Question about ACA premiums. Are they capped?

[disneysteve]

I saw something in another thread that I didn't understand but I didn't want to hijack that thread.


@ncbill said, "for a subsidized Silver-level ACA plan premiums capped at 8.5% of income (no "cliff" for at least two years)"


Does that mean if your MAGI is 68K, meaning you qualify for the subsidy, the most you would have to pay for the year for a Silver plan is $5,780 (8.5% of 68K)? Is that per person? So for my wife and I we'd be capped at $11,560?


What if we choose a Gold plan instead? It looks like the cheapest Gold plan would be $22,980/year with the subsidy.


Also, what is the "cliff" that ncbill referred to?


I'm trying to figure out exactly what ACA coverage would cost us but there seem to be a lot of factors that determine that number and the results vary wildly.

 

[zinger1457]

It would be best to go to the KFF web site below and use their subsidy calculator, it will tell you exactly what your subsidy will be based on income and location, you then can apply that subsidy to any plan (Bronze, Silver, Gold). Prior to this year there was an ACA cliff (income cutoff), if your income was $1 over the cliff you received no subsidy. There is no ACA cliff for at least the next two years, not sure if it will be extended after that.

https://www.kff.org/interactive/subsidy-calculator/

 

[RunningBum]

Your premium is capped at 8.5% of the second lowest cost silver plan(SLCSP) you are eligible for.

I'm not married so I don't know all the details for marrieds, but I assume if your joint MAGI was $68K, you are capped at 8.5% of that SLCSP plan that covers both of you. If for some reason you get individual policies or file separately, I don't know.

So say that SLCSP plan costs $10K/yr. If you're capped at 8.5% of that, you would pay $5780 and $4220 would be your subsidy. You can apply that $4220 subsidy to any ACA plan. If a bronze policy costs $4225/yr, you only pay $5. If a gold policy costs $12,000, you pay $7780.

At tax time after the end of the year, you'd see what your MAGI actually was and any difference is added to or subtracted from your total taxes.

Does that make sense? If you go thru healthcare.gov or healthsherpa.com, you will see what your subsidy is based on MAGI, and what each policy costs with or without your subsidy. So you really don't have to figure out the stuff I explained in the preceding paragraph, but that's how it works. Seems complicated, but it actually is a fair way to determine your subsidy.

At $68K you may be capped at a slightly lower level than 8.5%, which is a good reason to use one of the tools to see what it'd actually be for you.

 

[jim584672]

The benchmark plan is the second lowest cost Silver plan. So if the percentage is 8.5%, it means the SCLSP will cost 8.5%. The subsidy is the difference between the SLCSP insurance price and whatever amount it takes to get you to 8.5%. The subsidy can be used for any metal level or any plan.

 

[finnski1]

I saw something in another thread that I didn't understand but I didn't want to hijack that thread.


@ncbill said, "for a subsidized Silver-level ACA plan premiums capped at 8.5% of income (no "cliff" for at least two years)"


Does that mean if your MAGI is 68K, meaning you qualify for the subsidy, the most you would have to pay for the year for a Silver plan is $5,780 (8.5% of 68K)? Is that per person? So for my wife and I we'd be capped at $11,560? No your costs for the ACA would be much less and it would be for the 2 of you not each. The 8.5% max is a temporary one for 2021 and 2022 (or is it 2022 and 2023?)and it eliminates a MAGI ceiling that you had to be under for subsidies. I see that you are in NJ. I stuck in 2 people from Bergen county, @$68k MAGI and got:

You are likely eligible for financial help

Based on the information you provided, your income is equal to 394% of the poverty level. This means you are likely eligible for financial help through the Health Insurance Marketplace. An estimate of your cost for coverage and amount of financial help in 2021 are provided below. To find out your actual amount of financial help and to get coverage, you must go to Healthcare.gov or your state’s Health Insurance Marketplace.
Estimated financial help: $1,210 per month ($14,522 per year) as a premium tax credit. This covers 72% of the monthly costs. Your cost for a silver plan: $474 per month ($5,685 per year) in premiums (which equals 8.36% of your household income). The most you have to pay for a silver plan: 8.36% of income for the second-lowest cost silver plan Without financial help, your silver plan would cost: $1,684 per month ($20,207 per year) Additional Help

The state of New Jersey provides additional help to New Jersey residents at your income level. After accounting for this additional help, the amount you pay would be lower than the amount shown above. For more information, click here.
Other Levels of Coverage

The costs above are for a silver plan in your area. Silver plans are one of four levels of coverage that you can buy with financial help. These levels – bronze, silver, gold, and platinum – tell you about how much financial protection the plan will offer you if you get sick. Bronze plans have the lowest monthly costs, but when you need medical care, you will pay more for your care. Gold and platinum plans offer more financial protection if you get sick, but these plans have higher monthly costs. You can receive financial help to purchase any of these levels of coverage.
For example, you could enroll in a bronze plan for about $116 per month ($1,387 per year), which is 2.04% of your household income, after taking into account $14,522 in subsidies). For most people, the Bronze plan represents the minimum level of coverage required under health reform. Although you would pay less in premiums by enrolling in a Bronze plan, you will face higher out-of-pocket costs than if you enrolled in a silver plan.

