Transition to ACA - Avoiding Health care Coverage gap

[Whitefalcon]

Lets say I plan on retiring in February 1, 2025 at age 61.
In October 2024 I signup for the annual company health care single coverage, which becomes effective Jan 1 2025

1. At what date should I signup for ACA health care Coverage ?
a. assume Cobra is more expensive
2. Can I use cobra as a bridge until ACA coverage becomes effective?

[mhc]

Your state should have people who can answer all these questions. 6 months before I retired last year, I signed up for a free 30 minute consultation to go over my options and to answer my questions. It was very helpful. I had a lot of questions that were specific to the plans available in my area. The counselor was very helpful. The counselor also pointed out things I didn't even know to ask. We spoke for almost an hour. Take a look at the exchange to see what is available to you.

[retired@50]

Lets say I plan on retiring in February 1, 2025 at age 61.
In October 2024 I signup for the annual company health care single coverage, which becomes effective Jan 1 2025

1. At what date should I signup for ACA health care Coverage ?
a. assume Cobra is more expensive
2. Can I use cobra as a bridge until ACA coverage becomes effective?

One easy way around this is to start ACA coverage on January 1st by using the open enrollment period in the fall of the prior year. It would lead to "double coverage" for one month, or you could simply opt out of the employer coverage during the same open enrollment period the prior autumn.

If you want to orchestrate a clean hand-off between the employer policy and ACA, then you'd sign up for ACA in late December, or early January. I suspect the ACA sign up and approval would have to be completed by January 15th for coverage starting February 1st.

You could start nosing around at healthcare.gov or your own state's ACA website if they have one. Some states run their own show, and others rely on the Federal site.

Regards,

[Whitefalcon]

Lets say I plan on retiring in February 1, 2025 at age 61.
In October 2024 I signup for the annual company health care single coverage, which becomes effective Jan 1 2025

1. At what date should I signup for ACA health care Coverage ?
a. assume Cobra is more expensive
2. Can I use cobra as a bridge until ACA coverage becomes effective?

One easy way around this is to start ACA coverage on January 1st by using the open enrollment period in the fall of the prior year. It would lead to "double coverage" for one month, or you could simply opt out of the employer coverage during the same open enrollment period the prior autumn.

If you want to orchestrate a clean hand-off between the employer policy and ACA, then you'd sign up for ACA in late December, or early January. I suspect the ACA sign up and approval would have to be completed by January 15th for coverage starting February 1st.

You could start nosing around at healthcare.gov or your own state's ACA website if they have one. Some states run their own show, and others rely on the Federal site.

Regards,

Thanks for the suggestions

I do plan on talking to an Agent/broker in early fall of this year, hopefully they can walk me through some of the decisions. My state Minnesota, has a very comprehensive ACA website that I have started to explore. I was just wondering if any Bogleheads had personal experience or insider knowledge

On other thing I am trying to work out is Potential ACA subsidies for 2025. If I applied during open enrollment in 2024, I assume they will look at my most recent taxes to determine premium estimates. Once retired in 2025 I believe I could appeal the cost of ACA premiums, based on being retired and maybe provide an estimate of my income.. I suspect this could be complicated. If on the other hand I wait until I am actually retired before applying for ACA, It May be less complicated, but that's strictly a guess.

Another factor in my decision, based on preliminary research if I DO NOT qualify for ACA Premium reduction via tax credits in 2025, Cobra for single coverage would be close to the cost of a Silver plan through ACA. For ACA premiums 2026 and beyond.... will have to wait and see what congress decides

[retired@50]

Lets say I plan on retiring in February 1, 2025 at age 61.
In October 2024 I signup for the annual company health care single coverage, which becomes effective Jan 1 2025

1. At what date should I signup for ACA health care Coverage ?
a. assume Cobra is more expensive
2. Can I use cobra as a bridge until ACA coverage becomes effective?

One easy way around this is to start ACA coverage on January 1st by using the open enrollment period in the fall of the prior year. It would lead to "double coverage" for one month, or you could simply opt out of the employer coverage during the same open enrollment period the prior autumn.

If you want to orchestrate a clean hand-off between the employer policy and ACA, then you'd sign up for ACA in late December, or early January. I suspect the ACA sign up and approval would have to be completed by January 15th for coverage starting February 1st.

You could start nosing around at healthcare.gov or your own state's ACA website if they have one. Some states run their own show, and others rely on the Federal site.

