Another ACA / Cobra question ...

[Steelart99]

So, I recently decided to call it done in early November and finally be FIRE'd.

My work Health Ins plan will cover me until the end of Nov. My understanding is that I have 60 days to select COBRA and 45 days after that to pay for it and still have retroactive coverage. If I don't pay for the coverage, then I'm just not officially enrolled. (3.5 month window)

I also have the option to sign up for ACA starting Nov 1st to Jan 31st 2017. If I enroll before the 15th of any month, my coverage starts the first day of the next month. If I enroll after the 15th of the month, I’ll have to wait until the month after that for my coverage to start. So, for example, if I enroll on January 16, my coverage would start on March 1.

So my tentative plan is to not select COBRA immediately so that I'll still be able to sign up with ACA. If I have a medical event I can enroll in COBRA ... if not, I don't need to do anything. That should have me covered for Dec/Jan/Feb. Then, I can sign up for ACA after Jan 16 to start coverage on March 1st.

Does this sound right?

 

[GTFan]

Yep, that's exactly what I did when I retired at end of 2014 because I knew I was going to have to pay full cost for an ACA policy in 2015. Got me two 'free' months of coverage while I was in the Cobra election window (I didn't use the 45 day payment window, just the 60 day election one). Enrolled on exchange after Jan 15 and coverage started March 1.

But I was careful to tell my wife what I was doing and had the enrollment forms already signed in case I had an accident and she had to elect coverage while I was out of it.

 

[RobbieB]

I went with the full 18 months of COBRA coverage, it was two thirds of what I'm paying now.

Good thing she wasn't with you in the car when you had the accident that kept you both in the hospital for a couple of weeks while your insurance was cancelled and you were forced into bankruptcy.

 

[jim584672]

Yep, that's exactly what I did when I retired at end of 2014 because I knew I was going to have to pay full cost for an ACA policy in 2015. Got me two 'free' months of coverage while I was in the Cobra election window (I didn't use the 45 day payment window, just the 60 day election one). Enrolled on exchange after Jan 15 and coverage started March 1.

But I was careful to tell my wife what I was doing and had the enrollment forms already signed in case I had an accident and she had to elect coverage while I was out of it.

I did the same thing, free rided for Nov/Dec, ACA in Jan.

 

[Steelart99]

Yep, that's exactly what I did when I retired at end of 2014 because I knew I was going to have to pay full cost for an ACA policy in 2015. Got me two 'free' months of coverage while I was in the Cobra election window (I didn't use the 45 day payment window, just the 60 day election one). Enrolled on exchange after Jan 15 and coverage started March 1.

But I was careful to tell my wife what I was doing and had the enrollment forms already signed in case I had an accident and she had to elect coverage while I was out of it.

I appreciate the feedback. The ACA stuff makes my head spin sometimes

 

[Aerides]

So does that mean if you are covered by cobra during the "sign up" period for ACA, you can't join ACA?

I'm on severance w/benes thru 8/2017, and then plan to COBRA immediately after, likely for 18 months, realizing I can drop it once I have other coverage (or no?).

So 8/2017... that means cobra 9/2017 thru 3/2019 but I plan to shop the exchange in Q42018 to expect to have drop cobra and go full ACA coverage Jan 2019 and forward. (My severance paying full salary thru 8/2017 exceeds the income for favorable ACA rates hence wanting to wait and ride cobra.)

Are my plans faulty? Can I not shop ACA for 2019 if my cobra covers a few months?

 

[bingybear]

I took cobra for 18 months which ends next month. I have purchased a plan off exchange for the remainder of the year. Cobra was much less expensive than a non subsidy ACA plan in my state and had a large nationwide network. Most ACA plans in my state have fairly narrow networks. So we rolled TIRA->RIRA up to the top of the 15% bracket last year and will again this year. We will decide again at the end of the year which way to go for next year.

I was concerned with coverage when travelling and hiking out of state. I asked my cobra insurance company about their ACA offerings and coverage out of state. They noted I could use the ER for life threatening events. Normal broken bone, not life threatening. Compound fracture (bone protruding thru the skin) would be life threatening.

Do read your plans. Many don't cover as well as employer plans. Note this is true for off exchange individual plans to.

 

[MBSC]

... that means cobra 9/2017 thru 3/2019 but I plan to shop the exchange in Q42018 to expect to have drop cobra and go full ACA coverage Jan 2019 and forward.

Your plan is sound. You can voluntarily drop COBRA during the ACA annual Open Enrollment Period (OEP) and enroll in an exchange plan. You would have only one plan deductible to meet during 2019.

