ACA Subsidy

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willyd123
Posts: 398
Joined: Mon Feb 19, 2018 6:23 am

ACA Subsidy

Post by willyd123 »

Hello -

Just got my 2022 medical plan premium notice - increase of 9.6%. My income has been too high to qualify for subsidies but my income for 2022 will be substantially lower than prior years. I estimate our 2022 MAGI will be about $149,500 and we are a family of two. I believe this income level will still be too high to qualify for any subsidies even with the temporary changes that came about due to the American Rescue Plan. I tried to confirm that I will NOT get any subsidies but the information I found on the internet was not very clear. Do you know the answer?

Thanks.
J295
Posts: 3399
Joined: Sun Jan 01, 2012 10:40 pm

Re: ACA Subsidy

Post by J295 »

What do you show when you use this calculator? It is updated for 2021 Plans and should be a good starting point (of course the ACA site controls).
Are you using a HD plan and thus using an HSA to reduce MAGI?
Are you using a solo 401k to reduce MAGI?

https://www.kff.org/interactive/subsidy-calculator/
marcopolo
Posts: 8411
Joined: Sat Dec 03, 2016 9:22 am

Re: ACA Subsidy

Post by marcopolo »

willyd123 wrote: Tue Oct 26, 2021 12:29 pm Hello -

Just got my 2022 medical plan premium notice - increase of 9.6%. My income has been too high to qualify for subsidies but my income for 2022 will be substantially lower than prior years. I estimate our 2022 MAGI will be about $149,500 and we are a family of two. I believe this income level will still be too high to qualify for any subsidies even with the temporary changes that came about due to the American Rescue Plan. I tried to confirm that I will NOT get any subsidies but the information I found on the internet was not very clear. Do you know the answer?

Thanks.
For 20121 and 2022 there is no "cliff" for the ACA tax credits. At your income level you are expected to pay 8.5% of your MAGI towards an ACA plan.
That is about $12,700. Whether or not you qualify for any credits will depend on how much the plan you choose costs.

The plans for 2022 are now available on healthcare.gov. You can get an exact answer by spending about 2 minutes putting in some info.

When you go to the website, you will probably get a pop-up window, close that.
Then select the green button that says "Get Ready to Apply"
Then select the blue button that says "Preview 2022 Plans & Prices Now"
Fill in your specific info and you will see if you qualify for ant tax credits, and what your plans will cost for 2022
Once in a while you get shown the light, in the strangest of places if you look at it right.
Topic Author
willyd123
Posts: 398
Joined: Mon Feb 19, 2018 6:23 am

Re: ACA Subsidy

Post by willyd123 »

J295 wrote: Tue Oct 26, 2021 12:33 pm What do you show when you use this calculator? It is updated for 2021 Plans and should be a good starting point (of course the ACA site controls).
Are you using a HD plan and thus using an HSA to reduce MAGI?
Are you using a solo 401k to reduce MAGI?

https://www.kff.org/interactive/subsidy-calculator/
Wow, the calculator says I can get around $650 per month in subsidies based on the numbers for 2021. I am currently on a HDHP and plan to continue that going forward and I fully fund. I can't do a 401(k) contribution due to being retired (my income is from a pension and investments).
marcopolo
Posts: 8411
Joined: Sat Dec 03, 2016 9:22 am

Re: ACA Subsidy

Post by marcopolo »

J295 wrote: Tue Oct 26, 2021 12:33 pm What do you show when you use this calculator? It is updated for 2021 Plans and should be a good starting point (of course the ACA site controls).
Are you using a HD plan and thus using an HSA to reduce MAGI?
Are you using a solo 401k to reduce MAGI?

https://www.kff.org/interactive/subsidy-calculator/
Or they could get see the actual 2022 plans, pricing, tax credits, etc. for 2022 on healthcare.gov
Once in a while you get shown the light, in the strangest of places if you look at it right.
Topic Author
willyd123
Posts: 398
Joined: Mon Feb 19, 2018 6:23 am

Re: ACA Subsidy

Post by willyd123 »

marcopolo wrote: Tue Oct 26, 2021 12:37 pm
willyd123 wrote: Tue Oct 26, 2021 12:29 pm Hello -

Just got my 2022 medical plan premium notice - increase of 9.6%. My income has been too high to qualify for subsidies but my income for 2022 will be substantially lower than prior years. I estimate our 2022 MAGI will be about $149,500 and we are a family of two. I believe this income level will still be too high to qualify for any subsidies even with the temporary changes that came about due to the American Rescue Plan. I tried to confirm that I will NOT get any subsidies but the information I found on the internet was not very clear. Do you know the answer?

Thanks.
For 20121 and 2022 there is no "cliff" for the ACA tax credits. At your income level you are expected to pay 8.5% of your MAGI towards an ACA plan.
That is about $12,700. Whether or not you qualify for any credits will depend on how much the plan you choose costs.

The plans for 2022 are now available on healthcare.gov. You can get an exact answer by spending about 2 minutes putting in some info.

When you go to the website, you will probably get a pop-up window, close that.
Then select the green button that says "Get Ready to Apply"
Then select the blue button that says "Preview 2022 Plans & Prices Now"
Fill in your specific info and you will see if you qualify for ant tax credits, and what your plans will cost for 2022
OK, will do. Thanks.
OnTrack2020
Posts: 1413
Joined: Mon Mar 20, 2017 10:24 am

Re: ACA Subsidy

Post by OnTrack2020 »

Could someone explain to me how the 8.5% of income works in terms of, what I'm assuming is, the premium? I went to check out the rates, and there are some bronze plans which are under the 8.5% of the premium I put in. However, if we stay with the current insurance company we have, for any silver or gold plans, the premiums were more around 22% of our guesstimated income. I was shocked!! Our income we guesstimated at around $8,000 higher for 2022, but the monthly premiums for the same gold plan we were on jumped from around $300 (this was with the estimated $50 per person less for the American Rescue Plan) to over $1,500.
Raycpact
Posts: 429
Joined: Thu Jun 24, 2021 9:00 pm

Re: ACA Subsidy

Post by Raycpact »

The subsidy is based on the following premium and is not based on the premium for the plan that was chosen:

The second-lowest priced Marketplace health insurance plan in the Silver category that applies to you. It may not be the plan you enrolled in. You need to know your second lowest cost Silver plan (SLCSP) premium to figure out your final premium tax credit. In most cases, you’ll find your SLCSP premium on Form 1095-A.

https://www.healthcare.gov/glossary/sec ... lan-slcsp/
OnTrack2020
Posts: 1413
Joined: Mon Mar 20, 2017 10:24 am

Re: ACA Subsidy

Post by OnTrack2020 »

Raycpact wrote: Tue Oct 26, 2021 4:52 pm The subsidy is based on the following premium and is not based on the premium for the plan that was chosen:

The second-lowest priced Marketplace health insurance plan in the Silver category that applies to you. It may not be the plan you enrolled in. You need to know your second lowest cost Silver plan (SLCSP) premium to figure out your final premium tax credit. In most cases, you’ll find your SLCSP premium on Form 1095-A.

https://www.healthcare.gov/glossary/sec ... lan-slcsp/
Year 2021 was our first year on the exchange (we do not yet have a Form 1095-A). Is this something where I would have to look at all the insurance plans offered in our zip code to find the SLCSP?
OnTrack2020
Posts: 1413
Joined: Mon Mar 20, 2017 10:24 am

Re: ACA Subsidy

Post by OnTrack2020 »

Raycpact wrote: Tue Oct 26, 2021 4:52 pm The subsidy is based on the following premium and is not based on the premium for the plan that was chosen:

The second-lowest priced Marketplace health insurance plan in the Silver category that applies to you. It may not be the plan you enrolled in. You need to know your second lowest cost Silver plan (SLCSP) premium to figure out your final premium tax credit. In most cases, you’ll find your SLCSP premium on Form 1095-A.

https://www.healthcare.gov/glossary/sec ... lan-slcsp/
Not the premium tax credit, but the 8.5% of gross income.
PaunchyPirate
Posts: 1157
Joined: Sun Nov 30, 2014 6:58 pm

Re: ACA Subsidy

Post by PaunchyPirate »

OnTrack2020 wrote: Tue Oct 26, 2021 5:02 pm
Raycpact wrote: Tue Oct 26, 2021 4:52 pm The subsidy is based on the following premium and is not based on the premium for the plan that was chosen:

The second-lowest priced Marketplace health insurance plan in the Silver category that applies to you. It may not be the plan you enrolled in. You need to know your second lowest cost Silver plan (SLCSP) premium to figure out your final premium tax credit. In most cases, you’ll find your SLCSP premium on Form 1095-A.