Regards,

Thanks for the suggestions

I do plan on talking to an Agent/broker in early fall of this year, hopefully they can walk me through some of the decisions. My state Minnesota, has a very comprehensive ACA website that I have started to explore. I was just wondering if any Bogleheads had personal experience or insider knowledge

On other thing I am trying to work out is Potential ACA subsidies for 2025. If I applied during open enrollment in 2024, I assume they will look at my most recent taxes to determine premium estimates. Once retired in 2025 I believe I could appeal the cost of ACA premiums, based on being retired and maybe provide an estimate of my income.. I suspect this could be complicated. If on the other hand I wait until I am actually retired before applying for ACA, It May be less complicated, but that's strictly a guess.
...

They might look at your most recent (2024) income, BUT, they should really be asking for an estimate of your 2025 income since that's when you'll be covered. If they do ask about your 2024 income, you can let them know that you're in for a drastic change in your income level due to leaving your job in Feb. 2025. It's certainly possible that you'll have to write a letter to explain the details, but that's not really a problem if you're being truthful about your estimated income. Just be sure to include all other forms of income you expect to receive in 2025. Dividends, interest, etc.

For more on what income counts, see link: https://www.healthcare.gov/income-and-h ... come/#magi

Regards,

[cjcerny]

Voluntary loss of employment is not considered a life event for ACA plans, meaning you will likely not be able to start coverage on any day of the year other than January 1. Get fired and you can start coverage February 1.

[marcopolo]

Voluntary loss of employment is not considered a life event for ACA plans, meaning you will likely not be able to start coverage on any day of the year other than January 1. Get fired and you can start coverage February 1.

This is not true!
Where are you getting this?

[marcopolo]

Lets say I plan on retiring in February 1, 2025 at age 61.
In October 2024 I signup for the annual company health care single coverage, which becomes effective Jan 1 2025

1. At what date should I signup for ACA health care Coverage ?
a. assume Cobra is more expensive
2. Can I use cobra as a bridge until ACA coverage becomes effective?

When will your employer coverage end?
If you retire Feb 1, many companies will provide coverage through the end of the month, meaning you need ACA coverage starting March 1.

In any case, to start coverage on the 1st of month, you need to have your application completed by the 15th of the prior month.

ACA credits are based on estimates if current year income. They will ask you that when you apply. The fact that you had high income last year will not impact that.

[PaunchyPirate]

Voluntary loss of employment is not considered a life event for ACA plans, meaning you will likely not be able to start coverage on any day of the year other than January 1. Get fired and you can start coverage February 1.

This is absolutely not true. You can retire any date you want and start ACA plans accordingly. Although, most ACA exchanges are set up to begin benefits on the first of a month.

To the OP, you can begin the ACA signup process up to 60 days prior to a qualifying event such as retirement. OP, you need to find out if your company insurance is only good to your last day of employment or to the last day of the month in which you work. If it's only good until your last day, then I would target to retire on January 31 and start the ACA process in early December to set up ACA coverage beginning February 1. If your coverage is good until the last day of February, I would start the ACA process in early January to set up ACA coverage beginning March 1.

While you can wait until the 15th of the month prior to ACA plans start to finish your application, I would not wait that long. There are sometimes additional things you need to pull together to document your anticipated income for the year and such.

[miket29]

Voluntary loss of employment is not considered a life event for ACA plans, meaning you will likely not be able to start coverage on any day of the year other than January 1. Get fired and you can start coverage February 1.

That is incorrect. I retired voluntarily and then started ACA midyear.

[miket29]

Lets say I plan on retiring in February 1, 2025 at age 61.
In October 2024 I signup for the annual company health care single coverage, which becomes effective Jan 1 2025

1. At what date should I signup for ACA health care Coverage ?
a. assume Cobra is more expensive
2. Can I use cobra as a bridge until ACA coverage becomes effective?

Find out from HR how long your health insurance lasts. At many companies it is monthly so you'd be covered until the end of February and would start ACA coverage on March 1st. If your coverage ends the same day as your employment then make your last day Jan 31st and start ACA coverage on Feb 1st.

Don't start COBRA because voluntarily terminating it does not qualify as a valid reason for special enrollment in ACA (eg. enrollment not during the ordinary end-of-year signup time). If you start COBRA you'll have to wait until regular enrollment comes around at the end of 2025 and start ACA in Jan 2026. But you should have no problem setting up ACA coverage to start the day after your regular health coverage ends.

