Patient Protection and Affordable Care Act

[scrabbler1]

The discussion about the subsidy and the Kaiser calculator has interested me a lot. I did wonder as I was playing with it which income I should enter - AGI or Taxable Income? For me both have jumped around a lot in my 3 years of ER because of irregular Cap Gains distributions. Using AGI, I have been as high as just over $47k so the off-the-cliff subsidy behavior posted by others did alarm me. If I use TI I end up no worse than the low 40s in income and get a subsidy.

 

[NW-Bound]

Great! More tax planning...

In my line of work, I do a lot of optimization. I cannot tell you about it, but will say that it is analogous to tweaking a car ECU to optimize its MPG, or something like that. It feels great when you master these inanimate objects to get the most performance out of them.

I don't feel good when I tweak my finances to minimize my taxes according to various tax laws. I have to do it, else I would get socked. But when I am done, instead of feeling elated, why do I often feel like - excuse me - a cheater?

 

[rescueme]

So one of the unintended consequences of the Act are likely to be un-"green" and fill our landfills. Where are the environmentalists when you most need them?

Well, the info (both federal and local insurance company) does have this stuff on-line. However my son does not have an internet connection at his apartment (due to his challange) and I need to grab a hardcopy if/when I go there to discuss something related to his coverage.

Of course, when I go on Medicare Jan 1 ( I hope), and my DW on May 1, we'll just use the electronic version.

 

[pb4uski]

The discussion about the subsidy and the Kaiser calculator has interested me a lot. I did wonder as I was playing with it which income I should enter - AGI or Taxable Income? For me both have jumped around a lot in my 3 years of ER because of irregular Cap Gains distributions. Using AGI, I have been as high as just over $47k so the off-the-cliff subsidy behavior posted by others did alarm me. If I use TI I end up no worse than the low 40s in income and get a subsidy.

It has piqued my interest as well. While I haven't been able to find anything that is clear as to what "income" is for that purpose, my best guess would be that it is total income from Form 1040 (line 22) and not AGI or TI.

If I am right, it would then include capital gains, tIRA withdrawals and SS. So as other posts have noted it may make postponing SS even more attractive for those who are ER because lower income would get you a bigger subsidy from ages 62-65 when Medicare kicks in. The inclusion of capital gains and capital gains distributions would require careful planning and probably last minute planning as well since many funds CG distributions are not finalized until late December.

And as discussed in another thread, it will make Roth conversions during ER much more costly because the cost will be the incremental tax (as it is today) plus any reduction in the subsidy.

I wonder when OMP and other calculators will be adjusted for this new world?

 

[Midpack]

If the CBO is correct will we see slight rises for greater coverage. Not Too bad an outcome.

Depending on the free rider aspect, which the CBO did not factor in AFAIK...

 

[MichaelB]

It has piqued my interest as well. While I haven't been able to find anything that is clear as to what "income" is for that purpose, my best guess would be that it is total income from Form 1040 (line 22) and not AGI or TI.

If I am right, it would then include capital gains, tIRA withdrawals and SS. So as other posts have noted it may make postponing SS even more attractive for those who are ER because lower income would get you a bigger subsidy from ages 62-65 when Medicare kicks in. The inclusion of capital gains and capital gains distributions would require careful planning and probably last minute planning as well since many funds CG distributions are not finalized until late December.

And as discussed in another thread, it will make Roth conversions during ER much more costly because the cost will be the incremental tax (as it is today) plus any reduction in the subsidy.

I wonder when OMP and other calculators will be adjusted for this new world?

I'm guessing along those lines as well. A MAGI that would also include tax free income such as muni dividends and MLP return of capital distributions.

 

[Texas Proud]

I spent a bit of time perusing the site linked by tomz.

Being a casual consumer of health care so far (knock on wood), I am certainly not knowledgeable, but I thought that the largest portion of the current healthcare costs was incurred in hospitalization. If it weren't for that, pfft, I could pay for my annual exams and my once-every-10-year colonoscopy with a few months worth of my current insurance premium, which is a $10K/year deductible policy.

Yet, I do not see what would make hospital stays less costly, more efficient, etc... There is something about electronic record keeping, but is it enough? What am I missing?

PS. I know that the law helps people with pre-existing conditions, but for the nation as a whole, how does this reduce hospitalization costs? By the way, there is something about the costs of drug.

You know, I had not thought about that....

IOW, the people that do not go to doctors etc. now because they can not afford to.... how are they going to afford the $5K or higher deductible (if they still are available) if they get sick

The results of this law might not be what some people think it will be....


An interesting thought....

