Losing employer insurance in April. Cobra or alternatives?

[mikes425]

Wish I could've come up with a better title. I'll become 64 in April. I do not yet take SS, and figure on doing so at, probably 66-67. Portfolio assets -w/ a Moderate allocation, no debt hovering around 2.1m, and expenses average up to 5k a month...often much less, and own my home- no mortgage.

So, I am a healthy self-employed freelance performer with enough for full retirement but continue to work as much as I 'want to' basically...One of the benefits of that has been qualifying for a performance union insurance plan for the past few years, which is pretty fantastic Anthem PPO coverage, but the union has upped the annual earnings eligibility requirements to the point that i will not requalify for continuation as of April. That plan's premium cost has been been around 2000 a year..even includes Dental & 'mental health.' Pretty phenomenal, and that's for a pretty low Deductible at that. My only other cost is for a 'concierge' primary care doctor's confiscation of about 1800 a year. I've gone along with that because I really like him. He says he would not bill me anything more than a 25.00 office visit if I was not insured, but anyway..the main question here is where to go when this great plan runs out, for major medical, specialist visits etc. I am very good about maintaining an exercise regimen, healthy habits, preventive health. The question becomes, what's my best move when this union insurance plan runs out effective in May.

COBRA would put me at around 800 a month last time I checked...a pretty massive increase given i've paid next to nothing for a few years. That said, as I understand it I'll be eligible for some form of government insurance options at age 65 or thereabouts (sorry - haven't even looked into the specifics of this whole realm so i may sound quite naive here). That means there'll be a 'window' where I will need to either go with the COBRA for awhile, or look at other more cost-efficient but sufficient coverage options. Mainly due to investment income, in the past couple of years at least - I have gone over the limit of eligibility to qualify for an ACA plan subsidy. I don't know if it's worth pursuing trying some creative loopholing to show enough of a reduced total income to be eligible for the subsidized ACA plan. It seems a major hassle. So other than that idea, what other options might be out there to consider if any...that would give me a reasonable major medical and basic care plan that would ideally be a lot less than COBRA-- and either way, how long would it be til I would be eligible for Medicare - and does that have anything to do with whether I'm on or off SS, IOW still working enough to where I 'can't' qualify for SS. Thanks for reading through all this and always appreciate the great insights here! I welcome any thoughts or questions! Mike

 

[MBAustin]

You can be on Medicare at 65 and delay your SS, so that's not an issue. I think your best options are to either suck it up and pay the COBRA or go with a non-subsidized ACA plan. (BTW, $800/month for what you have isn't bad at all, I'm paying $1100 for a much higher deductible, no dental, and no prescription drug coverage until I hit the deductible) It's only for a year, so I wouldn't spend a lot of time trying to save a few hundred $$/month and potentially ending up with a big bill if something bad happens.

 

[Midpack]

DW retired early, she is about 2 years younger than me. I went on Medicare before she retired, she was not eligible so she took COBRA for 18 months. After that while still not eligible, she looked at non-subsidized ACA options but they weren't cheap! So she took out a short term HC policy with UHC for 5 months until she was eligible for Medicare. The UHC policy was quite a bit less than COBRA, but of course the benefits were inferior as well. We decided we were OK with a very high deductible plan for 5 months to cover us for something catastrophic only. Their short term policies, 6 months to 2 years, were fairly reasonable IME. Of course she made sure she had no outstanding health issues before she went off COBRA. Best of luck.

 

[Aerides]

There are additional benefits to cobra besides cost:

Path of least resistance - just stay on what you've got, no hassle
Same docs, etc.
Deductible - any insurance expenses you accrue while still on your employer plan carry with you, vs. swapping a few months into the year

In your shoes I'd just cobra, very simple decision, and only one year. It's often hard the first year when working part of it, to qualify for good subsidies anyway.

 

[PaunchyPirate]

Don’t be so quick to dismiss an ACA plan. For 2022, the subsidies have been boosted up plus there is no longer an income cap like there was in the past. This is part of Covid recovery legislation. You should run your numbers on the healthcare.gov (or your own state’s equivalent healthcare exchange) website.

