Questions about insurance, subsidies, ACA, etc

[Machine99]

I tried searching and reading some other threads, but couldn’t really find what I was looking for.

Our original plan was to retire early next summer at 53 and move out of the country where healthcare and insurance is much more affordable. But plans have changed and we will most likely remain in the US.

Can someone give me a brief explanation of subsidies and if they are just based on actual income and not how much money you have in savings and retirement accounts?

I would still like to try to retire next year, but the cost of insurance, rent, and all other expenses would make me feel uncomfortable retiring early if we are staying in the US. We are healthy at the moment, but do not feel comfortable not having decent health coverage while in the US.

Are there any recommendations on where to go for a bronze or silver plan if retiring early? Would most likely be in North Carolina or Tennessee.

Sorry if there are other threads that cover this. I tried searching and reading a few. It this insurance crap is confusing.

Many thanks!

 

[VanWinkle]

The subsidies are not based on assets, only and MAGI (modified adjusted gross income). Controlling this income is the key to getting great cost subsidies and lower coverage deductibles/out of pocket maximums. Staying under 150% of the poverty level gets the lower subsidies, but there are subsidies for larger incomes.

You can go to Healthcare .gov to get estimates of subsidies based on your approximate income.

My SO is in Tennessee on ACA and has United Healthcare Silver plan.

VW

 

[Aerides]

You have a lot of homework to do and should create an account on healthcare.gov to get started.

Yes, it's income only - the ACA is part of tax law, and it's tied to income, not assets.

 

[teej1985]

^ You don't even need to create an account you can use the rate calculator without doing that.

 

[O2Bfree]

This is a good subsidy calculator to start with:

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

 

[Rianne]

This link should help get you started. Your zip code matters regarding the available plans and subsidies in your area.
https://www.healthinsurance.org/obamacare/will-you-receive-an-aca-premium-subsidy/

 

[CRLLS]

In quick simple terms, the subsidy is based on actual income. You can declare/estimate your income for the upcoming year and get the subsidy now or claim nothing and get the subsidy when you file taxes for that year. And everything in between.

Yes, there are more steps in it, but in very short terms, it is based on the income earned during the period of ACA coverage, even partial year periods.

 

[Donno]

I live near you in Maryville and was on the ACA for 4 years up until last year when I went on Medicare. If you can manage your income, ideally you want to keep it above the Medicaid level and below the level where you begin to lose subsidies. I was only able to get the subsidy for one year and I chose a Bronze plan, and it was premium free, but it had a large deductible (~$7000). In this area, Blue Cross had the best network of coverage and generally the best plan prices as well. In addition, BCBS also has a good network that covers you at network rates if you are travelling and need health care. Be aware that if you stay in this area and go with a BCBS plan they have 2 different networks, an L and S. The L is extremely limited to just UT medical center and wouldn't be my choice, but it is also less expensive.

You should look on the ACA website and start comparing plans, prices and subsidies for different income levels to get a good understanding of what your costs would be and what coverage you can get.

 

[Machine99]

Thanks all for the replies.

 

[W2R]

Good luck! Insurance is insanely confusing to me, so I don't have much help to offer.

In my case, I was able to carry my (same) workplace health insurance into retirement and actually that was a big reason why I originally chose the government job I retired from. When I retired there wasn't any ACA.

 

[Machine99]

Unless I’m looking at these estimators incorrectly, it appears that if we can keep our income around $30k or so, then the Bronze plans are essentially no cost and the silver plans are like $20/month?

 

[O2Bfree]

Unless I’m looking at these estimators incorrectly, it appears that if we can keep our income around $30k or so, then the Bronze plans are essentially no cost and the silver plans are like $20/month?

The low premium may seem too good to be true, but it probably is true if you put in the right numbers. I was pleasantly shocked over how inexpensive our medical insurance was. I'd budgeted around $700/month for premiums, but they were around $90/month my first full year of retirement, and much less during Covid. Enjoy!

 

[jblack]

Hi there, like the OP I'm starting to strongly consider pulling the plug in the April-May timeframe next year and have a couple of related questions.....(apologies if this is too repetitive but I'm just now starting to seriously roll up my sleeves on the transition plan and health insurance is the biggest expense in my ER plan - would love it to be less than $25k/yr)

Background: my (good) problem is that a disproportionate amount of my yearly income comes thru the first 4 months due to annual cash bonus & vesting of restricted stock. Based on this my 2024 income will exceed the 400% FPL that enables ACA subsidies. DW is not expected to work, we will both be 48, and we have 2 young teenagers - all are healthy and no major expenses expected. We can absorb high OOP deductibles if tragedy struck. We will minimize income in future years by spending taxable savings while starting Roth conversions while hopefully still maximizing ACA subsidies.

