2015 ACA Obamacare Income Qualification Chart

Open enrollment for obtaining health insurance from the Affordable Care Act-sponsored Health Insurance Marketplace for the 2015 calendar year starts on November 15th, 2014. (If you have a qualifying event like marriage, divorce, the birth of a child, loss employment, or loss of insurance then you can enroll at any time.)

Here is a chart to help you determine if you will qualify for lower premiums and/or lower out-of-pocket costs based on your estimated 2015 household income and household size. Get more details and sign-up for e-mail reminders at Healthcare.gov.

aca2015income2

The numbers above are for the contiguous 48 states. Income cutoffs are higher in Alaska and Hawaii.

Estimated prices for 2015 plans are supposed to be available in “early November” but there are only 9 days until enrollment actually starts. I would hope that the actual 2015 premiums will have been finalized by then!

Our Family’s Retroactive COBRA Health Insurance Experience

healthIn order to extend her maternity leave, my wife is taking an unpaid leave-of-absence from her job. Since this means we will lose her employer-paid health insurance and our child has an issue that requires regular doctor visits at this time, we knew that we would have to sign up for COBRA benefits. Our employer-paid coverage ended 9/30. Somehow due to an administrative mishap, we did not get the paperwork until the third week of October, by which we already had four different (expensive!) doctor visits.

I have written before about the ability to get retroactive COBRA benefits, so I knew that we would be okay:

You have 60 days after you lose your benefits to elect to pay for COBRA coverage. However, even if you enroll on Day 60, your coverage is retroactive to Day 1. Of course, you’ll have to pay the retroactive premiums for that period. Thus, you could technically waive your COBRA coverage initially, and then wait to see if you incur any medical bills.

Her employer uses the big benefit provider Conexis to manage their COBRA administration. We were able to make our COBRA plan elections online and even paid the premiums online via electronic bank transfer. The process was much smoother than I thought it would be; some parts of the healthcare industry are just so archaic.

Our coverage was retroactive to 10/1, and all of our healthcare providers had to resubmit their claims. One thing that I didn’t expect what that we had to get new insurance card and insurance numbers for everyone in the family. I was also surprised that we were able to pick and choose amongst our original workplace options (Dependent coverage, HMO, PPO, etc.) I thought that COBRA meant we would just continue on with our exact same plan as before. Just wanted to share our story in case anyone was wondering how it worked.

Affordable Care Act (Obamacare) and Out-of-Pocket Cost Subsidies

healthPlease consider this an addendum to my previous post on Early Retirement and The Affordable Care Act.

In addition to subsidies on health insurance premiums, the Affordable Car Act (ACA) provides subsidies on out-of-pocket costs to qualifying households when buying insurance from an exchange. The income requirements are more restrictive, but they further improve affordability for those with lower incomes by reducing their deductibles, copayments, coinsurance, and total out-of-pocket maximum limits.

Income eligibility requirements. In this case, the income cutoffs are 200% and 250% of the Federal Poverty Level (FPL). Modified adjusted gross income (MAGI) is used for income. Modified takes your AGI (Line 4 on a Form 1040EZ, Line 21 on a Form 1040A, or Line 37 on a Form 1040) and adds back in certain deductions like non-taxable Social Security income, foreign income, and tax-exempt interest.

For reference, here are the 2014 FPLs by household size listed with the 200% and 250% levels, as calculated by the Department of Health and Human Services (for 48 contiguous states, higher in Alaska and Hawaii).

2014 POVERTY GUIDELINES FOR THE 48 CONTIGUOUS STATES AND THE DISTRICT OF COLUMBIA
Persons in
family/household
100% FPL 200% FPL 250% FPL
1 $11,670 $23,340 $29,175
2 $15,730 $31,460 $39,325
3 $19,790 $39,580 $49,475
4 $23,850 $47,700 $59,625
5 $27,910 $55,820 $69,775

 

Deductible, copayment and, coinsurance subsidies. These cost-sharing subsidies are only available if you start with buying a Silver plan. Now, the idea of a Silver plan is the insurer will pay 70% of covered health expenses across the entire population, leaving the insured to pay 30%. However, if your income is 150% FPL or less, you’ll only have to pay 6% of covered health expenses. If your income is between 150% and 200% FPL, you’ll only pay 13%. If your income is between 200% and 250% FPL, you’ll have to pay 27%.

