Health insurance during F.I.R.E and before age 65? ACA vs Employer Retiree Healthcare Benefits?

[mkc]

I used a random SugarLand, TX zip code and assumed you have a spouse. Unsubsidized plans in your area are running $1,500 for bronze, $2,000 for silver and $1,840 for Gold.

https://www.healthcare.gov/see-plans/#/plan/results

You can play around with it by changing AGI to get an idea of today’s subsidies.

I am single. What will I get with subsidies?

See upthread - the PTC expires in 2025. After that, there's a subsidy cliff at 400% of the federal poverty level. As of right now, in 10-15 years you will likely pay full price.

[twh]

Health insurance is expensive. My unsubsided, pre-65, retiree PPO coverage for 2024 is just a few dollars short of $1,500/month. The plan is great and that includes drug costs and reasonable deductible and co-pays and maximum out-of-pockets for both in and out of network.

[Longdog]

I max out t401k and Roth IRA then taxable account. However, my company offers up to $10k after tax contributions on 401k which can be converted to Roth IRA. I haven’t used that feature. Should I?

Yes.

I did post a topic on that. Did you see it?

Yes and I thought there was already a good discussion and recommendations in the thread that should provide you with a lot to consider and then decide what you felt makes the most sense for you.

[quantAndHold]

We have to assume this health plan stays.

Why? It may not stay. And why does it matter? We’re only talking about the choice between two plans for the 8 years of healthcare before you turn 65. The difference, over the whole eight years, will be five figures, at most. There are many things that will happen between now and twelve years from now that will have a much larger impact on your ability to retire than your health plan choices.

Just keep saving, and revisit the issue 1-2 years out.

What if it does stay?

It still doesn’t matter. For one thing, you don’t have any numbers attached to anything. In the big picture, the numbers are likely to not be that large. I mean, I pay $12k/year for my healthcare. A Bronze ACA plan with $400/month (subsidized) premiums and a $7k out of pocket max. Even if the RRA picks up half of that, which is unlikely, you’re talking $6k/year for 8 years, or about $50k all in. In the big scheme of things, over the course of a 40 year retirement, that’s nothing. There are a dozen things that will make a bigger difference than that, even before you hit 57. If you’re retiring on a tight budget and you don’t get the RRA at 57, or the RRA isn’t all that, you might have to work an extra six months to pay for healthcare. That’s pretty much the whole consequence of this.

Man plans. God laughs.

$1k a month for medical? That’s a lot. I was expecting no more than $500 a month.

You mean you got to $400 a month with subsidized?

I’m 60. My current plan is a Bronze ACA plan with a $7000 deductible and $7000 out of pocket max. The unsubsidized premium of $775/month, but with the subsidy, I pay about $400/month. I’ve hit my out of pocket max the last 2 years in a row, and expect to hit it every year until I qualify for Medicare. So $400 * 12 + $7000 = $12k/year.

Also, I’m in one of the cheapest places in the country for the ACA. Yours might be higher.

[Vanguard User]

Aside from the time horizon, the other reasons no one can answer your question are that we don’t know how big this RRA is, what the COBRA premiums will be or what the exchange pricing in your area will be.

I just retired and we found that the unsubsidized ACA premiums are lower than my COBRA premiums. We took COBRA for the rest of the year since we have met the deductible. Then we are switching to ACA.

If you would have asked me last year what my MAGI would be for 2024, I would have estimated based on 1-2% interest rates on cash and CDs. Now they are closer to 5% and our MAGI (combined with stable dividends) will put us out of premium subsidy range.

Premium subsidies without a cliff are a relatively new phenomenon and twelve years ago, the entire insurance exchange was not up and running.

I don’t know how much RRA is. Is your company offering anything other than COBRA?

Nothing except COBRA. That plan is about $300 a month more than the Gold Plan we chose. It has a higher deductible and the network is no better than the gold plan we chose. The main difference is the lack of OOP max for out of network services.

I posted what my company offers through Mercer 365+.