Questions:

1. When I exit I will need to either enroll in COBRA thru my employer or shop around for an ACA plan unsubsidized for the rest of 2024. Any prevailing wisdom on either of these options or alternatives during the RE transition year?

2. Even though I won't be working the majority of 2024 I should estimate my 2025 income as mentioned above by the OP's question when enrolling late next year, correct? i.e. My high 2024 income won't make me ineligible for 2025 subsidies? I assume not because it will get taken care of in April 2026 when doing my 2025 taxes with much lower income?

Any other related healthcare words of wisdom related to the RE transition ?

Thanks!!

 

[O2Bfree]

1. When I exit I will need to either enroll in COBRA thru my employer or shop around for an ACA plan unsubsidized for the rest of 2024. Any prevailing wisdom on either of these options or alternatives during the RE transition year?

Have you compared the coverage vs cost of your COBRA plan with various ACA plans available on the exchange, making sure that the doctors and medical facilities you want to use accept the ACA plans you're considering?

2. Even though I won't be working the majority of 2024 I should estimate my 2025 income as mentioned above by the OP's question when enrolling late next year, correct? i.e. My high 2024 income won't make me ineligible for 2025 subsidies? I assume not because it will get taken care of in April 2026 when doing my 2025 taxes with much lower income?

Yes, estimate your 2025 income late next year and report the change in income when you sign up for your 2025 plan.

Your 2024 income won't affect your 2025 subsidies.

 

[Aerides]

1. When I exit I will need to either enroll in COBRA thru my employer or shop around for an ACA plan unsubsidized for the rest of 2024. Any prevailing wisdom on either of these options or alternatives during the RE transition year?

There are several benefits to going Cobra in the transition year, assuming you are unsubsidized:
You can use HSA money for the premiums
You keep ticking against the deductible that you have on Jan1
No need to worry about doctors that aren't in your new ACA plan
One less change to deal with in the first few months of retirement

You can drop Cobra for Jan1 2025, but only during open enrollment. You can't pick up Cobra in May, and then in July go... "Eh I'll switch to the ACA now". Only year end, or end of cobra, are qualifying events.

 

[PaunchyPirate]

Hi there, like the OP I'm starting to strongly consider pulling the plug in the April-May timeframe next year and have a couple of related questions.....(apologies if this is too repetitive but I'm just now starting to seriously roll up my sleeves on the transition plan and health insurance is the biggest expense in my ER plan - would love it to be less than $25k/yr)

Background: my (good) problem is that a disproportionate amount of my yearly income comes thru the first 4 months due to annual cash bonus & vesting of restricted stock. Based on this my 2024 income will exceed the 400% FPL that enables ACA subsidies. DW is not expected to work, we will both be 48, and we have 2 young teenagers - all are healthy and no major expenses expected. We can absorb high OOP deductibles if tragedy struck. We will minimize income in future years by spending taxable savings while starting Roth conversions while hopefully still maximizing ACA subsidies.

Questions:

1. When I exit I will need to either enroll in COBRA thru my employer or shop around for an ACA plan unsubsidized for the rest of 2024. Any prevailing wisdom on either of these options or alternatives during the RE transition year?

2. Even though I won't be working the majority of 2024 I should estimate my 2025 income as mentioned above by the OP's question when enrolling late next year, correct? i.e. My high 2024 income won't make me ineligible for 2025 subsidies? I assume not because it will get taken care of in April 2026 when doing my 2025 taxes with much lower income?

Any other related healthcare words of wisdom related to the RE transition ?

Thanks!!

1. Your COBRA costs will likely be the cost that your company pays plus what you normally pay plus a 2% service fee. Some companies reveal this cost to employees on internal websites. I don’t know if it is required that they do that. You would need to know that cost in order to compare to the ACA plans. You may not get those costs until you quit work, I suppose. As mentioned above, it’s important to know what doctor network differences might change if you go the ACA route. It may not be important to you if healthy. Your doctors may be supported by your ACA plans. Maybe not.

2. Also, as said above, estimate your 2025 income when signing up for 2025 ACA plans on the exchange. Depending on the exchange, you MAY be required to provide some form of documentation to support this. Especially if you’ve given the exchange access to your income tax returns. Your proof may be nothing more than you writing a paragraph indicating you will not be earning the income you previously did and that your 2025 income will be derived from xxx, yyy, and zzz. The exchange will ask questions if it wants more info from you. You don’t need to tell them you retired early. Just tell them your income sources have changed. It all will get reconciled on the 2025 tax return if your estimate is wrong.

 

[jblack]

Thank you all for the quick responses! This is exactly the feedback & insights I was looking for.

As I mentioned above, healthcare costs are the big wildcard for us and many others on the FIRE journey. I've planned for the worst but hopefully can take advantage of subsidies starting in 2025....and hopefully they continue thereafter.