Obamacare

[Mulligan]

I suspect the folks who usually "jump the gun" with estimates have very little certainty about what the IRS will do with this starting in 2014 when PPACA takes (more or less) full effect, so they are hesitant to stick their necks out as in past years.

Still, Ziggy, you have given me hope. I am down to my HSA and mortgage as my last deductions, going forward. I would hate to be down to one, as the HSA is about to be a bigger deduction than my mortgage is.

 

[JoeWras]

My Megacorp has a "retirement insurance" option that pretty much prices the insurance as I see in these calculators. They argue to us today that the insurance is a good benefit because there are no pre-existing condition clauses. I agree. Although expensive, it sure is nice to not worry about going through the pre-existing condition gauntlet.

However, since the cost will be about the same, and the ACA doesn't rule out if pre-existing conditions exist, I wonder if my Megacorp will bother continuing to offer the plan?

My bet is that they won't. I'm not complaining, just observing and predicting.

 

[MichaelB]

My understanding is that the insurers made it very clear that they *supported* a guaranteed issue, zero-underwriting system with no preexisting condition exclusions as long as they were allowed to price their product profitably and there was a true universal mandate (to avoid adverse selection).

+1

 

[MichaelB]

Based on the Covered California calculator, subsidies go away once our income goes over $60K, which is not very much for our high COL area. Does anyone know if there will be any regional adjustment to the subsidies based on COL? Otherwise, it would be better to retire on $60K or less in a low COL area.

You are expected to contribute 9.5% of modified AGI, once the premium exceeds that amount you get a subsidy. The % contribution is fixed across the country.

 

[foxfirev5]

My Megacorp has a "retirement insurance" option that pretty much prices the insurance as I see in these calculators. They argue to us today that the insurance is a good benefit because there are no pre-existing condition clauses. I agree. Although expensive, it sure is nice to not worry about going through the pre-existing condition gauntlet.

However, since the cost will be about the same, and the ACA doesn't rule out if pre-existing conditions exist, I wonder if my Megacorp will bother continuing to offer the plan?

My bet is that they won't. I'm not complaining, just observing and predicting.

I'm facing the same deal Joe. My big hang up to RE is waiting to see how this all shakes out. While my Megacorp dropping retiree coverage has always been in the back of my mind, the 400% caught me off guard. I'm one of those people who put every available dollar into 401k's, 403b's and any other deferred account available. Now I find that I'll get hit pretty hard if megacorp drops their plan and I need ACA coverage. I don't plan to live on $60k a year after saving my entire worklife. However, I'm struggling with the taxable savings cash flow to make it work. Just when you figure it out they change the rules.

 

[JoeWras]

While my Megacorp dropping retiree coverage has always been in the back of my mind, the 400% caught me off guard. I'm one of those people who put every available dollar into 401k's, 403b's and any other deferred account available. Now I find that I'll get hit pretty hard if megacorp drops their plan and I need ACA coverage. I don't plan to live on $60k a year after saving my entire worklife. However, I'm struggling with the taxable savings cash flow to make it work. Just when you figure it out they change the rules.

+1

I hear you. Thanks to this discussion, I've finally understood the 400% cliff you all have talked about. I'll be on that border when I ER too. My official plan is ER in 5 years and I hope they've made it a slider instead of a cliff by then. However, if Megacorp offers a buyout, then my ER moves up and I'll be worrying about this.

So many moving parts, so many things to consider...

 

[Live And Learn]

Covered California, the PPACA health exchange for California, has rolled out it's benefit plans and related information.
<snip>
They put together a crude cost estimator, which will give a quote for a "Silver Plan" policy. A typical high deductible policy such as many of us use is more like a "Bronze Plan" policy. Costs look comparable to current Preferred Provider plans from Aetna, Blue Cross, etc for California residents. That is, ouch... But we're used to it. (They probably just loaded in the current prices of plans similar to the Silver Plan benefits.)

Health Insurance Calculator | Covered California

actually a little more than the Berkeley site estimated 1723/month vs 1592/month cost.

 

[ERhoosier]

I made a point. You made a point. We disagree on this topic. I just don't want to waste my time arguing with you on this topic, ERD50, and run the risk of getting this thread shut down.

Just remember one thing : while you spend time posting in these forums from the comfort of your home, I am the one who takes care of these patients' cancer and other conditions at free clinics. Until you do that, please don't be so judgmental and self righteous about 'responsible' vs 'non responsible' patients.

