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Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.


Unaffordable Coverage Without Subsidy?

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Question: I am single making $50,000 ( I do not work) and the insurance cost is $7320 which is 14.6 percent of my annual income. The 14.6 percent exceeds the 9.5 percent affordability rule yet I am not eligible for tax credits as my income is a bit too high. Do I misunderstand something, or are options available?

Answer: While you are not eligible for a subsidy because of your income, your lack of affordable coverage does provide you with another option - access to a Catastrophic Plan, which is normally reserved for individuals under 30 years of age.

7 Comments

The HSA deduction does not affect MAGI because HSA money cannot be used to pay premiums, only direct qualified medical expenses — which are the HDHP deductible expenses.

hi,

thanks for all the feedback.

This is a solution. I am surprised the an HSA deduction is not reversed in MAGI!!!!

Finally, I can add $10,000 per year to my income without affecting my tax credit by switching some assets into MLP pipelines stocks like EPD.

OK, now that we have some additional information, we can give some additional advice. A bronze tier plan at about $6100 per year is still a bit above 12% of gross income. As a single person, because the annual unsubsidized premium exceeds 8% of gross income, you are eligible for enrollment in a “catastrophic” plan or you could skip health insurance altogether and be exempt from the Shared Responsibility Payment (no insurance tax penalty of $95 in 2014).

Because a catastrophic plan is very similar to an HSA-compatible HDHP plan. You might actually be better off going the HSA-HDHP route, because you probably have the ability to fund, at least in part, the HSA account, which reduces your taxable income and could get you to just below the 400% FPL.

How? The maximum contribution to an HSA for a single person is $3,250. But persons age 55 and older may add up to $1,000 additional, for a total of $4,250. 400% FPL = $45,960. $50,000 - $4,250 = $45,750, $190 less than 400% FPL and earning you a small subsidy of about $179 per month.

Earn $50,191 in 2014 and you’re completely screwed. Better to take a few unpaid days off work at the end of the year to avoid earning more than $50,000.

In the Los Angeles region, a bronze HSA-compatible PPO from Blue Shield is about $261 per month, and the Kaiser HSA-compatible HMO is about $284 per month. With either plan, there is a $4,500 deductible, 40% coinsurance, and a $6,350 maximum out-of-pocket expense (including prescription meds). Although the Blue Shield plan is a PPO, out-of-network expenses are subject to a higher deductible and higher coinsurance.

Best worst-case scenario = $9,482 total out of pocket for health care including premiums and prescription meds. The $4,250 contribution to an HSA could be used in the same year to offset the $6,350 in OOP expense, and does not increase the amount you need to set aside for health care expenses. You get a tax deduction, put that money toward your medical bills and prescription meds (not premiums), pay $3,132 in subsidized premiums for the Blue Shield PPO, plus about $1,950 in out-of-pocket payments in addition to your HSA contributions which are withdrawn to cover expenses. Your objective would be to fully fund the HSA as fast as possible.

Assuming a 23% combined federal and state tax liability (including Medicare/Social Security/SDI contributions — or about $10,523), your “discretionary” income would be about $25,475 annual / $2,145 monthly.

Can you live on that? You won’t be living high on the hog, so to speak, but I could probably find a way to make that work for me if I were single.

Hi,

Thanks for all the comments.

I will be 60 in November of this year. A bronze plan in available for about $1200 less per year.

reducing my income is not a options. I do not directly control it. Besides living on my income is touch and go .

Ps I am correct in using silver Plan cost to determine affordability?

Catastrophic coverage is not the only option. The poster could obtain any plan available in the individual market — on or off the exchange. We don’t know this person’s age or where he/she lives, but there is likely to be a bronze plan in virtually any area of the state for a person age 64 would be less costly than $7320. Younger persons would pay less than that.

The employer-sponsored plan, as costly as it is, probably provides better benefits.

As I have said elsewhere, the “Affordable” part of the ACA is not what most people expected. It really meant that a new form of welfare was being created for a small subset of the American population.

The individual is making $50,000 MAGI and does not work.

Clearly there must be some method to reduce that $45,955. By doing so, that person, if 64, would then get a subsidy of $483 a month in the central Bay Area which they could apply to any level of coverage available to them.

That is worth $5,796 whereas the additional $4,000 of income after tax is only worth perhaps $3,000.

Talk to your tax account.

Example a Bronze policy with a income of $45,955 in my area, costs $$611 a month for a 64 year old but after the $483 deduction it comes out to $129

This is VERY useful to know. Thank you. I called Covered California, however, and they have no clue of this Catastrophic Plan affordability option. They say that Catastrophic Plans are for those 29 and under only. I also asked about the ‘hardship’ request, as I believe this exists, and also they have never heard of this either. On both questions, phone rep checked with his manager too.

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