https://www.healthcare.gov/glossary/sec ... lan-slcsp/
Year 2021 was our first year on the exchange (we do not yet have a Form 1095-A). Is this something where I would have to look at all the insurance plans offered in our zip code to find the SLCSP?
Essentially, yes. It’s not always 100% accurate that way. But it’s as close as you can get on your own. The numbers that show up on the 1095-A may differ because the plans on the exchange MAY offer something in addition to the requirements of the ACA. The insurance company may charge for these “extras”. But the price of what the ACA-compliant features of the plan are what gets reported on the 1095-A. It’s usually only a few dollars difference and probably not worth looking at.
marcopolo
Posts: 8411
Joined: Sat Dec 03, 2016 9:22 am

Re: ACA Subsidy

Post by marcopolo »

OnTrack2020 wrote: Tue Oct 26, 2021 5:10 pm
Raycpact wrote: Tue Oct 26, 2021 4:52 pm The subsidy is based on the following premium and is not based on the premium for the plan that was chosen:

The second-lowest priced Marketplace health insurance plan in the Silver category that applies to you. It may not be the plan you enrolled in. You need to know your second lowest cost Silver plan (SLCSP) premium to figure out your final premium tax credit. In most cases, you’ll find your SLCSP premium on Form 1095-A.

https://www.healthcare.gov/glossary/sec ... lan-slcsp/
Not the premium tax credit, but the 8.5% of gross income.
The 8.5% is not fixed, it is a progressive scale based on your Modified Adjusted Gross Income (MAGI) as a percentage of the Federal Poverty Level (FPL).
The sliding scales is shown here in Table 1 (first column is old percentages, second column is for 2021/22):
https://www.brookings.edu/blog/usc-broo ... th-policy/

Once you have your Expected Contribution (EC) calculated, you then need to look up the cost of SLCSP in your area.

The Tax Credit (TC) you will receive will be a fixed dollar amount that is the difference between those two values.

TC = SLCSP - EC

The TC does not change based on the plan you choose.

If you choose the SLCSP, you will pay exactly your EC
if you choose a plan that is cheaper than the SLCSP, it will cost less than EC, all the way down to free, but is not refundable.
If you choose a plan that is more expensive than the SLCSP, you will pay more than your EC.

In a weird twist that happened a few years ago, in many states Gold Plans (offering better coverage) can actually be cheaper that the SLCSP.
In those states, the elevated costs of the SLCSP also make the Bronze plans quite inexpensive if you qualify for tax credits.
Once in a while you get shown the light, in the strangest of places if you look at it right.
OnTrack2020
Posts: 1413
Joined: Mon Mar 20, 2017 10:24 am

Re: ACA Subsidy

Post by OnTrack2020 »

marcopolo wrote: Tue Oct 26, 2021 11:41 pm
OnTrack2020 wrote: Tue Oct 26, 2021 5:10 pm
Raycpact wrote: Tue Oct 26, 2021 4:52 pm The subsidy is based on the following premium and is not based on the premium for the plan that was chosen:

The second-lowest priced Marketplace health insurance plan in the Silver category that applies to you. It may not be the plan you enrolled in. You need to know your second lowest cost Silver plan (SLCSP) premium to figure out your final premium tax credit. In most cases, you’ll find your SLCSP premium on Form 1095-A.

https://www.healthcare.gov/glossary/sec ... lan-slcsp/
Not the premium tax credit, but the 8.5% of gross income.
The 8.5% is not fixed, it is a progressive scale based on your Modified Adjusted Gross Income (MAGI) as a percentage of the Federal Poverty Level (FPL).
The sliding scales is shown here in Table 1 (first column is old percentages, second column is for 2021/22):
https://www.brookings.edu/blog/usc-broo ... th-policy/

Once you have your Expected Contribution (EC) calculated, you then need to look up the cost of SLCSP in your area.

The Tax Credit (TC) you will receive will be a fixed dollar amount that is the difference between those two values.

TC = SLCSP - EC

The TC does not change based on the plan you choose.

If you choose the SLCSP, you will pay exactly your EC
if you choose a plan that is cheaper than the SLCSP, it will cost less than EC, all the way down to free, but is not refundable.
If you choose a plan that is more expensive than the SLCSP, you will pay more than your EC.

In a weird twist that happened a few years ago, in many states Gold Plans (offering better coverage) can actually be cheaper that the SLCSP.
In those states, the elevated costs of the SLCSP also make the Bronze plans quite inexpensive if you qualify for tax credits.


I noticed that yesterday when I went on to look at 2022 prices. Both the silver and gold plans were in the same area in terms of pricing--around $1400-$1500 dollars premium per month (4 of us on the plan currently--with us parents on the plan being around age 60). The bronze plans were very inexpensive which makes me wonder about something...

If we look at total yearly costs of the plans, and we tend to use a fair amount of health care (specifically, prescription medication and some medication supplies which are ordered 4 times a year), would it be beneficial to get a bronze plan where the premium is under $100 per month and capped out around $17,000 for out-of-pocket? And then just know that we are going to probably going to pay out around the $17,000 for the year because we will owe more out-of-pocket for prescription medication/supplies under a bronze plan, plus we would owe co-insurance versus a co-pay, from what I can remember.

Or, do we stick with the gold plan which has around a $1,500 per month premium and capped out around $17,000 for out-of-pocket knowing that we will be spending around $18,000 per year in premiums but probably not ever reaching the $17,000 out-of-pocket on the gold plan?

From purely a financial standpoint, the total estimated yearly costs of the bronze plan would be around the same price as just the yearly premiums of the gold plan. I tend to like knowing how much we will owe each time we go to the doctor (the gold plan)--the co-pay amount of going to the doctor versus co-insurance. But from what I can tell, all the prescription drug charges under ACA plans are going toward the out-of-pocket expense. And that's where the majority of our money is spent in health care. That, and premiums. Am I missing something?
PaunchyPirate
Posts: 1157
Joined: Sun Nov 30, 2014 6:58 pm

Re: ACA Subsidy

Post by PaunchyPirate »

OnTrack2020 wrote: Wed Oct 27, 2021 5:57 am
marcopolo wrote: Tue Oct 26, 2021 11:41 pm
OnTrack2020 wrote: Tue Oct 26, 2021 5:10 pm
Raycpact wrote: Tue Oct 26, 2021 4:52 pm The subsidy is based on the following premium and is not based on the premium for the plan that was chosen:

The second-lowest priced Marketplace health insurance plan in the Silver category that applies to you. It may not be the plan you enrolled in. You need to know your second lowest cost Silver plan (SLCSP) premium to figure out your final premium tax credit. In most cases, you’ll find your SLCSP premium on Form 1095-A.

https://www.healthcare.gov/glossary/sec ... lan-slcsp/
Not the premium tax credit, but the 8.5% of gross income.
The 8.5% is not fixed, it is a progressive scale based on your Modified Adjusted Gross Income (MAGI) as a percentage of the Federal Poverty Level (FPL).
The sliding scales is shown here in Table 1 (first column is old percentages, second column is for 2021/22):
https://www.brookings.edu/blog/usc-broo ... th-policy/

Once you have your Expected Contribution (EC) calculated, you then need to look up the cost of SLCSP in your area.

The Tax Credit (TC) you will receive will be a fixed dollar amount that is the difference between those two values.

TC = SLCSP - EC

The TC does not change based on the plan you choose.

If you choose the SLCSP, you will pay exactly your EC
if you choose a plan that is cheaper than the SLCSP, it will cost less than EC, all the way down to free, but is not refundable.
If you choose a plan that is more expensive than the SLCSP, you will pay more than your EC.

In a weird twist that happened a few years ago, in many states Gold Plans (offering better coverage) can actually be cheaper that the SLCSP.
In those states, the elevated costs of the SLCSP also make the Bronze plans quite inexpensive if you qualify for tax credits.


I noticed that yesterday when I went on to look at 2022 prices. Both the silver and gold plans were in the same area in terms of pricing--around $1400-$1500 dollars premium per month (4 of us on the plan currently--with us parents on the plan being around age 60). The bronze plans were very inexpensive which makes me wonder about something...

If we look at total yearly costs of the plans, and we tend to use a fair amount of health care (specifically, prescription medication and some medication supplies which are ordered 4 times a year), would it be beneficial to get a bronze plan where the premium is under $100 per month and capped out around $17,000 for out-of-pocket? And then just know that we are going to probably going to pay out around the $17,000 for the year because we will owe more out-of-pocket for prescription medication/supplies under a bronze plan, plus we would owe co-insurance versus a co-pay, from what I can remember.

Or, do we stick with the gold plan which has around a $1,500 per month premium and capped out around $17,000 for out-of-pocket knowing that we will be spending around $18,000 per year in premiums but probably not ever reaching the $17,000 out-of-pocket on the gold plan?

