HSA Silver plan with cost sharing = Big trouble!

[spncity]

What one should do there might depend on whether your state expanded Medicaid. If you are in a state that did not, I'd either try to reduce income enough to qualify for it, or find a way to generate a few more bucks in taxable income to qualify for tax credits on the marketplace.

Thx. I don't want Medicaid, I was just curious.

We're going to be in the situation where we earned money from jobs this year, but are planning not to next year (would withdraw from pre-tax retirement accounts at whatever level).

So, I was not enthralled with the idea of having to provide income information, setting up monthly payments in order to prove a certain income level to qualify for a subsidy... or as someone mentioned "deal with" this part of the exchange process. I got the idea from that post that maybe we could just pay the higher premium, take out a lump sum at some point, and get the "refund" (tax credits) when we file taxes.

Am I understanding correctly?

Thanks!

 

[easysurfer]

Thx. I don't want Medicaid, I was just curious.

We're going to be in the situation where we earned money from jobs this year, but are planning not to next year (would withdraw from pre-tax retirement accounts at whatever level).

So, I was not enthralled with the idea of having to provide income information, setting up monthly payments in order to prove a certain income level to qualify for a subsidy... or as someone mentioned "deal with" this part of the exchange process. I got the idea from that post that maybe we could just pay the higher premium, take out a lump sum at some point, and get the "refund" (tax credits) when we file taxes.

Am I understanding correctly?

Thanks!

I believe if you don't have the subsidies applied to the premium monthly, then you can wait until tax time to see if you get a tax credit (refund) or not. But you can't take out the credit sometime in-between.

From the IRS:

3. How do I get the premium tax credit?

When you apply for coverage in the Marketplace, the Marketplace will estimate the amount of the premium tax credit that you may be able to claim for the tax year, using information you provide about your family composition and projected household income. Based upon that estimate, you can decide if you want to have all, some, or none of your estimated credit paid in advance directly to your insurance company to be applied to your monthly premiums. If you choose to have all or some of your credit paid in advance, you will be required to reconcile on your income tax return the amount of advance payments that the government sent on your behalf with the premium tax credit that you may claim based on your actual household income and family size.

If you do not opt for advance credit payments or the Marketplace determines that you were not eligible for advance payments at the time of enrollment, you may be eligible to claim the credit when you file your tax return for the year, which will either lower the amount of taxes owed on that return or increase your refund.

https://www.irs.gov/Affordable-Care...estions-and-Answers-on-the-Premium-Tax-Credit

 

[AllDone]

Whether or not you receive you premium subsidy monthly, you will fill out IRS form 8962 or 8965 to reconcile your subsidy (or penalty, if you don't have insurance and are not exempt from its purchase) and your income for the year. That will result in either a refundable credit or or an additional payment.

Zensy - there is no penalty for overestimating your income. Your premium subsidy credit will be adjusted.

 

[spncity]

Let me propose the opposite

Thanks for the replies!

So - let me propose the "other" way. Let's say I want to get the subsidy monthly (lessening our upfront payment for ACA).

Do I have to arrange for monthly payments (withdrawals) from pre-tax funds that will then be counted as taxable income? Can't do it quarterly? Annually?

I'm fine with the reconciling part (I plan to stay comfortably away from that figure that makes subsidy go away completely).

While I hope to not work at all next year, I have one "now-and-then" client that loves me. And, to be fair, I love them. So, if they needed me for a short assignment, well, you get the idea.

That's why I would prefer to withdraw my annual target income in December of 2016. It would be a bummer to withdraw the target income earlier, or throughout the year, and then have the client call me asking for a little help in the last quarter. Ugh.

What say ye?

 

[bingybear]

Thanks for the replies!

So - let me propose the "other" way. Let's say I want to get the subsidy monthly (lessening our upfront payment for ACA).

Do I have to arrange for monthly payments (withdrawals) from pre-tax funds that will then be counted as taxable income? Can't do it quarterly? Annually?

