Getting an ACA Subsidy

[Murf2]

Well, I'm learning from you guys even if the OP isn't.

Could someone please explain the "cost sharing" you are referring to?

Thanks,
Murf

[brewer12345]

Quote:

Originally Posted by Murf2 Well, I'm learning from you guys even if the OP isn't. Could someone please explain the "cost sharing" you are referring to? Thanks, Murf

Basically if your MAGI is under 250% FPL you get goodies on top of premium subsidies. So instead of a $5k deductible it might be $2k or $200 depending on how low your MAGI is.

[MRG]

+1
Insted of a 5k deductable mine is 1k, instead of $20 copay mine is $5, both due to cost sharing. Instead of paying $700 a month premium I pay $350, this part is subsidies. So if you can manage a under 250% FPL there may be a benefit.

Of course one must look at both the near term savings of subsidies and cost sharing vs. the long term tax benefits of doing IRA rollovers and Roth conversions. I think that what many people have been trying to communicate.

[Murf2]

Thanks guys! Sorry if I'm derailing the OP's thread but if you could indulge me at bit longer.

How/when is the eligibility for cost sharing determined? Is it something that I would need to track and work for or is it fairly automatic in it's administration?

"Of course one must look at both the near term savings of subsidies and cost sharing vs. the long term tax benefits of doing IRA rollovers and Roth conversions. I think that what many people have been trying to communicate."

I assume this refers to the Roth conversion being taxable and thus included in your MAGI, correct? Only my IRA accounts would be subject to RMD and not my Roth ira, right?

So in my case, If I was able to live at 250 FPL using funds from my taxable accounts which are mostly LTG. I would only be able to do Roth conversions up to a MAGI of <250 FPL total, correct?

We will most likely never be above the 15% bracket so I assume I don't really need to worry much about RMD. Is this correct?

Finally, could anyone point me to good resources regarding specifics of retirement planning for lower net worth people. It seems most of the info I can find is aimed at people with higher net worth than I.

Thanks again!
Murf

[MichaelB]

Quote:

Originally Posted by Murf2 Thanks guys! Sorry if I'm derailing the OP's thread but if you could indulge me at bit longer.

Don't worry about it. The OP started another thread and then announced he was going to look in another forum. (see here) Ask away.

Here are some links that will help you
How MAGI is determined http://laborcenter.berkeley.edu/pdf/...I_summary13.pd and http://www.fas.org/sgp/crs/misc/R41997.pdf

Premium credits and cost sharing are discussed here http://www.fas.org/sgp/crs/misc/R41137.pdf The entire paper is useful, cost sharing is discussed beginning page 14.

[brewer12345]

On my state's exchange, when I plugged in different MAGI numbers for policy and premium estimates I got to see different premium subsidy amounts and different OOP/deductible/copays depending on my forecast income level when looking at the same policy. I imagine that you could do the same with the national exchange or your state's exchange.


The comment about trade-offs will really depend on your personal financial circumstances. I am 41, but I have such a large amount of my assets in traditional IRAs that I need to be cognizant that every year I pig out on subsidies is another year I am making a potential RMD tax bomb bigger. If you don't have a ton of traditional IRA assets, this will not be a consideration for you.

[Tom52]

Just heard on the news, SC rules 6 to 3 to keep Obamacare subsidies. Nice to hear since I take advantage of them.

[Hermit]

So anyone got any ideas on how DD can finagle the system so she gets a subsidy? She is single, 25, and making about 35k per year. We plugged her numbers into the state calculator and she is entitled to $4 subsidy. The 35k is barely enough for her to rent an apartment - but only if she has a roommate!

[papadad111]

Quote:

Originally Posted by Hermit So anyone got any ideas on how DD can finagle the system so she gets a subsidy? She is single, 25, and making about 35k per year. We plugged her numbers into the state calculator and she is entitled to $4 subsidy. The 35k is barely enough for her to rent an apartment - but only if she has a roommate!

Be happy you raised a productive member of society and doesn't need handouts !! Her earnings will increase as she gets older. At 25 she could

1. target a career / company that offers health insurance, or

2. pick up a side hustle to earn a bit more to cover the cost of monthly premiums.

I can't imagine premiums are more than $300 bucks/ month for a 25 year old - she could earn that with a part time weekend job - baby sitting, dog walking, selling stuff on eBay.

I'd also review her monthly budget - we're talking 50-70 bucks a week ! She lives at home now ?

What does she spend 2500 (approx take home) per month -- on what ?

Continue to teach our kids to fish. Not wait in line for a fish ....

[Ian S]

Quote:

Originally Posted by Hermit So anyone got any ideas on how DD can finagle the system so she gets a subsidy? She is single, 25, and making about 35k per year. We plugged her numbers into the state calculator and she is entitled to $4 subsidy. The 35k is barely enough for her to rent an apartment - but only if she has a roommate!

MAGI is the key. Can she contribute to an IRA or 401k? That would reduce MAGI and increase the subsidy.

[NW-Bound]

Quote:

Originally Posted by papadad111 Be happy you raised a productive member of society and doesn't need handouts !! Her earnings will increase as she gets older. At 25 she could 1. target a career / company that offers health insurance...

+1

Quote:

... I can't imagine premiums are more than $300 bucks/ month for a 25 year old - she could earn that with a part time weekend job - baby sitting, dog walking, selling stuff on eBay...

Premiums for young people are very low. When we dropped our children who were in their 20s from our pre-ACA policy, the premium dropped something like $50-75 for each of them. Granted, our deductible was high at $10K/year, but young people only need insurance for catastrophic reasons, unlike geezers on this forum who need all kinds of health care.

