ACA trouble. Appeals court rules subsidies illegal

[Fermion]

I was being a bit tongue in cheek but realistically we will probably have $900k in 401K, $200K in traditional IRA and $200K in Roth. If we deplete our taxable accounts due to medical bills, we would still have $1,300,000 in assets after bankruptcy. It would also take several years for the bills to chase you around enough that you even need to declare bankruptcy.

The better solution is to keep the subsidy and ACA and let everyone get access to affordable insurance.

 

[MichaelB]

So anyone planning leaving work for an early retirement counting on a subsidy to make it happen better have a contingency plan.

I think a "very safe" ER plan would include the possibility that there is no health care subsidy, period. Not because of any legal challenges, just because subsidies can go away for many reasons, for all health care, includeing Medicare, and healthcare expenses are critical components of future public spending.

Personally, I feel the likelihood of this happening is quite low, but greater than any of the efforts to further delay or deter the ACA.

 

[donheff]

I think a "very safe" ER plan would include the possibility that there is no health care subsidy, period. Not because of any legal challenges, just because subsidies can go away for many reasons, for all health care, includeing Medicare, and healthcare expenses are critical components of future public spending.

Personally, I feel the likelihood of this happening is quite low, but greater than any of the efforts to further delay or deter the ACA.

+1 always safer to leave a fudge factor in expense estimates. But while I have noted the immense impact if the DC Circuit's reasoning were to prevail I highly doubt that it will. SCOTUSBLOG has a pretty good piece on why the Supreme Court will probably eventually hear the case and why they will probably rule in favor of the Administration (too many parts to summarize).

 

[FIRE'd@51]

I think a "very safe" ER plan would include the possibility that there is no health care subsidy, period. Not because of any legal challenges, just because subsidies can go away for many reasons, for all health care, includeing Medicare, and healthcare expenses are critical components of future public spending.

I agree. I think it is very likely that the eligibility for a subsidy will be modified so that multi-millionaires (like us) who are able to reduce their AGI without reducing their standard of living in order to qualify for a subsidy will no longer be able to do so.

 

[Fermion]

I agree. I think it is very likely that the eligibility for a subsidy will be modified so that multi-millionaires (like us) who are able to reduce their AGI without reducing their standard of living in order to qualify for a subsidy will no longer be able to do so.

What makes you think this? Do you have past examples where a tax credit was denied someone because of their assets and not their income?

 

[FIRE'd@51]

What makes you think this? Do you have past examples where a tax credit was denied someone because of their assets and not their income?

There has been a fair amount of discussion in this thread about the "intent" of the law. IMHO, I don't think it was the "intent" of Congress to provide subsidized health insurance to those who could afford to purchase it without the subsidy.

 

[Fermion]

There has been a fair amount of discussion in this thread about the "intent" of the law. IMHO, I don't think it was the "intent" of Congress to provide subsidized health insurance to those who could afford to purchase it without the subsidy.

Ah. So what is your definition of afford?

Say I am making $20,000 right now at age 50 but I have a pension from a former job that will kick in at age 60, paying me $50,000 a year. Am I too rich for a subsidy? $20,000 is not much to live on and pay $10,000 in premiums and copays.

But maybe I have $1,000,000 in a IRA at age 50 and am making $20,000 a year. I plan to buy an annuity at age 60 with that $1,000,000. Am I too rich for a subsidy? Do you force me to cash in my IRA early to pay for health insurance? Why am I so different than the previous guy with a pension?

What if I live in California and have a house I bought for $200,000 years ago that is now worth $1,200,000. I make $20,000 a year. Do I have to sell my house to pay for insurance or do I get a subsidy?


Income based testing is so much easier to quantify.

 

[FIRE'd@51]

Ah. So what is your definition of afford?

Say I am making $20,000 right now at age 50 but I have a pension from a former job that will kick in at age 60, paying me $50,000 a year. Am I too rich for a subsidy? $20,000 is not much to live on and pay $10,000 in premiums and copays.