I'm fine with the reconciling part (I plan to stay comfortably away from that figure that makes subsidy go away completely).

While I hope to not work at all next year, I have one "now-and-then" client that loves me. And, to be fair, I love them. So, if they needed me for a short assignment, well, you get the idea.

That's why I would prefer to withdraw my annual target income in December of 2016. It would be a bummer to withdraw the target income earlier, or throughout the year, and then have the client call me asking for a little help in the last quarter. Ugh.

What say ye?

Assuming you are asking about paying after the insurance for 2016 in December... then I think the answer is NO. They want to see the payment before your first month and I would assume all months. I doubt there would be an issue pre-paying for the year.

 

[WestcoastRN]

We have had ACA insurance for 6 months this year since we didn't opt for Cobra or have employer medical after DH retired in May. It is a HDHP w/HSA. I opened an HSA account and deposited the full contribution for both of us, plus the additional $1,000 catch up if over 55. Since our HSA-eligible HDHP is for the last six months of the year, we can take advantage of the “last-month rule.” To my understanding the last-month rule allows the full HSA contribution for the entire year. You are treated as having the same HDHP coverage for the entire year as you had on the first day of the last month.

The caveat is that we are subjected to a “testing period” which means we have to remain eligible for an HSA plan the following calendar year. This is because I contributed the full allowed HSA contribution and did not pro-rate contributions for the 6 months we've had ACA insurance (this is true whether you have ACA insurance, private, or an employer plan). If we had elected to go with cost sharing instead of an HDHP plan for 2016, we would be required to pay regular taxes on the HSA money I "over contributed" plus a 10% penalty for contributions above the pro-rated amount. Of course this wouldn't apply if I had pro-rated our HSA contributions.

 

[spncity]

Assuming you are asking about paying after the insurance for 2016 in December... then I think the answer is NO. They want to see the payment before your first month and I would assume all months. I doubt there would be an issue pre-paying for the year.

Not sure I explained well, or quite know how to phrase my question.

If I sign up for 2016 subsidized ACA,

1. Can I arrange my annual income (withdrawal from pre-tax such as solo 401-K) in an annual lump sum in December 2016...

OR

2. Will I be required to set up a monthly solo 401-K withdrawal (Jan -- Dec) in order to prove a qualifying (lower) income for 2016 ?

 

[bingybear]

Not sure I explained well, or quite know how to phrase my question.

If I sign up for 2016 subsidized ACA,

1. Can I arrange my annual income (withdrawal from pre-tax such as solo 401-K) in an annual lump sum in December 2016...

OR

2. Will I be required to set up a monthly solo 401-K withdrawal (Jan -- Dec) in order to prove a qualifying (lower) income for 2016 ?

If you make the payments for the insurance... say monthly from some source, it should not matter if you cause your income to all show up in December. You may, like many have fun gyrations explaining your income to the ACA people if you income is much different than you last couple tax returns. This is not impossible to do, but some have opted to just pay the whole bill and get the subsidy at tax time.

It should not matter if you pull the retirement account withdraw in one shot or spread throughout the year.

edit -- you may have issues explaining it to the ACA people because they are trained to help people figure out what there income is. In doing so they ask what your income is weekly or monthly. Since you are not under regular employment, it may take some effort to get your annual income across.

 

[spncity]

If you make the payments for the insurance... say monthly from some source, it should not matter if you cause your income to all show up in December. You may, like many have fun gyrations explaining your income to the ACA people if you income is much different than you last couple tax returns. This is not impossible to do, but some have opted to just pay the whole bill and get the subsidy at tax time.

It should not matter if you pull the retirement account withdraw in one shot or spread throughout the year.

edit -- you may have issues explaining it to the ACA people because they are trained to help people figure out what there income is. In doing so they ask what your income is weekly or monthly. Since you are not under regular employment, it may take some effort to get your annual income across.

Got it.