From purely a financial standpoint, the total estimated yearly costs of the bronze plan would be around the same price as just the yearly premiums of the gold plan. I tend to like knowing how much we will owe each time we go to the doctor (the gold plan)--the co-pay amount of going to the doctor versus co-insurance. But from what I can tell, all the prescription drug charges under ACA plans are going toward the out-of-pocket expense. And that's where the majority of our money is spent in health care. That, and premiums. Am I missing something?
I don't think you are missing anything. What you describe is very possible for someone who uses a significant amount of healthcare during the year. Each year, when the plans for next year are announced, I create a spreadsheet which compares anticipated TOTAL costs (insurance premium, co-pays, prescriptions) for bronze, silver and gold plans for the coming year. I enter values based on my actual healthcare spending in the previous year. It's the best approximation I can come up with for what it might cost next year using each plan.

For me, I visit the doctors enough and take enough medications (one of which costs quite a bit) that makes the bronze and gold packages almost even in terms of total costs. At least for the last 3 years. So I've been taking the Gold plan each year. The better prescription coverage is where it makes the difference.

You really need to do the math and pick the one that works best for your family.
OnTrack2020
Posts: 1413
Joined: Mon Mar 20, 2017 10:24 am

Re: ACA Subsidy

Post by OnTrack2020 »

willyd123 wrote: Tue Oct 26, 2021 12:29 pm Hello -

Just got my 2022 medical plan premium notice - increase of 9.6%. My income has been too high to qualify for subsidies but my income for 2022 will be substantially lower than prior years. I estimate our 2022 MAGI will be about $149,500 and we are a family of two. I believe this income level will still be too high to qualify for any subsidies even with the temporary changes that came about due to the American Rescue Plan. I tried to confirm that I will NOT get any subsidies but the information I found on the internet was not very clear. Do you know the answer?

Thanks.
I think you need to go to the ACA website to check 2022 prices of plans and put in your estimated 2022 MAGI. It will give you an answer right away.
PaunchyPirate wrote: Wed Oct 27, 2021 7:22 am
OnTrack2020 wrote: Wed Oct 27, 2021 5:57 am
marcopolo wrote: Tue Oct 26, 2021 11:41 pm
OnTrack2020 wrote: Tue Oct 26, 2021 5:10 pm
Raycpact wrote: Tue Oct 26, 2021 4:52 pm The subsidy is based on the following premium and is not based on the premium for the plan that was chosen:

The second-lowest priced Marketplace health insurance plan in the Silver category that applies to you. It may not be the plan you enrolled in. You need to know your second lowest cost Silver plan (SLCSP) premium to figure out your final premium tax credit. In most cases, you’ll find your SLCSP premium on Form 1095-A.

https://www.healthcare.gov/glossary/sec ... lan-slcsp/
Not the premium tax credit, but the 8.5% of gross income.
The 8.5% is not fixed, it is a progressive scale based on your Modified Adjusted Gross Income (MAGI) as a percentage of the Federal Poverty Level (FPL).
The sliding scales is shown here in Table 1 (first column is old percentages, second column is for 2021/22):
https://www.brookings.edu/blog/usc-broo ... th-policy/

Once you have your Expected Contribution (EC) calculated, you then need to look up the cost of SLCSP in your area.

The Tax Credit (TC) you will receive will be a fixed dollar amount that is the difference between those two values.

TC = SLCSP - EC

The TC does not change based on the plan you choose.

If you choose the SLCSP, you will pay exactly your EC
if you choose a plan that is cheaper than the SLCSP, it will cost less than EC, all the way down to free, but is not refundable.
If you choose a plan that is more expensive than the SLCSP, you will pay more than your EC.

In a weird twist that happened a few years ago, in many states Gold Plans (offering better coverage) can actually be cheaper that the SLCSP.
In those states, the elevated costs of the SLCSP also make the Bronze plans quite inexpensive if you qualify for tax credits.


I noticed that yesterday when I went on to look at 2022 prices. Both the silver and gold plans were in the same area in terms of pricing--around $1400-$1500 dollars premium per month (4 of us on the plan currently--with us parents on the plan being around age 60). The bronze plans were very inexpensive which makes me wonder about something...

If we look at total yearly costs of the plans, and we tend to use a fair amount of health care (specifically, prescription medication and some medication supplies which are ordered 4 times a year), would it be beneficial to get a bronze plan where the premium is under $100 per month and capped out around $17,000 for out-of-pocket? And then just know that we are going to probably going to pay out around the $17,000 for the year because we will owe more out-of-pocket for prescription medication/supplies under a bronze plan, plus we would owe co-insurance versus a co-pay, from what I can remember.

Or, do we stick with the gold plan which has around a $1,500 per month premium and capped out around $17,000 for out-of-pocket knowing that we will be spending around $18,000 per year in premiums but probably not ever reaching the $17,000 out-of-pocket on the gold plan?

From purely a financial standpoint, the total estimated yearly costs of the bronze plan would be around the same price as just the yearly premiums of the gold plan. I tend to like knowing how much we will owe each time we go to the doctor (the gold plan)--the co-pay amount of going to the doctor versus co-insurance. But from what I can tell, all the prescription drug charges under ACA plans are going toward the out-of-pocket expense. And that's where the majority of our money is spent in health care. That, and premiums. Am I missing something?
I don't think you are missing anything. What you describe is very possible for someone who uses a significant amount of healthcare during the year. Each year, when the plans for next year are announced, I create a spreadsheet which compares anticipated TOTAL costs (insurance premium, co-pays, prescriptions) for bronze, silver and gold plans for the coming year. I enter values based on my actual healthcare spending in the previous year. It's the best approximation I can come up with for what it might cost next year using each plan.

For me, I visit the doctors enough and take enough medications (one of which costs quite a bit) that makes the bronze and gold packages almost even in terms of total costs. At least for the last 3 years. So I've been taking the Gold plan each year. The better prescription coverage is where it makes the difference.

You really need to do the math and pick the one that works best for your family.
Thank you. This is very helpful. Didn't mean to derail the OP's question.
Topic Author
willyd123
Posts: 398
Joined: Mon Feb 19, 2018 6:23 am

Re: ACA Subsidy

Post by willyd123 »

Thanks for all the responses. On a related note, I have heard anecdotally that people have been hit by surprise tax liabilities after taking the subsidies and completing their returns. I assume that these surprises are the result of people underestimating their income when providing that information for purposes of determining the subsidy? So they get too much of a subsidy and then owe money back to the government? Correct?
J295
Posts: 3399
Joined: Sun Jan 01, 2012 10:40 pm

Re: ACA Subsidy

Post by J295 »

willyd123 wrote: Wed Oct 27, 2021 7:57 am Thanks for all the responses. On a related note, I have heard anecdotally that people have been hit by surprise tax liabilities after taking the subsidies and completing their returns. I assume that these surprises are the result of people underestimating their income when providing that information for purposes of determining the subsidy? So they get too much of a subsidy and then owe money back to the government? Correct?
I have not heard of any surprises, but your comments on how this could happen seems spot on.
PaunchyPirate
Posts: 1157
Joined: Sun Nov 30, 2014 6:58 pm

Re: ACA Subsidy

Post by PaunchyPirate »

willyd123 wrote: Wed Oct 27, 2021 7:57 am Thanks for all the responses. On a related note, I have heard anecdotally that people have been hit by surprise tax liabilities after taking the subsidies and completing their returns. I assume that these surprises are the result of people underestimating their income when providing that information for purposes of determining the subsidy? So they get too much of a subsidy and then owe money back to the government? Correct?
This is correct. The subsidy is calculated again at tax time and reconciled. If you were given more subsidy than your actual income warranted, then you pay it back at tax time. If you are due more subsidy than you got because your income was lower than you estimated, then you are given an additional tax credit on your tax return. This payback was waived for 2020 due to Covid, but is back in place for 2021 and onward.

This happened to me in 2019, but it wasn't a surprise. I had made an estimate of my MAGI to get a subsidy. But in December of 2019, I decided to sell some stock that I wasn't originally planning to do. That pushed me way over the threshold for subsidies entirely. So I had to pay back my entire year's subsidy at tax time. This was before the threshold cliff was taken away for 2021-2022. The cliff is currently scheduled to return for 2023, however, unless new legislation is passed.
marcopolo
Posts: 8411
Joined: Sat Dec 03, 2016 9:22 am

Re: ACA Subsidy

Post by marcopolo »

OnTrack2020 wrote: Wed Oct 27, 2021 5:57 am
marcopolo wrote: Tue Oct 26, 2021 11:41 pm
OnTrack2020 wrote: Tue Oct 26, 2021 5:10 pm
Raycpact wrote: Tue Oct 26, 2021 4:52 pm The subsidy is based on the following premium and is not based on the premium for the plan that was chosen:

The second-lowest priced Marketplace health insurance plan in the Silver category that applies to you. It may not be the plan you enrolled in. You need to know your second lowest cost Silver plan (SLCSP) premium to figure out your final premium tax credit. In most cases, you’ll find your SLCSP premium on Form 1095-A.

https://www.healthcare.gov/glossary/sec ... lan-slcsp/
Not the premium tax credit, but the 8.5% of gross income.
The 8.5% is not fixed, it is a progressive scale based on your Modified Adjusted Gross Income (MAGI) as a percentage of the Federal Poverty Level (FPL).
The sliding scales is shown here in Table 1 (first column is old percentages, second column is for 2021/22):
https://www.brookings.edu/blog/usc-broo ... th-policy/

Once you have your Expected Contribution (EC) calculated, you then need to look up the cost of SLCSP in your area.

