October 13, 2021

Bogleheads® Chapter Series – Healthcare Planning for Retirement

If you are near retirement and wondering about your health care options, this meeting is for you. Health care planning for those near retirement through age 65 (Medicare), including the recent 2021 law changes, is discussed.

The presentation also appeals to people who are contemplating leaving their corporate jobs to become self-employed.

Hosted by the Pre-Retirement and Early Retirement Life Stage chapters. Recorded on October 13, 2021.

Meeting update: The insurance rate brochure shown by LadyGeek (24 minutes into the video) is not proprietary and can be found publicly online: Affordable Care Act Health Rate Filings.

Slides can be accessed here.

Chat from the recorded meeting can be accessed here.

Chapter meetings are listed in the Bogleheads blog calendar. You can add this calendar to your Google account. Notifications are also sent from an email subscription list. See the blog for more information.


Bogleheads® Chapter Series – Health Care Planning for Retirement


Jim: Welcome to the Bogleheads Chapter Series. This episode was hosted by the Pre and Early Retirement Life Stage Chapter and recorded on October 13, 2021. It features a presentation and discussion on health care planning from retirement to Medicare, including recent law changes. Bogleheads are investors who follow John Bogle's philosophy for attaining financial independence. This recording is for informational purposes only and should not be construed as personalized investment advice. 

Carol:This is an update to a Chicago Virtual Group meeting that was held in February regarding your health care options from retirement until Medicare, and it also applies to people that are self-employed that don't have health insurance. Basically anybody that doesn't have health insurance through an employer or COBRA [Consolidated Omnibus Budget Reconciliation Act of 1985]. 

Jim:  It’s “how do I get insurance in this period after I leave work or if I'm self-employed?” 

So a lot of people will continue their retiree insurance through their employer union but that's less available than it's been in the past. Some people will buy COBRA, that's where you can extend the insurance you have through work. That's whether you quit or get fired. It doesn't matter, you can still get it,  but there's an 18-month limit,except for certain situations. Many people then plan on using the Affordable Care Act. Or, as one of our participants tonight will tell you, you can also use COBRA first, and then transition to ACA.

There are some people that use the ministry health plans. Is there anybody on the call that has used the ministry health plans, or knows of anybody, raise your hand if you have.  [no hands raised]

So some people are military veterans, and could possibly be available for the VA insurance.

We've had posters on the site who have talked about self-insurance, which I don't recommend. If you're lucky enough to retire at 30 years old you could still get a catastrophic plan.We probably don't have many people on this call– some people that are displaced workers due to trade cases– they can get a health care tax credit. That's pretty rare. No insurance, some people do that.

Some people move to another country. On our Chicago call, originally somebody went to Costa Rica or something and they enjoyed it. They loved it. They loved the medical care that they got.

My favorite option, keep the spouse working and use this spouse insurance. Part-time jobs with health insurance, self-employed, then in those cases like in the state of Indiana, you have to go through the ACA unless you do a group plan. And Carol, if you could speak for a second about this group plan idea.

Carol: So now this is probably different in every state. I'm in Texas, I worked for a single lawyer, that was only one lawyer and me, and you only needed to have a group health plan, you only need a group of two families, and the rates for similar plans that were on the exchange were lower for the same exact plan. And so it was a really good option. And we also had better options as far as PPOs, whereas maybe on the exchange there were just HMOs. 

There were better options, so just look into that. You should be able to go to any insurance broker and they can find those plans for you. It's just called a group health insurance plan, group plan.

Jim:  Yeah, my understanding it’s not allowed for a husband and wife . . .

Carol:  Right, it has to be two unrelated family . . .

Jim:  You and your cousin, right?  It could be you and your cousin, but not you and your wife or husband.

Carol:  . . . or your child.  I'm not sure an adult child would count, but for sure yeah. 

Jim:  And the last option I have is to enroll as a student. Many plans, if you become a student they want you to have health care, so they have a group rate, and that can often be good because students tend to be younger. So as a group they have less risk. So that's an option– if you want to go to school.

So some big changes happened to the ACA with the American Rescue Plan of 2021, which was signed by Joe Biden and the President signed it on March 11th. It's currently only a two-year deal but it's probably going to be extended from what I've heard. But we're not really supposed to speculate on those things.

It expands the subsidies to above the 400% poverty level, which really that means the cliff goes away. Which was a real sticking point for a lot of people. It increases subsidies for the people who are down in the 100% to 400% poverty levels. Those are the people who get premium tax credits and cost sharing, depending on their income. 

The cliff's gone away. Now it's 8.5% of income max, and if you had unemployment during 2021, you can get a zero premium plan, a very nice plan. There's also some unemployment issues with COBRA that we're going to talk about. There was also a much larger open enrollment period. Typically you get the plans sometime in November and you've got till about December 15th to decide for January 1st coverage. So President Biden opened the enrollment due to large unemployment and other issues, covid. 

There's also COBRA premium assistance to due to unemployment and as a side issue we're going to talk a little bit about the Surprise Billing Act, which is something we were talking about before we started recording, which is the issue of keeping the patient out of a billing fight between a hospital and an insurance company or a doctor and insurance company.

Insurance company people need to know what the federal poverty levels are, and they use this as a multiplier for the income to determine your subsidies. So it's basically the same across all 48 contiguous states. And typically it was very important in the old days to figure out where this cliff was because if you made a dollar over the cliff it could cost you a lot. 

