Obamacare Navigator Confusion

Early Retirement Stopped By ACA Premiums? How To Estimate Your Premium And What Departments Check Your Records

Due to the requirements of ACA someone who is planning to retire prior to their Medicare eligibility will need to consider the cost of mandated health insurance.  As implementation of ACA looms closer the estimated ACA (Affordable Care Act) premiums and procedures  are becoming more clear.  Starting in October 2013 Health Care Exchanges will open for business in all 50 states as state run, partnership (federal & state) or federally operated.  As January 2014 all Americans will be required to carry qualified  insurance policy.  Grandfathered health insurance policies  issued prior to March 23, 2010 will satisfy this requirement, assuming they have not been significantly changed since their issue date, such as a large increase in deductible or coinsurance.

While making retirement plans it has always been prudent to consider and budget for healthcare costs along with the insurance required to pay for those costs.  Some retirees have had employer based options that they could extend up to Medicare eligibility for little or no cost.  These arrangements could end and if not protected by contract could end even for those currently on these plans.  It is important for retirees and future retirees to become familiar with ACA requirements and premiums.

How to calculate your expected ACA Bronze Plan Premium – The Kaiser Family Foundation has an easy to use subsidy calculator here.

Sample Premiums for- Bronze Plan

Couple age 62 with household income of $60,000 and nontobacco users.

  • Household income in 2013: 387% of poverty level
  • Unsubsidized Health Insurance Premium in 2013: $17,342
  • Receive a government tax credit subsidy of up to:$11,642 (which covers 67% of the overall premium)
  • Amount they pay for the premium: $5,700

Same couple with $63,000 annual household income

  • Household income in 2013: 406% of poverty level
  • Unsubsidized Health Insurance Premium in 2013: $17,342
  • Eligible for a subsidy: None
  • Amount they pay for the premium: $17,342

With only $3000 more income annually the premium per couple rises from $5,700 to $17,342 per year for the most basic plan. 

For those who retire early or those who have already retired early will need to consider the new ACA requirements very carefully.  Those who have retired and are not yet 65 may need to go back to work for health benefits. For those considering early retirement; might want to reconsider before it is too late.

At the very least income per year will need to be managed very carefully.  The couple above with $60,000 income- after insurance premium net $54,300 .  Where as the second couple only nets $45,658 after paying for their insurance even though they had $63,000 to start with.

Keep in mind the Government pays the subsidy to the  insurance company at time of application so if, as in the example above income by year’s end crept up by $3000.  They would have to pay the premium difference of $11,642 in addition to any other income taxes due.  Quite an unexpected expenditure.  Also should you have any medical expenses the Bronze plan require each person’s out of pocket expenses to be $6,400 before they will be covered 100%; capped at $12,800 per family.

There are going to be “navigators” hired to help people navigate through the health exchange.  In the state of WI 10 navigators will be assigned for the entire state.  By law these navigators cannot make recommendations they only help navigate the exchange or “marketplace”.

Each health insurance applicant will checked by the

  • IRS for income to determine their subsidy if any.
  • Department of Homeland Security for citizenship and residency requirements
  • Social Security Administration for identity.

Tim Barton ChFC

3 Responses

  1. ss

    My husband and I are early retired due to company we worked at closing. We are earning yearly about 5K in interest and 3K a year from part time job. We are selling off our stock investments to live. It takes us about 25-30K a yr to live. In Jan 2014 husband will take early social security. What is considered income in calculating ACA insurance? I assume capital gains, interest and earned income but what about sales of assets and savings? What about social security payments? Should he wait on taking social security until 65 if that money is counted as income? Currently we have been rolling over IRA money to roth IRA and paying the taxes. Does this make that IRA money income for ACA eligibility?

    1. The IRS is enforcing ACA, it is my understanding all net taxable income is used to determine the ACA premium subsidies. According the Kaiser Family Foundation income over $62,000 fazes out the premium subsidy. Many early retiree clients are trying to figure out how to keep their income below $60,000. If an income mistake is made at time of ACA application and the income exceeds the subsidy the taxpayer will be have to pay back the excess along with some very stiff tax penalties. This audit could happen years later.
      The press is reporting some will simply declare less income in order to get a higher subsidy. DO NOT cheat on the income the IRS will eventually audit everyone’s premium subsidy by monitoring their bank accounts.

      SS income is taxable in many cases. Generally if you have the money for income without SS it is better to wait as long as possible before taking it. At least until full retirement age to avoid the early penalty and if possible age 70 to get a guaranteed increase of 8% per year.

      1. Rick Holcomb

        For Clarification, does your comment “… all net taxable income is used to determine the ACA premium subsidies” imply that Traditional IRA to ROTH IRA Conversions ARE included as Income for ACA eligibility!?


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