Help me understand the ACA Cliff

[rec7]

If one man makes 48k and a second man makes 49k is the difference that much with the ACA?

[MichaelRpdx]

Yes, it's huge.
You go from substantial subsidy to none. If you are insuring through the ACA and can control your income this is very important.

Zane Benefits has a chart that shows the threshold for family sizes up to eight persons.

Below 400% of the Federal Poverty level the subsidy change is fairly gradual.

[rec7]

When I use this link https://www.healthinsurance.org/obamaca ... alculator/
To go from 47k to 48k you lose $132 a year where I live

[scrabbler1]

If one man makes 48k and a second man makes 49k is the difference that much with the ACA?

As someone who has barely qualified for an ACA subsidy the last 3 years, I will likely not qualify for one in 2017 because of a huge, unexpected spike in my income (due to a large LTCG distribution) later this month, boosting my income over the MAGI limit to receive a subsidy.

The subsidy I would have qualified for will be around $730. This is based on the difference between the maximum HC contribution of ~$4,270 ($48,200 x 0.0969) and the estimated SLCSP of ~$5,400. For me, the cliff is the $730 subsidy I will no longer qualify for. If the SLCSP is higher, the cliff will be higher, too.

[curmudgeon]

There are wild amounts of variations in how much subsidy you might get. Depends on what plans are available in your state, income, your age (older has higher premiums), phase of the moon etc. In my case we are a married couple, so the cliff is around $64K. Next year if we go over the cliff, we would lose about $16,000 in subsidy (depending on the plan we choose).

[rec7]

From what I can tell it looks like a very gradual cliff as your income goes up.

[rec7]

Bumping

[MP123]

When I use this link https://www.healthinsurance.org/obamaca ... alculator/
To go from 47k to 48k you lose $132 a year where I live

But what happens when you go to $49k?

I don't know where you live but you can also try the US averages here: https://www.kff.org/interactive/subsidy-calculator/

Once you go over the cliff there is no subsidy and you have to pay the full premiums. They can be very high especially in your 50s and early 60s.

[pangea33]

I have employer sponsored health coverage, but I wanted to see what the cliff looks like in my state.

Married couple in NC with no kids, M=43 F=46.

Silver plan at $64,900 ~ $300 a month for both.

Silver plan at $65,000 ~ over $1100 a month.

[rec7]

I have employer sponsored health coverage, but I wanted to see what the cliff looks like in my state.

Married couple in NC with no kids, M=43 F=46.

Silver plan at $64,900 ~ $300 a month for both.

Silver plan at $65,000 ~ over $1100 a month.

I am not seeing these big jumps but I am on the lowest cost bronze plan.

[Dinosaur Dad]

It's huge here in Connecticut...Bronze plan for family of three is roughly $23,000.

[rec7]

OK I ran the numbers again at 48k I was at 122 at 49k it went to 431 for the cheapest bronze. It is a $309 difference. That is a big deal.

[munemaker]

If one man makes 48k and a second man makes 49k is the difference that much with the ACA?

Yes, the amount is "that much" and exactly how much depends partly on where you live.

Here is a good article on optimizing the ObamaCare subsidies:
http://gocurrycracker.com/obamacare-opt ... #more-5063

Here is a link to an ObamaCare subsidy calculator that you may find useful:
https://www.kff.org/interactive/subsidy-calculator/

[FireHorse]

It all depending on the income. then how do we define income?
We understand that SS is an income? Is dividend/interest an income? Is stock gain an income?

[neurosphere]

It all depending on the income. then how do we define income?
We understand that SS is an income? Is dividend/interest an income? Is stock gain an income?

Here ya go: https://www.healthcare.gov/glossary/mod ... come-magi/

[scrabbler1]

It all depending on the income. then how do we define income?
We understand that SS is an income? Is dividend/interest an income? Is stock gain an income?

For the purpose of determining an ACA subsidy, income includes tax-exempt interest, cap gains and CG distributions, and qualified dividends, as well as the untaxed portion of SS. It's called MAGI, or Modified Adjusted Gross Income. A huge LTCG distribution will push me over the cliff, sadly.

[MP123]

OK I ran the numbers again at 48k I was at 122 at 49k it went to 431 for the cheapest bronze. It is a $309 difference. That is a big deal.

And those premiums are for a relatively young person. Try them again for a 60 year old.

[ARB57]

Hamilton County, Florida (I don't live there, but thought about moving there once)

MAGI $48,200 Annual Subsidy $16,068
MAGI $48,300 Annual Subsidy $0

This is for a 60 something male.

[HoosierJim]

You should say also there is a reverse "cliff" if you adjust your 401K, SEP, Individual 401k, IRA, tax loss harvest , etc and a second order effect if you choose a plan that is HSA compatible and you use it.

Look at previous Boglehead post: Ways to reduce magi

[munemaker]

It all depending on the income. then how do we define income?
We understand that SS is an income? Is dividend/interest an income? Is stock gain an income?

For ObamaCare, income is defined as MAGI (modified adjusted gross income). Take your AGI (adjusted gross income), the last line on form 1040 front page, and add any tax exempt interest you earned to it.

[munemaker]

From what I can tell it looks like a very gradual cliff as your income goes up.

When you hit 400% of Federal Poverty Level (FPL), you reach the cliff, and there is nothing gradual about it.

[rec7]

From what I can tell it looks like a very gradual cliff as your income goes up.

When you hit 400% of Federal Poverty Level (FPL), you reach the cliff, and there is nothing gradual about it.

I understand now I am not use to financial cliffs. Very tricky when selling funds. I miss the old days when health insurance and selling funds were two different transactions.

[cookymonster]

Bumping an old thread....

I was on healthsherpa.org looking at the cost of various plans, and the size of the subsidy, in places I may relocate in the next year. I understand that the size of the subsidy can vary by location due to various convoluted factors. However, what puzzled me is that although I would get a subsidy where I live now, when I put in a projected income of $48,500 in a couple of states (not AK or HI), it said this income was too high to get a subsidy in those location. Is this true? If so, is there any reason why 400% of FPL exceeds the cliff in some counties but not in others? I tried to figure this out through online searches but came up empty.

[furwut]

Bumping an old thread....

I was on healthsherpa.org looking at the cost of various plans, ...

First off I wouldn’t rely on healthsherpa being accurate. Use Healthcare.gov or the corresponding state exchange (caveat emptor: my state exchange has gotten in wrong as well).

If your income is below 400% FPL you are expected to only contribute some percentage of your income towards a silver level plan (though you are free to pay more or less for a different plan tier). Call this amount X.

To figure the subsidy X is compared to a reference Silver plan in the marketplace. This is the so called Second Lowest Cost Silver Plan (SLCSP).

If SLCSP > X then you get the difference as a subsidy which you can apply to towards any plan.

If however, X >= SLCSP, then medical costs are low in that area and no subsidy is needed.

[cookymonster]

Bumping an old thread....

I was on healthsherpa.org looking at the cost of various plans, ...

First off I wouldn’t rely on healthsherpa being accurate. Use Healthcare.gov or the corresponding state exchange (caveat emptor: my state exchange has gotten in wrong as well).

If your income is below 400% FPL you are expected to only contribute some percentage of your income towards a silver level plan (though you are free to pay more or less for a different plan tier). Call this amount X.

To figure the subsidy X is compared to a reference Silver plan in the marketplace. This is the so called Second Lowest Cost Silver Plan (SLCSP).

If SLCSP > X then you get the difference as a subsidy which you can apply to towards any plan.

If however, X >= SLCSP, then medical costs are low in that area and no subsidy is needed.

Thanks, that clears up the confusion!