This is what the cliff actually looks like. The blue line is the old cliff. So this is saying that if we took a 60 year-old with a benchmark silver plan and we looked at their income along this bottom axis, here the x-axis, and we said if they made $15,000, as this is a single person, this is about what percent of their income they would pay. So a $15,000 income person would pay only about 1.7% of their income towards health insurance. That number would go all the way up to about 9.8%, but right here at the magic number, if you made over 400% of the poverty level, made one dollar over it, your cost would jump up to about 20% of your income. So it was a huge jump and many people, probably people on this call, have managed their income to stay below that. 

The new law is the orange curve, which limits it to 8.5% of your income, so if you make 50, 60, 70, you're still only paying 8.5% of that income. And at some point, because you've exceeded the cost of insurance, and you're making more and more money, it basically drops as a percentage.

But there are subsidies and assistance and no cliff above the 400% poverty level. That's the biggest change for people who are trying to plan Roth conversions, how much to take out of their 401k, what to spend out of their Roth post-tax money. So this makes it a little bit easier because you know what  the toll will be.

The nightmare I always thought about is a person who played this very close and they may have gotten called in to work on New Year's Eve, which they didn't plan to work, and they had to work a double shift and they made an extra $1,000 or $500 and it put them over this limit. And that limit could have cost them eight to ten thousand in premiums for working one day. So if you have to plan this you have to be very careful.

Has anybody in the audience had issues with this cliff that they'd like to speak about? Just raise your hand.  [no hands raised]

This is only a two-year deal, though so hopefully they continue it because it does help.

So the other thing that kind of dovetails into this is the End Surprise Billing Act. This means that health plans must cover the surprise bills, and for the definition of a surprise bill I'll give you an example. My wife went for a procedure and the anesthesiologist, unknown to her, was not in the network. So she went to a network hospital, with a network surgeon, and network pathologist, and network nurses, network janitors, everything. And she gets a bill at the end for about 10 times what you'd expect. And the reason is the anesthesiologist is not in the network.

Typically in those cases, if you had a plan without a network coverage, it would possibly pay for it, maybe with a higher deductible less reimbursement. But in certain states like our state of Indiana there is absolutely no non-network coverage at all in any of the ACA plans. So if you're dying in the hospital and, you know, for emergency care it's covered. But the minute you're patched up you want them to drag you to a network hospital. 

But in this case, with the surprise billing, if this anesthesiologist were to submit a $2,000 bill that would normally be reimbursed at let's say a $110--and that's what those rates are because I've looked at them and they're typically 10 to 20 times the amount that the insurance would reimburse– so what happens is this. Now they take the patient out of this, and the insurance company and the provider have to fight it out. And there's different strategies they talked about but they settled on an arbitration thing. 

And it should take the patient out of the billing fight, but they're still arguing about some of the regulations that have come out, and we'll see how that goes. So if you have a surgery that could be done on December 31st or January 1st, for this issue alone I'd make it January 1st.

This is how the premium, this is the difference between the old law and the new law, so this is the subsidies here, and you can see the subsidies have come down in certain areas, especially in the lower incomes.

The other thing that everyone should be aware of is that you eventually want to get and survive through these ACA plans to get to Medicare. And there's some certain rules. I'm no expert on medicare but you need to work at least 10 years of paid Medicare taxes. If you don't have that, let's say you started in the workforce very late, I would recommend you make sure you work enough to get Medicare. Have enough years, 40 quarters or 10 years of payment. You're eligible at 65, and you're also eligible if you've been on Social Security disability.

And the other caveat is there's a thing called IRMAA  [Medicare Income-Related Monthly Adjustment Amount] charges, and that would be, I think people are familiar with it, I think it's a two year’s look back, and if you've made a lot of money your Medicare premiums go up. Anybody want to speak about that?  [no hands raised]

So on the [Bogleheads] site, if you look at the blog, you'll see some cases about health ministry plans. I did personally talk to somebody who thought it was the greatest thing, and he just wasn't available for the call. You may not always get in. They are not legally required to pay. The people who have them seem to love them, but my theory is if you have a lot of assets you don't want to use something like this because you're the backstop. So the person I talked to said it saves them about $1,000 a month over the ACA plan.

Self-insure, you know even before covid it was insane. But if you think about people who have been in the ICU for three months it costs 15 million dollars or something. It would be very difficult to self-insure. The risk is just too high, I think, especially as you approach retirement ages and you also have to decide if you– I would prefer to self-insure my home any day of the week before I did health insurance. 

Okay we're going to talk about COBRA now and I'm going to bring LadyGeek in and she can talk a little bit about COBRA because she used it, and maybe you could explain how the process went for you. 

LadyGeek: Oh boy. Well it did, the process went fine. The process ended fine. I am now uninsured until I get on my ACA  plan November 1st. COBRA was an interesting thing, well for--oh well you have your slide here say it's the Consolidated Omnibus Budget Reconciliation Act– basically, if nothing else, you lose your job you have medical insurance. 

Back when I was thinking about retiring I went on a leave of absence without pay and because I was thinking covid was a little thing and I just recently became a widow. So I had a lot of stress going on, and I said I’ve got to retire. So what I did, I decided to do a test run and take 30 days leave without pay. That was a mistake because when I did that, they dropped ALL my benefits. As an employee, when you do leave without pay (and I googled it), you drop ALL benefits, ALL medical, ALL life insurance, ALL benefits are dropped when you do that.