Does it mean I will get some reimbursement?

[Vanguard User]

It still doesn’t matter. For one thing, you don’t have any numbers attached to anything. In the big picture, the numbers are likely to not be that large. I mean, I pay $12k/year for my healthcare. A Bronze ACA plan with $400/month (subsidized) premiums and a $7k out of pocket max. Even if the RRA picks up half of that, which is unlikely, you’re talking $6k/year for 8 years, or about $50k all in. In the big scheme of things, over the course of a 40 year retirement, that’s nothing. There are a dozen things that will make a bigger difference than that, even before you hit 57. If you’re retiring on a tight budget and you don’t get the RRA at 57, or the RRA isn’t all that, you might have to work an extra six months to pay for healthcare. That’s pretty much the whole consequence of this.

Man plans. God laughs.

$1k a month for medical? That’s a lot. I was expecting no more than $500 a month.

You mean you got to $400 a month with subsidized?

I used a random SugarLand, TX zip code and assumed you have a spouse. Unsubsidized plans in your area are running $1,500 for bronze, $2,000 for silver and $1,840 for Gold.

https://www.healthcare.gov/see-plans/#/plan/results

You can play around with it by changing AGI to get an idea of today’s subsidies.

I am single. What will I get with subsidies?

If you cannot estimate your MAGI in 12 years, then I can’t estimate your MAGI in 12 years.

I don’t know yet. MAGI is the income is taxable right?

[Vanguard User]

I used a random SugarLand, TX zip code and assumed you have a spouse. Unsubsidized plans in your area are running $1,500 for bronze, $2,000 for silver and $1,840 for Gold.

https://www.healthcare.gov/see-plans/#/plan/results

You can play around with it by changing AGI to get an idea of today’s subsidies.

I am single. What will I get with subsidies?

See upthread - the PTC expires in 2025. After that, there's a subsidy cliff at 400% of the federal poverty level. As of right now, in 10-15 years you will likely pay full price.

What about my employee benefit of 57? Am I getting reimbursed anything?

[Vanguard User]

Health insurance is expensive. My unsubsided, pre-65, retiree PPO coverage for 2024 is just a few dollars short of $1,500/month. The plan is great and that includes drug costs and reasonable deductible and co-pays and maximum out-of-pockets for both in and out of network.

That is too much. I went to marketplace for ACA and it was all less than $600 a month. How?

[Vanguard User]

I max out t401k and Roth IRA then taxable account. However, my company offers up to $10k after tax contributions on 401k which can be converted to Roth IRA. I haven’t used that feature. Should I?

Yes.

I did post a topic on that. Did you see it?

Yes and I thought there was already a good discussion and recommendations in the thread that should provide you with a lot to consider and then decide what you felt makes the most sense for you.

I am still confused about that thread.

[Vanguard User]

Why? It may not stay. And why does it matter? We’re only talking about the choice between two plans for the 8 years of healthcare before you turn 65. The difference, over the whole eight years, will be five figures, at most. There are many things that will happen between now and twelve years from now that will have a much larger impact on your ability to retire than your health plan choices.

Just keep saving, and revisit the issue 1-2 years out.

What if it does stay?

It still doesn’t matter. For one thing, you don’t have any numbers attached to anything. In the big picture, the numbers are likely to not be that large. I mean, I pay $12k/year for my healthcare. A Bronze ACA plan with $400/month (subsidized) premiums and a $7k out of pocket max. Even if the RRA picks up half of that, which is unlikely, you’re talking $6k/year for 8 years, or about $50k all in. In the big scheme of things, over the course of a 40 year retirement, that’s nothing. There are a dozen things that will make a bigger difference than that, even before you hit 57. If you’re retiring on a tight budget and you don’t get the RRA at 57, or the RRA isn’t all that, you might have to work an extra six months to pay for healthcare. That’s pretty much the whole consequence of this.

Man plans. God laughs.

$1k a month for medical? That’s a lot. I was expecting no more than $500 a month.

