How will cancelling ACA healthcare mid year effect subsidy?

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camper1
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How will cancelling ACA healthcare mid year effect subsidy?

Post by camper1 » Thu Feb 28, 2019 9:45 am

I have looked everywhere and even called Healthcare.gov and can't get a straight answer. In fact, they had no clue what I was asking ( just kept reading a script of how subsidy is determined) Hopefully someone here was in similar situation and can help me out.

Wife lost job which included family healthcare for us and 2 kids in Feb. I am self employed and no access employer health care. We are on COBRA until end of April. My wife does not plan on immediately working full time and may choose to just do part time consulting. If she chooses to not go back full time we are eligible for ACA subsidy for keeping income under around $100,000 for family of 4. From what I understand In this scenario, at the end of the year we make any adjustment to subsidy based on actual income. I understand this scenario.

However, can someone explain how this would effect our eligibility:

Start ACA in April with subsidy based on projected income under $100,000
In September wife takes full time job with HC benefits. Start employee HC plan
Cancel ACA plan in September due to qualifying event (total of 6 months on ACA then cancel)
Income from Sept to end of year (while not on ACA) causes income for year to go over $100,000

At the end of the year while doing taxes, how will this affect the subsidy received while on ACA from April to Sept? Does the end of year tax form account for the fact that ACA was stopped in Sept. and any income earned after cancellation is not counted? Or will we have to use income earned after cancelling ACA and have to pay back subsidy received before we cancelled?

It would seem to me this would be a fairly common scenario, but I can't seem to get an answer. Hopefully someone here on ACA has been through the end of year forms and may be able to help!

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desertbandit442
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Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by desertbandit442 » Thu Feb 28, 2019 9:51 am

Based on income for year, so will likely have to pay back.

marcopolo
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Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by marcopolo » Thu Feb 28, 2019 9:52 am

All income for the year is counted towards MAGI.
In the scenario you described, you would not be eligible for any premium tax credits (subdidies). Any subsidy paid up front would also have to be returned when filing taxes.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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munemaker
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Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by munemaker » Thu Feb 28, 2019 10:01 am

You can cancel in the middle of the year and keep your subsidy if your income for the year is in line with your estimate at the beginning of the year.

If, like you, you have additional income beyond your estimate, then it will be factored in, and you will receive less or no subsidy, depending on the amount of income. The government figures if you have the income, you can pay full price for the insurance.

SeekingAPlan
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Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by SeekingAPlan » Thu Feb 28, 2019 11:43 am

Are you saying you started Cobra in Feb 2019? If yes, unless I am missing something you cannot switch to ACA until Jan 2020 as you will not have a qualifying event in April.

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camper1
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Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by camper1 » Thu Feb 28, 2019 3:59 pm

SeekingAPlan wrote:
Thu Feb 28, 2019 11:43 am
Are you saying you started Cobra in Feb 2019? If yes, unless I am missing something you cannot switch to ACA until Jan 2020 as you will not have a qualifying event in April.
Actually, we are covered until April as part of her separation package. From what I understand we can then either continue with COBRA coverage ( at full cost) or change insurance due to "qualifying event".

Sounds like from the responses that even if we are only on ACA for a few months in 2019 that going over the subsidy cliff later in the year will require us to repay any subsidy we received, even though we were back on company provided HC.

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Watty
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Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by Watty » Thu Feb 28, 2019 4:19 pm

camper1 wrote:
Thu Feb 28, 2019 3:59 pm
Actually, we are covered until April as part of her separation package. From what I understand we can then either continue with COBRA coverage ( at full cost) or change insurance due to "qualifying event".
One thing to watch out for is that if you switch to an ACA policy you will have to start your 2019 deductible all over again.

When she starts the new job in September you will need to start the deductible for the new policy too.

It varies by company but if she starts in September the health insurance may not start right away. It was years ago so the rules may have changed but I have run into a 90 day delay before healthcare coverage started. You also have to look at the details since it might be something like it is not available until the 1st of the month 90 days after your hire date.

SeekingAPlan
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Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by SeekingAPlan » Thu Feb 28, 2019 5:35 pm

If you start Cobra, even if the former employer pays, you cannot switch to ACA until the next open enrollment period or a new qualifying event. The end of the employer Cobra subsidy is NOT a qualifying event. Please look into this before making a decision.

