Healthcare question

[NoOneGetsIt]

Healthcare Question

I am completely confused. If and WHEN we retire this year we are young and will need healthcare.

If we have no income but have assets will we purchase on an exchange with help or will we be forced to go on medicaid?

I am sorry I just don't get all of this....

 

[Animorph]

You should be able to purchase directly from an insurance company, but without a subsidy.

If you want the subsidy, and why not, you might be able to Roth convert or generate capital gains (0% tax rate if you stay within the 15% tax bracket) to show enough MAGI to avoid being placed with Medicare. Those are things you should be doing anyway while your income is low.

 

[youbet]

You should be able to purchase directly from an insurance company, but without a subsidy.

If you want the subsidy, and why not, you might be able to Roth convert or generate capital gains (0% tax rate if you stay within the 15% tax bracket) to show enough MAGI to avoid being placed with Medicare. Those are things you should be doing anyway while your income is low.

I think you meant Medicaid.

 

[NoOneGetsIt]

OK, so if I have no income I am forced into Medicaid even if I have assets?

and I thought you couldn't buy directly from an ins company anymore?

 

[walkinwood]

Sure you can. You're just not eligible for subsidies for private insurance.

 

[gozer]

You can buy directly from an insurance company or use something like http://www.ehealthinsurance.com/ to shop around. Heck you can even use the health exchange in your state. The plan you get just has to be ACA compliant so you don't pay a penalty. And you don't get a federal subsidy if your income is too low. Same is true if your income is too high. You are only "pushed toward" medicaid if you don't have the resources to buy a policy on your own.

What kind of assets do you have that do not produce income?

 

[gozer]

You can arbitrarily generate income by doing partial roth conversions. That's how I will keep qualifying for subsidies after this year. At least until our pensions actually kick in. Then we have enough income.

 

[NoOneGetsIt]

own our house outright, ROTHs and cash right now. We have stocks that produce dividends but doesn't it have to be 'earned income'?

 

[gozer]

own our house outright, ROTHs and cash right now. We have stocks that produce dividends but doesn't it have to be 'earned income'?

No. What counts is your modified adjusted gross income. This includes capital gains and dividends. In fact some thing like tax-exempt interest is counted. I get about $14,000/year on a muni bond fund. It's not taxable, but it is part of modified adjusted income for ACA purposes. See http://laborcenter.berkeley.edu/healthcare/MAGI_summary13.pdf for more info.

 

[NoOneGetsIt]

so how much do I need to ensure I make every year to be able to qualify for subsidies? and not be forced into medicaid?

 

[gozer]

Note, I'm assuming your stocks are in a taxable account, not a tax deferred IRA.

 

[rbmrtn]

You are not forced into anything. You can buy a policy from an insurer, broker or on the exchanges. Also your access to medicaid depends on your state expanding its medicaid program.

Income used for ACA is your households MAGI, see this link http://laborcenter.berkeley.edu/healthcare/MAGI_summary13.pdf

 

[NoOneGetsIt]

some is in tax deferred. i could convert ira funds to roth for a few years ...i think that would count as ACA right?

 

[gozer]

so how much do I need to ensure I make every year to be able to qualify for subsidies? and not be forced into medicaid?

Depends on the poverty line for your family size in the year we are talking about. Kaiser has a calculator that can help you figure it out at Subsidy Calculator | The Henry J. Kaiser Family Foundation.

 

[NoOneGetsIt]

thank you! I appreciate your help tremendously!

 

[gozer]

some is in tax deferred. i could convert ira funds to roth for a few years ...i think that would count as ACA right?

Yes, many of us are planning on doing that. In some years (pre-pension) I will sell enough from taxable mutual funds to cover it, in others I have to do the partial roth conversion thing.

 

[NoOneGetsIt]

So if I don't have a pension and my income comes from ROTH or Cash, will I have to try to find income every year until I die to stay out of medicaid? This is the one stress I have right now keeping me from retiring...ugh!

 

[AllDone]

So if I don't have a pension and my income comes from ROTH or Cash, will I have to try to find income every year until I die to stay out of medicaid? This is the one stress I have right now keeping me from retiring...ugh!

No, you don't have to. You can just keep renewing the same policy, over-estimate your income, or buy outside of the exchange. Your state may not have expanded Medicaid, anyway.

 

[gozer]

So if I don't have a pension and my income comes from ROTH or Cash, will I have to try to find income every year until I die to stay out of medicaid? This is the one stress I have right now keeping me from retiring...ugh!

Until you turn 65 and get on Medicare, then none of this matters anymore. I just retired last week. I'm 48, so I have about 17 years of this nonsense. 7 years trying to keep my income high enough to get subsidies, but low enough to minimize/eliminate federal taxes. Then 10 years of trying to minimize income enough to still get subsidies, while converting as much IRA to roth as I can while staying in the 15% income tax bracket so that my capital gains rate is 0.

I guess it helps if you sort of enjoy the game.

 

[gozer]

No, you don't have to. You can just keep renewing the same policy, over-estimate your income, or buy outside of the exchange. Your state may not have expanded Medicaid, anyway.

True you can always pay full price for a health care policy. There may be some sticker shock involved if you are on company subsidized insurance now. Before ACA I had a $325 per month plan that I was considering for my family after I retired. It was high deductible. After ACA, the cheapest plan I could get in my state would be over $900 per month. The $900 dollar plan had a more restrictive network, slightly lower deductibles and all kinds of coverage that I have no use for. I live in Ohio, many other states have much higher medical insurance costs. Seeing that price increase was when I started looking at the federal health exchange. Ohio doesn't have their own exchange.

My work coverage cost me about $250/month for medical. The company was picking up a substantial portion of the cost. So I went from company subsidized insurance to federally subsidized insurance.

 

[youbet]

So if I don't have a pension and my income comes from ROTH or Cash, will I have to try to find income every year until I die to stay out of medicaid? This is the one stress I have right now keeping me from retiring...ugh!

NO.

You do not have to be on Medicaid regardless of your MAGI income as long as you have resources to pay the non-subsidized premiums.

 

[NoMoreJob]

You can arbitrarily generate income by doing partial roth conversions. That's how I will keep qualifying for subsidies after this year. At least until our pensions actually kick in. Then we have enough income.

Research this. It may very well be a win-win in that you will be doing Roth conversions while in a very low tax bracket - very possibly lower than when you would otherwise take the money due to RMDs. It will also reduce your RMDs because your traditional IRA will be smaller by the amount of the conversions you do.

 

[MBSC]

If you do not wish to be on Medicaid and cannot generate enough qualifying income, over-estimate your income on the state/federal healthcare exchange to qualify for a private plan with ACA premium and cost-sharing subsidy. Then pay the over-estimation penalty listed in Table 1 on page 2 at the website below.

http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8154.pdf

 

[AllDone]

If you do not wish to be on Medicaid and cannot generate enough qualifying income, over-estimate your income on the state/federal healthcare exchange to qualify for a private plan with ACA premium and cost-sharing subsidy. Then pay the over-estimation penalty listed in Table 1 on page 2 at the website below.

http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8154.pdf

The table you have indicated gives penalties for under estimation of income, not over estimation.

 

[MBSC]

The table you have indicated gives penalties for under estimation of income, not over estimation.

For the OP, the advance payment (subsidy) will be greater than the amount of subsidy ultimately entitled to upon reconciliation ($0) because the individual qualifies for Medicaid. The total subsidy does not have to be repaid, only the amount in the table. The amount in the table may be less than going outside the marketplace and purchasing a non-subsidized plan.