Need some clarification on ACA vs Cobra please

[Fermion]

Hey guys. We are moving up our FIRE date to probably March 15, as that is just past vesting for some stock awards. (plus working until April 1 as originally planned means 12 days of work for half a month's pay...poor)

I have been maxing out 401K and between that and IRA/HSA, we should be able to keep our MAGI under $50,000 for 2015. Cobra coverage is around $1000 a month while we can get a family of 2 silver plan on our state exchange with similar coverage for $440 after $200 subsidy. This seems reasonable since we have not paid any deductible into our employer HDHP this year. We have contributed $4400 plus $1000 of employer contribution into a HSA already so I would like to get a HSA qualifying plan (it would be complicated undoing the HSA contribution since you don't pay SS tax on wage income going into HSA)

Anyway, my question is how does one go about quitting work and figuring out healthcare? It may be that the company desires me to work two weeks, which would put us nearly over the $60,000 threshold for ACA subsidy if I give notice on March 16. Currently though it seems the company is saying you have one hour to clean out your desk and then they escort you from the building, which is a reason I would not want to give notice until March 16. If I gave two weeks notice March 1 and was told to leave now, I would miss near $10,000 in stock vesting March 15. Complicated, I know. I want to treat the company well as far as giving notice but they don't make it easy....for someone who has been with them nearly 20 years.

How can I set up a ACA plan before I quit if I do not know the exact date of my last day?

If I don't set up a ACA plan beforehand, how do I handle coverage during the period between end of employment and start of the ACA plan (I think it takes about 15 days to have ACA coverage from application). Can you be covered on Cobra but plan to deny Cobra coverage (so you can get a special case enrollment timeslot in ACA)?

I have read you have 60 days to decide on Cobra, but what do you do during that 60 days? Is this the time where you submit an application for a exchange plan and then request to deny Cobra coverage? Are you responsible for Cobra premiums during this period?

Confused. Thanks for any help.

 

[rbmrtn]

Seems like you have some timing issues. So once you elect COBRA you can't just drop it and sign up for an exchange plan. You can drop COBRA and switch to an exchange plan during open enrollment.

If you don't take COBRA then you have a loss of coverage that gets a special enrollment period. You may want to look at a short term gap policy to cover the gap.

There are some other provisions with the SEP due to a qualifying event. You have 60 days before and after the event to enroll via the SEP.

https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/

Losing other health coverage
This could including losing a job-based plan, aging off a parent’s coverage at 26, losing coverage through divorce, losing eligibility for Medicaid or CHIP, and similar events:

Coverage can take effect: The first day of the month after you enroll and after the loss of coverage
Enrollment window: From 60 days before to 60 days after losing your other coverage Important: If you leave your job for any reason and lose your job-based health coverage, you qualify for a Special Enrollment Period. But you don’t get an SEP if you voluntarily drop: a job-based plan without leaving your job; an individual insurance plan; unexpired COBRA coverage; or any plan that doesn’t qualify as minimum essential coverage.

 

[MBSC]

My FIRE date was March 14, 2014. Since I was employed by Megacorp on March 1st, I had employer coverage for the entire month of March. You may want to ask your HR department about this. Effective April 1, I had a 60 day window to decide if I wanted COBRA or not. If I chose to take COBRA, the coverage and premiums would be retroactive to April 1st.

I completed the COBRA application, placed it in an envelope, and notified family and neighbors to mail that envelope should I be admitted to a hospital. Prior to April 15th, I signed up for an ACA plan on the Marketplace with a May 1st effective date. Since the wording of the COBRA notice seemed to indicate that it had to be "received" within 60 days, I didn't want to take that chance during May. I didn't have to submit a COBRA denial form, not submitting the application timely triggered the denial. FWIW, I'm healthy and take no prescriptions so I wasn't too worried about having "retroactive" health insurance during April. I did have to complete an additional IRS tax form indicating no coverage during April.

 

[Animorph]

DW retired Sept 2, finally. That gave us coverage through September. I had until September 15th to sign up for ACA, or in our case directly with the insurer. That went fairly seamlessly.


The problem would be retiring after the 15th of the month if you wanted to wait until after you retired to sign up. In that case you could go without insurance for a month, but sign up for COBRA in the event you really needed it. My understanding (from here) is that COBRA is retroactive. So it should be there if things get screwed up in the first 60 days.