Each plan will have a different way of implementing this overall requirement, usually by tweaking deductibles and copays. These may be referred to as Cost Sharing Reduction (CSR) plans.

Out-of-pocket maximum subsidies. The Affordable Care Act limits your maximum out-of-pockets expenses per year. Once you reach this limit, your insurance will pay for all of your covered healthcare expenses for the rest of the year. However, if you are under 200% or 250% FPL, these limits are even lower.

Modified Adjusted Gross Income 2014 maximum annual out-of-pocket cost, individual 2014 maximum annual out-of-pocket cost, family
100-200% FPL $2,250 $4,500
200-250% FPL $5,200 $10,400
> 250% FPL $6,350 $12,700

 

Note that you may read conflicting information elsewhere about reduced out-of-pocket limits being available to anyone at 400% FPL or less. That information is outdated (source). Those numbers were in the original law, but it was since revised to what is shown above.

Recap. These subsidies for out-of-pocket expenses provide another important income cutoff point to consider when purchasing health insurance independently from an employer plan. Your total healthcare expenses could vary significantly if your income is just $1 over the cutoff points of 200%, 250%, and 400% FPL.

More: Healthcare.gov (really wish this site was better), Kaiser Family Foundation, UC Berkeley Labor Center

Early Retirement and The Affordable Care Act (Obamacare)

healthBy now, we’ve all read things about the Patient Protection and Affordable Care Act (PPACA), also known as Obamacare. One concern is the PPACA’s impact on early retirees, or really anyone who wants to buy their own non-employer health insurance? The PPACA is eliminating many high-deductible health plans which many such folks previously used due to their low premiums. But at the same time, many others who didn’t pass the medical screening were faced with astronomical premiums if you could get coverage at all. Could the PPACA actually improve the overall affordability of comprehensive health care?

I’m not going to claim I completely understand everything about the PPACA and I certainly won’t cover it all here, I can only try to provide concise a few examples with sources.

What do I get? First, let’s recap some basics about the insurance you can buy on the new exchanges. You can no longer be denied insurance due to your health history, minimum coverage levels were set for all plans, and certain preventative care services are now free without copays. Taken from the PPACA Wikipedia page:

Guaranteed issue prohibits insurers from denying coverage to individuals due to pre-existing conditions, and a partial community rating requires insurers to offer the same premium price to all applicants of the same age and geographical location without regard to gender or most pre-existing conditions (excluding tobacco use). […]

Under the law’s authorization, Secretary of Health Kathleen Sebelius issued a set of defined “essential health benefits”[22] that all new insurance plans have to include. […] Among the essential health benefits, preventive care, childhood immunizations and adult vaccinations, and medical screenings are covered by an insurance plan’s premiums, and cannot be subject to any co-payments, co-insurance, or deductibles.

Am I eligible for a subsidy? Subsidies for healthcare premiums are determined by your income relative to the Federal Poverty Level (FPL). Here are the 2014 FPLs by household size, as calculated by the Department of Health and Human Services (for 48 contiguous states, higher in Alaska and Hawaii).

2014 POVERTY GUIDELINES FOR THE 48 CONTIGUOUS STATES AND THE DISTRICT OF COLUMBIA
Persons in family/household 100% FPL 400% FPL
1 $11,670 $46,680
2 $15,730 $62,920
3 $19,790 $79,160
4 $23,850 $95,400
5 $27,910 $111,640

 
Your household’s modified adjusted gross income (MAGI) must be below 400% FPL in order to receive a subsidy. As long as you are below 400% FPL, your health insurance premiums cannot exceed 9.5% of your income. Modified takes your AGI (Line 4 on a Form 1040EZ, Line 21 on a Form 1040A, or Line 37 on a Form 1040.) and adds back in certain deductions like non-taxable Social Security income, foreign income, and tax-exempt interest.

You may be surprised that a family of four could have an MAGI of $95,000 and still be eligible for a subsidy.

