ACA help please

[garyt]

I'm thinking about early retirement, and as with many people, healthcare may be the sticking point. I've been reading old posts.
I've read/heard that the ACA doesn't look at your total wealth, but strictly income. You could technically have millions, but if your income is low you could qualify for a subsidy.
Now you say how can you have millions (I don't btw) and have a low income? Well if your money is in Roth IRA's, it's drawn out tax free. So I'm thinking I can draw out some taxable 401K money and some tax free Roth money to keep my total income low?
I've also read something about your income not being more than 133% of the Federal Poverty Rate (FPR) to qualify for the subsidy? That comes to about $21K by my calculation for a married couple. Does any of this sound correct? Am I any where near in the right direction?

 

[jwkde]

You are in the ballpark - ACA subsidy is based on income only not assets. The amount of the subsidy starts at 138% of Federal Poverty Level and phases out at 400%. If you have the ability to manage your income this way it will certainly (favorably) influence your ACA Subsidy.

http://laborcenter.berkeley.edu/pdf/2013/MAGI_summary13.pdf

 

[jim584672]

Income is what is considered, nothing else. If you are below 400% FPL you would get some subsidy/coverage if your state expanded Medicaid. If your state did not expand then 100% to 400% gets you in, under 100% you get you nothing.

 

[littleb]

Here is a calculator from Kaiser that will give you an estimate of the monthly premium if you enroll in the ACA. You can change your salary to see what options might be available for you and your family. You can also go to the ACA website and do a mid year dummy enrollment and get an estimate of how much your healthcare will cost. Remember, this is only an estimate.

Health Insurance Marketplace Calculator | The Henry J. Kaiser Family Foundation

The information I read about qualifying for the ACA is based on your MAGI (Modified Adjusted Gross Income) for the year and not the value of your assets. I am planning to keep our income low by moving money from traditional IRA's to ROTH's as you stated above.

However, due to the uncertainty of the ACA continuing with subsidies we are also planning to pay the full health premiums if necessary. Some insurance companies have dropped out of the ACA and the plan might change dramatically in the next few years.

 

[donheff]

Income is what is considered, nothing else. If you are below 400% FPL you would get some subsidy/coverage if your state expanded Medicaid. If your state did not expand then 100% to 400% gets you in, under 100% you get you nothing.

I think your third sentence is wrong. If your state did not expand Medicaid and you fall in the gap between 100% and 138% you get no Medicaid and no subsidy. If you are below 100% you get traditional Medicaid.

 

[scrabbler1]

My MAGI, which consists of mostly taxable bond fund and stock fund dividends but includes some cap gain distributions and tax-free bond income, has been around $41k which barely qualifies me for a small annual federal subsidy ($200-$500). A key factor which can determine one's subsidy is the Second Lowest Cost Silver Plan, or SLCSP, in your state. And I don't get to find out that exact amount until I receive the 1095-A form at the start of the following year.

 

[MBSC]

There are also cost sharing reductions, lower deductibles and maximum out-of-pocket (MOOP), on Silver Plans below 250% FPL. The reductions are generous below 200% FPL.

You can view ACA plans and premiums without creating an account here:
https://www.healthcare.gov/see-plans/

I think your third sentence is wrong. If your state did not expand Medicaid and you fall in the gap between 100% and 138% you get no Medicaid and no subsidy. If you are below 100% you get traditional Medicaid.

In non-expansion states, there is no help (no Medicaid and no subsidy) below 100% FPL unless you qualify for Medicaid under the "old" rules which usually involves an asset test. The new income-only rules do not apply. The premium/cost sharing subsidies start at 100% FPL in non-expansion states.

Those below 100% FPL in non-expansion states are generally exempt from the individual mandate penalty due to the IRS unaffordable exemption.

 

[jim584672]

In non-expansion states, there is no help (no Medicaid and no subsidy) below 100% FPL unless you qualify for Medicaid under the "old" rules which usually involves an asset test. The new income-only rules do not apply. The premium/cost sharing subsidies start at 100% FPL in non-expansion states.

+1
Under the "old" rules you would have to be blind or disabled to even be considered for someone under 65 yo.

 

[donheff]

In non-expansion states, there is no help (no Medicaid and no subsidy) below 100% FPL unless you qualify for Medicaid under the "old" rules which usually involves an asset test. The new income-only rules do not apply. The premium/cost sharing subsidies start at 100% FPL in non-expansion states.

Those below 100% FPL in non-expansion states are generally exempt from the individual mandate penalty due to the IRS unaffordable exemption.

That is interesting and different than I understood the problems.

To clarify, in a state that accepted the expansion those under 100% get Medicaid without asset tests vs. in a non-expansion state they do not get anything unless they are destitute?

And, two, in a non-expansion state you can be slightly over 100% earnings and get a substitute? I.e., there is no "gap" problem?

 

[jim584672]

That is interesting and different than I understood the problems.

To clarify, in a state that accepted the expansion those under 100% get Medicaid without asset tests vs. in a non-expansion state they do not get anything unless they are destitute?

And, two, in a non-expansion state you can be slightly over 100% earnings and get a substitute? I.e., there is no "gap" problem?

In an expansion state <138% gets Medicaid with no conditions and income only test. >138%-400 gets a subsidy marketplace plan.

In a non-expansion state <100% gets Medicaid on the condition you have spent down almost all your assets and are blind or disabled. >100%-400 gets a subsidy marketplace plan.

 

[MBSC]

(snip)...there is no "gap" problem?

This article explains the "gap" problem in non-expansion states.