 

[Fermion]

Ok, I think I understand. Let me put forth then three scenarios:

1) I give notice on March 16, they terminate me on March 15, I sign up for ACA that day and it is effective April 1 while my existing coverage is good for the rest of March?

2) I give notice on March 16, they want me to work 2 weeks. My last day is April 1, I am covered by employer for all of April and I can sign up in April for May 1 ACA?

3) I sign up for ACA earlier in March, like March 1. I give notice on March 16 and leave the same day, ACA goes in effect April 1, no coverage gap?

 

[Animorph]

2 and 3 sound OK to me, but I've just done it once.


1 won't work if you try to sign up for ACA on the 16th. Although termination before giving notice would be interesting. After the 15th, it's too late to sign up for coverage effective the next month. That's the only tricky part. If that happens, you could go with COBRA if you don't want to do without.

 

[rbmrtn]

I think there are some things you need to verify with your HR. Follow your policy for termination, usually if you give notice you are considered employed until the date you agreed on. Usually employer coverage is month to month so you would be covered to the end of a month but should be verified.

Here's the paper form application for ACA coverage. Appendix D is life changes for special enrollment periods. On item 1, it ask if you expect to loose coverage within the next 60 days. https://marketplace.cms.gov/applications-and-forms/marketplace-application-for-family.pdf

The online application should be similar to the paper form. You could go ahead and start the online app and see if it lets you specify a start date of 04/01, enrollment is still open until 2/15 so you may not even need a special enrollment period.

I did not have to through any of this so can't be 100% certain with this scenario.

 

[MichaelB]

Ok, I think I understand. Let me put forth then three scenarios:

1) I give notice on March 16, they terminate me on March 15, I sign up for ACA that day and it is effective April 1 while my existing coverage is good for the rest of March?

2) I give notice on March 16, they want me to work 2 weeks. My last day is April 1, I am covered by employer for all of April and I can sign up in April for May 1 ACA?

3) I sign up for ACA earlier in March, like March 1. I give notice on March 16 and leave the same day, ACA goes in effect April 1, no coverage gap?

#2 works.

You can't do #3. ACA policies coverage start dates are the first of each month, and you aren't eligible while covered under the employer's plan.

You need to call your insurer to see if the policy is prepaid. If the employer pays the monthly premium on the first of the month, the coverage is good through month-end and cannot be cancelled, regardless of the employment termination date.

If the coverage is not contracted on a monthly basis, ask the insurer how to extend the coverage through month-end.

 

[Fermion]

#2 works.

You can't do #3. ACA policies coverage start dates are the first of each month, and you aren't eligible while covered under the employer's plan.

You need to call your insurer to see if the policy is prepaid. If the employer pays the monthly premium on the first of the month, the coverage is good through month-end and cannot be cancelled, regardless of the employment termination date.

If the coverage is not contracted on a monthly basis, ask the insurer how to extend the coverage through month-end.

This doesn't make sense.

Can you decline Cobra and yet pay for a month of Cobra?

I can't sign up for ACA until I quit but if I quit after the middle of the month I can't get coverage for a month and a half. If I take Cobra, I can't get into the exchange.

I must be missing something here.

 

[MichaelB]

I can't sign up for ACA until I quit but if I quit after the middle of the month I can't get coverage for a month and a half. If I take Cobra, I can't get into the exchange.

You can sign up for ACA future coverage, for example, for the first of next month while you are currently covered by your employer. You cannot sign up for an ACA subsidized policy that runs concurrent with your employers coverage.

If you elect Cobra you must keep it until the next open enrollment period begins.

You need to call your current insurer directly and ask what day of the month the current coverage ends.

 

[Theseus]

This doesn't make sense.

My experience, fire'd mid 2014 was that the sequencing of employer plan, COBRA, and ACA was fraught with bureaucratic nonsense from my employer's plan and COBRA administration, ACA subsidy being subject to proving asserted income level, and the insurance carrier of selected ACA plan being unprepared for the influx of new customers. I wasn't expecting things to be very sensible, and I have yet to be disappointed...

I'd be wary of expecting all of the components of a well laid plan, especially on a tight timeline, working without a glitch somewhere along the line.

 

[rbmrtn]

This doesn't make sense.

Can you decline Cobra and yet pay for a month of Cobra?