You mean you got to $400 a month with subsidized?

I’m 60. My current plan is a Bronze ACA plan with a $7000 deductible and $7000 out of pocket max. The unsubsidized premium of $775/month, but with the subsidy, I pay about $400/month. I’ve hit my out of pocket max the last 2 years in a row, and expect to hit it every year until I qualify for Medicare. So $400 * 12 + $7000 = $12k/year.

Also, I’m in one of the cheapest places in the country for the ACA. Yours might be higher.

What qualifies for subsidy? I am in the Houston, TX area. It was showing less than $600 and with high deductible it was less than subsidy.

[Vanguard User]

What taxable income qualifies for subsidy? Does that mean I can get SSI, SNAP and other government benefits?

[Soaker]

What taxable income qualifies for subsidy? Does that mean I can get SSI, SNAP and other government benefits?

If you're bringing SSI and SNAP into it, then this whole discussion is irrelevant. If you intend to quit working at age 57 and think you would qualify for those programs, stop worrying about ACA marketplace vs. Mercer marketplace 12 years from now and get informed about Medicaid instead.

[marcopolo]

I used a random SugarLand, TX zip code and assumed you have a spouse. Unsubsidized plans in your area are running $1,500 for bronze, $2,000 for silver and $1,840 for Gold.

https://www.healthcare.gov/see-plans/#/plan/results

You can play around with it by changing AGI to get an idea of today’s subsidies.

I am single. What will I get with subsidies?

See upthread - the PTC expires in 2025. After that, there's a subsidy cliff at 400% of the federal poverty level. As of right now, in 10-15 years you will likely pay full price.

There seems to be some confusion here. Maybe just terminology.

But, The PTC does NOT expire in 2025!

The PTC (Premium Tax Credit) is the official name of the "subsidy". They are the same thing.

The cliff at 400% of FPL is scheduled to return in 2026.

I don't know how you could possibly know that full pay would be required in 10-15 years?

[marcopolo]

What if it does stay?

It still doesn’t matter. For one thing, you don’t have any numbers attached to anything. In the big picture, the numbers are likely to not be that large. I mean, I pay $12k/year for my healthcare. A Bronze ACA plan with $400/month (subsidized) premiums and a $7k out of pocket max. Even if the RRA picks up half of that, which is unlikely, you’re talking $6k/year for 8 years, or about $50k all in. In the big scheme of things, over the course of a 40 year retirement, that’s nothing. There are a dozen things that will make a bigger difference than that, even before you hit 57. If you’re retiring on a tight budget and you don’t get the RRA at 57, or the RRA isn’t all that, you might have to work an extra six months to pay for healthcare. That’s pretty much the whole consequence of this.

Man plans. God laughs.

$1k a month for medical? That’s a lot. I was expecting no more than $500 a month.

You mean you got to $400 a month with subsidized?

I’m 60. My current plan is a Bronze ACA plan with a $7000 deductible and $7000 out of pocket max. The unsubsidized premium of $775/month, but with the subsidy, I pay about $400/month. I’ve hit my out of pocket max the last 2 years in a row, and expect to hit it every year until I qualify for Medicare. So $400 * 12 + $7000 = $12k/year.

Also, I’m in one of the cheapest places in the country for the ACA. Yours might be higher.

What qualifies for subsidy? I am in the Houston, TX area. It was showing less than $600 and with high deductible it was less than subsidy.

No one can tell you what the situation will be 10 years from now.

You seem to be looking for a simple answer. There is no such thing when it comes to financing health insurance.

If you are interested in understanding how the ACA subsidy works, you can read below as a starting point of your research:

The amount of the "subsisdy", officially called a Premium Tax Credit (PTC), is based on two things. Your Modified Adjusted Gross Income (MAGI), and the cost of the benchmark plan in your area. The benchmark plan is the Second Lowest Cost Silver Plan (SLSCP) available in your area.