And the only reason I had medical insurance was due to COBRA, because it was a loss of employment. So I said, okay I’m not coming back, and so that's how I became involved with COBRA. And what I did is I went on, and I have a medical insurance broker and I said, “Hey, should I go on ACA or COBRA?” It was without hesitation he said:  stay on COBRA.. 

Why?  Because they do COBRA, the employer, your employer's insurance, they are big. Your premium is based on the average age of the workforce. If the average age of the workforce is 35, the premium is one hell of a lot lower than it is if you're at 62 or 60. So for me, even if I pay full freight, that's for me in Philadelphia, actually well close enough to Philadelphia, and I would say I'm saving almost half, I guess. Other people, I've heard COBRA is way more expensive, but for me, like 60%, I was paying only 60%  even at full price plus two percent admin fee.

So COBRA is you continue the benefits, no change, you don't change your plan, you just continue that on for 18 months. One thing with COBRA, if you miss a payment your coverage is dropped. Bye-bye, see you later. And the other thing, when I was talking with my employer about the timing of your premium payments, here's something interesting that I didn't know about the employer's side. When they have this, the website, the company website, where they set it up and they said, okay, just do automatic billing pay at the first a month, you're fine.

When I spoke with the rep, she said, “You don't want to do that.” Why? And I’ve heard this with other companies. If you send the company your money the first, they don't pay the insurance company until a week later. You are NOT covered for that first week of the month.

Really?  Yes. So be very careful if you want to go on COBRA  and your company website says automatic payments. Don't do that. I was paying my monthly bill the day the billing came out which is like on the 15th, a couple weeks early. So I made sure I did a Quicken reminder, even got a mail notification, made sure I paid my premium two weeks before the first of the month. And so I didn't mention that in my discussion threads or anything, but that is a very important point. Your COBRA premiums, make sure that the insurance company gets paid at the first of a month, not when you pay your employer, because there was a week delay there.

Let me show the discussion threads. I have a couple of links. (Sharing screen.)

First of all, I called the company HR.  When does my coverage end? They said the end of the year. No, that's not right. The plan administrators don't understand it. I went with the administrator who does the insurance claims processing, it’s Blue Cross Blue Shield. I went with the company's administrator who handles the claims. They have to pay. They know the rules and they confirmed yes, of course, your coverage ends on October 6. I go and check the website yesterday. I'm still active.  Who knows, I'm not saying anything. So I'm just going to let it go. 

But what I wanted to say was my plan ended, my coverage ended October 6. I go to my medical insurance broker to sign me up October 6. He goes I can't do that. Why not? Because no ACA plan starts on an arbitrary day. They all start at the first of the month, and there's something called a 15th of the month rule.

A what? 15th of the month.  If you end coverage, I have it here, on the 15th of the month you can start on the first of the next month. If I had stopped my COBRA coverage on the 16th I would not be covered  until December. That's right, yes, now I’m in this gap right now and so what I was doing was kicking out some discussions that if guys if people are thinking of retirement, this is an important decision this is an important reason on how you want to set your date.

But the only other thing is there was a change on the federal website that– it's of course, not for me– starting next year they're going to get rid of the 15th of the month rule. So I have in this thread, in this post, I’m quoting  the website.

So I think this problem is going to go away, but there are some exceptions, just be careful. But no, it may go away because Pennsylvania is a state-run marketplace that follows the ACA, but they don't have to, so this federal marketplace rule may not apply to your state. So give it a shot but be aware of this.

Okay, so that's what I want to say here's all the details, as this is what I was trying to do about pay. The other thing that I mentioned, a nice surprise, was that I got denied for a pre-existing condition. So the ACA plans have to cover pre-existing conditions. I was saying pre-existing conditions– cancer, heart, diabetes, whatever, all the big stuff– no I got denied– well my insurance broker tried to get something to fill the gap, so we applied and got denied. 

So why?  For a minor, very minor condition, that I'm on a small generic drug for and because it's not an ACA plan, they're within their rights and have denied me coverage. I'm not, I do not qualify for medical coverage right now. So what my insurance broker did– oh and then I told my doctor, he was shocked. There are hundreds of conditions that you can be denied for. When I'm searching this, but  let me put it this way, the condition is my doctor didn't believe me. So I showed him the letter where okay.  So that's the way it goes. So I was getting here. Okay, so that's this in a nutshell.

Oh, the only thing I could get was some kind of hospital indemnity plan. That it's not medical insurance. It's meant for covering if you have problems with the medical expenses. It's just some insurance that covers people who have already had--it's not the right insurance for me– that's the only thing I could get, and I'm going to cancel it in 30 days, November 1st. So it's like some $100, but it's better than nothing, maybe. But they haven't charged me yet and, by the way, this policy also has a 30-day review where I can cancel for any reason within 30 days.

So if I don't use it, and he shouldn't have sold it to me anyway, but anyway so there's a lot of

things going on with insurance here, so that's this one. And then I just, I was, I wanted to link to 

Insurance.  This is my original discussion where I was about to leave without pay and this is my start on April 2020. This is where I started this whole process. So I'll put the links up as soon as I stop sharing the screen.