But maybe I have $1,000,000 in a IRA at age 50 and am making $20,000 a year. I plan to buy an annuity at age 60 with that $1,000,000. Am I too rich for a subsidy? Do you force me to cash in my IRA early to pay for health insurance? Why am I so different than the previous guy with a pension?

What if I live in California and have a house I bought for $200,000 years ago that is now worth $1,200,000. I make $20,000 a year. Do I have to sell my house to pay for insurance or do I get a subsidy?


Income based testing is so much easier to quantify.

I don't want to start a political argument here (Porky?). All I'm trying to say is, if you have significant assets, and can't afford the insurance without a subsidy, maybe you are not quite ready to ER. I don't think it was the intent of Congress to make it easier to ER.

 

[nash031]

Ah. So what is your definition of afford?

Say I am making $20,000 right now at age 50 but I have a pension from a former job that will kick in at age 60, paying me $50,000 a year. Am I too rich for a subsidy? $20,000 is not much to live on and pay $10,000 in premiums and copays.

But maybe I have $1,000,000 in a IRA at age 50 and am making $20,000 a year. I plan to buy an annuity at age 60 with that $1,000,000. Am I too rich for a subsidy? Do you force me to cash in my IRA early to pay for health insurance? Why am I so different than the previous guy with a pension?

What if I live in California and have a house I bought for $200,000 years ago that is now worth $1,200,000. I make $20,000 a year. Do I have to sell my house to pay for insurance or do I get a subsidy?


Income based testing is so much easier to quantify.

Got in a similar discussion with an acquaintance who proclaimed that no one yet had been able to give him a good reason why we shouldn't shift from a progressive income tax to a flat 1% "net worth" tax.

I just started by asking him how you determine "net worth" and went from there for about 20 minutes...

But I do think there's some momentum in this country to look at taxing assets...

 

[footenote]

There has been a fair amount of discussion in this thread about the "intent" of the law. IMHO, I don't think it was the "intent" of Congress to provide subsidized health insurance to those who could afford to purchase it without the subsidy.

We know Congress's intent in this instance. When the ACA was being drafted, asset and income tests for subsidies were discussed at length.

Congress did not include an asset test for ACA subsidy eligibility because of this country's 28 million small business (22 million of which are self-employed individuals (or couples) with no other employees). Add to those businesses about 2 million family farms.

Since so many of small businesses and family farms generate modest income, but own substantial illiquid assets, Congress decided not to test assets for ACA subsidy eligibility. So, if you receive a subsidy because your MAGI made you eligible despite sitting on $1mm or more of assets, thank your local small businesses and family farms.

 

[pb4uski]

Got in a similar discussion with an acquaintance who proclaimed that no one yet had been able to give him a good reason why we shouldn't shift from a progressive income tax to a flat 1% "net worth" tax.

I just started by asking him how you determine "net worth" and went from there for about 20 minutes...

But I do think there's some momentum in this country to look at taxing assets...

I think there is a desire by some for an assets based tax since it will tax the other guy. I think it is unlikely that we will see a tax based on assets or net worth in my lifetime only because of definitional issues (that we sometimes debate here), measurement issues and fairness issues (in the case of "self-made" wealth, assets are a result of past income the income tax has already been applied and also the Sally Saver vs Sue Spender debate).

 

[Fermion]

If you think the pension haters are bad now, imagine how they are going to feel if you include 401K balances in a asset test but don't include present value of a future pension.

Asset testing fails out of the gate. Will never be used for ACA subsidy.

 

[Mulligan]

If you think the pension haters are bad now, imagine how they are going to feel if you include 401K balances in a asset test but don't include present value of a future pension.

Asset testing fails out of the gate. Will never be used for ACA subsidy.

In the totality of it all, I imagine high net worth individuals receiving subsidized healthcare is a flea bite of a problem. Knowing how efficient the government is, the cost of "making it right" whatever that is, would be more expensive than leaving it as is.