 

[obgyn65]

Sorry for any possible typo as I am typing from my iPad. Would it make sense then to invest in annuity or not to optimize MAGI?

I'm guessing along those lines as well. A MAGI that would also include tax free income such as muni dividends and MLP return of capital distributions.

 

[Koolau]

It will help certain groups of people. It WILL raise premiums substantially for all. As long as the taxpayers as a group are ok with that, there will be no major upswell to undo any of it.

If anyone can SHOW me how this lowers the national debt or spending I am all ears.........

Like the old joke goes... They'll "make it up on volume." But, seriously, my former empl*yer has been making noises about dropping our retiree insurance group plan - specifically because of the act. Since I am on Medicare now, my cost for the company plan went down (about the same amount I have to pay for Medicare). If suddenly in 2014 I have to buy a supplement, I can probably expect $4K to $5K (or who knows how much it will be once the Ins. Cos. figure out how much the act will cost them.) I understand the act WILL be good for some folks, but clearly not for me and many (most??) who have employer provided (subsidized) retiree health care. By the time the taxes start coming due, I can see the overall effect to my bottom line approaching $10K MORE/year. I admit that's not even a SWAG because there are too many assumptions and guesses to build in. BUT< clearly, the act WILL absolutely cost me money (taxes as a minimum) even if my former empl*yer does not drop it's coverage on me. So... While I understand the benefits for the many, I think there will be quite a large number of the "few" who will end up subsidizing other people even more than now. Don't mean this to be political, but simply to recognize that some ERs (or at least current retirees) will have to modify their retirement plans because of the act. I honestly thought when I ER'd that I had the medical insurance piece of the puzzle settled. Turns out that's not true. I won't know at least until 2014 if I will have to be a Walmart greeter or go back to driving cars to the auction (do they accept plasma donations from old people??) Obviously, YMMV.

 

[Texas Proud]

This is what I am thinking as well Texas Proud. I'm having problems with the way this thing came down or should I say was "upheld". Bottom line, it was struck down as the statute was written. Justice Roberts rewrote the statute instead of our Congress rewriting it. I suppose I was naive in thinking our Supreme Court could not do that. I thought they had to rule based on how the statute was presented to them which they obviously struck down. We all know Congress has the right to impose a tax but again, this is not how the statute was originally written or originally passed. Does it matter? Probably not at this point but that doesn't make it right IMHO.

So at this point I am more bothered by the way this was done and the future ramifications than some of the details at the moment.

I think you are reading my post differently than I intended... I was not making any comment on how the case was decided... only on the people that previously did not have insurance because they could not afford it...

If they could not afford insurance, how are they going to afford the high deductible if they get sick? There is nothing that provides for the actual cost of health care besides the subsidy for insurance....

So I think there will still be a class of people who do not have affordable health care even if they have insurance...

As an example, I have already run through the $1800 that I put on my flex account paying for doctors and drugs... and we are only half way through the year... insurance paid their share, but it still is expensive at times....

 

[MichaelB]

Sorry for any possible typo as I am typing from my iPad. Would it make sense then to invest in annuity or not to optimize MAGI?

Oby, I don't know. The details and rules haven't been written so right now much of this is a guess. Within the next few months much more detail will become available and I suggest waiting for that.

 

[sheehs1]

I think you are reading my post differently than I intended... I was not making any comment on how the case was decided... only on the people that previously did not have insurance because they could not afford it...

If they could not afford insurance, how are they going to afford the high deductible if they get sick? There is nothing that provides for the actual cost of health care besides the subsidy for insurance....

So I think there will still be a class of people who do not have affordable health care even if they have insurance...

As an example, I have already run through the $1800 that I put on my flex account paying for doctors and drugs... and we are only half way through the year... insurance paid their share, but it still is expensive at times....

I wasn't trying to make any assumptions about what was meant by your post. Rather...I was sort of agreeing that with so many unknowns...it is hard to know how thing will really go.

 

[pb4uski]

Sorry for any possible typo as I am typing from my iPad. Would it make sense then to invest in annuity or not to optimize MAGI?

I don't think it would matter (assuming that income is defined as tax return income - Form 1040, line 22). If you bought a SPIA with taxable funds then only the "interest" is included in income (like any other time deposit). If you buy the SPIA with tax deferred funds then all annuity payments are included in income just like withdrawals from a tax deferred account are.

If they define income differently or include exclusions then who knows?

 

[Mulligan]

You know, I had not thought about that....

IOW, the people that do not go to doctors etc. now because they can not afford to.... how are they going to afford the $5K or higher deductible (if they still are available) if they get sick

The results of this law might not be what some people think it will be....

