Retiring soon - Cobra VS ACA Bronze

J

jschner

Dryer sheet wannabe
Joined
Dec 20, 2020
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23
I finally pulled the trigger. Retiring at 57 on July 7th. DW who is 52 is stay at home, no income no benefits. No pension no healthcare. Looking at around $100K annual income in retirement until 59.5.

We are fairly healthy, spend about $3K for the four of us, two boys 19 and 21 but they will be on their own ACA plans.

Work has offered Cobra Anthem 90% but it is expensive about $1400/mo for the two of us, $2300/mo for all four. We have about $1200 ded. left for the year.

Another option is ACA. In Arizona we can get a Bronze BCBS $8700pp/$8700ppmax/$17400max fam for $3.50 a month.

Option#1- Self and DW only
2022 Cobra - $10,250 Premium including $3k in HC costs, dental and eye.
2023 Cobra - $20,739 Premium and $3K in HC costs, dental and eye.

Option#2 – Self and DW only
2022 ACA Bronze BCBS - $3025 Premium and $3k in HC costs.
2023 ACA Bronze BCBS - $3050 Premium and $3k in HC costs.
Add around $1200 for dental and eye. Total $4250.

It seems to me the obvious choice is to take the ACA HC Bronze and pay out of pocket. A single person event would be $8700 in network which is still much lower than the Cobra premiums. All of our same doctors too.

Being BCBS, I would think the ACA package would be in-Network across the country if we travel as long as it is BCBS or should I just expect coverage only in Arizona? I need to check on this.

Maybe I am looking for confirmation to go for Option#2 here because it is tough to let go of something I had for numerous decades. lol But in the back of my mind, what am I missing here for Gotcha’s or is it this straight forward?

Is taking the cheapest plan with high deductible and pay out of pocket a popular plan for retirees that are fairly healthy?
 
A hybrid approach is to cobra to finish 2022.
Otherwise, you are going to "start" the year over in terms of deductibles right away. It also gives you the benefit of punting the decision a few months, and going into the ACA during open enrollment, vs. doing it twice in a short timespan.

You can drop Cobra during open enrollment. You can't drop it just because you want to the rest of the year.
 
Aerides said:
A hybrid approach is to cobra to finish 2022.
Otherwise, you are going to "start" the year over in terms of deductibles right away. It also gives you the benefit of punting the decision a few months, and going into the ACA during open enrollment, vs. doing it twice in a short timespan.

You can drop Cobra during open enrollment. You can't drop it just because you want to the rest of the year.
Click to expand...
I'm actually in the same situation. Going per diem in August so have to pay for my own coverage. I was going to go with ACA but because of my wife having some recent medical issues, I didn't want to drop our current coverage right away. So my plan is to take COBRA until the end of the year and then go on ACA in January. This also avoids starting a new deductible in August or September.


Anything wrong with that plan?
 
If you are healthy and no existing medical conditions, I would go for ACA Bluecross Blueshield
 
jschner said:
I finally pulled the trigger. Retiring at 57 on July 7th. DW who is 52 is stay at home, no income no benefits. No pension no healthcare. Looking at around $100K annual income in retirement until 59.5.

We are fairly healthy, spend about $3K for the four of us, two boys 19 and 21 but they will be on their own ACA plans.

Work has offered Cobra Anthem 90% but it is expensive about $1400/mo for the two of us, $2300/mo for all four. We have about $1200 ded. left for the year.

Another option is ACA. In Arizona we can get a Bronze BCBS $8700pp/$8700ppmax/$17400max fam for $3.50 a month.

Option#1- Self and DW only
2022 Cobra - $10,250 Premium including $3k in HC costs, dental and eye.
2023 Cobra - $20,739 Premium and $3K in HC costs, dental and eye.

Option#2 – Self and DW only
2022 ACA Bronze BCBS - $3025 Premium and $3k in HC costs.
2023 ACA Bronze BCBS - $3050 Premium and $3k in HC costs.
Add around $1200 for dental and eye. Total $4250.

It seems to me the obvious choice is to take the ACA HC Bronze and pay out of pocket. A single person event would be $8700 in network which is still much lower than the Cobra premiums. All of our same doctors too.

Being BCBS, I would think the ACA package would be in-Network across the country if we travel as long as it is BCBS or should I just expect coverage only in Arizona? I need to check on this.

Maybe I am looking for confirmation to go for Option#2 here because it is tough to let go of something I had for numerous decades. lol But in the back of my mind, what am I missing here for Gotcha’s or is it this straight forward?

Is taking the cheapest plan with high deductible and pay out of pocket a popular plan for retirees that are fairly healthy?
Click to expand...

Are you sure your 19 and 21 yr olds will not be part of your tax household for ACA purposes? Are they college students? If they could be claimed as your dependents, then they can't get an ACA subsidy, even if you choose not to claim them. Also, it might be better for them to be on your ACA plan until age 26 if you look at this holistically and try to minimize healthcare costs and taxes across the entire family.