You are expected to pay a sliding scale percentage of your MAGI towards your health insurance policy, upto as much as 8.5% of your MAGI. Once you know your MAGI, you can use the following table to determine what percentage of your MAGI you are expected to pay:

Income 2022 – 2025
< 133% FPL 0%
< 150% FPL 0%
< 200% FPL 0% – 2%
< 250% FPL 2% – 4%
< 300% FPL 4% – 6%
<= 400% FPL 6% – 8.5%
> 400% FPL 8.5%

Where FPL is Federal Poverty level for your family size.

Once you have calculated the amount your are expected to pay,
You can calculate your PTC by subtracting the amount you are required to pay from the cost of the SLCSP.

This is the amount of your tax credit. It does not change based on the plan you choose.

If you choose a plan more expensive than the SLCSP, you get the same PTC and end up paying more towards your plan.

If you choose a plan that is cheaper than the SLCSP, you still get the same PTC, so your plan will cost even less.


In 2026, there will be a cliff returning (unless laws are changed) so that if your MAGI is above 400% of FPL, you are not eligible for ANY PTC.

So let's work through an example:
For a plan in 2024, the 2023 FPL is used and is $19,720 for a couple.

Let's assume your income is 300% of FPL ($59,160)
At this level, you are expected to pay 6% of your MAGI ($3550) towards your policy.

Now let's assume the plans in your area cost as follows:

SLCSP: $1500/mo ($18,000)
Cheaper Bronze plan: $1000/mo ($12,000)
More Expensive Gold Plan: $2000/mo ($24,000)

Based on the SLCSP,
you would receive a PTC of $14,450 ($18,000 - $3550).

If you choose the SLCSP you would pay your calculated contribution amount $3550 ($296/mo) for the plan.

If you choose the more expensive Gold Plan, you would pay ($24,000-$14450), or $9550 ($796/mo) for your plan.

If you choose the cheaper Bronze plan you would get the plan for free $0/mo, because your PTC ($14,450) is more than the cost of the plan ($12,000). In fact, in this scenario, you would probably want to increase your MAGI (Roth Conversion or Tax Gain Harvesting) because it can be done without any loss of PTC.

[Vanguard User]

What taxable income qualifies for subsidy? Does that mean I can get SSI, SNAP and other government benefits?

If you're bringing SSI and SNAP into it, then this whole discussion is irrelevant. If you intend to quit working at age 57 and think you would qualify for those programs, stop worrying about ACA marketplace vs. Mercer marketplace 12 years from now and get informed about Medicaid instead.

So I can get Medicaid to save money? I know assets don’t matter but taxable income does?

[quantAndHold]

What taxable income qualifies for subsidy? Does that mean I can get SSI, SNAP and other government benefits?

If you're bringing SSI and SNAP into it, then this whole discussion is irrelevant. If you intend to quit working at age 57 and think you would qualify for those programs, stop worrying about ACA marketplace vs. Mercer marketplace 12 years from now and get informed about Medicaid instead.

So I can get Medicaid to save money? I know assets don’t matter but taxable income does?

Yes, if you can keep your income low enough, but you’ll need to move to a state that has expanded Medicaid benefits. Texas hasn’t.

[Soaker]

What taxable income qualifies for subsidy? Does that mean I can get SSI, SNAP and other government benefits?

:shock: If you're bringing SSI and SNAP into it, then this whole discussion is irrelevant. If you intend to quit working at age 57 and think you would qualify for those programs, stop worrying about ACA marketplace vs. Mercer marketplace 12 years from now and get informed about Medicaid instead.

So I can get Medicaid to save money? I know assets don’t matter but taxable income does?

Yes, if you can keep your income low enough, but you’ll need to move to a state that has expanded Medicaid benefits. Texas hasn’t.

I wouldn't want to be on Medicaid voluntarily, it would be a "no other option" situation. With sufficient assets, I'd generate just enough taxable income to qualify for an ACA marketplace plan, foregoing any SSI and SNAP benefits.