How much will it cost for a couple with no kids? Let’s assume a couple, both age 40, California resident, and $60,000 MAGI. This is under 400% FPL so they get a subsidy. California’s exchange website is CoveredCA.com. Here are results for a middle-of-the-road Silver plan for the couple with $60,000 income:

ppaca0

Let’s pick the cheapest Blue Cross Blue Shield option:

ppaca0a

The total quoted was $354 a month, or $177 per person, per month after subsidies.

If they made $95,000 a year, then they would have no subsidy and be quoted just the flat $340 per month, per person.

How much will it cost for a family of four? Let’s try 2 adults, both 40 years old, and 2 dependents under 18. They live in California and make $60,000 MAGI a year. Here are results for a Silver plan for the family with $60,000 income:

ppaca1

Let’s pick the cheapest Blue Cross Blue Shield option:

ppaca1a

The total quoted was $354 a month after $326 a month in subsidies. I was somewhat surprised to see that the kids would be covered by Medi-Cal, which is commonly considered a welfare program for low-income families.

Here are results for a Silver plan for the family with $95,000 income:

ppaca2

Let’s pick the cheapest Blue Cross Blue Shield option:

ppaca2a

The total quoted was $676 a month after $342 of subsidy. Most of the difference between the $60,000 income figures was due to the fact that I would have to pay for dependent coverage.

Recap. The primary takeaway is that you should try and get some actual quotes, as you may be surprised by your findings. While you can play around with the California website pretty easily, note that other states may offer a much more frustrating experience at their exchange. Alternatively, you can try a comparison site like eHealthInsurance.com which also has ACA-compliant individual plans. I tried various ages up to the 60s (before Medicare kicks in at 65) and the numbers didn’t rise significantly. If I was a retired couple under 65 and on a budget, I would consider paying under $200 a month per person to be “affordable”. Even if you aren’t retired, these numbers may allow many people to pursue self-employment when otherwise they would be scared to lose employer-linked group health insurance.

The secondary takeaway is that the subsidy is significant, and it may take some planning to qualify for it upon early retirement. If you miss the income cutoff by even a small amount, you end up paying thousands more in premiums. Qualification also looks at your most recent tax return, which may not reflect your current income. If you are transitioning to early retirement, you likely had a high savings rate which means your past income might be high while your income needs in retirement could be much lower. I need to do more research on if you can get the subsidy retroactively in this type of situation.

Update: I wrote an additional post about Affordable Care Act out-of-pocket cost subsidies.

Employer Health Insurance Wellness Programs: Helpful Feature or Profit Center?

healthLike many other folks, I have the majority of my health insurance premiums paid by my employer. I appreciate this and value it as part of my “total compensation” (a fact that they keep reminding me about).

My employer and health insurance provider recently teamed up to offer us a “Wellness program”. These used to be rewards-based programs where you earned points for activities like watching health-education videos, tracking your weight, creating a food journal, etc. You could then redeem those points towards gift cards and such. The idea was to encourage healthy behaviors like eating better and regular exercise with little pushes (“carrots”).

But instead of the “carrot”, it appears they may be switching to the “stick”.

Starting this year, if I don’t complete an in-person health exam, 30-minute online survey, and telephone coaching session annually, then the employer contribution towards my health insurance premiums will be cut by around 40%. For example, if my employer used to contribute $800 a month towards health insurance and I don’t jump through all the hurdles, my out-of-pocket costs will increase by $320 a month. This program is managed by a for-profit publicly-traded corporation called Healthways (ticker HWAY).

Healthways, Inc. provides well-being improvement solutions that help people improve their physical, emotional and social well-being, thereby improving their health and productivity and reducing their health-related costs.

I’m a skeptical person, so this basically translates to “Healthways makes money by making people cost less to insure.” They can do this in two ways:

  • Decrease health insurance claims by improving employee health through cost-effective strategies.
  • Decrease employer-paid premiums by increasing the employee-paid portion for lazy or forgetful employees.

I really don’t know how much these mandated tasks will improve worker health. I suppose some people who never see a doctor on their own may find out they have hypertension or high cholesterol. I know my wife and I pretty much went through the motions (took about 4 hours altogether including travel time) in order to prevent that huge premium hike. It was a financial no-brainer. On the other hand, I would love to see what percentage of workers fail to complete all the tasks by the deadline and how much extra money that brings in.