The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid – An Update | The Henry J. Kaiser Family Foundation

 

[ivinsfan]

Just a note in some states like mine( MN),with expanded Medicaid they don't consider assets for intelligibility BUT if you are over 55 a lien will be attached to your estate for medicaid coverage (including health coverage). There is some chatter in the legislature to change this but it is in force right now.

 

[donheff]

In a non-expansion state...100%-400 gets a subsidy marketplace plan.

Jim: could you please explain how this fits into the principles laid out in article referenced below.

This article explains the "gap" problem in non-expansion states.

The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid – An Update | The Henry J. Kaiser Family Foundation

This article addresses what I have always understood to be the case. It states that in non-expansion states, people falling in the "gap" between 100-138% FPL are both ineligible for Medicaid and ineligible for an ACA subsidy.

Jim: are you saying this article has it wrong? I am not trying to provoke a squabble. I just always understood the gap to kill subsidies for low income people in non-expansion states. We have had posts here recommending that people make Roth conversions solely to raise their incomes sufficiently to get over the 138% bar to insure a subsidy. That would not make any sense if 100% was sufficient.

 

[MichaelB]

In Medicaid expansion states eligibility for ACA premium assistance is for incomes ranging between 133% - 400% of the federal poverty level (with a 5% income disregard for Medicaid). For non-expansion states eligibility is for incomes ranging between 100% - 400%. The gap is in non-expansion states, and includes working age adults that are not disabled, and therefore not typically eligible for Medicaid. See this paper on Premium Assistance http://www.fas.org/sgp/crs/misc/R41137.pdf

 

[MBSC]

This article addresses what I have always understood to be the case. It states that in non-expansion states, people falling in the "gap" between 100-138% FPL are both ineligible for Medicaid and ineligible for an ACA subsidy.

I do not see that statement. I do see this statement:

What Would Happen if All States Expanded Medicaid?

1.8 million adults who are currently eligible for Marketplace coverage (those with incomes between 100 and 138% of poverty) would also gain Medicaid eligibility.

They are currently receiving subsidies instead of Medicaid. It also states 2.9 million below 100% FPL would gain coverage. This is the gap.

The gap are the grey people in Figure #1. It consists of childless adults under 100% FPL and families between the Medicaid cutoff (~44% FPL) and marketplace eligibility at 100% FPL. Figure #1 correctly shows marketplace subsidies starting at 100% FPL.

 

[Fermion]

Brings up a new criminal market. Reverse money laundering, where you take money that has already been taxed and dirty it up so it can be taxed again.

"Yes, we did sell that pancake that looked like Jesus for $5,000. The buyer wished to remain anonymous but I am reporting the gain here on my 2016 taxes..."

 

[Taxman59]

ACA Repayment

I expected to have MAGI of about $35k based on dividends, interest and cap gains in 2016. My policy costs $400/ month and I have a family OOP of $1400.

If I convert $20k in my tIRA to ROTH, how does that affect my OOP? I know the reduced premium subsidy will require a tax payment next April, but what happens to the OOP, particularly if we have significantly gone over the $1400?

I want to maximize the conversion to ROTH to keep the income taxes at a minimum, but the ACA income limits are giving me headaches!

 

[Fermion]

You don't have to pay back cost sharing, so the OOP is not an issue.

Actually you don't really have to pay back the subsidy either...they have no way to collect if you don't get a refund.

 

[MBSC]

If I convert $20k in my tIRA to ROTH, how does that affect my OOP? I know the reduced premium subsidy will require a tax payment next April, but what happens to the OOP, particularly if we have significantly gone over the $1400?

Cost sharing reductions for OOP only impact Silver Plans. There are 4 levels of reductions.

Below 150% FPL: Very large reduction
150%-200% FPL: Large reduction
200%-250% FPL: Small reduction
Over 250% FPL: No reduction

As long as you do not report an income increase to the exchange during the year, there will be no impact to your OOP and there is no OOP reconciliation at year end. Just reconcile the premium subsidy at tax time. If you do want to report a higher income, wait until the Open Enrollment Period (OEP) for 2017.

If you report an income increase now (mid-year) and it is enough to move you into one of the higher brackets listed above, your prior claims may be reprocessed and show you owe more OOP. Claims submitted later this year would also be applied to the new, higher OOP.

Actually you don't really have to pay back the subsidy either...they have no way to collect if you don't get a refund.

That tactic is for avoiding the individual mandate penalty. Premium reconciliation is mandatory.

"If you received the benefit of advance credit payments, you must file a tax return to reconcile the amount of advance credit payments made on your behalf with the amount of your actual premium tax credit. You must file an income tax return for this purpose even if you are otherwise not required to file a return."

Thousands may lose subsidies: http://www.nytimes.com/2015/10/26/u...urns-may-lose-health-care-subsidies.html?_r=0

 

[Fermion]

That tactic is for avoiding the individual mandate penalty. Premium reconciliation is mandatory.

Yes, I was thinking about the penalty.

But you may not have to pay back much of the subsidy. For a family with an income less than $47,100, you only have to pay back a maximum of $600.

 

[xdafly]

Posted our experience (1st year on ACA after more than a decade in corporate plan..) in the UnitedHealth thread.

Summary:
We qualified for a 35 / person / month plan with better coverage than we had for several decades on corporate plan.

We are aggressively converting tIRA to Roth IRA for the next few years but keep the conversion(s) to about 30k / year, still qualify for around 35 - 45 / month / person Silver Plan with a max annual out of pocket of 900 / person / year.

The IRS tax bite from the 30k / year is much less than expected due to MFJ standard deduction and no other income to report.

 

[REWahoo]

xdafly, I'm not sure how relevant ACA coverage in Guam (per your "About Me" profile) is to the forum. Wasn't even aware Guam fell under the ACA.

 

[xdafly]

We have a primary residence in lower 48.