What if we choose a Gold plan instead? It looks like the cheapest Gold plan would be $22,980/year with the subsidy.


Also, what is the "cliff" that ncbill referred to?


I'm trying to figure out exactly what ACA coverage would cost us but there seem to be a lot of factors that determine that number and the results vary wildly.

See my response in blue, Just noticed that by the time I typed all of this up others already have given you the answers. Oh well.

 

[disneysteve]

Your cost for a silver plan: $474 per month ($5,685 per year) in premiums (which equals 8.36% of your household income). The most you have to pay for a silver plan: 8.36% of income for the second-lowest cost silver plan



There is a Silver plan for that price, but there are various other Silver plans ranging as high as $2,400/month. I'm not quite getting how our premium is capped if there are choices that will cost us a lot more than that amount.

 

[RunningBum]

Although you would pay less in premiums by enrolling in a Bronze plan, you will face higher out-of-pocket costs than if you enrolled in a silver plan.

Maybe. The deductible is (always?) higher with a bronze plan, but max out of pocket is often the same, or even lower with a bronze HSA plan.

 

[RunningBum]

Your cost for a silver plan: $474 per month ($5,685 per year) in premiums (which equals 8.36% of your household income). The most you have to pay for a silver plan: 8.36% of income for the second-lowest cost silver plan



There is a Silver plan for that price, but there are various other Silver plans ranging as high as $2,400/month. I'm not quite getting how our premium is capped if there are choices that will cost us a lot more than that amount.

Because saying your premium is capped for all plans really isn't correct. Like everyone said, your premium is capped for the SLCSP. That determines the subsidy and you can apply the subsidy to any ACA plan available to you.

 

[disneysteve]

Because saying your premium is capped for all plans really isn't correct. Like everyone said, your premium is capped for the SLCSP. That determines the subsidy and you can apply the subsidy to any ACA plan available to you.

Ok. That makes much more sense. So your premium isn't really capped. They shouldn't use that term. Capped, to me, means you can't pay more than that, which isn't the case here. They're just saying we could get coverage for $474 if we choose to, but there are lots of more expensive plans, too.

 

[finnski1]

Your cost for a silver plan: $474 per month ($5,685 per year) in premiums (which equals 8.36% of your household income). The most you have to pay for a silver plan: 8.36% of income for the second-lowest cost silver plan



There is a Silver plan for that price, but there are various other Silver plans ranging as high as $2,400/month. I'm not quite getting how our premium is capped if there are choices that will cost us a lot more than that amount.

What you do is take the premium tax credit ($1210/month in this example) and apply it to the monthly premium of which ever plan you choose. So if you did indeed find one for$2400/month you subtract the $1210 to get $1190/month. However you cannot pay more than 8.5% for the next few years so it would in reality be $482/month ($5780/yr)as RunnngBum mentioned.

 

[finnski1]

Maybe. The deductible is (always?) higher with a bronze plan, but max out of pocket is often the same, or even lower with a bronze HSA plan.

Could be. All that info in blue I lifted strait from the results of the KFF calculator page linked to earlier

 

[disneysteve]

KFF gives the exact same numbers as HealthSherpa.


My question, which I'm still not clear on, is what if we choose a plan that costs more than $474? HealthSherpa shows exactly what each plan would cost. The numbers for Silver range as high as $2,396/month WITH THE SUBSIDY. finnski1 seems to be saying we'd take that number and subtract the subsidy, but isn't the subsidy already factored into that number? We can't subtract it twice. And surely they would give us that $2,396 plan for $474.
Sorry if I'm being dense here. I thought I understood this until someone mentioned that there is a "cap" on premiums.

 

[zinger1457]

The first result the KFF calculator gives you is the 'estimated financial help', that is your subsidy, you would subtract that from the premium cost for any plan selected to find out your cost. Your premium cost will be lower if selecting a Bronze plan and higher if selecting a gold plan. The 'cap' is based on the second lowest cost silver plan only, you will pay more for more expensive Silver and Gold plans.

 

[jim584672]

I think when they say capped it is in a way. For example premiums go up with age in most states, so the benchmark goes up as well, therefore capping any huge age related increases.

 

[DireWolf]

Your subsidy is based on your income and the SLCSP. If you choose a higher priced plan, you’ll pay the difference. Because of how providers do “silver loading”, sometimes a silver isn’t the best option, especially if you aren’t in the CSR range

 

[finnski1]

KFF gives the exact same numbers as HealthSherpa.


My question, which I'm still not clear on, is what if we choose a plan that costs more than $474? HealthSherpa shows exactly what each plan would cost. The numbers for Silver range as high as $2,396/month WITH THE SUBSIDY. finnski1 seems to be saying we'd take that number and subtract the subsidy, but isn't the subsidy already factored into that number? We can't subtract it twice. And surely they would give us that $2,396 plan for $474.
Sorry if I'm being dense here. I thought I understood this until someone mentioned that there is a "cap" on premiums.