What I did here, oh this is another link because as soon as I go into the marketplace there's something called EPO, HMO, and PPO. I refuse to do an HMO because you need referrals. I have had nothing but bad experiences, and I have the luxury that with Blue Cross I do not need to have an HMO plan. So that was my key requirement, either EPO or PPO for me.

I just also wanted to show you--I probably can't share it because it was sent by my broker--this is a real live rate sheet of Keystone Blue Cross from Philadelphia. Because I want to show you that, because people are wondering, like you hear all this stuff but there's nothing like live data.

So if say--because I want to show you the difference in the premium rate--so if say, if you're like 30 years old, take this top plan, $650 non-tobacco. Okay, let's go to 60. So $650, and if I go down to age 60, that same plan is $1554. So I want to show you, yes, this is why I stayed with COBRA, because my company's average premium was down in the eight, no the average age was down in the 30s, and I‘m 60. So if I went to buy this in the marketplace it would cost me $1,500. So this is why you need to pay attention and compare and ask your company what is my COBRA cost. And then you go and shop the plan and see if it makes a difference. So this is why I stayed on COBRA. 

What I'm doing now, is I'm going in the Pennsylvania marketplace, and I just want to know, and what-- oh wait, I already entered in, I know this is a Philadelphia zip code and an arbitrary birthday, but this is where the tax subsidy comes in. So I just put in an arbitrary number just to show you that here are the plan details. This is the market. So here HMO, EPO, or PPO,  gold, platinum whatever, then I'm going to go across Blue Cross so here's the EPO for $350.

Jim: What income did you put in, LadyGeek?

LadyGeek: I put in $10,000 just to get something up there. I could put S50,000, just watch these premiums but when I work, the thing is that this is where my, here's the--here's yours is for $600 a month. So this is a subsidized deductible out of pocket math. So this is $600 a month, so 12 times 6,  $7,200 a year. Versus this, but say with my tax credit I'm paying $11 a month versus $500 a month for this EPO plan.

So I say I'm taking a gamble right now for 2022, and starting November 1st I am taking a gamble with my tax subsidy that I'm going to spend when way less than like six or seven thousand dollars so I’m just taking gamble the max this is going to cost me $7,000 because this is an $8,000 deductible. Like I got one for $7,000. Here it is.

Jim:  And then Independence is at the Blue Cross Blue Shield franchise in Pennsylvania.

LadyGeek: So yes, Blue Cross. So this deductible, see it's out of pocket and it's EPO, they see the deductible in an EPO, see the deductible is $7,000. That's because there is no coinsurance, there's no copay, you just pay all, you pay the in-network rates. 

Jim: Everybody should note the HSA plans that are available. If you go to the next plan to the right there's no HSA on that plan because it's got benefits before the deductible.

LadyGeek: Yeah, so these are HSA plans. So that’s actually okay. Let's show, I'll dump the links in the chat for my discussion stuff. That's all I wanted to show. I don't think I can share this because it was sent by the broker to me, not intended unless you can find the Keystone ACA  rate sheet on google. I really probably can't share that, but I just want to show you how much the premiums are significant based on your age, significant change. So let me stop sharing.

Jim:  And remind me to cut that out of the video because we don't want to share it.

LadyGeek: I don't know. I thought you'd probably keep it. I just didn't want to pass a copy around, and then that's also because, by the way, insurance rates vary by county, so plans and everything goes by county. That's why they want your zip code. But then again I had a question on that on the ACA plans. I've never had one before. When you sign up you need to show proof of income in Pennsylvania's household income, not adjusted gross income, but how do they know for 2022? What I’m doing, I assume there's a tax form, there's a marketplace tax form because I know they have to adjust my premium for next year.

Jim: You give them the estimate of the thing and then there's a text, well I forget the form. I have it in the presentation that you would true it up on your tax return. It turns out this year for people who underestimated their income, but then went on unemployment, they don't even have to pay that back. 

So somebody asked about whether you should work or take a leave of absence. It seems like this year, if you can get on unemployment, it's the best thing to do.

LadyGeek: Okay, okay, yeah. So if you have something, if during your presentation you say like well how is my first year in ACA , how do I adjust, how is my premium adjusted for next year, so I know how to…

Jim:  Well you just estimate your own income, your MAGI. Really, and we'll talk about that. But the issue is that it will then give you an immediate premium tax credit that will be a lower bill. Some people do it the opposite way, where they say just let me have the bill and I'll pay it and then I'll true it up on my tax return at the end.

LadyGeek: Oh okay. So this true up is done on the ACA website or on your…

Jim:  No, on your tax return.

LadyGeek: That's where I want to know what form and stuff, okay.

Jim: Yeah we have a screenshot.I don't remember the number.

LadyGeek: Okay I just thought of the links of my discussion threads and the definition.

Jim: Okay I'm going to share my screen now again.

LadyGeek: Yeah I’m done.

Jim:  But I want to turn it over to Carol for a second because she has an answer on the Medicare question that came up in the chat. Somebody asked about a non-working spouse. Carol, if you'd like to speak.