And if that were the scenario I think you would have the answer to your original question. At Modified AGI very close to 150% of the Federal Poverty Level, your Premium Tax Credit or "subsidy" should cover all of your ACA plan premium, and the ACA plan's premium of zero cost to you would clearly be better than the Mercer Marketplace plan's premium net of the RRA contribution.

[clip651]

The above ACA calculations refer only to the premiums. If you actually use healthcare (go to the doctor, have tests, need prescriptions, etc), there will be additional costs for copays, deductibles, etc up to the annual out of pocket max each year. This can add up to a few thousand per year or more if you use health care, which in your late 50s through 60s you are likely to do at least some years.

But regardless, as many have posted, you can only make a ballpark estimate of future healthcare costs. Lots will change in the next 10 plus years. Plan for health insurance and other health expenses to be a varying but not small part of your future budget.

[WhitePuma]

It still doesn’t matter. For one thing, you don’t have any numbers attached to anything. In the big picture, the numbers are likely to not be that large. I mean, I pay $12k/year for my healthcare. A Bronze ACA plan with $400/month (subsidized) premiums and a $7k out of pocket max. Even if the RRA picks up half of that, which is unlikely, you’re talking $6k/year for 8 years, or about $50k all in. In the big scheme of things, over the course of a 40 year retirement, that’s nothing. There are a dozen things that will make a bigger difference than that, even before you hit 57. If you’re retiring on a tight budget and you don’t get the RRA at 57, or the RRA isn’t all that, you might have to work an extra six months to pay for healthcare. That’s pretty much the whole consequence of this.

Man plans. God laughs.

$1k a month for medical? That’s a lot. I was expecting no more than $500 a month.

You mean you got to $400 a month with subsidized?

I’m 60. My current plan is a Bronze ACA plan with a $7000 deductible and $7000 out of pocket max. The unsubsidized premium of $775/month, but with the subsidy, I pay about $400/month. I’ve hit my out of pocket max the last 2 years in a row, and expect to hit it every year until I qualify for Medicare. So $400 * 12 + $7000 = $12k/year.

Also, I’m in one of the cheapest places in the country for the ACA. Yours might be higher.

What qualifies for subsidy? I am in the Houston, TX area. It was showing less than $600 and with high deductible it was less than subsidy.

No one can tell you what the situation will be 10 years from now.

You seem to be looking for a simple answer. There is no such thing when it comes to financing health insurance.

If you are interested in understanding how the ACA subsidy works, you can read below as a starting point of your research:

The amount of the "subsisdy", officially called a Premium Tax Credit (PTC), is based on two things. Your Modified Adjusted Gross Income (MAGI), and the cost of the benchmark plan in your area. The benchmark plan is the Second Lowest Cost Silver Plan (SLSCP) available in your area.

You are expected to pay a sliding scale percentage of your MAGI towards your health insurance policy, upto as much as 8.5% of your MAGI. Once you know your MAGI, you can use the following table to determine what percentage of your MAGI you are expected to pay:

Income 2022 – 2025
< 133% FPL 0%
< 150% FPL 0%
< 200% FPL 0% – 2%
< 250% FPL 2% – 4%
< 300% FPL 4% – 6%
<= 400% FPL 6% – 8.5%
> 400% FPL 8.5%

Where FPL is Federal Poverty level for your family size.

Once you have calculated the amount your are expected to pay,
You can calculate your PTC by subtracting the amount you are required to pay from the cost of the SLCSP.

This is the amount of your tax credit. It does not change based on the plan you choose.

If you choose a plan more expensive than the SLCSP, you get the same PTC and end up paying more towards your plan.

If you choose a plan that is cheaper than the SLCSP, you still get the same PTC, so your plan will cost even less.


In 2026, there will be a cliff returning (unless laws are changed) so that if your MAGI is above 400% of FPL, you are not eligible for ANY PTC.

So let's work through an example:
For a plan in 2024, the 2023 FPL is used and is $19,720 for a couple.

Let's assume your income is 300% of FPL ($59,160)
At this level, you are expected to pay 6% of your MAGI ($3550) towards your policy.

