans available for an income below $39K. I can't see how we could have a comfortable retirement in California and still qualify for those. If I put most of our money in a savings account earning zilch, maybe.

Alternatives? I am still working on that. Moving is an obvious one. Saving more too.
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Old 10-01-2014, 03:22 PM   #17
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The TOOP is combined for medical and pharmaceutical, exception made only for certain grandfathered employer plans. The bronze plan must cover 60% of the total actuarial value, so an average plan should have around around $6k or so of TOOP for each of you.
Maybe I am reading this wrong. I am not sure whether I can post a screen capture from the healthsherpa website, so I'll summarize:

For a Anthem Bronze 60 HSA EPO policy:
Monthly premium: $592
Total Annual Cost: Low: $7,106, High $32,506
Subsidy $0
Deductible $4,500 per person for medical, $4,500 per person for drugs
$9,000 per family for medical, $9,000 per family for drugs
Out of pocket maximum: $6,350 per person for medical, $6,350 per person for drugs
$12,700 per family for medical, $12,700 per family for drugs

To get the high total annual cost number quoted above ($32,506), I see no other explanation but to hit $12,700 per family for both medical and drugs.

Am I reading this incorrectly? In my former place of residence, the $12,700 limit does indeed apply to the combination of medical and drugs (maximum out of pocket cost is the premium + $12,700 for the 2 of us).
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Old 10-01-2014, 03:37 PM   #18
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It seems to me that Obamacare may encourage folks to retire early. In our case, I would have to provide my own health insurance until Medicare. I would probably qualify for a heavily subsidized plan from Healthcare.gov. We could spend down non-retirement assets that don't create a tax event (basicly cash) and only show taxable income from dividends and interest on other non-retirement accounts until age 65. This will be relatively low amount as most of our assets are in retirement accounts. It strikes me as a bit odd that you can actually have a substantial amount of money and still get hefty Obamacare subsides. Anyone using Healthcare.gov for health insurance and getting a hefty subsidy?
Yeah, as long as you can keep your income under 62,000 you can get subsidies. Unfortunately for me and my wife our pension is over that somewhat and we will be stuck with sky high premiums and deductibles. It is funny how someone with 6 and 7 figure incomes will only have to pay as much as someone who barely makes 62,000.
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Old 10-01-2014, 03:58 PM   #19
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Am I reading this incorrectly? In my former place of residence, the $12,700 limit does indeed apply to the combination of medical and drugs (maximum out of pocket cost is the premium + $12,700 for the 2 of us).
Healthsherpa isn't doing a very good job of presenting the data. It's very confusing.

The BCBS website may be more helpful. ACA mandates drug coverage as an essential health benefit, it must be included in the single deductible, and the sole exception does not apply to exchange policies. This plan is $4.5k deductible per individual, $12.7k total family OOP for sure.

Pb4uski makes a good point earlier about separate policies. There is no disadvantage, aside from some extra bookkeeping.
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Old 10-01-2014, 04:21 PM   #20
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Healthsherpa isn't doing a very good job of presenting the data. It's very confusing.

The BCBS website may be more helpful. ACA mandates drug coverage as an essential health benefit, it must be included in the single deductible, and the sole exception does not apply to exchange policies. This plan is $4.5k deductible per individual, $12.7k total family OOP for sure.

Pb4uski makes a good point earlier about separate policies. There is no disadvantage, aside from some extra bookkeeping.
Thanks! I just found the same policy on the Covered California website and it confirmed that the plan is $4.5K deductible per person, $12.7K total family OOP. So it looks like Healthsherpa had it wrong. Breathing a sigh of relief!
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