IMHO- With all due respect you ARE getting political, and you are not the only one caring for such patients. I know many who work urban charity hospitals & clinics who genuinely fear ACA will be net negative for US health care, inc eventually DEcreased access to care for un/under insured. For example, sharp reductions (up to 75%) in federal Disproportionate Share (DSH) payments to hospitals serving indigent/poor/underinsured patients may severely hurt these urban "safety net" facilities & their ability to continue operating at current levels of service.
http://www.nauh.org/component/option,com_rubberdoc/format,raw/id,115/view,doc/
And CBO estimates for the number of people remaining uninsured under ACA continue to rise by the millions with each successive updated analysis.
http://www.cbo.gov/sites/default/files/cbofiles/attachments/03-13-Coverage Estimates.pdf
http://www.cbo.gov/sites/default/files/cbofiles/attachments/43472-07-24-2012-CoverageEstimates.pdf

I'm sure we all hope for the best, but no one knows just how this will all play out. Many critical rules & regs for actual implementation have yet to finalized, and the overall effect of ACA on the US economy (inc unemployment) continues to be hotly debated. Only time will tell.

 

[WestLake]

M thanks for the California calculator. I'm getting $635 per month for a single between 55-60. Under the 'cliff' a $279 subsidy, 0 over.

Will probably be over the cliff unless I can come up with some neat tricks.

Not hugely 'affordable' for those with mortgages and/or high COL areas but for me, OK and a relief.

 

[Running_Man]

Is the income used for calculations current year income or prior year income or some average?

 

[MichaelB]

Is the income used for calculations current year income or prior year income or some average?

From the most recent 1040. For 1/1/2014, that means 2012 income.

 

[ziggy29]

From the most recent 1040. For 1/1/2014, that means 2012 income.

Meaning people who FIRE and suddenly have a large drop in income will feel a lot of pain for a year. Looks like that may be a new budget item for FIRE: paying the "full freight" on a health plan with a much lower income for a year. If you go from $120K in 2013 to $50K in 2014, you would have to pay the full cost based on an assumed $120K salary in 2014 -- meaning you could be paying perhaps 30% of your income to health insurance in that first year.

Hence someone who thinks they can retire on $X may need to figure on needing $X+10000 in the first year.

 

[Running_Man]

OK thank you Micael B! This means for 2 years of unsubsidized full freight healthcare expense to plan for then.

 

[Marc]

Does anyone have an idea how they are going to calculate "income" for the subsidy? Will you collect the subsidy in arrears based on previous year's tax filing? If so, if I retire in middle of year is there any way to change the tax year start and end date? Or, do I need to make sure to retire in December and ensure that I have enough money in Roth and taxable accounts to keep income under $60K (or whatever number for family of 2) until we go on Mediscare?

I will qualify for half employer paid medical at 58 (so my costs would be just $600 month for the two of us) but I have a strong suspicion that will be gone in the remaining 22 months before I turn 58. As we both have many pre-existing conditions and very expensive maintenance drugs medical is the real concern for RE.

thanks,

Marc

edited to add: Sorry, didn't see same question popup just before i started posting.

 

[ziggy29]

Does anyone have an idea how they are going to calculate "income" for the subsidy? Will you collect the subsidy in arrears based on previous year's tax filing? If so, if I retire in middle of year is there any way to change the tax year start and end date? Or, do I need to make sure to retire in December and ensure that I have enough money in Roth and taxable accounts to keep income under $60K (or whatever number for family of 2) until we go on Mediscare?

I think it's the most recent available AGI from a tax filing. I'm not sure about any ability to play games with the "tax year". For most folks, the first year of a major drop in income will cause a spike in expenses for the first year and perhaps the second year in retirement, because you are likely getting little or no subsidy for health insurance.

As far as engineering your income, if you look like you might only barely exceed 400% of the FPL, it might be worth doing but if you are fortunate enough to have retirement income that *easily* exceeds it, I wouldn't impoverish myself just to get any of the subsidy. In other words, manipulating "the cliff" to become eligible for subsidies might be worth it if you expect to have income of (say) 450% of FPL, but not if you had 800% of it.

 

[explanade]

So if there's guarantee issue, why not go without insurance until you think you'd need it?

If the cost without subsidies are so high that the premiums exceed the penalty?