Carol: Yeah, I was searching during the presentation.  I found a pretty good article. Let me post the link again explaining about the 40 quarters. And there are some options if you don't have the 40 quarters, if your spouse--similar to the way Social Security works--you can qualify on a spouse's record, but you still can't get Medicare until 65, and your spouse that has worked the 40 quarters has to be at least 62. And luckily, I didn't even know this until just now either. It's not an all or nothing thing. The 40 credits quarters is just to get the free premium part A, and it sounds like it's a little bit--here I'm going to post something right in the chat-- here if you work between 30 and 39 quarters you're going to be paying $259 a month. So it is a huge, it's a pretty big price jump, but it's not totally off the table. And then less than 30 quarters it's $471 a month, so it does go up a lot, but you're not totally cut out of it if you haven't worked the 40 quarters. But it's definitely worth it, if you're close you definitely want to try to get your 40 quarters in. But that's a really good article that explains everything that I posted in the chat.

Okay back to Jim. Miriam has her hand raised.  Oh go ahead, Miriam, you're muted, unmute yourself.

Miriam: I have two things. First of all, I believe on the Boglehead forum I read one of the Bogleheads mentioned he lived in California and he worked for the university system.

That when his COBRA ended at 18 months the state of California would extend the COBRA for another, I think it was six months. I'm pretty sure that's what I read. This was several years ago. I don't know if that's true but maybe some states or some, well I guess it would be states, maybe some employers will extend COBRA.  I don't know if anybody knows about that.

Carol: Miriam, I can actually speak to that. Like I was saying earlier, I used to work for, I was a paralegal for just a single attorney. And so obviously the COBRA rules didn't apply because I think  you have to have 50 employees, but there was something called Texas State Continuation Coverage which worked a lot like COBRA except it was only nine months. But still, hey that's a lot better than--so I was able to get the better cheaper plan for an additional nine months. 

And it was kind of funny how it worked. Whereas I had 60 days to decide. And then let's see, I worked till the end of January, then I had 60 days to make my decision, and then the nine months started from the end of the 60 days. So really it was 11 months you got to kind of look into those little rules, and extend that as much as you can.

So that's going to be state by state rules on that one though. 

Miriam:  And then I also wondered whether anybody had made claims under COBRA and they found it difficult to be paid, for COBRA insurance to pay their claims.

LadyGeek:  I never had a problem. I mean because it's just I say with Blue Cross if you go direct COBRA is just how the claims get paid. How the premiums get paid, everything else is handled directly with the insurance. Your company has nothing to do with it after that. After they pay it's the claims administrators and the usual stuff.

Carol: Okay thank you, Cheryl. You want to go ahead, go ahead. 

Cheryl: I was going back to talking about extending beyond 18 months. My husband's an air transport pilot so he's forced to retire at age 65. And I am younger than he is and I need more than 18 months worth of coverage, so I have to finalize the answer on this, but my understanding is that with other pilots, since it is a situation of forced retirement, it's a condition of employment for all air transport pilots that carry passengers, since that's a forced condition of retirement as opposed to simply choosing to retire, that we also have the opportunity to have COBRA for longer because of that. But I need to confirm it and we'll post it on the forum.

Jim:  Okay thank you. Yeah there were some extensions on the COBRA. It could go as much as 36 months that I had read about but there are special circumstances.

But I would like to just repeat that you have up to 60 days to activate this COBRA, so you could be terminated from your employment or quit. You could have a heart attack the minute you cross over the parking lot and you could decide a week later that you want to get this COBRA coverage. So you do have to pay your bills as LadyGeek said. But once you have, 60 days retroactively to choose COBRA.

And the other thing that's important is you need to know what the employer is paying because you're going to pay a slight 2% administration charge over it. Most people don't understand their employers are paying maybe up to 80% of the cost. So when it comes to you, it could be five times the amount or four times the amount that they're taking out of your check as your contribution.

All right, so let's keep going here. So COBRA had some effects, or The American Rescue Plan affected it. They have a big premium assistance, and does this affect you LadyGeek as far as the premium assistance on COBRA?

LadyGeek: No, because I started with 2020. I don't know if I would qualify. I was already retired.

Jim:  But when did you complete COBRA, just recently right? 

LadyGeek: October 6th.

Jim: Yeah, you should look into that. That might help you.

LadyGeek: Well it's already done. I don't know if you can do it retroactive. 

Jim: Yeah I don't know., So again this could be even a reduction of hours. It doesn't have to be termination. 

LadyGeek:  Okay, let me put it this way, I'd rather not deal with my employer at this point. 

Jim: Okay all right. So again unemployment provisions, if you're unemployed anytime in 2021 it treats it as if you had 133% of the federal poverty level, which is the maximum subsidy. So the only issue there is this thing called a family glitch, which is when your spouse has maybe doesn't have insurance because they turned it down because it was coming through you, but if they are eligible for employer-sponsored insurance, then you don't get a subsidy. So again if you had any, even a week, of unemployment in 2021, you're going to have, and you're on ACA, you're going to have a very nice low premium. And it will affect and help your COBRA as we talked about.

I don't know if people are familiar with Health Savings Accounts. If the insurance policy is eligible for a Health Savings Account, you can put money into that. The 2021 limits were $3,600 individual, $7,200 family, and then a catch-up provision for 55 and older. And this money is tax-free, and it's tax-free when you spend it and you can spend it on deductibles. You can, I think you can spend it on Medicare Advantage Programs. You could buy some over-the-counter items. Has anybody used their HSA a lot and would like to speak about it?

LadyGeek: I just, this is LadyGeek, I just started last year and I said qualified medical expenses, I zeroed mine out with one month's nursing home, skilled nursing facility for my late husband. So the idea is you have to keep a record of your qualified medical expenses, rather than keeping an entire pack of stuff. I just said here's one month from a nursing home and that year thrown out, actually I have five cents left in the account because I forgot to close it up properly. But I might restart it. 