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Epsilon Delta
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Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by Epsilon Delta » Fri Mar 01, 2019 12:51 am

You could use the 2018 premium tax credit forms and instructions to do pro forma returns. AFAIK there are (as of yet) no major changes for 2019.

https://www.irs.gov/pub/irs-pdf/f8962.pdf
https://www.irs.gov/pub/irs-pdf/i8962.pdf

TropikThunder
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Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by TropikThunder » Fri Mar 01, 2019 1:19 am

SeekingAPlan wrote:
Thu Feb 28, 2019 5:35 pm
If you start Cobra, even if the former employer pays, you cannot switch to ACA until the next open enrollment period or a new qualifying event. The end of the employer Cobra subsidy is NOT a qualifying event. Please look into this before making a decision.
That’s not correct. Per Healthcare.gov:
Can you change from COBRA to a Marketplace plan?
Outside Open Enrollment
If your COBRA is running out:
- Yes, you can change — you qualify for a Special Enrollment Period.
If you’re ending COBRA early:
- No, you can’t change until the next Open Enrollment Period, your COBRA runs out, or you qualify for a Special Enrollment Period another way.
If your COBRA costs change because your former employer stops contributing and you must pay full cost
- Yes, you can change — you qualify for a Special Enrollment Period.
https://www.healthcare.gov/unemployed/cobra-coverage/

Jamesla30
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Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by Jamesla30 » Fri Mar 01, 2019 3:28 am

How much would it cost to continue COBRA per month?

How much would the ACA plan cost per month, and what amount of subsidy would you receive? Keep in mind it's a sliding scale, not all or nothing. You might use the calculator to estimate the subsidy at a few different levels of expected income.

Let me know and I can let you know what I might do.

SeekingAPlan
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Joined: Sat Dec 12, 2015 1:03 pm

Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by SeekingAPlan » Fri Mar 01, 2019 5:09 am

TropikThunder wrote:
Fri Mar 01, 2019 1:19 am
SeekingAPlan wrote:
Thu Feb 28, 2019 5:35 pm
If you start Cobra, even if the former employer pays, you cannot switch to ACA until the next open enrollment period or a new qualifying event. The end of the employer Cobra subsidy is NOT a qualifying event. Please look into this before making a decision.
That’s not correct. Per Healthcare.gov:
Can you change from COBRA to a Marketplace plan?
Outside Open Enrollment
If your COBRA is running out:
- Yes, you can change — you qualify for a Special Enrollment Period.
If you’re ending COBRA early:
- No, you can’t change until the next Open Enrollment Period, your COBRA runs out, or you qualify for a Special Enrollment Period another way.
If your COBRA costs change because your former employer stops contributing and you must pay full cost
- Yes, you can change — you qualify for a Special Enrollment Period.
https://www.healthcare.gov/unemployed/cobra-coverage/
Thank you. Good to know as that is not what I was told.

Topic Author
camper1
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Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by camper1 » Sun Mar 03, 2019 8:47 pm

Jamesla30 wrote:
Fri Mar 01, 2019 3:28 am
How much would it cost to continue COBRA per month?

How much would the ACA plan cost per month, and what amount of subsidy would you receive? Keep in mind it's a sliding scale, not all or nothing. You might use the calculator to estimate the subsidy at a few different levels of expected income.

Let me know and I can let you know what I might do.
COBRA will be about $1700/month after first 3 months. For the first 3 months it will be about $600 because of employer is still subsidizing. I did a quick search on healthcare.gov and see that family of 4 plans run $600-$800/ month if we stay under the cliff amount of around $100,000. If we go over the cliff (if she takes full time job later this year) plans run around $1700-1800/Month.

Another option may be short term plan or health share program for the months between employer subsidy coverage and end of year open enrolment or until employer health care is available if she chooses full time work.

Any comments on the idea of using short term or healthshare plan after employer subsidy ends and either going to new employers plan if she chooses full time work or starting 2020 ACA plan? Either way we would put off any "optional" health care (checkups, things that can wait) until we have a new coverage. This would be more of a catastrophic event coverage to fill the gap.

aum
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Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by aum » Sun Mar 03, 2019 10:10 pm

If your COBRA costs change because your former employer stops contributing and you must pay full cost
- Yes, you can change — you qualify for a Special Enrollment Period.
I had done that in May 2017. As part of separation package, company provided six months of health insurance and paid 2/3 of the cost. Remainder of 12 months of COBRA, I had to pay the full cost which was about 1800/month for family of five. At end of six months, I called healthcare.gov, explained my situation, told them that I can not afford full COBRA payment without company subsidy and they enrolled me in. I made sure my MAGI was below cliff and got the govt subsidy.