I called and spoke to a broker. She told me briefly how to create my account and put in her identifying number so that she will have access to the info.

To be continued.

 

[Trawler]

Long story short: In order to get an HSA Silver plan we will have to manipulate our income by taking a larger RMD from the inherited IRA. Had we finalized the purchase of the original cost sharing Silver plan, the agent thought the insurance company would have eventually contacted us regarding the HSA ineligibility, but who knows. I can just imagine contributing to the HSA in January, then finding out mid year I wasn't allowed to do that.[/QUOTE]

OUCH,
Sure Glad this was posted. DW and I signed up for 2015 Silver HSA ($3500 deductible and max OPP) HSA compatible plan but with cost sharing we became HSA ineligible as deductible and Max OPP became $2K under cost sharing. The actual name of our specific lower cost share plan is InHealth Mutual Individual Silver3500 HSA-87OX-87. You would think by its name is was HSA compatible I did not know the cost share made our plan HSA ineligible until reading this forum. Glad I have not funded the HSA for 2015 but had balance leftover from 2014 when we did have HSA compatible plan. But I do have some questions.

1. Can I use the 2014 HSA leftover balance in 2015 for Medical expenses.
2. If I had funded 2015 HSA account what could happen?
3. How does IRS know what type plan you have as none of the forms I have seen say or ask specifics.

Thanks

 

[spncity]

Just thought I'd share our latest experience with the ACA, just in case one/some of you weren't aware of this "gotcha." After going to the ACA website checking out the few remaining plans (PPO's have all disappeared in Utah), I calculated our 2016 income which qualified us for a Silver HSA-eligible plan that resulted in cost sharing. This calculation consisted of my small pension, DH's SS, estimated ordinary dividends, and a yearly distribution from an inherited IRA. When I subtracted the pre-tax HSA contribution from this amount, it just barely placed us in cost sharing territory. Win-win I think...cost sharing AND an HSA!

Yesterday, DH and I met with a health insurance broker to help with our 2016 enrollment. Went through the enrollment screens, income info, etc. The ACA website allowed us to choose that Silver plan with an HSA. Then the broker said "I don't think this is correct, and I'm not sure why the website is letting you purchase this plan." He went on to explain that if you purchase a Silver plan with an HSA while falling in the cost sharing range, the HSA is no longer allowed. The agent then called the insurance company (Select Health through Intermountain Healthcare) to double check. The Select Health rep did indeed confirm that an HSA contribution would not be allowed for 2016 due to our income falling in the cost sharing level.

The insurance broker said the reason behind disallowing an HSA contribution while financially benefiting from a cost sharing policy is due to the rationale that if you are "wealthy enough" to contribute to an HSA, you are too wealthy to qualify for a cost sharing plan.

Long story short: In order to get an HSA Silver plan we will have to manipulate our income by taking a larger RMD from the inherited IRA. Had we finalized the purchase of the original cost sharing Silver plan, the agent thought the insurance company would have eventually contacted us regarding the HSA ineligibility, but who knows. I can just imagine contributing to the HSA in January, then finding out mid year I wasn't allowed to do that.

What is this income figure a couple must "stay above"?

 

[Exit 2024]

What is this income figure a couple must "stay above"?

Cost sharing exists for incomes between 100% and 250% of Federal Poverty Level (FPL), so for couple in 2016 you need to "stay above" of $39,825 according to this table
https://obamacare.net/2016-federal-poverty-level/

 

[Exit 2024]

Also looks like cost sharing exists only for Silver plans, does that mean that picking Bronze plan with HSA will not result in such issue ?
ETA: if that is correct then it is the best solution assuming you expect low medical costs during the year:
-You will save on premium, and still will be able to get full premium subsidy
-You will be able to contribute to HSA
-You will save on taxes as you do not need to manipulate your taxable income to higher level just to avoid cost sharing.