The Tax Credit (TC) you will receive will be a fixed dollar amount that is the difference between those two values.

TC = SLCSP - EC

The TC does not change based on the plan you choose.

If you choose the SLCSP, you will pay exactly your EC
if you choose a plan that is cheaper than the SLCSP, it will cost less than EC, all the way down to free, but is not refundable.
If you choose a plan that is more expensive than the SLCSP, you will pay more than your EC.

In a weird twist that happened a few years ago, in many states Gold Plans (offering better coverage) can actually be cheaper that the SLCSP.
In those states, the elevated costs of the SLCSP also make the Bronze plans quite inexpensive if you qualify for tax credits.


I noticed that yesterday when I went on to look at 2022 prices. Both the silver and gold plans were in the same area in terms of pricing--around $1400-$1500 dollars premium per month (4 of us on the plan currently--with us parents on the plan being around age 60). The bronze plans were very inexpensive which makes me wonder about something...

If we look at total yearly costs of the plans, and we tend to use a fair amount of health care (specifically, prescription medication and some medication supplies which are ordered 4 times a year), would it be beneficial to get a bronze plan where the premium is under $100 per month and capped out around $17,000 for out-of-pocket? And then just know that we are going to probably going to pay out around the $17,000 for the year because we will owe more out-of-pocket for prescription medication/supplies under a bronze plan, plus we would owe co-insurance versus a co-pay, from what I can remember.

Or, do we stick with the gold plan which has around a $1,500 per month premium and capped out around $17,000 for out-of-pocket knowing that we will be spending around $18,000 per year in premiums but probably not ever reaching the $17,000 out-of-pocket on the gold plan?

From purely a financial standpoint, the total estimated yearly costs of the bronze plan would be around the same price as just the yearly premiums of the gold plan. I tend to like knowing how much we will owe each time we go to the doctor (the gold plan)--the co-pay amount of going to the doctor versus co-insurance. But from what I can tell, all the prescription drug charges under ACA plans are going toward the out-of-pocket expense. And that's where the majority of our money is spent in health care. That, and premiums. Am I missing something?
Not missing anything. The Bronze plans (high deductible) usually do better if you have either little or a lot of healthcare expenses. There is a narrow window of healthcare spending where the low deductible plans come out ahead. We always get the Bronze plan for this reason.
Once in a while you get shown the light, in the strangest of places if you look at it right.
marcopolo
Posts: 8411
Joined: Sat Dec 03, 2016 9:22 am

Re: ACA Subsidy

Post by marcopolo »

willyd123 wrote: Wed Oct 27, 2021 7:57 am Thanks for all the responses. On a related note, I have heard anecdotally that people have been hit by surprise tax liabilities after taking the subsidies and completing their returns. I assume that these surprises are the result of people underestimating their income when providing that information for purposes of determining the subsidy? So they get too much of a subsidy and then owe money back to the government? Correct?
What you describe can happen, but it really should not be a surprise. Also, if your MAGI is still under 400% of FPL, but more than you estimated, there is a relatively low cap on how much of the advance tax credit you have to payback.
Once in a while you get shown the light, in the strangest of places if you look at it right.
skierincolorado
Posts: 2377
Joined: Sat Mar 21, 2020 10:56 am

Re: ACA Subsidy

Post by skierincolorado »

willyd123 wrote: Tue Oct 26, 2021 12:29 pm Hello -

Just got my 2022 medical plan premium notice - increase of 9.6%. My income has been too high to qualify for subsidies but my income for 2022 will be substantially lower than prior years. I estimate our 2022 MAGI will be about $149,500 and we are a family of two. I believe this income level will still be too high to qualify for any subsidies even with the temporary changes that came about due to the American Rescue Plan. I tried to confirm that I will NOT get any subsidies but the information I found on the internet was not very clear. Do you know the answer?

Thanks.
You said your income is from pension and investments. You should be able to alternate years to game the system if you can control your investment income. Sell some gains this year and put in bank account. Don't sell next year. If you coul get your income down to ~100k the subsidies could be quite large, get the income down until the premium is free after subsidy. Then in 2023 sell gains again up to the top of the current tax bracket.

It could slightly increase sequence of return risk, but the gains from ACA subsidy are large and guaranteed.
Last edited by skierincolorado on Wed Oct 27, 2021 12:07 pm, edited 1 time in total.
skierincolorado
Posts: 2377
Joined: Sat Mar 21, 2020 10:56 am

Re: ACA Subsidy

Post by skierincolorado »

marcopolo wrote: Wed Oct 27, 2021 11:38 am
OnTrack2020 wrote: Wed Oct 27, 2021 5:57 am
marcopolo wrote: Tue Oct 26, 2021 11:41 pm
OnTrack2020 wrote: Tue Oct 26, 2021 5:10 pm
Raycpact wrote: Tue Oct 26, 2021 4:52 pm The subsidy is based on the following premium and is not based on the premium for the plan that was chosen:

The second-lowest priced Marketplace health insurance plan in the Silver category that applies to you. It may not be the plan you enrolled in. You need to know your second lowest cost Silver plan (SLCSP) premium to figure out your final premium tax credit. In most cases, you’ll find your SLCSP premium on Form 1095-A.

https://www.healthcare.gov/glossary/sec ... lan-slcsp/
Not the premium tax credit, but the 8.5% of gross income.
The 8.5% is not fixed, it is a progressive scale based on your Modified Adjusted Gross Income (MAGI) as a percentage of the Federal Poverty Level (FPL).
The sliding scales is shown here in Table 1 (first column is old percentages, second column is for 2021/22):
https://www.brookings.edu/blog/usc-broo ... th-policy/

Once you have your Expected Contribution (EC) calculated, you then need to look up the cost of SLCSP in your area.

The Tax Credit (TC) you will receive will be a fixed dollar amount that is the difference between those two values.

TC = SLCSP - EC

The TC does not change based on the plan you choose.

If you choose the SLCSP, you will pay exactly your EC
if you choose a plan that is cheaper than the SLCSP, it will cost less than EC, all the way down to free, but is not refundable.
If you choose a plan that is more expensive than the SLCSP, you will pay more than your EC.

In a weird twist that happened a few years ago, in many states Gold Plans (offering better coverage) can actually be cheaper that the SLCSP.
In those states, the elevated costs of the SLCSP also make the Bronze plans quite inexpensive if you qualify for tax credits.


I noticed that yesterday when I went on to look at 2022 prices. Both the silver and gold plans were in the same area in terms of pricing--around $1400-$1500 dollars premium per month (4 of us on the plan currently--with us parents on the plan being around age 60). The bronze plans were very inexpensive which makes me wonder about something...

If we look at total yearly costs of the plans, and we tend to use a fair amount of health care (specifically, prescription medication and some medication supplies which are ordered 4 times a year), would it be beneficial to get a bronze plan where the premium is under $100 per month and capped out around $17,000 for out-of-pocket? And then just know that we are going to probably going to pay out around the $17,000 for the year because we will owe more out-of-pocket for prescription medication/supplies under a bronze plan, plus we would owe co-insurance versus a co-pay, from what I can remember.

Or, do we stick with the gold plan which has around a $1,500 per month premium and capped out around $17,000 for out-of-pocket knowing that we will be spending around $18,000 per year in premiums but probably not ever reaching the $17,000 out-of-pocket on the gold plan?

From purely a financial standpoint, the total estimated yearly costs of the bronze plan would be around the same price as just the yearly premiums of the gold plan. I tend to like knowing how much we will owe each time we go to the doctor (the gold plan)--the co-pay amount of going to the doctor versus co-insurance. But from what I can tell, all the prescription drug charges under ACA plans are going toward the out-of-pocket expense. And that's where the majority of our money is spent in health care. That, and premiums. Am I missing something?
Not missing anything. The Bronze plans (high deductible) usually do better if you have either little or a lot of healthcare expenses. There is a narrow window of healthcare spending where the low deductible plans come out ahead. We always get the Bronze plan for this reason.
Do the silver plans no longer have a cost sharing subsidy?
PaunchyPirate
Posts: 1157
Joined: Sun Nov 30, 2014 6:58 pm

Re: ACA Subsidy

Post by PaunchyPirate »

skierincolorado wrote: Wed Oct 27, 2021 12:05 pm
marcopolo wrote: Wed Oct 27, 2021 11:38 am
OnTrack2020 wrote: Wed Oct 27, 2021 5:57 am
marcopolo wrote: Tue Oct 26, 2021 11:41 pm
OnTrack2020 wrote: Tue Oct 26, 2021 5:10 pm

Not the premium tax credit, but the 8.5% of gross income.
The 8.5% is not fixed, it is a progressive scale based on your Modified Adjusted Gross Income (MAGI) as a percentage of the Federal Poverty Level (FPL).
The sliding scales is shown here in Table 1 (first column is old percentages, second column is for 2021/22):
https://www.brookings.edu/blog/usc-broo ... th-policy/

Once you have your Expected Contribution (EC) calculated, you then need to look up the cost of SLCSP in your area.