Those Bronze Plan prices look awfully low for someone who's retiring after working the first 6 months of the year. Don't forget that all the income you earned in the first 6 months of the year counts towards your ACA subsidy calculation. Also, if your boys are your dependents, then their income may count as well.

You should assume that the ACA coverage is only in network in Arizona (or in your region if AZ is divided into multiple regions) until you have confirmation otherwise. Most ACA BCBS plans are not in network in other states, but a few are.

Is that a High Deductible / HSA Eligible Bronze Plan you're considering? Those oop numbers look like it might be. If it is, then look into HSA contributions. It might be beneficial for your adult children to be on your ACA plan if it's an HSA plan. There's a loophole in the law that allows them (or you as a gift) to contribute the full amount of the family HSA contribution to each child's HSA account, which can then grow tax free for many years. You and your DW could also fund your individual HSAs plus catch-up contributions for those over age 55.
 
When you pay out of pocket with the Bronze plans you only pay the lower contracted rates which was a lot less than I expected.

Also check if the plan is HSA qualified which will give you a nice tax deduction as well.

Maximum contribution amounts for 2022 are $3,650 for self-only and $7,300 for families. The annual “catch-up” contribution amount for individuals age 55 or older will remain $1,000. Consumers can contribute up to the annual maximum amount as determined by the IRS.
 
Switching from Blue Shield Cobra to Blue Shield ACA bronze ppo with HSA was a good move, despite the higher deductible. The premiums were so low, I almost felt guilty. Almost.
 
cathy63 said:
Are you sure your 19 and 21 yr olds will not be part of your tax household for ACA purposes? Are they college students? If they could be claimed as your dependents, then they can't get an ACA subsidy, even if you choose not to claim them. Also, it might be better for them to be on your ACA plan until age 26 if you look at this holistically and try to minimize healthcare costs and taxes across the entire family.

Those Bronze Plan prices look awfully low for someone who's retiring after working the first 6 months of the year. Don't forget that all the income you earned in the first 6 months of the year counts towards your ACA subsidy calculation. Also, if your boys are your dependents, then their income may count as well.
Click to expand...
Yeah, something seems amiss with the numbers presented by OP. I don't think with $100K in income one could get that much subsidy without also counting the sons as part of the household to increase the 400% FPL level. And unless something changes, in 2023 the subsidy cliff comes back and OP probably couldn't get any subsidy unless the income drops substantially. It's hard to guess without more numbers.
 
I agree with earlier poster- I think the ACA costs are reflective of 2022 with the 8.5% rule that goes away next year

*currently expected to go away - who knows if Congress changes that
 
I am using Cobra to finish the year as my deductible and out of pocket limits and credits against are still valid. ACA would have ben less, but then out of pocket would have been more

Next year I will evaluate between ACA, Cobra and Retiree medical. Retiree medical was $500 a month more from my current company. It is less at a previous company and comparable to Cobra and my current/recent company
 
As mentioned above, definitely do not assume the BCBS plan will have coverage outside your region. It may or it may not. In my location, SOME BCBS plans offer the extended coverage and some BCBS plans do not. In my research, their name for extended coverage is called “BlueCard benefits”. Research and understand the network thoroughly.

Full disclosure, I currently have a BCBS ACA plan with the BlueCard network benefit. But I pay for a Gold plan. And I’m in Western Pennsylvania. They did not offer the BlueCard benefit in my zip code in 2021. Fingers crossed they continue to offer it in 2023.
 
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Both of my sons 19 and 21 have some income, not going to school and they claim themselves on taxes. The older is choosing to go on a 2-yr church mission. The younger is working odd jobs, but is also starting to talk about a mission, probably next year. If I continued Cobra I believe they would be covered for the remainder of the year.

The least expensive Bronze ACA plan is an HMO plan and yes it is <$4 a month in my area 85365. If I choose Phoenix area 85001, the same plan with the same info is $688/mo. Try it yourself with ages 57/52 and $100k. https://consumer.websales.azblue.com/

Weird such a difference. Glad I'm in the lower priced one of the two. I did more digging into the plan and everyone is correct, it has very limited coverage outside the area providing only emergency and urgent care. I must have misread one of the summary documents when one mentioned BCBSAZ would be good in places such as BCBS Wyoming. That was probably for the PPO version. The first PPO plan available in my area for two of us is Silver BCBS at $1187/mo w $3100 deductible. That almost matches my Cobra benefits in coverage minus dental and eye but at a lower cost.

Only one HSA plan, a HSA HMO Bronze is $270/mo $7000/$14000. Maybe what I save here I can sock into an HSA to cover a bad year when we need to hit the deductibles. Never had one so not sure if that is a viable plan.