 

[spncity]

Cost sharing exists for incomes between 100% and 250% of Federal Poverty Level (FPL), so for couple in 2016 you need to "stay above" of $39,825 according to this table
https://obamacare.net/2016-federal-poverty-level/

Thank you for replying. Stay with me. Does this mean that:

For a couple over 55 - who wish to put the max plus catch-up into two individual hsa accounts - we would need to increase income by $8,750 for a total of $48,575 in order to contribute a "total" of $8,750 to the hsa accounts - which thus reduces the income to $39,825...?

 

[Exit 2024]

Thank you for replying. Stay with me. Does this mean that:

For a couple over 55 - who wish to put the max plus catch-up into two individual hsa accounts - we would need to increase income by $8,750 for a total of $48,575 in order to contribute a "total" of $8,750 to the hsa accounts - which thus reduces the income to $39,825...?

That is how I understand it also, assuming you want to avoid cost sharing but still buy a silver plan.

Or go for bronze plan, then 250% of FPL is meaningless, you just need to be above 138% of FPL +$8750, no cost sharing danger for you if you are in the state with expanded medicaid

 

[bingybear]

While I could understand the reason given by the broker above as being valid... that is "that by getting cost sharing means you should not have enough to fund an HSA". However, I would wonder if the cost sharing my change the character of the plan (reduced deductibles, etc) such that the plan my not qualify for an HSA. I would think they they would have to consider the form of the resulting plan after the inclusion of cost sharing.

Exit, I believe your assumption is correct.

 

[MBSC]

In my zip code 201% FPL results in a small cost sharing reduction that allows Silver plans to remain HSA eligible. At 199% FPL, the major cost sharing reduction kicks in making the plan non-HSA. YMMV.
Cost Sharing Reduction Subsidies (CSR) - Obamacare Facts

 

[spncity]

That is how I understand it also, assuming you want to avoid cost sharing but still buy a silver plan.

Or go for bronze plan, then 250% of FPL is meaningless, you just need to be above 138% of FPL +$8750, no cost sharing danger for you if you are in the state with expanded medicaid

When I search for a plan, stating income of $40,000 (The strategy being $48,750 from pre-tax minus $8,750 going into an HSA) - why do only Silver plans pop up and no Bronze plans?

I would prefer a low premium as we have minimal healthcare needs. I understand that will require a high deductible and OOP max.

The other tip I could use - is how do I determine if there is nationwide coverage (expect to fulltime RV when house sells).

Thanks for any help.

 

[bingybear]

When I search for a plan, stating income of $40,000 (The plan being $48,750 from pre-tax minus $8,750 going into an HSA) - why do only Silver plans pop up and no Bronze plans?

I would prefer a low premium as we have minimal healthcare needs. I understand that will require a high deductible and OOP max.

The other tip I could use - is how do I determine if there is nationwide coverage (expect to fulltime RV when house sells).

Thanks for any help.

When you click "learn more about this plan", in the list that shows up has a couple check boxes dealing with notional coverage or multi-state.
As for why do no hsa plans come up?, good question. Are you doingt any other selection/filtering on plans? I would expect some bronze plans would show up too unless they were filtered out. Either filter only for bronze plans or sort from lowest premium to highest. Without knowing exactly what you are doing, it is hard to tell you why something is happening

 

[spncity]

When you click "learn more about this plan", in the list that shows up has a couple check boxes dealing with notional coverage or multi-state.
As for why do no hsa plans come up?, good question. Are you doingt any other selection/filtering on plans? I would expect some bronze plans would show up too unless they were filtered out. Either filter only for bronze plans or sort from lowest premium to highest. Without knowing exactly what you are doing, it is hard to tell you why something is happening

Could be a characteristic of the Maryland Connection website...? After a couple of Silver plans pop-up, I go back and click on Bronze and a couple of Bronze plans are added to the list.

If I go to healthcare.gov and put in my zip, it only directs me to the Maryland website. I can only guess that a BCBS PPO is my best bet for national coverage...