So, if my children did not have good employer group insurance like they have now, and if they needed help, I would talk them into buying a high-deductible plan, then help them with paying that deductible if they get that sick to need the health care.

[Hermit]

Quote:

Originally Posted by Ian S MAGI is the key. Can she contribute to an IRA or 401k? That would reduce MAGI and increase the subsidy.

That is an interesting thought. She contributes to a Roth IRA. Off the top of my head, I would think it would serve her better in the long run to continue with the Roth rather than contributing to regular IRA for a greater subsidy.

[NW-Bound]

Quote:

Originally Posted by NW-Bound Premiums for young people are very low. When we dropped our children who were in their 20s from our pre-ACA policy, the premium dropped something like $50-75 for each of them. Granted, our deductible was high at $10K/year...

Oops. I forgot that one feature of ACA is that it raises the premium for youngsters to pay for geezers' coverage. Scratch what I wrote.

[bingybear]

Quote:

Originally Posted by Hermit That is an interesting thought. She contributes to a Roth IRA. Off the top of my head, I would think it would serve her better in the long run to continue with the Roth rather than contributing to regular IRA for a greater subsidy.

Contribute to an HSA will help... Roth... no. For the younger the subsidy might not be as good as the underlying premium is lower.

[pb4uski]

Quote:

Originally Posted by Hermit So anyone got any ideas on how DD can finagle the system so she gets a subsidy? She is single, 25, and making about 35k per year. We plugged her numbers into the state calculator and she is entitled to $4 subsidy. The 35k is barely enough for her to rent an apartment - but only if she has a roommate!

She can get a bigger subsidy but contributing to a 401k or deductible IRA or HSA but none of those really work since she needs the money for living expenses.

Has she shopped for a catastrophic policy? In most states they are less expensive but are more bare-bone coverage, but still would provide some preventative care and protect her from a huge medical bill if she had a serious illness.

Having a 26 year old, I insist that he have health insurance but more for my benefit. I would not want to be in a situation where he has a serious medical issue and doesn't have insurance and I need to make a tough decisions whether or not to foot the bill to get him the care he needs. Actually, I'd be willing to pay for the HI to protect me from that situation (but don't tell him that )

[bingybear]

you know, the subsidy can't be for everyone. I'm not on ACA yet (working thru cobra), but I wonder if they planned on everyone getting a subsidy. The ER may be a small enough demographic to not mess up the subsidy picture or it may be in the mix. As others have mentioned, I wonder if the Roth conversion may be a better long term strategy as it effect not only taxes, but medicare premiums as many are means tested.

There was a post noting the subsidy was only $4 I think. How does this happen with the subsidy cliff? Is the cliff eliminated for the young?

[MBSC]

Quote:

Originally Posted by bingybear you know, the subsidy can't be for everyone. I'm not on ACA yet (working thru cobra), but I wonder if they planned on everyone getting a subsidy. The ER may be a small enough demographic to not mess up the subsidy picture or it may be in the mix. As others have mentioned, I wonder if the Roth conversion may be a better long term strategy as it effect not only taxes, but medicare premiums as many are means tested. There was a post noting the subsidy was only $4 I think. How does this happen with the subsidy cliff? Is the cliff eliminated for the young?

Not everyone in ER is getting a subsidy. You only have to go through the exchange if you qualify for a subsidy, otherwise you can purchase a plan directly from the insurer, their agent, or a third party like e-healthinsurance.com. In general, the subsidy cliff impacts those age ~54-64 because their premium is high. The younger folks have a glide path to zero subsidy before the 400% FPL cutoff.

[Sojourner]

I have been carefully reading these recent threads about ACA subsidies and have been wondering if someone in my situation may simply never be in a good position to take advantage of them. The "problem" is that most of my investments are in after-tax accounts, and those investments are generating enough dividends and capital gains each year to put me over the 250% FPL threshold. This is a good problem to have, I know, so I'm not complaining. I'm just wondering if this means I should forget about ACA subsidies, or might there be strategies I'm not aware of that could lower my MAGI. Other than switching to investments that don't generate so much div and CG income, is there anything that I could do, within reason, to reduce my MAGI?

[RunningBum]

400% is the max for subsidies, 250% or less also includes the cost sharing (includes things like lower deductible). There's not too much you can do to reduce MAGI other than what you say about switching investments (which, in itself, may generate capital gains which add to MAGI). You could harvest capital losses if you have any. If you're right on the border you could look at tricks like taking a penalty for early CD withdrawal. Maybe an early IRA withdrawal penalty would work too? Not sure if that is above or below MAGI. If you're much off, I'd forget about it. If Roth conversions put you over, you could overload conversions one year and skip them another to get the subsidies some years.


I'm over also. Not quite close enough to change my investments, and too far for the tweaks that could help.

[Hermit]

Quote:

Originally Posted by Sojourner I have been carefully reading these recent threads about ACA subsidies and have been wondering if someone in my situation may simply never be in a good position to take advantage of them. The "problem" is that most of my investments are in after-tax accounts, and those investments are generating enough dividends and capital gains each year to put me over the 250% FPL threshold. This is a good problem to have, I know, so I'm not complaining. I'm just wondering if this means I should forget about ACA subsidies, or might there be strategies I'm not aware of that could lower my MAGI. Other than switching to investments that don't generate so much div and CG income, is there anything that I could do, within reason, to reduce my MAGI?

My RE was at 63, so I have income streams from pension and SS on the late DW's account coming in. I will never see the 15% tax bracket let alone ACA subsidies. When I hit 70 and move to my SS and start RMDs, I will be lucky to be in the 25% tax bracket. Like you said, it's a nice problem to have.