Strategy for mid-year FIRE, TCC, Gap and ACA

[bearkeley]

Hi there - sorry if this has been covered extensively but had a hard time finding the answers....hoping you can help.

DH will leave Federal Govt job in July and should be eligible for TCC (Cobra equivalent as far as I can tell) starting 9/1. We won't be eligible for subsidies this year, but definitely planning for it next year via careful planning. We are both under 50, low utilization of healthcare projected other than potential ER visit due to kidney stones. We also plan to only be in the US for half the year (travelling during the cold months!). We will still want US coverage but plan to get future preventative care outside the US.

TCC will be approx 1400/month with 0 deductible and 11 k max Out of pocket. ACA (HSA elig) will be 662/month with 12,900 deductible and 13k oop.


Questions:

1) I was thinking of this strategy....any issues with this? Assuming TCC is very similar to cobra but not sure: Don't complete TCC paperwork during 60 day grace unless needed. Sign up for Lowest premium plan and contribute max to HSA (new to us but would be helpful in dropping our taxable income!). Get supplemental medical travel insurance. (So much better than US coverage!)

2) We estimate about 3-5k in subsidies in 2017. Given our situation above, would it make sense to consider plans outside the marketplace?

Thanks!

 

[MBSC]

With COBRA, the 60 day retroactive activation period begins when the employer coverage ends. At most but not all large companies, if you leave during the middle of the month your employer coverage continues to the end of that month. In those cases, the COBRA window begins the first of the following month.

The TCC activation window is 60 days from the date of separation or receipt of TCC notice, whicever comes later. Your retro-activation request must be received by the program administrator within 60 days so account for mail delivery time. Any out-of-pocket expenses already applied to your current plan will transfer to the TCC policy.

ACA compliant policies (both on and off exchange) begin on the first of the month. You should consider 2016 off-exchange plans if you are 100% certain of no premium subsidy. You said you wanted to contribute the max to an HSA. Your contribution limit is prorated based on the number of months you have an HSA eligible health plan.

If you are healthy and have no pre-existing conditions, consider a non-compliant short-term medical plan from the end of the TCC retro-activation grace period to year end. ST plans can start any day of the month and usually have broad provider networks. They are not HSA compatible but the premium savings may offset this. Given your age you may be exempt from the penalty for not having compliant coverage during this period. You are exempt if the cost of the least expensive bronze plan is more than 8.13% MAGI. You claim the penalty exemption at year end on your IRS tax forms. Just be sure you are purchasing a medical plan and not an indemnity plan that only covers accident/specific illness.

Unaffordable Exemption (8.05% MAGI in 2015, 8.13% in 2016): https://www.irs.gov/instructions/i8965/ch01.html

 

[bearkeley]

Wow, thank you for such a thorough reply! Very helpful. Since my husband is working half the year, we would be earning more than the 64k or 65k max to get a subsidy. However, when I tried to research plans outside the marketplace for mid year, they seem to only sell me non compliant, short term plans because I am outside the open enrollment season. Do they not offer plans for qualifying events or was I looking at the wrong website?

Also, re the HSA....I seem to recall a provision around HSAs and being eligible for the full amount if covered under a qualified plan for December (and the next 12 months). I was hoping this option will allow me to contribute this year, and next. Maybe not?


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[MBSC]

However, when I tried to research plans outside the marketplace for mid year, they seem to only sell me non compliant, short term plans because I am outside the open enrollment season. Do they not offer plans for qualifying events or was I looking at the wrong website?

The following website lists some compliant off-exchange plans and is a good place to start.

Off-Exchange Health Plan Finder: https://finder.healthcare.gov/

Also, re the HSA....I seem to recall a provision around HSAs and being eligible for the full amount if covered under a qualified plan for December (and the next 12 months). I was hoping this option will allow me to contribute this year, and next. Maybe not?

Yes, the full 2016 contribution will qualify if you maintain an HSA eligible health plan for 2017. I would wait until you are sure there will be a 2017 HSA eligible plan available in your market before using this provision.