Thanks!

 

[Theseus]

In my zip code 201% FPL results in a small cost sharing reduction that allows Silver plans to remain HSA eligible. At 199% FPL, the major cost sharing reduction kicks in making the plan non-HSA. YMMV.
Cost Sharing Reduction Subsidies (CSR) - Obamacare Facts

That is my assessment of the situation also. Going back to MichaelB's post http://www.early-retirement.org/forums/f38/hsa-and-hdhp-with-aca-cost-sharing-69905.html#post1398137 and his bolded portion of https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/marketplace-faq-5-14-2013.pdf "This may result in the plan variation not meeting IRS standards for an HDHP and therefore not being eligible to be offered in conjunction with an HSA" I believe the words "may result in" are being construed as "must result in" by some. In my opinion, and I do wish to be corrected if mistaken - as long as the cost sharing component does not result in deductible or OOP max being driven outside the HSA min/max a HDHP plan can remain HSA compatible, even with cost sharing.

 

[spncity]

That is how I understand it also, assuming you want to avoid cost sharing but still buy a silver plan.

Or go for bronze plan, then 250% of FPL is meaningless, you just need to be above 138% of FPL +$8750, no cost sharing danger for you if you are in the state with expanded medicaid

So for Bronze - in a state with expanded Medicaid, for a family of two - would this be (round up the $21,983 which is 138% of FPL to) $22,000 minimum plus $8,750 = $30,750 in order to contribute the max with catch up to HSA ?

Thanks!

 

[bingybear]

So for Bronze - in a state with expanded Medicaid, for a family of two - would this be (round up the $21,983 which is 138% of FPL to) $22,000 minimum plus $8,750 = $30,750 in order to contribute the max with catch up to HSA ?

So confused (not really)
Using your numbers I just look at this as
ACA-MAGI $22000 minimum AGI
The $8750 HSA Contribution is part of that calculation, make sure you put proper amounts in each spouse HSA! Yes I see what you are doing here.
Possibly another 3000 if you have >=3k in total losses after truing up gains and losses.
Any other subtracters (deductible T-IRA contributions or others?)

The next question is how to generate income. At these levels Q-divies and LTCG should be federal tax free.

 

[Theseus]

In my zip code 201% FPL results in a small cost sharing reduction that allows Silver plans to remain HSA eligible. At 199% FPL, the major cost sharing reduction kicks in making the plan non-HSA. YMMV.
Cost Sharing Reduction Subsidies (CSR) - Obamacare Facts

I found the exact same thing, although I am only looking at one Anthem/BCBS plan in a single zip as well. But yes, it seems that the insurance companies are designing in "cliffs" of their own to watch for. My 2016 target income is 249%. I over estimated income for 2015 and it was too late in the year before I realized I could have saved several thousand $ through cost sharing as our expenses were lower than planned (a good thing, for sure) and therefore our income being pulled from pre-tax funds was less than anticipated also. Our higher deductibles had already been met, and there is no mechanism to be credited for that water under the bridge. <head exploding now>

 

[littleb]

When you click "learn more about this plan", in the list that shows up has a couple check boxes dealing with notional coverage or multi-state.
As for why do no hsa plans come up?, good question. Are you doingt any other selection/filtering on plans? I would expect some bronze plans would show up too unless they were filtered out. Either filter only for bronze plans or sort from lowest premium to highest. Without knowing exactly what you are doing, it is hard to tell you why something is happening

I currently have BCBS multi state plan and when talking to a BC customer service representative yesterday she said that multi-state is a marketing tool that may not mean what it says. What??

So the conclusion at the end of the conversation was like this. Yes, I have coverage in other states 1. IF they offer the BCBS Blue Network at the dr. office, hospital or facility. 2. IF they are in the Blue Network services are covered under my plan in network.

I don't know if all states offer BCBS but if you rv travel it is something to consider and research. Of course, emergencies out of state should be covered under the plan.