I can't sign up for ACA until I quit but if I quit after the middle of the month I can't get coverage for a month and a half. If I take Cobra, I can't get into the exchange.

I must be missing something here.

Yes. Loss of coverage ( quit your job ) is an event that generates a special enrollment period. That allows you to start without meeting the 15th of the month deadline.

also for loss of coverage it can be done 60 days in advance of losing coverage.

Links from FAQ

Screener for special enrollment
https://www.healthcare.gov/screener/

Special enrollment periods, see section on loss of other coverage

https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/

 

[Fermion]

Yes. Loss of coverage ( quit your job ) is an event that generates a special enrollment period. That allows you to start without meeting the 15th of the month deadline.

also for loss of coverage it can be done 60 days in advance of losing coverage.

Links from FAQ

Screener for special enrollment
https://www.healthcare.gov/screener/

Special enrollment periods, see section on loss of other coverage

https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/

Ok, this is new to me. So you don't have to sign up by the 15th of the month to have ACA coverage at the beginning of the next month if you have a special enrollment?


Edit: Yes, I found it.




Your coverage can start sooner with some Special Enrollment Periods

During Open Enrollment, you usually have to enroll by the 15th of the month for coverage to start by the first day of the next month. But if you have one of the following qualifying life events, you’re eligible for a Special Enrollment Period that allows your coverage to start sooner.
Having a baby, adopting a child, or placing a child for adoption

• Coverage can take effect: The day of the event
• Enrollment window: Up to 60 days after the event

Getting married

• Coverage can take effect: The first day of the month after you enroll
• Enrollment window: Up to 60 days after your marriage. (You can’t enroll until after the marriage.)

Losing other health coverageThis could including losing a job-based plan, aging off a parent’s coverage at 26, losing coverage through divorce, losing eligibility for Medicaid or CHIP, and similar events:

• Coverage can take effect: The first day of the month after you enroll and after the loss of coverage
• Enrollment window: From 60 days before to 60 days after losing your other coverage Important: If you leave your job for any reason and lose your job-based health coverage, you qualify for a Special Enrollment Period. But you don’t get an SEP if you voluntarily drop: a job-based plan without leaving your job; an individual insurance plan; unexpired COBRA coverage; or any plan that doesn’t qualify as minimum essential coverage.

 

[Animorph]

Even with a special enrollment for September retirement, the insurer I signed up with followed the 15th of the month prior to the initial coverage month enrollment deadline. Maybe you can find something better than that, but I thought it was standard.

 

[bingybear]

You can sign up for ACA future coverage, for example, for the first of next month while you are currently covered by your employer. You cannot sign up for an ACA subsidized policy that runs concurrent with your employers coverage.

If you elect Cobra you must keep it until the next open enrollment period begins.

Is this in writing somewhere? Cancelling cobra is not a qualifying special event, so you can't cancel cobra to make a special event.
When you terminate employment and loose your insurance, you have a qualifying event which gives you a 60 day window. I don't see why you could not use cobra to fill a gap.

As for what I would do in the OP situation. Knowing you are going to quit an loose your insurance will create a special qualifying event. If you say and get one more months insurance... notify ACA of the change of situation.. it should just push your date out. You'd still be in the same 60 day window anyway.

I signed up for insurance in January to start in march because I was still working. Yes I should have been able to do it based on open enrollment, but the way I answered the questions put me in a special enrollment. I've held tight with my employer that my last day is Feb 27th. So you can sign up before you loose it. A gap is not required.

One other comment. You noted that you were looking at a silver plan, but you also had paid HSA contributions up front. I have not seen an HSA plan in my local area that is a silver plan. Make sure you get that right... or I think you can withdraw the overage and pay a penalty.

 

[jim584672]

You have a "free ride" period of 60 days with COBRA. If nothing happens great you get two free months, else you get sick, then sign up for COBRA which is retro to your last day of work. Once on COBRA you need to stay on it until the next open enrollment.

Better to avoid COBRA if you can.

 

[rbmrtn]

Is this in writing somewhere? Cancelling cobra is not a qualifying special event, so you can't cancel cobra to make a special event.

Yes it is in the FAQ on healthcare.gov https://www.healthcare.gov/unemployed/cobra-coverage/

If you’re ending your COBRA coverage early outside Open Enrollment, you can’t enroll in a Marketplace plan at all, with or without lower costs.