Now let's assume the plans in your area cost as follows:

SLCSP: $1500/mo ($18,000)
Cheaper Bronze plan: $1000/mo ($12,000)
More Expensive Gold Plan: $2000/mo ($24,000)

Based on the SLCSP,
you would receive a PTC of $14,450 ($18,000 - $3550).

If you choose the SLCSP you would pay your calculated contribution amount $3550 ($296/mo) for the plan.

If you choose the more expensive Gold Plan, you would pay ($24,000-$14450), or $9550 ($796/mo) for your plan.

If you choose the cheaper Bronze plan you would get the plan for free $0/mo, because your PTC ($14,450) is more than the cost of the plan ($12,000). In fact, in this scenario, you would probably want to increase your MAGI (Roth Conversion or Tax Gain Harvesting) because it can be done without any loss of PTC.

Thanks for this detailed explanation with example — it’s super helpful!

[quantAndHold]

I wouldn't want to be on Medicaid voluntarily, it would be a "no other option" situation.

Depends on location. Here (Southern California), If I could get my income low enough, I could get on a Medi-Cal Managed Care plan with Kaiser. A friend has it. She has the same excellent care as I do, except everything is free. Between premiums and copays, I spent $12k this year.

I agree it isn’t that way everywhere.

[nguy44]

My company doesn’t offer Pension. After 65 you would qualify for Medicare.

So did you use your employer health benefits after you retired?

Yes. I retired at 60 and used them until I went on Medicare. the premiums were half of what ACA would have cost me, with lower deductibles and a wider choice of doctors. My wife and I had been expecting (and had put away) about $120K for premiums for those 5 years. Our actual premiums turned out to be $46K.

[eugeneD]

My company doesn’t offer Pension. After 65 you would qualify for Medicare.

So did you use your employer health benefits after you retired?

Yes. I retired at 60 and used them until I went on Medicare. the premiums were half of what ACA would have cost me, with lower deductibles and a wider choice of doctors. My wife and I had been expecting (and had put away) about $120K for premiums for those 5 years. Our actual premiums turned out to be $46K.

I work for a big multinational company but never heard of any retirement benefits. They used to offer a pension, but that gone long before I joined 8 years ago. All I have is a 401K. They offer some benefits to people who they lay off. I was under the impression that retirement on your own is no different from voluntarily leaving, like when changing jobs.

[nguy44]

My company doesn’t offer Pension. After 65 you would qualify for Medicare.

So did you use your employer health benefits after you retired?

Yes. I retired at 60 and used them until I went on Medicare. the premiums were half of what ACA would have cost me, with lower deductibles and a wider choice of doctors. My wife and I had been expecting (and had put away) about $120K for premiums for those 5 years. Our actual premiums turned out to be $46K.

I work for a big multinational company but never heard of any retirement benefits. They used to offer a pension, but that gone long before I joined 8 years ago. All I have is a 401K. They offer some benefits to people who they lay off. I was under the impression that retirement on your own is no different from voluntarily leaving, like when changing jobs.

I understand. I had 40 years with my corporation. While the retirements benefits definitely eroded over time, since I joined before the changes certain things were grandfathered, or given alternative retirement compensations, for those of us with enough years.

[Coastfical]

Personal experience - Went to less than 30 hours so lost subsidized health insurance at end of last year. cobra payments were about 800/ month - note - you can use HSA funds for Cobra payments. I moved mine to Fidelity from Optum. Don’t forget you also have to keep paying hdhp deductibles and meet out of pockets. So - I budgeted $1000/mo. I would recommend starting with that! You can typically look on your paycheck to see what cobra would cost you. ( it’s your contribution plus employers contribution). Unless your AGI is very low, cobra and silver plan cost about the same ( I’m in CA). Cobra is good for 18 months. On the plus side I got to keep my same doctors. As others have stated you can go into state website and play with AGI and zip code to get estimated ACA cost. looking forward to Medicare in a few years but that’s not free either!

Good luck!