An interesting thought....

I am sure the act did not address issues that I am concerned with even though you have insurance. Such as lack of clarity in billing process, insurance rejecting payment on treatments you received that you had no idea they would reject when they were administered to you, and paying out of network prices for services that you thought were in network because you went to an in network medical center.

 

[Buckeye]

Like the old joke goes... They'll "make it up on volume." But, seriously, my former empl*yer has been making noises about dropping our retiree insurance group plan - specifically because of the act. Since I am on Medicare now, my cost for the company plan went down (about the same amount I have to pay for Medicare). If suddenly in 2014 I have to buy a supplement, I can probably expect $4K to $5K (or who knows how much it will be once the Ins. Cos. figure out how much the act will cost them.) I understand the act WILL be good for some folks, but clearly not for me and many (most??) who have employer provided (subsidized) retiree health care. By the time the taxes start coming due, I can see the overall effect to my bottom line approaching $10K MORE/year. I admit that's not even a SWAG because there are too many assumptions and guesses to build in. BUT< clearly, the act WILL absolutely cost me money (taxes as a minimum) even if my former empl*yer does not drop it's coverage on me. So... While I understand the benefits for the many, I think there will be quite a large number of the "few" who will end up subsidizing other people even more than now. Don't mean this to be political, but simply to recognize that some ERs (or at least current retirees) will have to modify their retirement plans because of the act. I honestly thought when I ER'd that I had the medical insurance piece of the puzzle settled. Turns out that's not true. I won't know at least until 2014 if I will have to be a Walmart greeter or go back to driving cars to the auction (do they accept plasma donations from old people??) Obviously, YMMV.

My mom has an absolute Cadillac gap policy in FL (expensive for insurance) and her premium is about $230 per month.

 

[Calico]

I sincerely hope this thread does not have to be closed. I am learning a LOT, and many of the posts are giving me food for thought, and avenues to explore which I had not previously considered.

I am not eligible for medicare for 10+ years, and employer-provided healthcare has been one huge motivating factor for me remaining at my j*b. However, with the advent of PPACA, there may be other avenues open to me, which is exciting - although a bit daunting, given all the uncertainty around implementation of the act.

I am very new to the forum, and I benefit greatly from the perspectives on this topic provided by folks who are already in, or preparing for, ER.

I think the mods are doing a good job of keeping this thread focused on the original topic, and I do hope it stays open.

Just my two cents as a newbie.

 

[Texas Proud]

I am not trying to make a political comment here.... just a comment to the people who are stating that they can start taking COBRA next week and be 'in the clear' with the new law...


I read that since Roberts said it was a tax, then Congress can repeal this tax with a simple majority with no filibuster option... if it were me and I had to choose a date, I would wait until the elections to make the jump.... if the Senate is split 50-50 and Romney wins, I would bet that this part of the law will be overturned. I am not sure what else would happen, but would not want to chance it myself if I were relying on this law....

 

[Animorph]

From Wikipedia, federal poverty levels:

"United States Department of Health and Human Services (HHS) figures for poverty in 2012[5]
Persons in 48 Contiguous Alaska Hawaii
Family Unit States and D.C.
1 $11,170 $13,970 $12,860
2 $15,130 $18,920 $17,410
3 $19,090 $23,870 $21,960
4 $23,050 $28,820 $26,510
5 $27,010 $33,770 $31,060
6 $30,970 $38,720 $35,610
7 $34,930 $43,670 $40,160
8 $38,890 $48,620 $44,710
Each additional person adds
$3,960 $4,950 $4,550

"

And the main entry I think has already been posted:

Patient Protection and Affordable Care Act - Wikipedia, the free encyclopedia

"Low income persons and families above the Medicaid level and up to 400% of the federal poverty level will receive federal subsidies[28] on a sliding scale if they choose to purchase insurance via an exchange (persons at 150% of the poverty level would be subsidized such that their premium cost would be of 2% of income or $50 a month for a family of 4).[29]"

Now if we can find what the sliding scale is, we can make our own calculators.

 

[Semiretired2008]

Isn't this going to take several years to play out before the true impact is known. The ultimate purpose is to lower healthcare costs across the country and that will eventually lower insurance costs also.

First you have an industry that claims a lot of losses every year due to providing healthcare for free and then those losses are passed on as higher charges to the customers that are paying.

Now, in the perfect world - everyone gets insurance then the losses will disappear and the costs being passed on will disappear and then insurance rates will become lower.

But this will take time. Hospitals are not going to say - Hey this new law means we can charge less so let's do it and the Insurance companies are not going to follow suit until the hospital charges are steady and the "data" shows they are steady.