 

[bingybear]

Yes it is in the FAQ on healthcare.gov https://www.healthcare.gov/unemployed/cobra-coverage/

If you’re ending your COBRA coverage early outside Open Enrollment, you can’t enroll in a Marketplace plan at all, with or without lower costs.

I'm not sure this covers the case when you are already in a special enrollment period and just use cobra for a bridge plan. I stated that you can't drop cobra and create a special enrollment. I think that question really would need to be asked. The loosing your coverage may allow a cobra bridge... but you would have to get ACA plan during the special period. I could be wrong, but if you bought a gap plan... then you would have insurance and could not get into the ACA plans until open enrollment either.

 

[Fermion]

I see what you mean bingybear (I think).

One could work until March 16, apply for ACA some time in the next 60 days, and if for some reason during that time you had some expensive medical expense, just stay on Cobra until the next open enrollment in November, since Cobra gives you 60 days to decide to take it and is retroactive.

The question becomes do you gain a tax penalty if you quit on March 16, waffle for a few weeks about ACA but then sign up for it in March or April, and do not have any medical expenses so decline Cobra and go on ACA. This would mean you were technically without coverage for April (if, say your ACA started May 1) and I do not know if you owe penalties for 1 month of no coverage (is it a prorated penalty?)

 

[bingybear]

I see what you mean bingybear (I think).

One could work until March 16, apply for ACA some time in the next 60 days, and if for some reason during that time you had some expensive medical expense, just stay on Cobra until the next open enrollment in November, since Cobra gives you 60 days to decide to take it and is retroactive.

The question becomes do you gain a tax penalty if you quit on March 16, waffle for a few weeks about ACA but then sign up for it in March or April, and do not have any medical expenses so decline Cobra and go on ACA. This would mean you were technically without coverage for April (if, say your ACA started May 1) and I do not know if you owe penalties for 1 month of no coverage (is it a prorated penalty?)

not quite... you work until March 16th and lose your insurance say at the end of the month (many seem to continue for the month). So you apply with the ACA and get a special enrollment since you lost your insurance. On April 16 you sign up for ACA insurance and on April 17 you sick... hurt or whatever and need medical care, so you sign up for cobra as it likely is the only thing you can do. So... now you have cobra, does this disallow the insurance you just signed up for on April 16th that won't start until June 1?

But more simply. The loss of your insurance opens a special enrollment period. I'm under the assumption (don't know for sure) that as long as you sign up for coverage during the special enrollment period, you should be able to get the ACA plan. If you use cobra or some other short term insurance to cover the short time gap... that shouldn't impact that.

I think it is well documented that cancelling cobra does not create a special enrollment.

 

[jim584672]

One or two months without insurance is no penalty.

 

[bingybear]

One or two months without insurance is no penalty.

penalty is nothing... I'd be more concerned with needing medical care. A couple years back I had a couple light headed spells lasting maybe 5 or 10 seconds and a couple very short blackouts lasting just a bit longer. Ended up with a pacemaker after a bunch of tests... $45k+ later.

I think the point is staying covered. Yes... most of the time you don't have any problems... but when you do, it can be bad.

 

[Fermion]

Essentially you are saying since Cobra is retroactive you can wait to accept it and wait to get a ACA policy, then choose which one based on how your heath was during the waiting period. It is like buying car insurance after you have an accident but getting covered for the accident.

 

[ziggy29]

Essentially you are saying since Cobra is retroactive you can wait to accept it and wait to get a ACA policy, then choose which one based on how your heath was during the waiting period. It is like buying car insurance after you have an accident but getting covered for the accident.

In theory this is a no-risk free lunch, but it could also be playing with fire, especially if you get beyond 45 days or so and there are problems getting your COBRA successfully elected retroactively. I'd have no qualms about doing this for up to 30 days or so, but beyond about 45 days I'd really start to get nervous.

 

[jim584672]

Essentially you are saying since Cobra is retroactive you can wait to accept it and wait to get a ACA policy, then choose which one based on how your heath was during the waiting period. It is like buying car insurance after you have an accident but getting covered for the accident.

That is what I did. I was packaged out 10/31/2014. Went Nov/Dec without incident. Then to an ACA Platinum policy starting 1/1/2015. The moved saved me $1230 in COBRA premiums. I have some additional monthly income that will end in May, then I drop into Medicaid.