 

[Buckeye]

There's another active thread right now about medical payments on your auto insurance. If you don't take Cobra, be sure you have good medical coverage on your auto insurance to help cover injuries due to an auto accident.

 

[Bamaman]

Congratulations on getting to your point of life and being able to spend your life entertaining people. I think answers to your health insurance question has been answered above.

I've lived in Memphis, Nashville and Muscle Shoals, and you have no idea how many road musicians have toured without any health insurance. There have been dozens of benefit concerts over the years to pay for musicians' hospital bills and burial costs.

Thank you for being responsible.

 

[mikes425]

Hi, All great info and thanks to everyone who's chimed in here. Super helpful. I can see the point on just rolling with COBRA...tho the note about how the income requirements may have been modified with the ACA is intriguing, so I guess i should at least do due diligence to look into that! Much appreciated,

Mike

 

[disneysteve]

Thanks to the OP for starting this thread. I'm facing a similar decision - COBRA or ACA - when I drop down to per diem employment. COBRA will have a higher premium than ACA but also better coverage and lower out of pocket costs. ACA could work out cheaper if our utilization is relatively low but it could also be thousands higher. No way to know. I haven't totally crunched the numbers yet but on the surface, I'm leaning toward COBRA as the known entity even if it works out to be somewhat more costly.



In our case, though, we'll have a lot longer before Medicare kicks in so ultimately we'd need COBRA for 18 months and then ACA after that anyway.


For you, OP, sounds like COBRA is probably the way to go as long as the premiums are affordable for you. But definitely check what ACA would cost you.

 

[Montecfo]

Cobra is path of least resistance at least to end of your first calendar year. You can drop the dental and vision to keep it a bit cheaper.

Things will be changing at 65. Best path might be to stay the course at least initially.

 

[Ian S]

When DH was terminated due to Covid ravaging the travel business last year, we looked into both COBRA and ACA. Although COBRA was costly, the coverage was better and he'd already met his annual deductible. Plus the company would pay for three months of premiums! So considering that and the ease of continuity, we went with COBRA. As luck would have it, after paying for COBRA for the first three months of 2021, from April 2021 for six months, his COBRA was paid for through the American Rescue Plan Act that Congress passed and President Biden signed. Then, in September of this year, his old company was in a position to hire back several employees. He applied and was rehired at his old salary with all the benefits and vacation he had prior to his termination. We lucked out but there was no way of knowing that a priori. Not sure if we would make the same decision on COBRA again. The changes to the ACA might make it more attractive.

 

[mikes425]

Cobra is path of least resistance at least to end of your first calendar year. You can drop the dental and vision to keep it a bit cheaper.
Things will be changing at 65. Best path might be to stay the course at least initially.

Well, not sure if this plan would allow me to decouple the Dental. It's basically just an affiliated deal with Delta Dental. In any event - and maybe i'm overlooking something but if in fact the ACA income caps for subsidies have been lifted-- and i were able to estimate an AGI after tax preparation of say, 67,000.00 (rough estimate)... it would appear, based on healthcare.gov estimates for a typical high deductible plan at a glance...i would be entitled to a subsidy that would allow for something in the realm of 350-400/month.. vs a COBRA plan for 800/month. Guess my first impression would be, if that is the case, and it was for a window of time before eligibility for a medicare plan at 65 y/o... then wouldn't an ACA option save me roughly half the $$ for that 'gap' period?

 

[PaunchyPirate]

Well, not sure if this plan would allow me to decouple the Dental. It's basically just an affiliated deal with Delta Dental. In any event - and maybe i'm overlooking something but if in fact the ACA income caps for subsidies have been lifted-- and i were able to estimate an AGI after tax preparation of say, 67,000.00 (rough estimate)... it would appear, based on healthcare.gov estimates for a typical high deductible plan at a glance...i would be entitled to a subsidy that would allow for something in the realm of 350-400/month.. vs a COBRA plan for 800/month. Guess my first impression would be, if that is the case, and it was for a window of time before eligibility for a medicare plan at 65 y/o... then wouldn't an ACA option save me roughly half the $$ for that 'gap' period?