Learning a lot quickly, thanks for all the input so far.
 
jschner said:
The least expensive Bronze ACA plan is an HMO plan and yes it is <$4 a month in my area 85365. If I choose Phoenix area 85001, the same plan with the same info is $688/mo. Try it yourself with ages 57/52 and $100k. https://consumer.websales.azblue.com/

Weird such a difference. Glad I'm in the lower priced one of the two.
Click to expand...
I looked at your plans and you are right, the second lowest cost silver plan (which determines the subsidy) in 85365 is much higher than in 85001 - $2383/mo vs $1171/mo. That's why you can still get a large subsidy to use against the cheaper bronze plans.

But be aware, $100K is 547% of the Federal Poverty Level (FPL) and you will be ineligible for a subsidy in 2023 and beyond as the cliff will return unless Congress makes changes to continue to allow subsidies above 400% of FPL. The maximum percentage of your AGI you must pay will also go back to "normal", from the current 8.5% to something like 9.83% for 2023 if you are below 400% FPL.

Without the subsidy, you would be responsible for about $20K per year if the premium were the same next year.
 
Is it true the current low ACA rates could be ending in the near future? I think I remember recently reading something about needing something to be extended again and if they don't there could be some real sticker shock for all?
Oh looks my question was just answered above....
 
Aerides said:
A hybrid approach is to cobra to finish 2022.
Otherwise, you are going to "start" the year over in terms of deductibles right away. It also gives you the benefit of punting the decision a few months, and going into the ACA during open enrollment, vs. doing it twice in a short timespan.

You can drop Cobra during open enrollment. You can't drop it just because you want to the rest of the year.
Click to expand...

Exactly my plan. Retiring sometime between now and the end of the year and will just do Cobra through December and ACA starting in January till of Medicare age...
 
2HOTinPHX said:
Why does zip code affect ACA subsidies so much?
Click to expand...

It's more usually the county you live in, rather than the zip code alone that affects pricing. Here's the list of Arizona's Rating Areas. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/az-gra

The OP lives in Yuma County which is rated together with La Paz County. For some reason, Silver plans are very expensive there while Bronze plans are very cheap, so subsidies are huge. It's a sparsely populated area with a large-ish military presence and a border crossing to an area of Mexico that has a lot of cheap medical and dental services. Only the insurance companies (and maybe state regulators) know how any of that factors into their pricing.
 
the other thing to mention is Cobra is 18 months of eligibility which means 2022 and all of 2023. In a tie or close, I would stick with Cobra as it protect that option in 2023.
 
2HOTinPHX said:
Why does zip code affect ACA subsidies so much?
Click to expand...

I think the only reason is that the government needed some sort of geographic regions set up to allow insurance companies to deal with price/cost/coverage differentiations around the country. One's home location is where these are all determined, so zip code seemed like a logical geographic region. As Cathy63 notes, in many (most?) states, the county level is often the actual regional unit of differentiation. But zip codes are actually what is entered into the ACA database to search on.
 
niven said:
But be aware, $100K is 547% of the Federal Poverty Level (FPL) and you will be ineligible for a subsidy in 2023 and beyond as the cliff will return unless Congress makes changes to continue to allow subsidies above 400% of FPL. The maximum percentage of your AGI you must pay will also go back to "normal", from the current 8.5% to something like 9.83% for 2023 if you are below 400% FPL.

Without the subsidy, you would be responsible for about $20K per year if the premium were the same next year.
Click to expand...

This has me thinking further, thanks.

Do you know if there is a "normal" calculator without the 8.5% so I can possibly see what it would be like in 2023 if nothing is passed?

If the 8.5% goes away then I could take Cobra this year and sell LTCG this year to use to drop my MAGI in 2023(58) and 2024(59). Then in 2025(60) use ROTH funds after that to keep my MAGI low until the wife hits 65 in 2034. Theoretically.
 
jschner said:
This has me thinking further, thanks.

Do you know if there is a "normal" calculator without the 8.5% so I can possibly see what it would be like in 2023 if nothing is passed?

If the 8.5% goes away then I could take Cobra this year and sell LTCG this year to use to drop my MAGI in 2023(58) and 2024(59). Then in 2025(60) use ROTH funds after that to keep my MAGI low until the wife hits 65 in 2034. Theoretically.
Click to expand...
Well, the FPL will be higher for 2023, the maximum percentage of MAGI will change slightly, and of course premiums haven't been decided - but here's a subsidy calculator for 2021 before the COVID relief bill was passed. The subsidy would of course be used to reduce the premium on whatever policy is chosen.

https://www.kff.org/interactive/subsidy-calculator-2021-before-covid-relief
 
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Check the ACA plans for doctors/hospitals, they may be restrictive. The key to making ACA affordable is staying under the 4 x Federal Poverty Level limit to get a premium credit. If you have more than that in ACA MAGI (which adds back in Muni bond interest, non taxable SS, foreign tax credits) ACA may be no bargain in 2023. In our area, ACA with no premium credit is the same price or worse than our COBRA.

The benefit of staying on COBRA next year is it makes it a good time to do Roth Conversions if you need to make some. Beyond the COBRA time frame, some people can arrange their income to go up and down in different years, so they qualify for premium credits in at least some years.
 
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