Jim:  So I mean if you don't mind me asking, what does a month of nursing home cost these days? 

LadyGeek: $408 a day. . .

Jim:   Wow, okay.

LadyGeek:  . . . that’s $10,000 to $12,000 per month. And at the time I was prepared to burn down his IRA for that, it's called self-insuring, but we're diverting from medical, but yeah, so they're skilled nursing and anything that's a qualified medical expense. A lot of people use HSA’s for they have a debit card and you just go to the pharmacy and it'll tell you yes or no, if you can use the card for it. So a lot of people do it for that.

Jim: Okay, thank you. So the key thing is not all plans are eligible. So as LadyGeek  showed on the Philadelphia or the Pennsylvania site, certain plans, depending on their deductible range and whether they start providing benefits before the deductibles reach, so if you have co-pays, you're not going to be an HSA plan. So these tend to be high deductible plans.

But in the State of Indiana we have cases where the deductibles are so high they exceed the limit, which is a typical government bureaucracy issue that doesn't make any sense. You could

have a plan with a $8,000 deductible, with a $7,000 limit and you can't save with an HSA. But that's a different issue.

So again, it has to be at least $1,400 for an individual but it can't be more than $7,050 or fourteen for a family and it can't have anything other than preventative care, so your annual checkups things like that are covered, mammograms things like that. But if they say they're going to  give you a 20% copay it's over. And in Indiana we had 39 plans available and only three were HSA compatible, and most of them were because of the $7,000 deductible was way exceeded. It was in the eights or something. 

So these are not like flexible spending plans. This is your money and you can decide when you want to pay for it, as LadyGeek said you could pay it for nursing home at the end, you could pay for aspirin today if you wanted to. And as LadyGeek mentioned, there's debit cards and all sorts of ways to pay. I heard you can even buy stuff on Amazon and use your HSA..

These are a couple plans that I looked at and this is just to get an idea of, you know, what had an HSA and what were the premiums. This is this year and it reflects the  America Rescue Act and it shows you $20,000, $25,000 income, $50,000, $100,000, and what the ranges are. So this is for a male and a female non-smoker, and sixty years old. I just picked that arbitrarily, but you can see the range here. That at a $25,000 income you could be paying $52 a month in Illinois. Or if you want the Blue Cross Blue Shield Preferred Silver PPO plan you could be paying $1,500 a month, with a $6,000 deductible and a $17,000 family out of pocket. So it pays to shop around and decide what your risks are for your health and how much your income is.

Now we're going to go back to the basic ACA Act that was passed under Obama and that is

that they did things like eliminate cancellation by the insurance companies.They had a lot of subsidy levels between 138% of the federal poverty level. Now here's a case where let's say I had a million dollars in a 401k, a million dollars in a Roth and I had a million dollars underneath

the mattress that was post-tax money, legal. At that point I could spend money just out of the mattress money and technically have no income. In those cases I would be below the 138%and I would have to go on Medicare, which would mean I might be subject to asset tests which I wouldn't pass. 

So you basically would like to, if you had no income from wages, interest, dividends, things like that, you would basically like to take money out of your 401k to get up to the 138% of poverty level to qualify for the ACA plans, and at that point you'd also get a major subsidy. But you do need to be at least at 138% of the federal poverty level.

This is the rule that allowed people to stay on their parents' policies until they're 26. It required employers to cover workers if they had enough employees. So it was the basic ACA Act of,  I forget what year it was actually. 

So there's no coverage limits in the ACA. It used to be they could set a limit of like two million dollars, but some people could reach those limits. They could cancel you. Now they can still cancel you for fraud. So that's the only reason, non-payment and fraud. And as LadyGeek pointed out on the COBRA, you want to make sure you pay it.

I think people know what deductibles and co-pays are. Deductible is what you're going to be paying first. The co-pays, you go to the doctor and they say it's a 30% copay, you'll be paying that. And then some of them have co-insurance up to limits. And each of the plans that you have under the ACA will have a benefit coverage limit.

I think I have a page here, and you'll see a page that looks like this, and this will tell you what's covered, what isn't. Some of these plans might have vision and dental and they could be very expensive but you'll find out what it covers.

This is the typical open enrollment. It typically happens November 1st through December 15th. You want to purchase insurance by December 15th for coverage on the first of the year. They've been extended greatly this year because of covid. And the other thing that happens is if you have a qualifying event, which would mean you got married, you had a baby, adopted somebody, placed the child in foster care, got divorced, a spouse passed away, you moved to a new zip code, or you lost your insurance for whatever reason. Could be that you came off Medicaid because you had too much income now.

So these open enrollment periods weren't part of the ACA or the Recovery Act. They were actually an executive order by President Biden to get people to sign up. And there's a new 80/20 rule.  Some of you may have received credits back from your insurance company because they didn't spend enough money. They need to spend 80% of their money on medical care and if they don't, they have to rebate that money to their customers. 

This is a typical benefit plan page. You get this if you go to the healthcare.gov and look up your state and look at a plan. You'll see this. This is what we were talking about earlier about whether you need referrals. If you go to an HMO, with an HMO you're typically assigned a doctor. And that doctor makes all the medical decisions for you.