With an income of $67,000 it is very possible for you to be getting that price for an ACA plan. It varies wildly based on your geographic location. So, sure, it sounds like an ACA plan might be good for you for the short term. Just be sure you're happy with the coverage. It may not be as good as your COBRA plan would be. It's usually a choice you just have to make one way or the other and live with until you can change it again on the next January 1st.

Be sure you have estimated your MAGI (Modified AGI) and not just your AGI. For MAGI, there are a few things added back into the income, such as Tax-Exempt Interest.

Also note that they ask for HOUSEHOLD income. So, if there is a spouse or dependent involved that has income it needs to be included.

I'm not sure it was mentioned earlier, but the subsidy coverage levels for 2022 will not necessarily be the same for 2023 and onward. The current legislation that passed was for 2021-2022. There will have to be new legislation for it to be further extended. Otherwise, the income cap will return and I think the higher subsidy levels will as well, but I could be wrong on that part.

If you can live off savings, without having to sell investments (and therefore realize capital gains), you may be able to keep your income lower to get better subsidies.

 

[cat4ever]

If you have a funded HSA this can be a pretty big break for COBRA premiums, which you can't do for ACA insurance:

https://dpath.com/hsa-and-cobra/

 

[mikes425]

If you have a funded HSA this can be a pretty big break for COBRA premiums, which you can't do for ACA insurance:
https://dpath.com/hsa-and-cobra/

Hi and thanks! That is an interesting point. I do not have a funded HSA at this time. I guess where i'm at on it is what the lowest cost route would be for 'sufficient' insurance from the date the employer coverage ends (March 31) to the point where i am eligible for Medicare. Will be 65 in April '2023.

So looking at my COBRA, it turns out it'd be 975/month; higher than i thought.

Now this April if my tax returns show a MAGI, after deductions et.al that would be low enough to qualify for a decent subsidy, that would presumably bring my premium down substantially lower if I went with an ACA plan vs COBRA - even if it would be a much higher deductible plan (no doubt) and most likely nowhere near as great as the Anthem employer PPO i've had; But...it still could provide me adequate 'major medical' protection, negotiated rates for specialists, and ideally some coverage for preventive care procedures.

So, in that respect, it seems sort of like a no brainer to go that route in that it could theoretically save me something like $500 a month in lower premium costs during that window of time. That's a rough estimate of course. Just basing it on averages from the Marketplace when I plug in a MAGI in the $75,000 ballpark. (Could be more, could be less)

Of course beyond all this, I have no idea what to expect with Medicare. Haven't even begun to think about that.

Thanks again for all the helpful comments!

 

[PaunchyPirate]

Hi and thanks! That is an interesting point. I do not have a funded HSA at this time. I guess where i'm at on it is what the lowest cost route would be for 'sufficient' insurance from the date the employer coverage ends (March 31) to the point where i am eligible for Medicare. Will be 65 in April '2023.

So looking at my COBRA, it turns out it'd be 975/month; higher than i thought.

Now this April if my tax returns show a MAGI, after deductions et.al that would be low enough to qualify for a decent subsidy, that would presumably bring my premium down substantially lower if I went with an ACA plan vs COBRA - even if it would be a much higher deductible plan (no doubt) and most likely nowhere near as great as the Anthem employer PPO i've had; But...it still could provide me adequate 'major medical' protection, negotiated rates for specialists, and ideally some coverage for preventive care procedures.

So, in that respect, it seems sort of like a no brainer to go that route in that it could theoretically save me something like $500 a month in lower premium costs during that window of time. That's a rough estimate of course. Just basing it on averages from the Marketplace when I plug in a MAGI in the $75,000 ballpark. (Could be more, could be less)

Of course beyond all this, I have no idea what to expect with Medicare. Haven't even begun to think about that.