The Tax Credit (TC) you will receive will be a fixed dollar amount that is the difference between those two values.

TC = SLCSP - EC

The TC does not change based on the plan you choose.

If you choose the SLCSP, you will pay exactly your EC
if you choose a plan that is cheaper than the SLCSP, it will cost less than EC, all the way down to free, but is not refundable.
If you choose a plan that is more expensive than the SLCSP, you will pay more than your EC.

In a weird twist that happened a few years ago, in many states Gold Plans (offering better coverage) can actually be cheaper that the SLCSP.
In those states, the elevated costs of the SLCSP also make the Bronze plans quite inexpensive if you qualify for tax credits.


I noticed that yesterday when I went on to look at 2022 prices. Both the silver and gold plans were in the same area in terms of pricing--around $1400-$1500 dollars premium per month (4 of us on the plan currently--with us parents on the plan being around age 60). The bronze plans were very inexpensive which makes me wonder about something...

If we look at total yearly costs of the plans, and we tend to use a fair amount of health care (specifically, prescription medication and some medication supplies which are ordered 4 times a year), would it be beneficial to get a bronze plan where the premium is under $100 per month and capped out around $17,000 for out-of-pocket? And then just know that we are going to probably going to pay out around the $17,000 for the year because we will owe more out-of-pocket for prescription medication/supplies under a bronze plan, plus we would owe co-insurance versus a co-pay, from what I can remember.

Or, do we stick with the gold plan which has around a $1,500 per month premium and capped out around $17,000 for out-of-pocket knowing that we will be spending around $18,000 per year in premiums but probably not ever reaching the $17,000 out-of-pocket on the gold plan?

From purely a financial standpoint, the total estimated yearly costs of the bronze plan would be around the same price as just the yearly premiums of the gold plan. I tend to like knowing how much we will owe each time we go to the doctor (the gold plan)--the co-pay amount of going to the doctor versus co-insurance. But from what I can tell, all the prescription drug charges under ACA plans are going toward the out-of-pocket expense. And that's where the majority of our money is spent in health care. That, and premiums. Am I missing something?
Not missing anything. The Bronze plans (high deductible) usually do better if you have either little or a lot of healthcare expenses. There is a narrow window of healthcare spending where the low deductible plans come out ahead. We always get the Bronze plan for this reason.
Do the silver plans no longer have a cost sharing subsidy?
They do exist if your income is low enough to qualify for them. Go to your exchange and enter a high income. Then do the same comparison with an income of say $28,000 (for one person). You will see lower deductibles/co-pays.

What's different now is the fact that this cost sharing is not funded by the federal government. The Trump admin ended that. So the insurers are permitted to pass the cost off somewhere, likely on the cost of the silver plans.
marcopolo
Posts: 8411
Joined: Sat Dec 03, 2016 9:22 am

Re: ACA Subsidy

Post by marcopolo »

skierincolorado wrote: Wed Oct 27, 2021 12:05 pm
marcopolo wrote: Wed Oct 27, 2021 11:38 am
OnTrack2020 wrote: Wed Oct 27, 2021 5:57 am
marcopolo wrote: Tue Oct 26, 2021 11:41 pm
OnTrack2020 wrote: Tue Oct 26, 2021 5:10 pm

Not the premium tax credit, but the 8.5% of gross income.
The 8.5% is not fixed, it is a progressive scale based on your Modified Adjusted Gross Income (MAGI) as a percentage of the Federal Poverty Level (FPL).
The sliding scales is shown here in Table 1 (first column is old percentages, second column is for 2021/22):
https://www.brookings.edu/blog/usc-broo ... th-policy/

Once you have your Expected Contribution (EC) calculated, you then need to look up the cost of SLCSP in your area.

The Tax Credit (TC) you will receive will be a fixed dollar amount that is the difference between those two values.

TC = SLCSP - EC

The TC does not change based on the plan you choose.

If you choose the SLCSP, you will pay exactly your EC
if you choose a plan that is cheaper than the SLCSP, it will cost less than EC, all the way down to free, but is not refundable.
If you choose a plan that is more expensive than the SLCSP, you will pay more than your EC.

In a weird twist that happened a few years ago, in many states Gold Plans (offering better coverage) can actually be cheaper that the SLCSP.
In those states, the elevated costs of the SLCSP also make the Bronze plans quite inexpensive if you qualify for tax credits.


I noticed that yesterday when I went on to look at 2022 prices. Both the silver and gold plans were in the same area in terms of pricing--around $1400-$1500 dollars premium per month (4 of us on the plan currently--with us parents on the plan being around age 60). The bronze plans were very inexpensive which makes me wonder about something...

If we look at total yearly costs of the plans, and we tend to use a fair amount of health care (specifically, prescription medication and some medication supplies which are ordered 4 times a year), would it be beneficial to get a bronze plan where the premium is under $100 per month and capped out around $17,000 for out-of-pocket? And then just know that we are going to probably going to pay out around the $17,000 for the year because we will owe more out-of-pocket for prescription medication/supplies under a bronze plan, plus we would owe co-insurance versus a co-pay, from what I can remember.

Or, do we stick with the gold plan which has around a $1,500 per month premium and capped out around $17,000 for out-of-pocket knowing that we will be spending around $18,000 per year in premiums but probably not ever reaching the $17,000 out-of-pocket on the gold plan?

From purely a financial standpoint, the total estimated yearly costs of the bronze plan would be around the same price as just the yearly premiums of the gold plan. I tend to like knowing how much we will owe each time we go to the doctor (the gold plan)--the co-pay amount of going to the doctor versus co-insurance. But from what I can tell, all the prescription drug charges under ACA plans are going toward the out-of-pocket expense. And that's where the majority of our money is spent in health care. That, and premiums. Am I missing something?
Not missing anything. The Bronze plans (high deductible) usually do better if you have either little or a lot of healthcare expenses. There is a narrow window of healthcare spending where the low deductible plans come out ahead. We always get the Bronze plan for this reason.
Do the silver plans no longer have a cost sharing subsidy?
They still do have the CSR for silver plans, but you have to have a MAGI between 138% (100% in some states) and 250% of FPL to be eligible for them.
If you are in that window, it may make sense to go with a silver plan.
We have not been able to hit that window.
Once in a while you get shown the light, in the strangest of places if you look at it right.
marcopolo
Posts: 8411
Joined: Sat Dec 03, 2016 9:22 am

Re: ACA Subsidy

Post by marcopolo »

PaunchyPirate wrote: Wed Oct 27, 2021 12:45 pm
skierincolorado wrote: Wed Oct 27, 2021 12:05 pm
marcopolo wrote: Wed Oct 27, 2021 11:38 am
OnTrack2020 wrote: Wed Oct 27, 2021 5:57 am
marcopolo wrote: Tue Oct 26, 2021 11:41 pm

The 8.5% is not fixed, it is a progressive scale based on your Modified Adjusted Gross Income (MAGI) as a percentage of the Federal Poverty Level (FPL).
The sliding scales is shown here in Table 1 (first column is old percentages, second column is for 2021/22):
https://www.brookings.edu/blog/usc-broo ... th-policy/

Once you have your Expected Contribution (EC) calculated, you then need to look up the cost of SLCSP in your area.

The Tax Credit (TC) you will receive will be a fixed dollar amount that is the difference between those two values.

TC = SLCSP - EC

The TC does not change based on the plan you choose.

If you choose the SLCSP, you will pay exactly your EC
if you choose a plan that is cheaper than the SLCSP, it will cost less than EC, all the way down to free, but is not refundable.
If you choose a plan that is more expensive than the SLCSP, you will pay more than your EC.

In a weird twist that happened a few years ago, in many states Gold Plans (offering better coverage) can actually be cheaper that the SLCSP.
In those states, the elevated costs of the SLCSP also make the Bronze plans quite inexpensive if you qualify for tax credits.


I noticed that yesterday when I went on to look at 2022 prices. Both the silver and gold plans were in the same area in terms of pricing--around $1400-$1500 dollars premium per month (4 of us on the plan currently--with us parents on the plan being around age 60). The bronze plans were very inexpensive which makes me wonder about something...

If we look at total yearly costs of the plans, and we tend to use a fair amount of health care (specifically, prescription medication and some medication supplies which are ordered 4 times a year), would it be beneficial to get a bronze plan where the premium is under $100 per month and capped out around $17,000 for out-of-pocket? And then just know that we are going to probably going to pay out around the $17,000 for the year because we will owe more out-of-pocket for prescription medication/supplies under a bronze plan, plus we would owe co-insurance versus a co-pay, from what I can remember.