This is also with two industries that always claim their profit margins are to low or they continue with losses - how much of this will be seen as an opportunity for them to fix that and eventually pass it on to the consumer.

Only time will tell - How much time is still an unknown, but it will take time...

 

[Animorph]

From http://www.kff.org/healthreform/upload/7962-02.pdf

"

What is the amount of the tax credit provided to people?​

The amount of the tax credit that a person can receive is based on the premium for the second lowest cost silver plan in the exchange and area where the person is eligible to purchase coverage. A silver plan is a plan that provides the essential benefits and has an actuarial value of 70%. (In PPACA, a 70% actuarial value means that on average the plan pays 70% of

the cost of covered benefits for a standard population of enrollees.) The amount of the tax credit varies with income such

that the premium that the premium a person would have to pay for the second lowest cost silver plan would not exceed a

specified percentage of their income (adjusted for family size), as follows:
​

​

Income Level Premium as a Percent of Income

​

​

​

Up to 133% FPL 2% of income
133-150% FPL 3 – 4% of income
150-200% FPL 4 – 6.3% of income
200-250% FPL 6.3 – 8.05% of income
250-300% FPL 8.05 – 9.5% of income
300-400% FPL 9.5% of income"​

There are other provisions for selecting the plan cost and out-of-pocket cost expectations depending on income levels.

This looks a lot more linear than the calculator is coming up with.

 

[Calico]

Animorph,

Thanks very much for posting that link; it's very helpful. Unlike a lot of documents I've seen which purport to "explain" PPACA, I can actually understand the material in the link.

 

[ziggy29]

From http://www.kff.org/healthreform/upload/7962-02.pdf

"

What is the amount of the tax credit provided to people?​

...

Income Level Premium as a Percent of Income

Up to 133% FPL 2% of income
133-150% FPL 3 – 4% of income
150-200% FPL 4 – 6.3% of income
200-250% FPL 6.3 – 8.05% of income
250-300% FPL 8.05 – 9.5% of income
300-400% FPL 9.5% of income"​

This looks a lot more linear than the calculator is coming up with.

Except for a very steep cliff at 400% of the poverty line. At that point it goes from a few thousand straight to zero. Should this aspect not change, people near that threshold may need to be careful and creative in their tax planning throughout the year. That last dollar could cost you thousands.

It's not like the credit is only $10 at 399% of the poverty line. It's usually still into the thousands, going suddenly to zero at 400%.

 

[Animorph]

Except for a very steep cliff at 400% of the poverty line. At that point it goes from a few thousand straight to zero. Should this aspect not change, people near that threshold may need to be careful and creative in their tax planning throughout the year. That last dollar could cost you thousands.

It's not like the credit is only $10 at 399% of the poverty line. It's usually still into the thousands, going suddenly to zero at 400%.

Yep. And that will depend on the what the second lowest "silver" plan costs, which we won't know for quite a while I guess. Though apparently the calculator has a guess.

9.5% of 400% of single FPL is $4244
9.5% of 400% of couple FPL is $5749

So whatever that cost is minus those limits is the tax bump.

 

[tulak]

Except for a very steep cliff at 400% of the poverty line. At that point it goes from a few thousand straight to zero. Should this aspect not change, people near that threshold may need to be careful and creative in their tax planning throughout the year. That last dollar could cost you thousands.

It's not like the credit is only $10 at 399% of the poverty line. It's usually still into the thousands, going suddenly to zero at 400%.

I tend to think this is one of those pieces that'll change.

Also, since it's based on the poverty line, it'll also be interesting to see how this works out if/when the poverty line increases.

The modeling will be interesting, since now you're not only trying to come in at 400% of PL, but the PL also changes, so you'll have to take that into consideration.

What I suspect will happen, at least for the REs out there, is that some years you'll go for the max subsidy and other years you'll get little/no subsidy. Especially if, on average, your income needs are greater than 400% PL.

So now you'll have multi-year tax planning, with the hope the tax code doesn't change much year over year...

 

[ziggy29]

What I suspect will happen, at least for the REs out there, is that some years you'll go for the max subsidy and other years you'll get little/no subsidy. Especially if, on average, your income needs are greater than 400% PL.

That would make it a lot like the folks who itemize every other year and take the standard deduction every other year. You try to make two property tax payments -- one in January for the previous year, one in December for the current year -- in the year you itemize and none when you don't, and you might pay one mortgage payment exactly on January 1 to make 13 of them in a year when you itemize and 11 when you don't.

Fun times!