 

[Mulligan]

So if there's guarantee issue, why not go without insurance until you think you'd need it?

If the cost without subsidies are so high that the premiums exceed the penalty?

I know one fly in the ointment on that strategy is there is a yearly window signup period for those that pass. So you could possibly rack up a big cost in the hospital waiting for the window period to open up.

 

[Katsmeow]

Meaning people who FIRE and suddenly have a large drop in income will feel a lot of pain for a year. Looks like that may be a new budget item for FIRE: paying the "full freight" on a health plan with a much lower income for a year. If you go from $120K in 2013 to $50K in 2014, you would have to pay the full cost based on an assumed $120K salary in 2014 -- meaning you could be paying perhaps 30% of your income to health insurance in that first year.

Hence someone who thinks they can retire on $X may need to figure on needing $X+10000 in the first year.

If (and I realize it is a big if) then is done like the income based premiums on medicare then in the situation you give above they will give you relief.

When DH went on medicare in late 2012 they initially based premiums for part B and part D on our 2010 tax return. However, if your income was less in 2011 or 2012 for certain reasons such as him reducing his hours of work or me reducing mine or retiring then you could bring in proof and they would modify this. He brought in our 2011 tax return and got it modified somewhat.

What they don't modify for or one time large IRA withdrawals. For example in 2012 we had larger IRA withdrawals in connection with a house purchase. That will cause his medicare premiums to go up in 2014.

 

[marko]

As far as engineering your income, if you look like you might only barely exceed 400% of the FPL, it might be worth doing but if you are fortunate enough to have retirement income that *easily* exceeds it, I wouldn't impoverish myself just to get any of the subsidy. In other words, manipulating "the cliff" to become eligible for subsidies might be worth it if you expect to have income of (say) 450% of FPL, but not if you had 800% of it.

Good point, but it still might be worth using some ($30K?) taxed money to save $10K a year until Medicare arrives. I could envision taking a $50K loan to save $10K for 2-3 years if you needed a few years. "Impoverishment" isn't the only angle, I think.

Regardless of how you get there, I find it interesting that there is a lot of talk on this site about 'engineering income'. It seems that now more than ever it has become better to appear low income than middle class.

 

[youbet]

Looks like that may be a new budget item for FIRE: paying the "full freight" on a health plan with a much lower income for a year.

Your use of the word "new" in this situation is a bit confusing Zig. Before ACA, an early retiree without employer provided retiree health insurance would have budgeted for the full cost of a private plan until age 65. Now, with ACA, he/she budgets for the full cost of a private plan obtained through the exchange until a possible subsidy lowers that cost later, likely after the first full tax year of RE.

Are you saying "new" because even with a temporay unsubsidized premium, under ACA lower income early retirees will be able to obtain tax payer subsidized health coverage whereas before they would be paying the entire premium until Medicare?

 

[ziggy29]

Your use of the word "new" in this situation is a bit confusing Zig.....

Are you saying "new" because even with a temporay unsubsidized premium, under ACA lower income early retirees will be able to obtain tax payer subsidized health coverage whereas before they would be the entire premium until Medicare?

"New" as in different rules to learn and [-]manipulate[/-] apply for your maximum personal benefit - not "new" as in "new costs that early retirees never faced before."

 

[youbet]

"New" as in different rules to learn and [-]manipulate[/-] apply for your maximum personal benefit - not "new" as in "new costs that early retirees never faced before."

Thanks Zig. Yeah, I understand your point now. Originally I was reading "new" to be a "new additional cost."

 

[samclem]

Thanks Zig. Yeah, I understand your point now. Originally I was reading "new" to be a "new additional cost."

And, it will be an additional cost for those who do lose the insurance provided by their previous employers. That apparently not a trivial number of cases.

 

[ERhoosier]

And, it will be an additional cost for those who do lose the insurance provided by their previous employers. That apparently not a trivial number of cases.

+1. But in fairness to ACA, it appears this trend had started some years ago & some employers may be blaming ACA for what they intended to do anyway.

Budget Report: More Employers Than Previously Estimated Will Drop Health Coverage - Kaiser Health News

 

[anethum]

I'm sure we all hope for the best, but no one knows just how this will all play out.

While I completely agree that no one knows how it will all play out, I'm afraid that there are many in this country who do not hope for the best as far as the PPACA is concerned. (I want to emphasize that I am not referring to anyone in this forum.)