As for income, talk to an ACA counselor to find out what documents to submit (in my state it was simply an affidavit). MN says

Do not report income no longer received. We will use each person's current income to calculate their projected annual income for the coverage year you are applying for. If you think the projected annual income will be different, you can provide us with a different amount.
https://www.mnsure.org/new-customers/ap ... income.jsp

MN is not taking any risk by trusting your expected income. In your 2025 tax return you will file this form https://www.irs.gov/pub/irs-pdf/f8962.pdf which reconciles the premium tax credit you received with what you were entitled to.

[Whitefalcon]

Thanks to everyone who took the time to reply

I reached out to company healthcare benefits, and they confirmed that coverage would continue until the end of the of the month when I leave the company.

Here is my current plan, feel free to reply if I am missing something:
1. Retire at or near February 1, 2025
2. Apply for ACA coverage in January 2025 to begin March 1, 2025
3. Evaluate keeping Taxable income low enough for 2025 tax year to take advantage of ACA credits
4. Thanks to miket29, I will take care not to enroll in Cobra

[marcopolo]

Thanks to everyone who took the time to reply

I reached out to company healthcare benefits, and they confirmed that coverage would continue until the end of the of the month when I leave the company.

Here is my current plan, feel free to reply if I am missing something:
1. Retire at or near February 1, 2025
2. Apply for ACA coverage in January 2025 to begin March 1, 2025
3. Evaluate keeping Taxable income low enough for 2025 tax year to take advantage of ACA credits
4. Thanks to miket29, I will take care not to enroll in Cobra

At least for the next couple of years, early retirees can have pretty significant income and still qualify for some tax credits. I think most people find it surprising. I would urge you to put your numbers into healthcare.gov, or your state exchange, and play around with various income levels and see what you qualify for.

[Whitefalcon]

At least for the next couple of years, early retirees can have pretty significant income and still qualify for some tax credits. I think most people find it surprising. I would urge you to put your numbers into healthcare.gov, or your state exchange, and play around with various income levels and see what you qualify for.

Thanks marcopolo

I have done this using my state exchange, I should be able to qualify for significant tax credits if I keep taxable income low.

FYI. There is also at calculator for ACA at kff.org search for "Health Insurance Marketplace Calculator" It seems pretty accurate and you can put in your state, or a state you are considering moving to.

Here's hoping congress can find a way to extend the tax cuts and job act, and the ACA Subsidies beyond 2025!

[marcopolo]

At least for the next couple of years, early retirees can have pretty significant income and still qualify for some tax credits. I think most people find it surprising. I would urge you to put your numbers into healthcare.gov, or your state exchange, and play around with various income levels and see what you qualify for.

Thanks marcopolo

I have done this using my state exchange, I should be able to qualify for significant tax credits if I keep taxable income low.

FYI. There is also at calculator for ACA at kff.org search for "Health Insurance Marketplace Calculator" It seems pretty accurate and you can put in your state, or a state you are considering moving to.

Here's hoping congress can find a way to extend the tax cuts and job act, and the ACA Subsidies beyond 2025!

I have heard good things about kff. But, I prefer to go to the primary source whenever possible.

We have been retired for 6 years, and on ACA for 5, company paid COBRA for the first year. So, we have already been through the various transitions.

Agree, hoping the elimination of ACA "cliff" gets extended, we have 8 more years to Medicare!

But, we do budget for having to pay full freight. Will just be happy if pre-existing condition requirements stay in place.

Good luck to you on your impending retirement.

[fiseek77]

Thanks to everyone who took the time to reply

I reached out to company healthcare benefits, and they confirmed that coverage would continue until the end of the of the month when I leave the company.

Here is my current plan, feel free to reply if I am missing something:
1. Retire at or near February 1, 2025
2. Apply for ACA coverage in January 2025 to begin March 1, 2025
3. Evaluate keeping Taxable income low enough for 2025 tax year to take advantage of ACA credits
4. Thanks to miket29, I will take care not to enroll in Cobra

Hi White falcon,
Can you update on your progress and what you found out? I was about to ask this same question as I plan to retire later in the year. Would love to learn what you learned and how your process went.

[Whitefalcon]

Thanks to everyone who took the time to reply

I reached out to company healthcare benefits, and they confirmed that coverage would continue until the end of the of the month when I leave the company.

