Please check my understanding of ACA subsidies.

[SecondAttempt]

I have a PhD in engineering and an MBA in finance but my mind goes numb trying to understand the information about ACA. I'm mostly reading information at the KFF website which is mostly clear but I still am not sure if I completely understand.

My understanding is that we get a subsidy that is equal to the difference between a percentage of our income based on our income with respect to the federal poverty level (FPL). The percentage is on the cost of a silver plan where we live. The percentage is about 8.5% if I am at 400% of FPL

So, using round numbers, if our income is $100000 and FPL is $25000 and a silver plan costs $10,000, we get a subsidy of $100,000 x 8.5% = $8,500 and our net cost for a silver plan is $1,500. If we buy a platinum plan that costs, say, $16,000, our net cost is $7,500 because the subsidy does not change because of which plan we select.

Also note that the FPL for Hawaii is higher. I'd appreciate picking on my math but not my round numbers for income and FPL because I can easily look those up.

And another question, am I right in concluding that we want our income to be between 100% and 400% of FPL. Below 100% means they steer you into Medicaid which we do not want in Hawaii for several reasons. Our income will be controllable because it will be from IRA withdrawals and Roth conversions.

Is my interpretation correct?

 

[monte1022]

I use this: https://www.healthcare.gov/see-plans/#/

 

[SecondCor521]

I have a PhD in engineering and an MBA in finance but my mind goes numb trying to understand the information about ACA. I'm mostly reading information at the KFF website which is mostly clear but I still am not sure if I completely understand.

My understanding is that we get a subsidy that is equal to the difference between a percentage of our income based on our income with respect to the federal poverty level (FPL). The percentage is on the cost of a silver plan where we live. The percentage is about 8.5% if I am at 400% of FPL

So, using round numbers, if our income is $100000 and FPL is $25000 and a silver plan costs $10,000, we get a subsidy of $100,000 x 8.5% = $8,500 and our net cost for a silver plan is $1,500. If we buy a platinum plan that costs, say, $16,000, our net cost is $7,500 because the subsidy does not change because of which plan we select.

Also note that the FPL for Hawaii is higher. I'd appreciate picking on my math but not my round numbers for income and FPL because I can easily look those up.

And another question, am I right in concluding that we want our income to be between 100% and 400% of FPL. Below 100% means they steer you into Medicaid which we do not want in Hawaii for several reasons. Our income will be controllable because it will be from IRA withdrawals and Roth conversions.

Is my interpretation correct?

No. One minor thing and one major thing:

1. The minor thing is it's not the cost of "a" Silver plan. It is the cost of the second cheapest Silver plan in your area. This is called the SLCSP (Second Lowest Cost Silver Plan).

2. The major thing is the subsidy is not 8.5% of your AGI. The subsidy is the *difference* between the cost of the SLCSP and 8.5% of your AGI. So in the first example you gave, your subsidy would be $1500 ($10K SLCSP - $8500). In the second example, your subsidy would still be $1500 and the Platinum plan would cost you $14,500.

As for your other question, you would want to be above either 100% or 138% depending on the state and whether it expanded Medicaid or not (I believe most states have). You can easily check this by going to your state exchange and putting in incomes at 100% or 138% of FPL for your family size and seeing if you get the subsidy or not.

There is a temporary suspension of the 400% FPL cliff, so it is possible to have an income over 400% FPL and still receive some subsidy. This will be in place this year and next.

Where to have your income be is sort of a complicated question. There are ACA/CHIP-related arguments for 100%, 138%, 150%, 185%, 200%, 250%, 300%, and 400%, which is where various breakpoints happen. There can be non-ACA related reasons to have it be even higher.

 

[SevenUp]

Our income will be controllable because it will be from IRA withdrawals and Roth conversions.

Roth Conversion and Capital Gains On ACA Health Insurance might help you see the immediate consequences of various income amounts.

What is best for you in the long run will depend on the rest of your situation.

 

[jim584672]

Household income percentage of Federal poverty line: Initial percentage Final percentage

Less than 150% 0.00% 0.00%

At least 150% but less than 200% 0.00% 2.00%

At least 200% but less than 250% 2.00% 4.00%

At least 250% but less than 300% 4.00% 6.00%

At least 300% but less than 400% 6.00% 8.50%

At least 400% and higher 8.50% 8.50%

Income 175% FPL = 1.00%. SLCSP will cost 1% of MAGI
Income 200% FPL = 2.00%. SLCSP will cost 2% of MAGI
Income 350% FPL = 7.25%. SLCSP will cost 7.25% of MAGI
Income 450% FPL = 8.50%. SLCSP will cost 8.5% of MAGI

SLCSP = Second Lowest Cost Silver Plan

 

[retire48in2018]

That 8.5% & 400% applies this year.

2026 - the 8.5% rule expires as it was a temporary, but extended.

ACA cliff would return, if it expires

 

[SecondAttempt]

No. One minor thing and one major thing:

1. The minor thing is it's not the cost of "a" Silver plan. It is the cost of the second cheapest Silver plan in your area. This is called the SLCSP (Second Lowest Cost Silver Plan).

2. The major thing is the subsidy is not 8.5% of your AGI. The subsidy is the *difference* between the cost of the SLCSP and 8.5% of your AGI. So in the first example you gave, your subsidy would be $1500 ($10K SLCSP - $8500). In the second example, your subsidy would still be $1500 and the Platinum plan would cost you $14,500.

As for your other question, you would want to be above either 100% or 138% depending on the state and whether it expanded Medicaid or not (I believe most states have). You can easily check this by going to your state exchange and putting in incomes at 100% or 138% of FPL for your family size and seeing if you get the subsidy or not.

There is a temporary suspension of the 400% FPL cliff, so it is possible to have an income over 400% FPL and still receive some subsidy. This will be in place this year and next.

Where to have your income be is sort of a complicated question. There are ACA/CHIP-related arguments for 100%, 138%, 150%, 185%, 200%, 250%, 300%, and 400%, which is where various breakpoints happen. There can be non-ACA related reasons to have it be even higher.

Thanks SecondCor! You explanation is the best I have ever read. I now understand! Seriously, this is so much better than what KFF has on their web site.