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[donheff]

In the totality of it all, I imagine high net worth individuals receiving subsidized healthcare is a flea bite of a problem. Knowing how efficient the government is, the cost of "making it right" whatever that is, would be more expensive than leaving it as is.


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+1

 

[Mulligan]

+1

I'm a little sour on the government efficiency thing today, Donheff. I bought a car a couple days ago, and it won't pass emissions test. Not because it is polluting, but because the codes haven't cleared from a previous repair. The solution? Drive needlessly for 2 days spewing emissions just so I can prove it is not in violation. I have 2 codes cleared now, so I have to continue driving another day or so needlessly through the backwoods to get a third one to clear...


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[scrabbler1]

+1 to pb4uski, fermion, and mulligan @ not using assets. Where would you draw the line with regard to evaluating real estate, collectibles, and personal property/valuables?

 

[samclem]

In the totality of it all, I imagine high net worth individuals receiving subsidized healthcare is a flea bite of a problem. Knowing how efficient the government is, the cost of "making it right" whatever that is, would be more expensive than leaving it as is.

Unfortunately, the politics of things, human psychology, and good old regular "envy" will play a role in what we eventually do. It may not matter much to Ms Voter that the "rich" guy earned less in his lifetime than average (he just saved some of it), or that it will cost $1.50 in govt "effort" and increased public compliance costs to net $1 in increased taxes by taxing wealth/denying subsidies to those with low incomes but higher-than-average wealth.

 

[ERD50]

I'm a little sour on the government efficiency thing today, Donheff. I bought a car a couple days ago, and it won't pass emissions test. Not because it is polluting, but because the codes haven't cleared from a previous repair. The solution? Drive needlessly for 2 days spewing emissions just so I can prove it is not in violation. I have 2 codes cleared now, so I have to continue driving another day or so needlessly through the backwoods to get a third one to clear...


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OK, this is a total sidetrack from the thread, so I hope to just pop in and out on this, but...

I'm one of the last people here you'd expect to defend government efficiency, but actually, those 'ready' codes make perfect sense. There really is no way to know that the repair did its thing until you accumulate some miles and various driving conditions. It might seem counter-intuitive in some cases, but on average it actually is the most efficient thing to do.

There, I defended the government bureaucracy. Put that in the record books!

Over and out - ERD50

 

[Mulligan]

OK, this is a total sidetrack from the thread, so I hope to just pop in and out on this, but...



I'm one of the last people here you'd expect to defend government efficiency, but actually, those 'ready' codes make perfect sense. There really is no way to know that the repair did its thing until you accumulate some miles and various driving conditions. It might seem counter-intuitive in some cases, but on average it actually is the most efficient thing to do.



There, I defended the government bureaucracy. Put that in the record books!



Over and out - ERD50

I'm sure you are right, ERD. But what frustrated me was the repair had nothing to do with the emissions. They pulled the computer and replaced it trying to correct a problem before I bought vehicle, but the problem was only an ignition switch. This threw everything off all unrelated to the current problem. To compound the problem I bought the vehicle out of state from a dealer in which no emissions test is needed. So they weren't looking at that as being a problem before I drove it back home.


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[ERD50]

I'm sure you are right, ERD. But what frustrated me was the repair had nothing to do with the emissions. They pulled the computer and replaced it trying to correct a problem before I bought vehicle, but the problem was only an ignition switch. This threw everything off all unrelated to the current problem.

Yes, even disconnecting the battery (for any reason) can reset the codes and require you to go through a driving cycle before it can pass. Maybe this should be held in non-volatile memory, but then again, I think they are trying to make it tamper-resistant, so maybe resetting everything when power is removed is a good plan.

Like I said, maybe it doesn't make sense in some specific cases like this, but when looking at the big picture, it probably does make sense overall. It really is difficult for large scale operations to deal with the exceptions, and that leaves it open to corruption as well.

To compound the problem I bought the vehicle out of state from a dealer in which no emissions test is needed. So they weren't looking at that as being a problem before I drove it back home.