Or, do we stick with the gold plan which has around a $1,500 per month premium and capped out around $17,000 for out-of-pocket knowing that we will be spending around $18,000 per year in premiums but probably not ever reaching the $17,000 out-of-pocket on the gold plan?

From purely a financial standpoint, the total estimated yearly costs of the bronze plan would be around the same price as just the yearly premiums of the gold plan. I tend to like knowing how much we will owe each time we go to the doctor (the gold plan)--the co-pay amount of going to the doctor versus co-insurance. But from what I can tell, all the prescription drug charges under ACA plans are going toward the out-of-pocket expense. And that's where the majority of our money is spent in health care. That, and premiums. Am I missing something?
Not missing anything. The Bronze plans (high deductible) usually do better if you have either little or a lot of healthcare expenses. There is a narrow window of healthcare spending where the low deductible plans come out ahead. We always get the Bronze plan for this reason.
Do the silver plans no longer have a cost sharing subsidy?
They do exist if your income is low enough to qualify for them. Go to your exchange and enter a high income. Then do the same comparison with an income of say $28,000 (for one person). You will see lower deductibles/co-pays.

What's different now is the fact that this cost sharing is not funded by the federal government. The Trump admin ended that. So the insurers are permitted to pass the cost off somewhere, likely on the cost of the silver plans.
That is what created the odd situation in some states (Silver Switcheroo) where the Silver plans are actually more expensive than the Gold plans.
Once in a while you get shown the light, in the strangest of places if you look at it right.
skierincolorado
Posts: 2377
Joined: Sat Mar 21, 2020 10:56 am

Re: ACA Subsidy

Post by skierincolorado »

marcopolo wrote: Wed Oct 27, 2021 12:48 pm
PaunchyPirate wrote: Wed Oct 27, 2021 12:45 pm
skierincolorado wrote: Wed Oct 27, 2021 12:05 pm
marcopolo wrote: Wed Oct 27, 2021 11:38 am
OnTrack2020 wrote: Wed Oct 27, 2021 5:57 am [/color]

I noticed that yesterday when I went on to look at 2022 prices. Both the silver and gold plans were in the same area in terms of pricing--around $1400-$1500 dollars premium per month (4 of us on the plan currently--with us parents on the plan being around age 60). The bronze plans were very inexpensive which makes me wonder about something...

If we look at total yearly costs of the plans, and we tend to use a fair amount of health care (specifically, prescription medication and some medication supplies which are ordered 4 times a year), would it be beneficial to get a bronze plan where the premium is under $100 per month and capped out around $17,000 for out-of-pocket? And then just know that we are going to probably going to pay out around the $17,000 for the year because we will owe more out-of-pocket for prescription medication/supplies under a bronze plan, plus we would owe co-insurance versus a co-pay, from what I can remember.

Or, do we stick with the gold plan which has around a $1,500 per month premium and capped out around $17,000 for out-of-pocket knowing that we will be spending around $18,000 per year in premiums but probably not ever reaching the $17,000 out-of-pocket on the gold plan?

From purely a financial standpoint, the total estimated yearly costs of the bronze plan would be around the same price as just the yearly premiums of the gold plan. I tend to like knowing how much we will owe each time we go to the doctor (the gold plan)--the co-pay amount of going to the doctor versus co-insurance. But from what I can tell, all the prescription drug charges under ACA plans are going toward the out-of-pocket expense. And that's where the majority of our money is spent in health care. That, and premiums. Am I missing something?
Not missing anything. The Bronze plans (high deductible) usually do better if you have either little or a lot of healthcare expenses. There is a narrow window of healthcare spending where the low deductible plans come out ahead. We always get the Bronze plan for this reason.
Do the silver plans no longer have a cost sharing subsidy?
They do exist if your income is low enough to qualify for them. Go to your exchange and enter a high income. Then do the same comparison with an income of say $28,000 (for one person). You will see lower deductibles/co-pays.

What's different now is the fact that this cost sharing is not funded by the federal government. The Trump admin ended that. So the insurers are permitted to pass the cost off somewhere, likely on the cost of the silver plans.
That is what created the odd situation in some states (Silver Switcheroo) where the Silver plans are actually more expensive than the Gold plans.
Fascinating. I have not used ACA exchange plan in a while and had lost track of this particular component. Per my previous post, are you able to modulate your income year to year to maximize subsidies?
Last edited by skierincolorado on Wed Oct 27, 2021 1:23 pm, edited 1 time in total.
AnEngineer
Posts: 2407
Joined: Sat Jun 27, 2020 4:05 pm

Re: ACA Subsidy

Post by AnEngineer »

skierincolorado wrote: Wed Oct 27, 2021 12:02 pm
willyd123 wrote: Tue Oct 26, 2021 12:29 pm Hello -

Just got my 2022 medical plan premium notice - increase of 9.6%. My income has been too high to qualify for subsidies but my income for 2022 will be substantially lower than prior years. I estimate our 2022 MAGI will be about $149,500 and we are a family of two. I believe this income level will still be too high to qualify for any subsidies even with the temporary changes that came about due to the American Rescue Plan. I tried to confirm that I will NOT get any subsidies but the information I found on the internet was not very clear. Do you know the answer?

Thanks.
You said your income is from pension and investments. You should be able to alternate years to game the system if you can control your investment income. Sell some gains this year and put in bank account. Don't sell next year. If you coul get your income down to ~100k the subsidies could be quite large, get the income down until the premium is free after subsidy. Then in 2023 sell gains again up to the top of the current tax bracket.

It could slightly increase sequence of return risk, but the gains from ACA subsidy are large and guaranteed.
You could also tax gain harvest instead of going to cash. You'll have some "risk" of gains, but your AA isn't affected.
skierincolorado
Posts: 2377
Joined: Sat Mar 21, 2020 10:56 am

Re: ACA Subsidy

Post by skierincolorado »

AnEngineer wrote: Wed Oct 27, 2021 1:07 pm
skierincolorado wrote: Wed Oct 27, 2021 12:02 pm
willyd123 wrote: Tue Oct 26, 2021 12:29 pm Hello -

Just got my 2022 medical plan premium notice - increase of 9.6%. My income has been too high to qualify for subsidies but my income for 2022 will be substantially lower than prior years. I estimate our 2022 MAGI will be about $149,500 and we are a family of two. I believe this income level will still be too high to qualify for any subsidies even with the temporary changes that came about due to the American Rescue Plan. I tried to confirm that I will NOT get any subsidies but the information I found on the internet was not very clear. Do you know the answer?

Thanks.
You said your income is from pension and investments. You should be able to alternate years to game the system if you can control your investment income. Sell some gains this year and put in bank account. Don't sell next year. If you coul get your income down to ~100k the subsidies could be quite large, get the income down until the premium is free after subsidy. Then in 2023 sell gains again up to the top of the current tax bracket.

It could slightly increase sequence of return risk, but the gains from ACA subsidy are large and guaranteed.
You could also tax gain harvest instead of going to cash. You'll have some "risk" of gains, but your AA isn't affected.
Yes and it wouldn't necessarily have to be alternating years. One could harvest a lot of gains in year 1, and then have several years of low income and high subsidies before needing to harvest gains again. It would depend on tax brackets. It might even be worth spanning 2 tax brackets for the subsidies. Although if it's all capital gains one could harvest up to 400k or whatever the limit is for the 15% cap gains bracket, which should keep one set for quite a few years.
PaunchyPirate
Posts: 1157
Joined: Sun Nov 30, 2014 6:58 pm

Re: ACA Subsidy

Post by PaunchyPirate »

skierincolorado wrote: Wed Oct 27, 2021 12:58 pm
marcopolo wrote: Wed Oct 27, 2021 12:48 pm
PaunchyPirate wrote: Wed Oct 27, 2021 12:45 pm
skierincolorado wrote: Wed Oct 27, 2021 12:05 pm
marcopolo wrote: Wed Oct 27, 2021 11:38 am

Not missing anything. The Bronze plans (high deductible) usually do better if you have either little or a lot of healthcare expenses. There is a narrow window of healthcare spending where the low deductible plans come out ahead. We always get the Bronze plan for this reason.
Do the silver plans no longer have a cost sharing subsidy?
They do exist if your income is low enough to qualify for them. Go to your exchange and enter a high income. Then do the same comparison with an income of say $28,000 (for one person). You will see lower deductibles/co-pays.