2013 New Year’s Resolution Follow-Up

It’s time to check up on our 2013 New Year’s Resolutions, which I gave the eloquent theme “Get our crap together” (in case one or both of us dies). I will roughly follow this GYST checklist.

Will and trusts. We are fortunate to have a family friend who is an estate lawyer, and she was able to assist us with creating all of these legal documents. They included:

  • Designating a Durable Power of Attorney for financial and medical decisions, including backups.
  • Designating who would take care of our children, including backups
  • Distribution of assets and personal items. Mostly the money will go into a trust for the kid(s).

Living Will. In case one or both of us are incapacitated, this included:

  • Medical power of Attorney and backup in case of being physical incapacitated
  • Advanced directives
  • Discussions of our wishes with family.

If you can find a good estate lawyer, I would recommend that route as they should have the experience to explain all of the potential issues in your state including being prepared for future law changes. I may try to write about the general issues later once I learn more. I also meant to compare my documents with those produced by services like Legalzoom, but haven’t gotten around to that. As for costs, it will vary depending on how complicated your situation is and how many additional documents you need prepared and reviewed (power of attorney, trust, etc.).

Life insurance. We each have a $1,000,000 term life insurance policy. We think this number is more than adequate given our future expected needs and our existing savings. If one of us dies, the other will ideally not have to work anymore. If both of us die, there should be enough to cover all living expenses plus any educational expenses. To get an idea of cost, try Term4Sale.com.

Short-term disability. We both have short-term disability through our employers. I don’t feel it is necessary to buy an additional individual policy as we have sizable cash reserves.

Long-term disability. Mrs. MMB obtained an individual long-term disability insurance tailored to her profession. This was done through a recommended local insurance broker. I did not pursue buying a long-term disability plan. This is due to the fact that I felt our portfolio is large enough to provide a substantial cushion, and also due to the fact that the physical demands of my job aren’t very high and thus I worried it would be hard to qualify for benefits. Upon further thought, however, I do think I should at least price it out. Another thing to do in 2014.

Financial Education

  • Passwords. All major passwords are stored in an encrypted password manager, with most sites having a unique complex password such that one hacked database won’t affect the security of other accounts. My wife uses it all the time now and is familiar with it.
  • Cash reserves. We have one year of expenses in cash held in an FDIC-insured bank account. This will provide a cushion so that nobody will have to worry about money until life insurance proceeds arrive.
  • Spousal budget education. We did have a few discussions about our current monthly cashflow situation (income and expenses) and what spending levels could be supported with our current portfolio and with the addition of any life insurance proceeds.
  • Spousal investor education. Can my spouse manage the finances without me? Probably, but not as optimally as I’d like. I did very little in this area, and this will be the focus on our 2014 resolutions.

I think we did pretty good in terms of estate planning, but for 2014 I’ll need to be much more proactive in sharing my investing knowledge. I’d like to learn how to make some simple videos and share them on Youtube.

Health Savings Accounts: Defer Reimbursement But Keep Receipts Forever

I always tell myself to do more research on Health Savings Accounts (HSAs), but I lack motivation because we have great health insurance benefits and not even the option of an HSA-eligible high-deductible plan. I know, what a tough problem to have ;).

Still, the benefits of HSAs include tax-deductible contributions, tax-free earnings growth, and tax-free withdrawals when used for qualified medical expenses. Because of this, HSAs are often nicknamed “Healthcare IRAs” and have the potential to be very useful for retirement planning.

A popular tip is to contribute the maximum allowable amount to your HSA every year ($3,300 individual, $6,550 family for 2014) and then invest that tax-deferred money so that you can have a big pile of money eligible for healthcare expenses when you are old and creaky. Some people recommend not taking any withdrawals even if you have current medical expenses and just pay for it out-of-pocket. This way, your contributions will be able to enjoy potentially decades of tax-free growth. There is no maximum allowable balance. There is no mandatory disbursement age.

In addition to all that, the Mad FIentist has a great post on How to Hack Your HSA where I learned that:

  • There is no time limit between when you incur a qualified healthcare expense, and when you can make a tax-free withdrawal of the same amount.*
  • By saving up all your medical receipts but not claiming them, you can effectively defer that qualified withdrawal indefinitely. For example if you pay your $2,000 bill now, you’ll still be able to take out $2,000 tax-free at any time you wish in the future. Meanwhile, that initial $2,000 can be left in there to grow in a variety of investment options, like stock index fund or ETF.