Well, that is a risk. I know when I went to purchase a used car, I used the Car-Fax report (or something like that?) and it included the emission test dates and results. Hindsight is 20/20, but I suppose you do need to be extra careful when purchasing out of state.

-ERD50

 

[Mulligan]

Yes, even disconnecting the battery (for any reason) can reset the codes and require you to go through a driving cycle before it can pass. Maybe this should be held in non-volatile memory, but then again, I think they are trying to make it tamper-resistant, so maybe resetting everything when power is removed is a good plan.



Like I said, maybe it doesn't make sense in some specific cases like this, but when looking at the big picture, it probably does make sense overall. It really is difficult for large scale operations to deal with the exceptions, and that leaves it open to corruption as well.







Well, that is a risk. I know when I went to purchase a used car, I used the Car-Fax report (or something like that?) and it included the emission test dates and results. Hindsight is 20/20, but I suppose you do need to be extra careful when purchasing out of state.



-ERD50

Last comment and I promise to not derail thread again! You mentioned car fax and I read it and looked at dealership photos. Bought it without even looking at it. Sometimes stereotypes are right. I noticed it had no wrecks, never had a lien, and the yearly license renewal was always one month ahead of time (one car owner, 5 years old). I said to myself, this car was owned by an old man who took good car of it. I was right, I googled his name as it was on the title after I bought it and he was 72 years old! It's a new looking, well kept SUV.


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[Senator]

Even in the unlikely event that the subsidies are ruled illegal, it is even more unlikely that the Federal Government tries to recoup subsidies from taxpayers

Even if people are required to pay it back, only those with the means to will be required. If you have assets, or a pension, you might have to pay. If you are truly below the poverty line, you would be exempt. You health care is free anyway.

Odds are, no one pays anything. Congress passes a law so it doesn't matter of you use the State exchange, or the Federal exchange.

ACA is here to stay, for everyone.

 

[aaronc879]

Even if people are required to pay it back, only those with the means to will be required. If you have assets, or a pension, you might have to pay. If you are truly below the poverty line, you would be exempt. You health care is free anyway.

Odds are, no one pays anything. Congress passes a law so it doesn't matter of you use the State exchange, or the Federal exchange.

ACA is here to stay, for everyone.

Income below poverty line does not equal free health care in states that didn't expand medicaid. If I make under $11,490 in taxable income then I have to pay the full health care premium with no subsidy. If I make $11,500 my health care cost is approx. $300/yr. If I make $11,489 my health care cost is approx. $3000/yr. I may have to not count all of my business expenses to make sure I stay above $11,490.

 

[Rpharmer]

I could live with giving up the subsidy, paying a full-freight premium each month. After all that's the way it was before Obamacare. But I'd hate to see the cost-sharing subsidies eliminated as well. My old policy had a $5000 deductible and a $7500 out-of-pocket max. Now I have a $250 deductible and a $500 OOPmax, which I easily met back in February. So I'm getting over a thousand dollars a month in prescriptions at no cost to me, not to mention doctor's visits, out-patient surgery, etc.
In other words, that's where the real savings is, not in the $400 a month premium subsidy (I pay $160).
I think that the court's decision applies only to premium subsidies, but who knows. And would insurance companies even continue to offer new policies like mine, if too few people could afford to buy them at the higher premium?
In any case, my strategy from the start has been to sock away the cost-sharing savings, not spend them, in the worst case where this does all fall apart in a few years, and count my blessings (and smile at the pharmacy counter) for now.

 

[donheff]

But I'd hate to see the cost-sharing subsidies eliminated as well. My old policy had a $5000 deductible and a $7500 out-of-pocket max. Now I have a $250 deductible and a $500 OOPmax, which I easily met back in February. So I'm getting over a thousand dollars a month in prescriptions at no cost to me, not to mention doctor's visits, out-patient surgery, etc.

I don't have an ACA plan but looked at them on the exchange out of curiosity. The impression that I got was that the deductibles and OOP maxes were pretty high. Did you get a platinum plan?