I didn't say subtract it twice. On the Health Sherpa site they have shown you the original price and the effective price after they subtract the subsidy. Thus there are silver plans on there as low as <$500/month to as high as >$2200/month After the subsidy. Personally I don't understand why anybody would choose a $2300/month plan when comparing benefits they are very similar. However as I mentioned because of the American Rescue Plan the subsidy cliff of 400% of FPL has been eliminated for 2021 and 2022. The plan states that you cannot pay anymore than 8.5% of your income (MAGI) on health insurance for the "Benchmark plan". So my guess is that the benchmark plan us the one that Health sherpa is quoting to get the premiums down around that $500 mark. The benchmark plan varies for each state. You would have to find out what that is for NJ. I'm not sure if it is the SLCSP or some other plan.
I am just some guy on the internet. You really need to talk directly with a representative of Health Sherpa or contact Healthcare.gov directly with your questions. I believe NJ has their own state website for the ACA.

 

[disneysteve]

The plan states that you cannot pay anymore than 8.5% of your income (MAGI) on health insurance for the "Benchmark plan".

Understood. So there isn't an overall cap. There's just a cap for that one particular plan.


I also don't know why anyone

would pick the $2,400 plan. It's not dramatically different.


This is actually really good news to me. For some reason, when I looked at numbers before, I came up with much higher figures. I'm not sure if I had entered something different in our demographic info but this makes ER far more affordable if we can get decent HI for about 6K/year. That's actually less than my current plan through work (though my coverage is a lot better).

 

[finnski1]

Understood. So there isn't an overall cap. There's just a cap for that one particular plan.


I also don't know why anyone

would pick the $2,400 plan. It's not dramatically different.


This is actually really good news to me. For some reason, when I looked at numbers before, I came up with much higher figures. I'm not sure if I had entered something different in our demographic info but this makes ER far more affordable if we can get decent HI for about 6K/year. That's actually less than my current plan through work (though my coverage is a lot better).

This is what I was hoping you would conclude from this. Your numbers seemed way high to me originally. As I mentioned however you really need to talk to the right agency to get the details nailed down. I'm only giving you my interpretation and even if I think I'm right or close, I may not be.

 

[finnski1]

Understood. So there isn't an overall cap. There's just a cap for that one particular plan.


I also don't know why anyone

would pick the $2,400 plan. It's not dramatically different.


This is actually really good news to me. For some reason, when I looked at numbers before, I came up with much higher figures. I'm not sure if I had entered something different in our demographic info but this makes ER far more affordable if we can get decent HI for about 6K/year. That's actually less than my current plan through work (though my coverage is a lot better).

I don't know that there is a cap for that one particular plan. What I think they did was make it so that there should be at least one choice of a plan with in that cap. There can be some priced below that. That way people would have at least one affordable choice that would fall within the cap on income (8.5% in this case) and if they want to spend above that that's their choice.

 

[jim584672]

The SLCSP is based on the county level plans.

 

[finnski1]

The SLCSP is based on the county level plans.

That's what I thought. Is that (SLCSP) what they mean by "the benchmark plan" as well?

 

[jim584672]

That's what I thought. Is that (SLCSP) what they mean by "the benchmark plan" as well?

Yes, the SLCSP is the benchmark.

 

[disneysteve]

I don't know that there is a cap for that one particular plan. What I think they did was make it so that there should be at least one choice of a plan with in that cap. There can be some priced below that. That way people would have at least one affordable choice that would fall within the cap on income (8.5% in this case) and if they want to spend above that that's their choice.

That makes sense. I can sit down and dig into the details of the differences between the plans. If a slightly more costly plan has improved coverage that warrants the higher price, I'm certainly not opposed to doing that. And if not, then $475/month sounds pretty sweet to me.

 

[disneysteve]

This is what I was hoping you would conclude from this. Your numbers seemed way high to me originally. As I mentioned however you really need to talk to the right agency to get the details nailed down. I'm only giving you my interpretation and even if I think I'm right or close, I may not be.

To be fair, I was using Gold plan prices in what I posted before, not Silver. They are considerably more expensive.

 

[BubbaChris]

This is actually really good news to me. For some reason, when I looked at numbers before, I came up with much higher figures. I'm not sure if I had entered something different in our demographic info but this makes ER far more affordable if we can get decent HI for about 6K/year. That's actually less than my current plan through work (though my coverage is a lot better).

We transitioned to ACA in April 2021. In our case the Benchmark Silver plan was with the same insurance company as DW's employer plan. Our premium was significantly lower than the employee contributions we were doing. IN addition we went from a high-deductible plan to one with extremely low out of pocket costs overall (e.g. $5 Rx). And after the American Rescue Plan went into effect, monthly premiums for this year dropped to the point I'm earning a net profit if I maintain my participation in the insurer's healthy activity tracking program.

It was likely my thread about MAGI that raised the 8.5% question, and I'll be doing some what-if scenarios with Long Term Capital Gains and possibly ROTH conversions to see where my comfort level is while the ACA Cliff is on hiatus.

Best regards,
Chris