Now, you can still only take out $2,000 tax-free and not whatever that $2,000 grew to. However, as you get older you will likely have more medical expenses including copays or coinsurance payments. HSA money can also be taken out tax-free to pay for COBRA premiums and Medicare deductibles and Part B/C/D premiums. Finally, once you reach age 65, withdrawals for non-qualified reasons will be taxable as income without penalty, acting very similar to a Traditional IRA. If you did that before 65, you’d be subject to a 20% penalty.

This is an intriguing wrinkle, but I’d be wary of keeping my receipt for 20 or 30 years and then trying to redeem them. The IRS states that you “must keep records sufficient to later show that the distributions were exclusively to pay or reimburse qualified medical expenses, that the qualified medical expenses have not been previously paid or reimbursed from another source”. What if the IRS starts asking questions? The doctor’s office that did the procedure may be long gone. How do you prove that you didn’t just Photoshop the receipt?

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California Obamacare Health Insurance Sample Quote

healthOpen enrollment for individually-bought health insurance through state exchanges was supposed to start October 1, 2013, although several states experienced some delays and/or technical glitches. If your state exchange isn’t up and running yet, you can still estimate your premiums and tax credits here.

However, I was able to get a sample quote from the California health exchange website CoveredCA.com using my family’s demographic information.

Income: Above 400% of federal poverty line (roughly $60,000 for a 3-person household), so no tax credits or premium assistance.

Number of people: 3, specifically

  • One 35-year-old male
  • One 35-year-old female
  • One under-18 dependent child

Here are the monthly premiums I was quoted for each plan tier. The lowest quotes for our family situation were all from Blue Shield of California. $628 a month for Bronze, $722 a month for Silver, $910 a month for Gold, and $1,042 a month for Platinum.


(click to enlarge)

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How to Estimate Your Obamacare Health Insurance Premiums and Tax Credits

Open enrollment for “Obamacare” will start October 1, 2013 for coverage that will start January 1, 2014. Find your state’s exchange website at Healthcare.gov. Plans will be broken down into four tiers: Bronze, Gold, Silver, and Platinum. People 30 and under will also have a catastrophic coverage-only option. While the cost of these plans will not be based on any pre-existing conditions, they will depend on factors like age, tobacco use, and geographic location.

Based on approved insurance plans in 48 states, the average individual premium will be $328 monthly for the cheapest Silver option and $249 for the cheapest Bronze option. This is before any tax credits. Subsidies will be provided to households with annual income up to 400% of the federal poverty level (FPL) (~$88,000 for a family of four). Individuals and families earning less than 250% of FPL (~$27,000 for an individual and ~$55,000 for a family of four) are also eligible for additional cost-sharing credits.

You can get a rough estimate of your tax credits by using this Kaiser Family Foundation calculator. Once 10/1 rolls around, check the official exchange website instead. Any subsidies are paid directly to the insurer, and you only have to pay the difference.

The Department of Health and Human Services released a report with premium estimates for the 36 states with federally-supported exchanges (data as of 9/18/13).

For example, in Texas, an average 27-year-old with income of $25,000 could pay $145 per month for the second lowest cost silver plan, $133 for the lowest cost silver plan, and $83 for the lowest cost bronze plan after tax credits. For a family of four in Texas with income of $50,000, they could pay $282 per month for the second lowest cost silver plan, $239 for the lowest silver plan, and $57 per month for the lowest bronze plan after tax credits.

HuffPost condenses the tables into a nice map:

US Income, Poverty, and Health Insurance Stats 1978-2012

The U.S. Census Bureau just released its 2012 annual report on Income, Poverty, and Health Insurance Coverage in the United States. A good recap of the data can be found via the charts in this slide presentation [pdf]. Below is my even-briefer summary.

The US median household income (inflation-adjusted) was roughly $51,000 in 2012. This number has decreased or remained stagnant each year since 2007, and is actually about the same as in 1989.

The 2012 official poverty rate was 15.0 percent, and roughly the same amount of the population was without health insurance coverage, 15.4%.

