It's that time of year to sign up for ACA if you are not on Medicare yet (less than 65 years old) and are not covered by any other healthcare plan (such as those offered by your employer, if still employed). The Inflation Reduction Act keeps savings and lower costs through 2025. Under ACA you may be eligible for a premium tax credit (reduces the amount you pay for insurance premiums) and may be eligible for Cost Sharing Reduction (lower deductible, co-pays, etc.). These costs saving are based on the Federal Poverty Level (FPL) which for a family of two in 2023 is $18,310. You compare your modified adjusted gross income (MAGI) to the poverty level. Your cost saving are based on what % your MAGI is above the FPL. Greater than 400% of the FPL and your max cost for the Insurance premium is 8.5% of your MAGI. Less than 400% and the savings level get better in % steps. If you MAGI is less than 150% of the FPL (but greater than 133%) meaning less than $27,465 for a family of two, you may be eligible for cost sharing reduction. So, since the savings afforded to you via ACA is solely based on income (not net worth) you have options. For example if you are retired, have no earned income, not taking social security, not getting any pensions, and have sources of money that does not go into your MAGI such as Roth withdraws, saving accounts, etc to live on, you can get you MAGI down below 150% of the FPL and get great deals from ACA. Thoughts??
Here is a good article about the tax implications of the ACA: https://www.advisorperspectives.com/articles/2022/11/14/tax-planning-and-health-insurance-premium-subsidies-under-the-affordable-care-act?bt_ee=NDEv9j9A8VOauwhpyoOBb4NkwaGdxJXiBe3%2BEiFdgQU39Tae3muMJFyZGY9fH5ND&bt_ts=1670584146556
Also, advisors often advocate delaying Social Security benefits. For those who obtain health coverage through the Affordable Care Act, this may provide an additional strong incentive to delay Social Security benefits. As the ACA MAGI adds in 100% of the benefits received to its calculation, an additional downside to claiming early could be a significant reduction to the eligible premium subsidy.
The (ACA) subsidy is the premium of the benchmark insurance plan less the percentage of modified adjusted gross income (MAGI) one is deemed able to pay. The ACA-specific definition of MAGI takes the AGI and adds other items back in, such as untaxed foreign earnings, tax-exempt interest, and the non-taxable portion of any Social Security benefits. The percentage of ACA MAGI one is expected to contribute is further based on the federal poverty level (FPL) in the previous year for the household seeking coverage, which in turn depends on the number of people in the household.
Very good article explaining ACA subsidies:
https://www.verywellhealth.com/no-asset-tests-for-aca-subsidies-1738965
Some opponents of the ACA have cried foul, complaining that people with millions of dollars worth of investments can be receiving premium subsidies in the exchange. This is true, although investment income outside of a tax-advantaged account (401k, IRA, HSA, etc.) counts as annual income. But it's also important to note that the ACA's premium subsidies are simply a tax credit. For people who get their health insurance from an employer—which is the majority of Americans under age 65—there have always been significant tax breaks. The portion of the premiums paid by the employer is tax-free compensation for the employee. And the portion of the premium that's paid by the employee is payroll deducted pre-tax. There have never been any asset tests—or income tests for that matter—with this arrangement. And it's important to note that the government spends far more on the tax exclusion of employer-sponsored health insurance than on the premium tax credits for people who buy their own coverage.