Thanks again for all the helpful comments!

You may know this, but can't tell from what you posted. The MAGI used to calculate your subsidy will be your ESTIMATED MAGI for 2022. It will have nothing to do with your April tax return for 2021.

You estimate the MAGI for the year. Use that for subsidy calculations. Then, if at the end of the year, your estimate was off, it gets reconciled on the tax return for 2022.

 

[cat4ever]

Most definitely, if you can keep your income low the ACA with subsidies would be your lowest cost. But from the below quote it didn't look like that was an option you wanted to try:

" I don't know if it's worth pursuing trying some creative loopholing to show enough of a reduced total income to be eligible for the subsidized ACA plan. It seems a major hassle. So other than that idea, what other options might be out there to consider if any."

As pointed out from above, it will be all about keeping your 2022 income low. Keep in mind any money you take from an IRA or non Roth 401K during the year for paying the bills, etc. will be counted as income.

 

[cathy63]

You said you don't already have an HSA, but what about getting one with your new plan? Since it sounds like your medical plan usage is fairly low, get an ACA plan that's HSA eligible (it will be a Bronze plan) and you can put aside 3/4ths of $4600 into an HSA account during 2022. That reduces your income for 2022 and increases the amount of premium subsidy you're eligible for. You can do the same for the first quarter of 2023.

Then when you start Medicare, you can reimburse yourself for the premium costs. You should have enough in the HSA to pay for a couple of years of Medicare premiums.

 

[MBSC]

...it still could provide me adequate 'major medical' protection, negotiated rates for specialists, and ideally some coverage for preventive care procedures.

As someone mentioned upthread, the provider network of the ACA plan may be smaller than your current plan network. ACA plans will cost share true emergencies as in-network but you need to review the ACA plan's network to see if it includes your local hospitals and specialists for non-emergency services.

Your profile says you live in Erie, MI. Google says this is a few miles from Toledo, OH. Below is a thread from a Michigan forum member who can't use the providers in a 'big city' one mile away because it's across the state line. The thread title is misleading as it has nothing to do with snowbirding, just provider access.

https://www.early-retirement.org/forums/f38/aca-for-snowbirds-112018.html

When you find BCBS-MI plans on HealthCare.gov and drill down to plan documents>provider directory and search for providers, there is a banner at the top of the page saying "If the results below show a provider outside of Michigan, please be aware that if you visit that provider, your claim(s) will be processed as “out of network”. The Ambetter HMO plans appear to have some Toledo providers.

 

[CardsFan]

There are additional benefits to cobra besides cost:

Path of least resistance - just stay on what you've got, no hassle
Same docs, etc.
Deductible - any insurance expenses you accrue while still on your employer plan carry with you, vs. swapping a few months into the year

In your shoes I'd just cobra, very simple decision, and only one year. It's often hard the first year when working part of it, to qualify for good subsidies anyway.

^^^ This.

For one year I would not take on the hassle factor.

 

[SecondCor521]

Also note that they ask for HOUSEHOLD income. So, if there is a spouse or dependent involved that has income it needs to be included.

I'm not sure it was mentioned earlier, but the subsidy coverage levels for 2022 will not necessarily be the same for 2023 and onward. The current legislation that passed was for 2021-2022. There will have to be new legislation for it to be further extended. Otherwise, the income cap will return and I think the higher subsidy levels will as well, but I could be wrong on that part.

Dependent income need be included in household income only if the dependent is required to file a federal income tax return.

The elimination of the income cap (400% FPL cliff) and the increased subsidies are both currently scheduled to sunset 12/31/2022. If OP went with an ACA plan this year, they should be able to continue it on an unsubsidized basis for the first portion of 2023 until Medicare. In aggregate I bet it would be cheaper than COBRA, but OP sounds like they want to compare coverage also.

 

[mikes425]

As someone mentioned upthread, the provider network of the ACA plan may be smaller than your current plan network. ACA plans will cost share true emergencies as in-network but you need to review the ACA plan's network to see if it includes your local hospitals and specialists for non-emergency services.