I think this report provides some perspective about the realities of many families today. As a household that earns more than average, this reminds us that it is quite possible to spend less, as many others already do out of necessity. I am not one of those money gurus that tells everyone that they can get rich and retire early; it will always be very difficult for most people. I want to take advantage of my current situation, save money and use it to create future income and financial freedom, and then hopefully that will enable me to help more people down the road.

Car Insurance Quote Shopping and Credit Checks

After doing a car insurance quote comparison test, I wanted to clear up any confusion regarding applying for car insurance and your credit history. Here’s why you should be able to get quotes from as many insurers as you like without worrying about your credit score.

Will auto insurance companies check my credit?

Probably. According to recent surveys, over 90% of insurance companies (including the top 5 auto insurers) use credit information in their underwriting process. It’s not the only thing, just one of the many things that gets considered like your driving record or accident history. There is a historical correlation between certain behaviors like high credit limit utilization and filing an insurance claim. Insurance scores weigh various factors differently than in standard FICO scores.

However, certain states including California, Hawaii, and Massachusetts do not allow the use of credit information in the underwriting or rating of car insurance. Texas had a similar bill proposed in 2013, but I don’t think it was passed.

When will they check my credit?

Either during the premium quote process, or when you actually pick one and apply for insurance. (Some will also check your credit upon premium renewal.) Out of the four insurance companies that I got quotes from, only Progressive asked for a Social Security number and it was optional (I declined to provide it). However, all of them get permission from you to run a credit check in the fine print when you apply for a quote.

For some companies, the initial quote provided assumes you have acceptable credit, and during the application process they check your credit and may adjust the quote based on any negative information. For example, your report may show a high utilization percentage of available credit.

Will it affect my credit score? Hard vs. soft pulls

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Auto Insurance Quote Comparison Results: State Farm vs. GEICO vs. Allstate vs. Progressive vs. Liberty Mutual

Inspired by reader experiences, I set aside an hour today to obtain auto insurance quotes from the major providers in my area. Insurance companies provide different quotes for “new customers” and “renewals”. Guess which one is usually lower? Also, many insurers choose to focus on specific types of customers such young, high-risk, or low-risk. Finally, I’ve also moved around a lot so I’ve noticed that my quotes change significantly based on where I live. The bottom line is that insurance prices vary for a lot of different reasons, and the only way to know which one is cheapest for you is to compare quotes directly.

It will help to gather the following information first:

  • Personal information. Full name, birthdate, occupation, education level, accident history. None required Social Security Number, but others might.
  • Car information. Many pull this from DMV records automatically. Year, model, date of purchase, own/lease/finance, and security system details.
  • Driving patterns. Is the car primarily used for work/commute/pleasure? How many miles driver per year?
  • Insurance details. Have your current bill handy to know your specific coverages, limits, and deductibles.

The Results!

The totals shown are 6-month premiums for two cars and include liability, personal injury, collision, and comprehensive coverage. Exact same limits and deductibles for all insurers.

  • State Farm (existing) – $665 per 6-month period. This includes various discounts like accident-free, multiple-cars, etc.
  • GEICO – $479. The cheapest quote by far, beating State Farm by $186 per 6 months, or $372 a year. This follows anecdotal evidence that GEICO is pricing their insurance very aggressively for new customers.
  • Allstate – $693. Slightly more expensive than State Farm. I noticed that they have a lot of optional “bells and whistles” features like accident forgiveness. They also offer a discount for electronic bills and auto-pay from bank account. The price shown includes these discounts.
  • Progressive – $849. Way higher than State Farm. Their claim to also provide quotes from other car insurance companies was also very disappointing. They couldn’t provide any other quotes at all. After changing my existing insurer, they said State Farm’s rate would be between $696 – $5,922. Not helpful.
  • Liberty Mutual – $568. Cheaper than State Farm by $194 a year. Not bad but higher than GEICO for me.
  • USAA – ???. I tried as I’ve heard good things about USAA, but I do not have the proper military affiliation to be eligible for their car insurance.

$372 a year is pretty significant. I’m definitely intrigued by this cheap GEICO quote, but I have to do some more research as I also have homeowner’s and umbrella insurance from State Farm and I’m not sure how the total package price would differ.