Here is my current plan, feel free to reply if I am missing something:
1. Retire at or near February 1, 2025
2. Apply for ACA coverage in January 2025 to begin March 1, 2025
3. Evaluate keeping Taxable income low enough for 2025 tax year to take advantage of ACA credits
4. Thanks to miket29, I will take care not to enroll in Cobra

Hi White falcon,
Can you update on your progress and what you found out? I was about to ask this same question as I plan to retire later in the year. Would love to learn what you learned and how your process went.

fiseek77,
Sorry for the delayed response, current plan is to delay retirement until April/May to help transition/train my replacement. We had 2 other people leave recently who helped support my role and waiting a bit longer fits with our plans.

I may end up going on Cobra until the end of 2025 and then deciding if I want to switch to an ACA plan for 2026. Will try to post an update in the future.

[Epsilon Delta]

On other thing I am trying to work out is Potential ACA subsidies for 2025. If I applied during open enrollment in 2024, I assume they will look at my most recent taxes to determine premium estimates. Once retired in 2025 I believe I could appeal the cost of ACA premiums, based on being retired and maybe provide an estimate of my income.. I suspect this could be complicated. If on the other hand I wait until I am actually retired before applying for ACA, It May be less complicated, but that's strictly a guess.

Your income estimate is used to calculate the Advanced Premium Tax credits that pay part or all of your monthly premium. These will be reconciled with your actual Premium Tax credit and your actual 2025 income on Form 8962 filed with your 2025 income tax. You don't need to get the estimate exactly right.

That said you don't want to get the estimates horribly wrong. The worse pitfall may be to underestimate income and fall out of the exchange and into Medicaid. That said the estimates are made under penalty of perjury so don't just make things up.

[fiseek77]

Hi White falcon,
Can you update on your progress and what you found out? I was about to ask this same question as I plan to retire later in the year. Would love to learn what you learned and how your process went.

fiseek77,
Sorry for the delayed response, current plan is to delay retirement until April/May to help transition/train my replacement. We had 2 other people leave recently who helped support my role and waiting a bit longer fits with our plans.

I may end up going on Cobra until the end of 2025 and then deciding if I want to switch to an ACA plan for 2026. Will try to post an update in the future.

Thanks White falcon,
I am monitoring this. Any reason you want to go through Cobra. I find that ACA still offers subsidy unless you have compared Cobra rates and ACA subsidy for 5 months and found not much difference.
Thanks,

[Whitefalcon]

fiseek77,
Sorry for the delayed response, current plan is to delay retirement until April/May to help transition/train my replacement. We had 2 other people leave recently who helped support my role and waiting a bit longer fits with our plans.

I may end up going on Cobra until the end of 2025 and then deciding if I want to switch to an ACA plan for 2026. Will try to post an update in the future.

Thanks White falcon,
I am monitoring this. Any reason you want to go through Cobra. I find that ACA still offers subsidy unless you have compared Cobra rates and ACA subsidy for 5 months and found not much difference.
Thanks,

Fiseek77,

My thinking is that my current coverage has been very good, also the max out of pocket is relatively low, if I do need it. I already have some medical expenses this year, and I believe the out of pocket carries over to cobra for the calendar year. I asked HR for Cobra prices, and it would be just a bit more then price of a typical ACA plan in my area without subsidy's. From memory I may save around $600 this year if I sign up for a lower cost a ACA plan. Finally a big factor for me to stay on Cobra the rest of this year, is that I am still researching and learning more about ACA plans in my area, and not quite ready to pick a specific provider.

[Hebell]

I am of the worldview that if anything will go wrong, it will go wrong with me. So I would recommend you get your ACA plan during open enrollment.

When I signed up for the ACA plan out of cycle, I was living on investment income, and I declared quite a bit of it within my ACA application. In the state of Minnesota however investment income was not considered recurrent income, and they threw me on to Medicaid (medical assistance, in MN). When I applied for a Minnesota plan, I had recently been a Florida resident on a Florida ACA plan having just moved to Minnesota.

I actually had to get a local political person to help get me off of Medicaid by pushing on the department of health and human services, and then I got on to the MN ACA plan during open enrollment. (I held onto my Florida plan in the interim, which did let me see doctors out of state under the blue card program). During Minnesota open enrollment, after that bad experience, I declared a wage income equivalent to my investment income even though I had no wages.

All of this is to say you never know what can go wrong during an application process. It would be safer for you to start with January when you have some overlap.