What's different now is the fact that this cost sharing is not funded by the federal government. The Trump admin ended that. So the insurers are permitted to pass the cost off somewhere, likely on the cost of the silver plans.
That is what created the odd situation in some states (Silver Switcheroo) where the Silver plans are actually more expensive than the Gold plans.
Fascinating. I have not used ACA in a while and had lost track of this particular component. Per my previous post, are you able to modulate your income year to year to maximize subsidies?
Yes. If you're able to. There are various fully legal techniques. I initially had hesitations about doing this, but decided it was in the same category as the super rich leveraging every single tax loophole to pay less taxes. I pay all the taxes I am legally required to do.
skierincolorado
Posts: 2377
Joined: Sat Mar 21, 2020 10:56 am

Re: ACA Subsidy

Post by skierincolorado »

PaunchyPirate wrote: Wed Oct 27, 2021 1:13 pm
skierincolorado wrote: Wed Oct 27, 2021 12:58 pm
marcopolo wrote: Wed Oct 27, 2021 12:48 pm
PaunchyPirate wrote: Wed Oct 27, 2021 12:45 pm
skierincolorado wrote: Wed Oct 27, 2021 12:05 pm

Do the silver plans no longer have a cost sharing subsidy?
They do exist if your income is low enough to qualify for them. Go to your exchange and enter a high income. Then do the same comparison with an income of say $28,000 (for one person). You will see lower deductibles/co-pays.

What's different now is the fact that this cost sharing is not funded by the federal government. The Trump admin ended that. So the insurers are permitted to pass the cost off somewhere, likely on the cost of the silver plans.
That is what created the odd situation in some states (Silver Switcheroo) where the Silver plans are actually more expensive than the Gold plans.
Fascinating. I have not used ACA in a while and had lost track of this particular component. Per my previous post, are you able to modulate your income year to year to maximize subsidies?
Yes. If you're able to. There are various fully legal techniques. I initially had hesitations about doing this, but decided it was in the same category as the super rich leveraging every single tax loophole to pay less taxes. I pay all the taxes I am legally required to do.
Seems like this would be applicable to the opp. Agree it is a loophole and also eliminates the cliff which shouldn't exist logically. If near the cliff, go below cliff most years, above cliff in off years. If cliff did not exist, incentive to do this would still exist but wouldn't be as large. Could easily see benefit of 10k+ per year.
User avatar
GeraniumLover
Posts: 556
Joined: Mon Feb 22, 2016 2:39 pm

Re: ACA Subsidy

Post by GeraniumLover »

Very interesting discussion. I am trying to decide whether to continue COBRA then switch to ACA when it ends in March or go with ACA from January 1. Also trying to determine my target MAGI for 2022 (retired, so will consist solely of dividends, interest and capital gains).
AnEngineer
Posts: 2407
Joined: Sat Jun 27, 2020 4:05 pm

Re: ACA Subsidy

Post by AnEngineer »

GeraniumLover wrote: Fri Nov 05, 2021 11:46 am Very interesting discussion. I am trying to decide whether to continue COBRA then switch to ACA when it ends in March or go with ACA from January 1. Also trying to determine my target MAGI for 2022 (retired, so will consist solely of dividends, interest and capital gains).
As I recall, COBRA expiring is not a qualifying event for adding ACA coverage, but check.
marcopolo
Posts: 8411
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Re: ACA Subsidy

Post by marcopolo »

AnEngineer wrote: Fri Nov 05, 2021 12:33 pm
GeraniumLover wrote: Fri Nov 05, 2021 11:46 am Very interesting discussion. I am trying to decide whether to continue COBRA then switch to ACA when it ends in March or go with ACA from January 1. Also trying to determine my target MAGI for 2022 (retired, so will consist solely of dividends, interest and capital gains).
As I recall, COBRA expiring is not a qualifying event for adding ACA coverage, but check.
It is a qualifying event.
https://www.healthcare.gov/unemployed/cobra-coverage/
Once in a while you get shown the light, in the strangest of places if you look at it right.
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GeraniumLover
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Re: ACA Subsidy

Post by GeraniumLover »

marcopolo wrote: Fri Nov 05, 2021 1:16 pm
AnEngineer wrote: Fri Nov 05, 2021 12:33 pm
As I recall, COBRA expiring is not a qualifying event for adding ACA coverage, but check.
It is a qualifying event.
https://www.healthcare.gov/unemployed/cobra-coverage/
Thanks for confirming.
Cali4en
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Re: ACA Subsidy

Post by Cali4en »

GeraniumLover wrote: Fri Nov 05, 2021 11:46 am Very interesting discussion. I am trying to decide whether to continue COBRA then switch to ACA when it ends in March or go with ACA from January 1. Also trying to determine my target MAGI for 2022 (retired, so will consist solely of dividends, interest and capital gains).
First it's important to find out if the ACA offerings in your county are good or not. We live in a great ACA market, but head two counties over and the choices are markedly different.

After that it comes down to MAGI management. It's not too hard to get excellent coverage for essentially free via the ACA provided your MAGI, natural or engineered, falls into the right FPL bucket. Throw in high CSRs and rewards programs and such and sometimes you can actually get paid to accept coverage.

Of course, no price is a good value if none of the local ACA options work for your specific needs.
AnEngineer
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Re: ACA Subsidy

Post by AnEngineer »

marcopolo wrote: Fri Nov 05, 2021 1:16 pm
AnEngineer wrote: Fri Nov 05, 2021 12:33 pm
GeraniumLover wrote: Fri Nov 05, 2021 11:46 am Very interesting discussion. I am trying to decide whether to continue COBRA then switch to ACA when it ends in March or go with ACA from January 1. Also trying to determine my target MAGI for 2022 (retired, so will consist solely of dividends, interest and capital gains).
As I recall, COBRA expiring is not a qualifying event for adding ACA coverage, but check.
It is a qualifying event.
https://www.healthcare.gov/unemployed/cobra-coverage/
Thanks. Expiring is a qualifying event, but voluntarily ending it early is not (which is what I must have been thinking of).
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GeraniumLover
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Re: ACA Subsidy

Post by GeraniumLover »

Cali4en wrote: Fri Nov 05, 2021 1:20 pm
GeraniumLover wrote: Fri Nov 05, 2021 11:46 am Very interesting discussion. I am trying to decide whether to continue COBRA then switch to ACA when it ends in March or go with ACA from January 1. Also trying to determine my target MAGI for 2022 (retired, so will consist solely of dividends, interest and capital gains).
First it's important to find out if the ACA offerings in your county are good or not. We live in a great ACA market, but head two counties over and the choices are markedly different.

After that it comes down to MAGI management. It's not too hard to get excellent coverage for essentially free via the ACA provided your MAGI, natural or engineered, falls into the right FPL bucket. Throw in high CSRs and rewards programs and such and sometimes you can actually get paid to accept coverage.

Of course, no price is a good value if none of the local ACA options work for your specific needs.
Thanks. What complicates things further is weighing the ACA subsidies against the benefits of ROTH conversions or harvesting capital gains (both of which would increase MAGI).
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GeraniumLover
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Re: ACA Subsidy

Post by GeraniumLover »

AnEngineer wrote: Fri Nov 05, 2021 1:28 pm
marcopolo wrote: Fri Nov 05, 2021 1:16 pm
AnEngineer wrote: Fri Nov 05, 2021 12:33 pm
GeraniumLover wrote: Fri Nov 05, 2021 11:46 am Very interesting discussion. I am trying to decide whether to continue COBRA then switch to ACA when it ends in March or go with ACA from January 1. Also trying to determine my target MAGI for 2022 (retired, so will consist solely of dividends, interest and capital gains).
As I recall, COBRA expiring is not a qualifying event for adding ACA coverage, but check.
It is a qualifying event.
https://www.healthcare.gov/unemployed/cobra-coverage/
Thanks. Expiring is a qualifying event, but voluntarily ending it early is not (which is what I must have been thinking of).
Yes, unless we voluntarily end it early during the ACA annual enrollment period (thereby foregoing 3 months of COBRA in exchange for ACA subsidies).
Cali4en
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Re: ACA Subsidy

Post by Cali4en »

GeraniumLover wrote: Fri Nov 05, 2021 1:44 pm Thanks. What complicates things further is weighing the ACA subsidies against the benefits of ROTH conversions or harvesting capital gains (both of which would increase MAGI).
Yes, we've gone back and forth multiple times on that since we regularly leave about half of our zero-tax conversion space unused. We ultimately decided that the immediate known post-tax savings on insurance was more attractive than increasing our conversions.

Of course, the gov then went and made the child tax credit fully refundable, so for this year at least we got both sides of the trade-off.

We're headed into about a decade of FAFSA years though, so regardless if what Congress does with the CTC moving forward, we'll just keep taking our natural low MAGI path.

It's a juggling act for everyone, but it's a nice problem to have. Even a "bad" choice typically only means a modest loss in investing return or tax efficiency.
marcopolo
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Re: ACA Subsidy

Post by marcopolo »

Cali4en wrote: Fri Nov 05, 2021 1:59 pm
GeraniumLover wrote: Fri Nov 05, 2021 1:44 pm Thanks. What complicates things further is weighing the ACA subsidies against the benefits of ROTH conversions or harvesting capital gains (both of which would increase MAGI).
Yes, we've gone back and forth multiple times on that since we regularly leave about half of our zero-tax conversion space unused. We ultimately decided that the immediate known post-tax savings on insurance was more attractive than increasing our conversions.