OP: At year end, you will get 1095-A form which you'll file. Subsidy is strictly based on Obamacare MAGI(AGI+Tax exempt interest if any + any income your kids earned) which has to be less than 400% federal poverty level. For family of four that will be $100,400 for the year 2019. There are several ways you can have above the line deductions to reduce your AGI which will lower Obamacare MAGI ---

1) If you had HDHP you can open and fund HSA and reduce $7K of AGI
2) Traditional IRA contribution
3) SInce you're self employed, you can deduct premium paid for health insurance as Self Employed Healthcare premium

This should give summary --> http://laborcenter.berkeley.edu/pdf/201 ... mary13.pdf

So basically, you can get the subsidy if your MAGI is below $100,400 otherwise you'll have to pay premium tax credit back when you file your 2019 taxes.

dcabler
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Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by dcabler » Mon Mar 04, 2019 7:37 am

desertbandit442 wrote:
Thu Feb 28, 2019 9:51 am
Based on income for year, so will likely have to pay back.
Yep. This is what happens. I had a job that I love in September of the year before ACA started. Did Cobra till December. Started ACA in January, with a subsidy. In July, I got a new job, with health benefits. Called ACA and the insurance company I was using to have them cancel my insurance due to new coverage via my job. Was a breeze. As a recall, the ACA rep was especially friendly, congratulating me on the new job, etc. Started my job. When tax season rolled around, there was a form to fill out, and I ended up paying the subsidy back, which was AOK because I was finally WORKING again! :sharebeer

Jamesla30
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Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by Jamesla30 » Wed Mar 20, 2019 2:38 pm

camper1 wrote:
Sun Mar 03, 2019 8:47 pm
Jamesla30 wrote:
Fri Mar 01, 2019 3:28 am
How much would it cost to continue COBRA per month?

How much would the ACA plan cost per month, and what amount of subsidy would you receive? Keep in mind it's a sliding scale, not all or nothing. You might use the calculator to estimate the subsidy at a few different levels of expected income.

Let me know and I can let you know what I might do.
COBRA will be about $1700/month after first 3 months. For the first 3 months it will be about $600 because of employer is still subsidizing. I did a quick search on healthcare.gov and see that family of 4 plans run $600-$800/ month if we stay under the cliff amount of around $100,000. If we go over the cliff (if she takes full time job later this year) plans run around $1700-1800/Month.

Another option may be short term plan or health share program for the months between employer subsidy coverage and end of year open enrolment or until employer health care is available if she chooses full time work.

Any comments on the idea of using short term or healthshare plan after employer subsidy ends and either going to new employers plan if she chooses full time work or starting 2020 ACA plan? Either way we would put off any "optional" health care (checkups, things that can wait) until we have a new coverage. This would be more of a catastrophic event coverage to fill the gap.
I'd probably go the ACA route as if you don't go over the income threshold then you'll save a good amount of money. And if you do, then you would have still paid the same as COBRA. The only advantage to COBRA is I assume it is better insurance (lower deductibles/limits), so if you usually go over your deductibles, then it might be worth considering.

Jamesla30
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Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by Jamesla30 » Wed Mar 20, 2019 2:39 pm

Jamesla30 wrote:
Wed Mar 20, 2019 2:38 pm
camper1 wrote:
Sun Mar 03, 2019 8:47 pm
Jamesla30 wrote:
Fri Mar 01, 2019 3:28 am
How much would it cost to continue COBRA per month?

How much would the ACA plan cost per month, and what amount of subsidy would you receive? Keep in mind it's a sliding scale, not all or nothing. You might use the calculator to estimate the subsidy at a few different levels of expected income.

Let me know and I can let you know what I might do.
COBRA will be about $1700/month after first 3 months. For the first 3 months it will be about $600 because of employer is still subsidizing. I did a quick search on healthcare.gov and see that family of 4 plans run $600-$800/ month if we stay under the cliff amount of around $100,000. If we go over the cliff (if she takes full time job later this year) plans run around $1700-1800/Month.

Another option may be short term plan or health share program for the months between employer subsidy coverage and end of year open enrolment or until employer health care is available if she chooses full time work.

Any comments on the idea of using short term or healthshare plan after employer subsidy ends and either going to new employers plan if she chooses full time work or starting 2020 ACA plan? Either way we would put off any "optional" health care (checkups, things that can wait) until we have a new coverage. This would be more of a catastrophic event coverage to fill the gap.
I'd probably go the ACA route after your 3 months of discounted COBRA. If you don't go over the income threshold then you'll save a good amount of money. And if you do, then you would have still paid the same as COBRA. The only advantage to COBRA is I assume it is better insurance (lower deductibles/limits), so if you usually go over your deductibles, then it might be worth considering.

michaeljc70
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Re: How will cancelling ACA healthcare mid year effect subsidy?

Post by michaeljc70 » Wed Mar 20, 2019 10:08 pm

I'd really try to decide if your wife will go back to work or not full time (aka you will be under the ACA cliff). The employer plan is probably better than the ACA plan. How do they compare? The networks are generally narrower on ACA plans. I went through this last year and the COBRA plan was much better than an ACA plan of the same cost. Short-term plans tend to have a lot of limitations. It has been discussed on Bogleheads a good amount. Look at the plan closely if going that route. There has been a good amount of discussion on medi-share plans too. Those aren't insurance though.

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