I'm just afraid-- I don't know this for a fact--that they might have some financial incentive of not referring you. So that's why a lot of people don't like HMOs.  Is anybody on here that has an HMO and likes it?  Just raise your hand if you do. I don't see anybody. 

Okay. Now one of the things that happens with the silver plans is there's extra cost saving sharing reductions that really can lower those plan costs. So typically if you're in the lower income or you're planning your income to be low, for example in my case with if you were to say a million in a Roth. a million in a 401k, and a million under the mattress, I could plan my income theoretically to be in the perfect spot to get the maximum subsidy. And if we went back to that cliff curve we would see that we really want to just barely make it into, we'd really want to be here in this 138%. Some states it could be 100%. I think it's got to do with Medicare expansion. But for two people it would be 238% and I don't know if this is 2021.

Some states have their own exchanges and there's a list here. So if you live, for example, in Maryland you would go, just like LadyGeek did, to a private exchange for the state.That the state runs. But all the other states use healthcare.gov.

And this is how you view a plan. So let's do that now.

Okay so let's pretend we live in, we'll say we live in Illinois and I'm going to put a zip code in.  This is near Chicago, and I'll pick the county, it's Cook County. And first thing I'm going to do is say, let's say it's just for me, and I’m going to say I’m 60 years old here, and I'm a male, and I don't smoke or use tobacco and things like that. And I don't have a spouse let's say, and let's say I have that income of, I mean I'm just going to put $25,000 in here. And here's an important question. Did I get any unemployment in 2021?  I'll say no, for now. And I'll look at the plans here. And they're basically telling me that I'm going to get $694 of assistance on my premium. 

So I'll go view the plans and you guys can all do this. And I'm going to add some filters because just to narrow it down I'm just going to look at the silver plans. This is where you get the most subsidies at these levels. If you're higher income and very healthy I would definitely look at the bronze plans here. And if you notice here there's some filters. So if I wanted to be in Blue Cross Blue Shield, if that was important to me. I could filter by this too. I could make sure that it has an HSA. It may turn out there are none. 

So I'm just going to apply these filters and you can see that the cheapest plan I could get is $21 from this Bright Healthcare, which I've never heard of, and the deductible is $1,500 and $2850 on the out-of-pocket. And it tells you kind of co-insurance, generic drugs, specialists, things like that. It includes child dental, but no adult dental. And if I scroll down here you can see the numbers that go up, and there's three pages here, and the most expensive plan is $495 [$459] and that was really because the income was so low okay, and this is Blue Cross and Blue Shield. And also you'd be looking at the other thing, you'd be looking at is this is a PPO plan, so that's why the cost is so high, where that first plan I'm sure was an HMO plan.

So if I go back to the top now, and if you were planning your income and deciding how much to take out of your 401k or do Roth conversions, you would want to do something like this. So I'm going to edit this now and let's say instead of making $25,000, I’m going to do Roth conversions and I decide to convert up to $150,000 or something like that. So I'm going to change this number to $150,000. Now this income is high enough that the 8.5% rule is not going to really play into it. So I'm going to see the real cost here, I’m sure.

And basically it says I don't have any subsidies here because of my income. I decided to convert Roth, do Roth conversions, and now this is the cheapest plan and I want to, I actually--what’s the easiest way to do this--I want to stick with Blue Cross Blue Shield for a second, and I'm going to say just show me these,and you can see that, now this is for a single person, so this is pretty good, pretty high, we're talking $1,300 a person here, 60 years old with $150,000 in income in Illinois. But you're getting a gold PPO plan.  Again if you wanted the cheapest plan--I'm sorry let me go back down here, I think it was what, $569.

Okay so go to healthcare.gov it's got lots of good information. And the other site is brought up by firefighter in the chat. The Kaiser Foundation has excellent papers, calculators, everything so you can do that. So if you want to plan your income.

Now remember in the second example I went to $150,000, the maximum I'm going to pay for my health care is 8.5% but that's for the cheapest silver plans and my Roth conversions really brought my income up. So you have to decide whether you think future taxes are going to be worth those Roth percentages against these premiums. I don't think it's worth it, but you have to figure that out for yourself. 

Okay, all right. As we talked about, you have to estimate your income.  There are differences between the AGI [Adjusted Gross Income] and the MAGI [Modified Adjusted Gross Income] and what those are, are things that like, if you had income from tax-free municipal bonds, those numbers get added back in and it's kind of like it's a bigger number than your than your AGI.

The next thing is, how would you optimize your MAGI income. One of the things to think about is if you're looking at these subsidies, if they mean something to you, you most likely would like to postpone Social Security or a pension if you could. So let's say you had a pension that you could take at 55, 60 or 65, and you knew you were going to have to survive through ACA plans, you should really seriously look at delaying that pension and or Social Security as long as you can.

You also don't want to take withdrawals from your IRA or 401k type accounts because those will count as ordinary income. Again if you're less than 59 and a half there's a penalty for taking out of your 401k, so you want to think about that too.

So the ideal way to do this is to have some post-tax money that you can use and you still want to be able to set your income above the 138% federal poverty level. Some people on the site have talked about timing things, like for example, if you had large capital gains you may want to sell them before you sign up for the ACA, for the year before.

But in many cases you're working a lot at that point, and you have high income at that point, so your marginal rates could be much higher. So you really need to work out a lot of different strategies.