My work Health Ins plan will cover me until the end of Nov. My understanding is that I have 60 days to select COBRA and 45 days after that to pay for it and still have retroactive coverage. If I don't pay for the coverage, then I'm just not officially enrolled. (3.5 month window)

If I have a medical event I can enroll in COBRA ... if not, I don't need to do anything. That should have me covered for Dec/Jan/Feb. Then, I can sign up for ACA after Jan 16 to start coverage on March 1st.

You may be subject to a small pro-rated penalty (tax) for going three consecutive months without coverage. There are other exemptions to the penalty, such as if the lowest cost Bronze plan is over 8.13% MAGI.

Reference: https://www.healthcare.gov/exemptions-tool/#/results/2015/details/short-gap

How to claim an exemption for a short gap in coverage:

Anyone with a gap in health coverage of no more than 2 consecutive months can claim this exemption. You’re considered covered any month you had minimum essential coverage for even 1 day.

• If your coverage gap crosses calendar years, the months without coverage of the second tax year aren’t counted for the exemption for the first tax year. But the uncovered months from the first year are counted for the exemption for the second tax year.
  • Example: Let’s say you didn’t have qualifying coverage November 2014, December 2014, and January 2015. You’re eligible for the short gap exemption for 2014. But for the 2015 tax year, you’re not eligible for the short gap exemption for January 2015 because you didn’t have coverage for three consecutive months – from November 2014 through January 2015.

 

[Steelart99]

Your plan is sound. You can voluntarily drop COBRA during the ACA annual Open Enrollment Period (OEP) and enroll in an exchange plan. You would have only one plan deductible to meet during 2019.

You may be subject to a small pro-rated penalty (tax) for going three consecutive months without coverage. There are other exemptions to the penalty, such as if the lowest cost Bronze plan is over 8.13% MAGI.

Reference: https://www.healthcare.gov/exemptions-tool/#/results/2015/details/short-gap

So, it seems to me that I will have a one month gap in 2016 (Dec) and a two month gap in 2017 (Jan-Feb). I have coverage for Jan-Nov of 2016, a coverage gap Dec 2016-Mar 2017 and then get ACA coverage as of March 1st 2017. I should be able to claim the short-term gap exemption in each year without getting any penalty.

I just read the IRS comment on this and for the year 2017, all three months will be considered (Dec/Jan/Feb)... yet that will be just 3 months and still should qualify for the exemption

 

[GTFan]

Even if you didn't get the exemption, the one month penalty is probably going to be way less than a month's premium. The short-term gap exemption is only for 2 months though, you're not going to get that exemption in 2017 but you could get others as MBSC said.

 

[pb4uski]

I went with the full 18 months of COBRA coverage, it was two thirds of what I'm paying now.

Good thing she wasn't with you in the car when you had the accident that kept you both in the hospital for a couple of weeks while your insurance was cancelled and you were forced into bankruptcy.

That would be my worry about playing the game.

 

[GTFan]

I have a chance of somebody suing me for way more than my umbrella will pay for, which is about as likely as the accident was for both of us in those two months. If you're really that worried about it, don't travel together in those two months. Or give the forms to other family members. Whatever.

You can't manage the risk out of everything, but you can try to mitigate it (as I did). Getting a couple of free months courtesy of Cobra was a very low risk that saved me $1500, but everyone has their own tolerance.

 

[Steelart99]

Based on the IRS documents on the ACA, I can get an exemption for anything less than three months (2017). So, by design I'll be covered on the 1st day of the 4th month. I'll have to make sure that it works this way. If not, then I'll just start ACA one month earlier .... IRS rules are below. Funny how the wording is different between the ACA site and the IRS site. ACA: "Anyone with a gap in health coverage of no more than 2 consecutive months can claim this exemption". IRS: "In general, a gap in coverage that lasts less than three months qualifies as a short coverage gap."

22. What qualifies as a short coverage gap?
In general, a gap in coverage that lasts less than three months qualifies as a short coverage gap. If you have more than one short coverage gap during a year, the short coverage gap exemption only applies to the first gap.If you have a coverage gap of 3 months or more, you are not exempt for any of those months.
If you do not have coverage for a continuous period that begins in one taxable year and ends in the next, for purposes of applying the short coverage gap rules to the first taxable year, the months in the second taxable year included in the continuous period are not counted. For purposes of applying the short coverage gap rules to the second year, the months in the first taxable year are counted. For example, if you lacked coverage from November 1, 2015 until February 1, 2016, November and December of 2015 are treated as a short coverage gap on your 2015 tax return. On your 2016 return, however, November and December of 2015 are included in the continuous period that includes January 2016. That continuous period is not less than 3 months so, on your 2016 return, January of 2016 is not an exempt month under the short coverage gap exemption.