Your profile says you live in Erie, MI. Google says this is a few miles from Toledo, OH. Below is a thread from a Michigan forum member who can't use the providers in a 'big city' one mile away because it's across the state line. The thread title is misleading as it has nothing to do with snowbirding, just provider access.

https://www.early-retirement.org/forums/f38/aca-for-snowbirds-112018.html

When you find BCBS-MI plans on HealthCare.gov and drill down to plan documents>provider directory and search for providers, there is a banner at the top of the page saying "If the results below show a provider outside of Michigan, please be aware that if you visit that provider, your claim(s) will be processed as “out of network”. The Ambetter HMO plans appear to have some Toledo providers.

Hi, that is a catch re: being on the border of a metro area but in a different state. I do have a way to claim a residence in Ohio, in this instance - for the purpose of coverage by the doctors in the metro area.... but i do think this is an unfair situation that insurance companies do not make special provision for residents in the suburb of a city that happens to lie in another state. In the instance you point out, it's absurd that i would have to go 30 miles to be able to use providers in my state when i am a mile outside of the city where my existing providers are. This should definitely be modified.

 

[mikes425]

You said you don't already have an HSA, but what about getting one with your new plan? Since it sounds like your medical plan usage is fairly low, get an ACA plan that's HSA eligible (it will be a Bronze plan) and you can put aside 3/4ths of $4600 into an HSA account during 2022. That reduces your income for 2022 and increases the amount of premium subsidy you're eligible for. You can do the same for the first quarter of 2023.

Then when you start Medicare, you can reimburse yourself for the premium costs. You should have enough in the HSA to pay for a couple of years of Medicare premiums.

Worth considering. Thanks!

 

[mikes425]

There are additional benefits to cobra besides cost:

Path of least resistance - just stay on what you've got, no hassle
Same docs, etc.
Deductible - any insurance expenses you accrue while still on your employer plan carry with you, vs. swapping a few months into the year

In your shoes I'd just cobra, very simple decision, and only one year. It's often hard the first year when working part of it, to qualify for good subsidies anyway.

Well, if for just a year -- i think it is still worth weighing whether the numbers (MAGI estimation) would suggest i could save maybe 6 to 7k in premiums by going on an ACA plan that would at least give me major medical and then, do the medicare thing. I think there would be 'adequate' options if i could hit the eligibility income requirement. So what is it now that my income has to be to qualify? As someone said, the rules have changed and there's no income cap - or at least a higher one. Much of my income is dividends. So as i understand it to arrive at the MAGI figure-(or should i say estimate ?) and sorry i'm so ignorant about this stuff - i need to add my work income to that of my dividend income. Now, is this work income figure the amount AFTER taxes (deductions et.al) or BEFORE deductions? Thanks! Mike

 

[mikes425]

The elimination of the income cap (400% FPL cliff) and the increased subsidies are both currently scheduled to sunset 12/31/2022. If OP went with an ACA plan this year, they should be able to continue it on an unsubsidized basis for the first portion of 2023 until Medicare. In aggregate I bet it would be cheaper than COBRA, but OP sounds like they want to compare coverage also.

No doubt the coverage will not be as great as that of the COBRA. It would also be as much as half the premium if i can get the subsidy...so yep, there's that. As i may have mentioned, my primary DR already extracts an MDVIP fee of about 1800/year - and he's told me that even with NO insurance, my office visits would be a flat 25 bucks. So there's that. Now if i got a high deductible ACA policy with a subsidy, it seems like there'd be significant savings vs 1000 a month - even if i paid out of pocket for a few specialists for the year -- and presumably would get some discount/contracted rate for such providers and certain wellness/preventative procedures like Colonoscopy - which i think even some ACA high-deductible providers might allow at a significantly reduced rate... tho feel free to correct me if i'm way off on that - i haven't 'shopped the marketplace' since being confronted with this question a few years back... In any event thanks for all the responses on this! Much appreciated,

Mike