Some people have even talked on the site about getting a home equity loan to tide you over. To keep--if you absolutely need money to survive--but you look at that premium tax credit. Say that's worth a lot, it might be cheaper to take a home equity line of credit to tide you through some of this time to keep the maximum premium. I don't know if that's worth it. 

But sometimes it's worth, depending on what your coverage needs are, if you had one spouse that had a lot of medical needs, it could be that it's better to put one patient on a much better plan, and what I mean by that is lower deductible load, or lower out-of-pocket. And then have the other person on a bronze plan with a very high deductible. And you also have to think about the children. It could be that they're better off, from a cost point of view, on the bronze plan.

So again delay Social Security, spend post-tax money, invest earnings in 401k, that will bring down--any 401k, individual 401k, IRAs--those things will bring your income down.Things like Roth conversions or Roth contributions raise your income, reverse mortgages.

So this is about how different states are covered differently depending on whether they expanded Medicaid. It's a little map of that. Again the Roth conversion, this is what a lot of people ask about, should I do Roth conversions or what's subsidy worth. So you've got to look at this. Roth conversions also raise your income, which can raise your Medicare IRMAA surcharges. So you’ve got to look at that too. And everyone always asks if there is a model out there that takes care of this, and we really haven't seen one.

Here's the IRMAA rate. So I don't know much about this, but apparently if you have, let's say you have made over $500,000, you could be surcharged by $347 a month on your Medicare premiums. So if you're self-employed and you're forced to do this, a couple of strategies would be to keep one spouse on an employer plan if that was possible. 

Again, if you're self-employed, sometimes people have very wild variability in their income and there I would just recommend you estimate on the low side because you always true it up on your final tax return anyway. If you were to have employees, non-spouse, you could do what Carol said, which is come up with a group plan. Could be very expensive but it may give you the doctors you need.

So here's another issue that some people have in retirement. They would like to buy an RV and travel around all the states. One of the things that would be very important if you're going to do that, is you would want to pick a state of residency if that was possible.  Let's say you sold your home and bought an RV, you would want to pick a state that would give you good insurance the way you'd like to get it. And you'd like to have a national provider with a PPO plan. So think about that.

This is again, the limits under the 8.5% rule, that's the idea that there's no more cliff. And these were a couple little issues that happened, and because of this, if you had estimated your income very low and you were really due to pay back a lot of the premium subsidies, you don't have to pay them back because of this American Rescue Act, which is interesting because the people

who decided to pay later, pay up front, are kind of getting screwed on that. Again that rule is a one-time case for this year.

The other thing that can be very helpful is you can run your tax software if you need to calculate some of this stuff. There's a lot of stipulations if you were unemployed during the year and that would help your COBRA as well as basically bring your income down.

Miriam:  Jim, someone asked if you could show the previous slide again.

Jim: Which one would you like me to stop at?

Miriam:  Show the previous slide, to go back.

Jim:  The RV one?

Carol:  I think the one you just had was the one they wanted. That one.

Jim:  So for most of us, you know we're probably, from the poll it looked like people were between 50 and 70 on this call, so we would look maybe in this column here.  So current monthly subsidy that you might have been getting before at $40,000 was $649.  With the new law that President Biden signed it would go up to $766 dollars, and the plan price would go down from $328 to $211, and the lowest price plan would have jumped down from $212 to $95. So some significant savings with this law.

I'm going to post these links into the chat right now for anybody that needs them.

Okay, let's go back to here. So this is the subsidy reconciliation form 1095-A. Has anybody here filled this out? I know my wife has. So this is where you true-up the income. So if you just thought you were--let's say you go and become self-employed, you act very conservatively, think you're going to have an income of $40,000 or $20,000--and you turn out to have this very successful business and you make 10 million dollars. This is where the premium tax credit gets fixed.

This is some information about what they have to pay out. This is kind of a combination between the premiums and the deductible and the total risk to the pool and what the insurance pays, and it's how they determine the bronze, silver.

It really doesn't affect the quality. You could still be in the same network, have the same access the same doctors, but the person in the bronze plan is probably going to be paying less premium but have a very large deductible, versus the platinum plan which has a very large premium but a very low deductible.

So you really have to look at your health care and it changes over the years and new chronic conditions can occur, so you may change your plan. In the beginning of retirement, you might be a bronze person because you want to take the risk yourself and if you start having medical problems, I've kind of looked at them all, and it's kind of a wash anyway, depending on if

you're going to spend the money, you either spend it in premium or deductible, either way it seems like.

So again, platinum will have the highest premiums. Gold, silver.  Now the good thing about silver, you need to look at is it has the highest cost sharing reduction. So the subsidies in the reductions in premium and out of pocket can be very good. So you really want to compare everything to the silver plan, really. And the bronze plan typically has these high deductibles, typically where you want to look at HSAs if possible, and typically if you're more healthy and you're not going to use it.

This is a little summary of the modified adjusted gross income. So you can see that your gross income is wages, dividends, capital  gains. This is kind of like the money that comes in. But if you look at the adjusted– oh, I'm sorry, I thought that was the MAGI there, you can see that the other calculation has things like subtracting alimony, moving expenses, half of self-employment tax– was a little bit more complicated.

Again, taking your AGI plus these things to get to your MAGI. So again student loan interest, half of self unemployment, tuition expenses, contributions to IRAs. These things will tend to reduce it.



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