LINK to information about health insurance after you quit or get fired from your job.
The question is: How do you decide between COBRA and ACA?
Some people call ACA by the nickname Obamacare. ACA (affordable care act) did many things including making the rule that insurance companies couldn’t exclude people for pre-existing conditions. The rules may change. Elections matter. BUT as of now, insurance companies still can’t exclude you or the ones you love because of pre-existing conditions.
In this narrative, I use ACA plans and Market place plans to mean the same thing. I am not an expert so please confirm everything I have said here. I am just writing down things you might want to consider in making your decision.
How do you decide between COBRA and health insurance offered via the ACA healthcare.gov ? Compare prices and coverage. Do you qualify for a subsidy? Are you willing and able to absorb smaller health care expenses so that you only need coverage that has a huge deductible but safeguards you against a huge medical expense? If the answer to the last question is yes then the bronze plan might be your best option. You’d be looking for the “maximum out of pocket” number.
Definition of out-of pocket maximum: The most you have to pay for covered services in a plan year. After you spend this amount on deductibles, copayments, and coinsurance, your health plan pays 100% of the costs of covered benefits. The out-of-pocket limit doesn’t include your monthly premiums. It also doesn’t include anything you spend for services your plan doesn’t cover. For the 2018 plan year: The out-of-pocket limit for a Marketplace plan is $7,350 for an individual plan and $14,700 for a family plan.
There is a big chance that if you don’t qualify for a subsidy, then the COBRA will be cheaper. Also if you’ve already met your deductible with your ex-employer’s plan, COBRA might be a better option. I don’t know that the deductible (that you’ve already paid) would transfer to the Marketplace plans. It would be something you’d need to ask.
You might qualify for a subsidy on the ACA insurance if your MAGI is less than $48,000. You have to estimate it. To estimate your MAGI, begin with the FIT income from your last paycheck and then add expected income for the rest of the year. IF you’re planning to take taxable income from your 401K, then you’ll need to add that to the FIT income for the MAGI for the year. And of course you’ll need to add expected income from your new job. BUT you’ll also be able to cancel your ACA insurance once you have health insurance coverage with your new job.
You don’t have to include ROTH distributions in that MAGI (modified adjusted gross income) number. So it seems it might be better if you need money, take the ROTH but keep the rest of the 401K money in the plan if you are trying to make sure your MAGI stays under that magical number that lets you get a subsidy. I think that the magical number is $48,000. Double check if this is an issue for you.
Savings [subsidies] are based on your income estimate for the year you want coverage, not last year’s. Learn more about estimating income.
Quote from the healthcare.gov website:
|Types of income to include in your estimate—yes or no
These fall under yes
1. Federal Taxable Wages (from your job) —If your pay stub lists “federal taxable wages,” use that. If not, use “gross income” and subtract the amounts your employer takes out of your pay for child care, health insurance, and retirement plans.
2. Self-employment income—Include “net self-employment income” you expect — what you’ll make from your business minus business expenses. Note:You’ll be asked to describe the type of work you do. If you have farming or fishing income, enter it as either “farming or fishing” income or “self-employment,” but not both.
3. Unemployment compensation
5. Capital gains
6. Social Security—Include both taxable and non-taxable Social Security income. Enter the full amount before any deductions.
7. Social Security Disability Income (SSDI)–But do not include Supplemental Security Income (SSI).
8. Retirement or pension Income— Include most IRA and 401k withdrawals. (See details on retirement income in the instructions for IRS publication 1040). Note: Don’t include qualified distributions from a designated Roth account as income.
9. Investment income–Include expected interest and dividends earned on investments, including tax-exempt interest.
10. Rental and royalty income—Use net rental and royalty income.
11. Excluded (untaxed) foreign income
Included under NO:
2. Supplemental Security Income (SSI)—But do include Social Security Disability Income (SSDI).
3. Veterans’ disability payments
4. Worker’s Compensation
5. Proceeds from loans (like student loans, home equity loans, or bank loans)