It’s Health Time Again

Last year I wrote about navigating and buying on the ACA marketplace; well it’s open enrollment time again. It’s pretty widely reported as to how the sign up period has been cut and that the advertising budget has been slashed. Politics aside, this makes life trickier. I have received a decent amount of emails, robocalls and texts from healthcare.gov reminding me it is sign up time, so for those already on the market place I can’t complain about the level of communication. For those new to the marketplace though I can imagine the experience might be different.

Last year we went with a gold plan. The main reason for this is that at the time we didn’t know exactly how much healthcare we would use and what the quality would be. In general we have been happy with it, but we needed to review for 2019.

If you don’t select a new plan you are automatically enrolled in the plan you were on previously. So without any review we would have been kept on the gold plan.

I’ll discuss the issue of the tax subsidies below, but based on our income level the gold plan cost our family of four around $900 a month. We felt for the level of healthcare we used last year we could probably move to a lower tier.

So for this year we have gone down to the bronze tier. This will save us about $450 a month. So a pretty large saving but, the main difference between the two plans is the level of deductible. Although we will save a large amount of money, we will need to pay “full price” for most of our doctor’s visit, vaccines and prescriptions. Yes it will be hard going from paying $10 a prescription to maybe $100 but we have to remember the amount we are saving each month, and budget some of that saving straight to visits and prescriptions.

The important thing to remember is that the quality of care is identical, and the overall out of pocket limit is the same.

We do get a tax subsidy based on our income. I know that these subsidies are not designed for people like us, they are clearly there for hard working small business owners and freelance workers. So I do understand there is an ethical dilemma here, but there is no real way around this other than buying direct from an insurance company.

However there is one small wrinkle that I’ve only just worked through that will require some action before the end of this year. I’m expecting our “income” this year to be around $60,000 based on dividends and capital gains, which would give us a very high amount of tax subsidy. However it puts us below the income threshold to make us eligible for CHIP.

CHIP is the equivalent of medicaid for children. If you qualify for CHIP and don’t apply then you have to relinquish your tax subsidies. Don’t get me wrong CHIP is a great program, but it is 100% not designed for people like us; I fully support it being there and it is a lifesaver for the people who need it. What this means is I need to create more income we don’t need in order bring us above the CHIP threshold but still in the tax subsidy bracket.

Here is the loophole in things like CHIP and Medicaid, there is no asset test only income is counted. It’s odd, but I guess it means it can be measured straight off income tax forms rather than requiring an analysis of housing records and bank accounts, which I imagine would require a lot of work both people and paper.

This actually isn’t as easy as it sounds. We won’t know our dividend income until the mutual funds payout in mid December. The rest of our income comes from capital gains, So if we sell say $60,000 of mutual funds the capital gains might be $20,000. Again we only see the exact amount of capital gains once we get the tax forms in early 2019. Therefore in theory if you are living off $60,000 a year then your tax return will show you only “making” $20,000, thus eligible for various benefits.

What I need to do this year (and probably every year until our children are in college) is move about $60,000 from one mutual fund into another (a high dividend account makes most sense) to “generate” another $20,000 in income.

I’ve learned a lot this week about the minefield of navigating benefits and tax law.

 

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