Of course, the gov then went and made the child tax credit fully refundable, so for this year at least we got both sides of the trade-off.

We're headed into about a decade of FAFSA years though, so regardless if what Congress does with the CTC moving forward, we'll just keep taking our natural low MAGI path.

It's a juggling act for everyone, but it's a nice problem to have. Even a "bad" choice typically only means a modest loss in investing return or tax efficiency.
I deal with this every year as well.
I am not sure foregoing zero tax space makes sense, unless it will put you over the cliff, which is not an issue for 2021/22.

The loss of subsidy is 8.5% in 2021/22 (9.8% otherwise).
That is a pretty low rate for conversions. Seems that would payoff in most scenarios.

In 10% bracket, the effective rate is 18.5% (or 19.8%), probably still likely to payoff.

In 12% bracket, you are at 20.5% (or 21.8%) effective rate, if you will hit SS hump of 22.2%, this is probably still a win.

This is where I stop doing conversions.

In 22% bracket, the effective rate becomes 30.5% (or 31.8%), that takes a lot of retirement income to make worthwhile
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: ACA Subsidy

Post by Cali4en »

marcopolo wrote: Fri Nov 05, 2021 2:18 pm I deal with this every year as well.
I am not sure foregoing zero tax space makes sense, unless it will put you over the cliff, which is not an issue for 2021/22.

The loss of subsidy is 8.5% in 2021/22 (9.8% otherwise).
That is a pretty low rate for conversions. Seems that would payoff in most scenarios.

In 10% bracket, the effective rate is 18.5% (or 19.8%), probably still likely to payoff.

In 12% bracket, you are at 20.5% (or 21.8%) effective rate, if you will hit SS hump of 22.2%, this is probably still a win.

This is where I stop doing conversions.

In 22% bracket, the effective rate becomes 30.5% (or 31.8%), that takes a lot of retirement income to make worthwhile
Our situation is complicated by the fact that we are a household of six and our natural MAGI puts us perfectly in the FPL range for maximum subsidies and CSRs. All-in we get somewhere like $35K-$45K in value each year by taking the subsidies and CSRs versus the $10K or so in tax gains from bumping up our conversions to fill our zero and tax conversion space. We've also got almost three decades still to do conversions, which should add up even at the reduced rate we are doing them.

There is also the fact that remaining under the 175% FPL cliff for the new FAFSA rules will be worth somewhere between $60K and $300K in higher education subsidies per kid.

If Congress extends the full refundability of the CTC, then we'll also continue to get the double benefit of both max ACA subsidies and full value of the CTC. No idea what will happen on that front at this point, but it's a major consideration since full refundability eliminates the losses from foregoing the increased conversions.

Once we are empty nesters and out of FAFSA years I expect we'll push our conversions up to fill the one or two lowest tax brackets, but that's about a decade off for us and who knows what will happen between now and then?
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Re: ACA Subsidy

Post by marcopolo »

Cali4en wrote: Fri Nov 05, 2021 3:26 pm
marcopolo wrote: Fri Nov 05, 2021 2:18 pm I deal with this every year as well.
I am not sure foregoing zero tax space makes sense, unless it will put you over the cliff, which is not an issue for 2021/22.

The loss of subsidy is 8.5% in 2021/22 (9.8% otherwise).
That is a pretty low rate for conversions. Seems that would payoff in most scenarios.

In 10% bracket, the effective rate is 18.5% (or 19.8%), probably still likely to payoff.

In 12% bracket, you are at 20.5% (or 21.8%) effective rate, if you will hit SS hump of 22.2%, this is probably still a win.

This is where I stop doing conversions.

In 22% bracket, the effective rate becomes 30.5% (or 31.8%), that takes a lot of retirement income to make worthwhile
Our situation is complicated by the fact that we are a household of six and our natural MAGI puts us perfectly in the FPL range for maximum subsidies and CSRs. All-in we get somewhere like $35K-$45K in value each year by taking the subsidies and CSRs versus the $10K or so in tax gains from bumping up our conversions to fill our zero and tax conversion space. We've also got almost three decades still to do conversions, which should add up even at the reduced rate we are doing them.

There is also the fact that remaining under the 175% FPL cliff for the new FAFSA rules will be worth somewhere between $60K and $300K in higher education subsidies per kid.

If Congress extends the full refundability of the CTC, then we'll also continue to get the double benefit of both max ACA subsidies and full value of the CTC. No idea what will happen on that front at this point, but it's a major consideration since full refundability eliminates the losses from foregoing the increased conversions.

Once we are empty nesters and out of FAFSA years I expect we'll push our conversions up to fill the one or two lowest tax brackets, but that's about a decade off for us and who knows what will happen between now and then?
That makes sense.
The CSRs and FAFSA rules definitely pay off for you.
Once in a while you get shown the light, in the strangest of places if you look at it right.
chw
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Re: ACA Subsidy

Post by chw »

OnTrack2020 wrote: Wed Oct 27, 2021 5:57 am
marcopolo wrote: Tue Oct 26, 2021 11:41 pm
OnTrack2020 wrote: Tue Oct 26, 2021 5:10 pm
Raycpact wrote: Tue Oct 26, 2021 4:52 pm The subsidy is based on the following premium and is not based on the premium for the plan that was chosen:

The second-lowest priced Marketplace health insurance plan in the Silver category that applies to you. It may not be the plan you enrolled in. You need to know your second lowest cost Silver plan (SLCSP) premium to figure out your final premium tax credit. In most cases, you’ll find your SLCSP premium on Form 1095-A.

https://www.healthcare.gov/glossary/sec ... lan-slcsp/
Not the premium tax credit, but the 8.5% of gross income.
The 8.5% is not fixed, it is a progressive scale based on your Modified Adjusted Gross Income (MAGI) as a percentage of the Federal Poverty Level (FPL).
The sliding scales is shown here in Table 1 (first column is old percentages, second column is for 2021/22):
https://www.brookings.edu/blog/usc-broo ... th-policy/

Once you have your Expected Contribution (EC) calculated, you then need to look up the cost of SLCSP in your area.

The Tax Credit (TC) you will receive will be a fixed dollar amount that is the difference between those two values.

TC = SLCSP - EC

The TC does not change based on the plan you choose.

If you choose the SLCSP, you will pay exactly your EC
if you choose a plan that is cheaper than the SLCSP, it will cost less than EC, all the way down to free, but is not refundable.
If you choose a plan that is more expensive than the SLCSP, you will pay more than your EC.

In a weird twist that happened a few years ago, in many states Gold Plans (offering better coverage) can actually be cheaper that the SLCSP.
In those states, the elevated costs of the SLCSP also make the Bronze plans quite inexpensive if you qualify for tax credits.


I noticed that yesterday when I went on to look at 2022 prices. Both the silver and gold plans were in the same area in terms of pricing--around $1400-$1500 dollars premium per month (4 of us on the plan currently--with us parents on the plan being around age 60). The bronze plans were very inexpensive which makes me wonder about something...

If we look at total yearly costs of the plans, and we tend to use a fair amount of health care (specifically, prescription medication and some medication supplies which are ordered 4 times a year), would it be beneficial to get a bronze plan where the premium is under $100 per month and capped out around $17,000 for out-of-pocket? And then just know that we are going to probably going to pay out around the $17,000 for the year because we will owe more out-of-pocket for prescription medication/supplies under a bronze plan, plus we would owe co-insurance versus a co-pay, from what I can remember.

Or, do we stick with the gold plan which has around a $1,500 per month premium and capped out around $17,000 for out-of-pocket knowing that we will be spending around $18,000 per year in premiums but probably not ever reaching the $17,000 out-of-pocket on the gold plan?

From purely a financial standpoint, the total estimated yearly costs of the bronze plan would be around the same price as just the yearly premiums of the gold plan. I tend to like knowing how much we will owe each time we go to the doctor (the gold plan)--the co-pay amount of going to the doctor versus co-insurance. But from what I can tell, all the prescription drug charges under ACA plans are going toward the out-of-pocket expense. And that's where the majority of our money is spent in health care. That, and premiums. Am I missing something?
You need to model out of pocket costs for everything, and then make a best guess which plan may work best for you. If considering a Bronze plan, I would try to find one that is HSA eligible. The tax credit from the HSA contribution is another intangible to consider, as it will give you a nice credit on your taxes. DW and I have been using a Bronze plan in our early 60's, and the HSA contributions have worked out nicely going towards the Medicare years (when we plan to start drawing on them).

At the end of the day, you may stick with the Gold plan given that 4 people are on it. If just one of you has a medical crisis of some sort, the Gold plan could be the better option for you.
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