What insurance options did you use before Medi-care?

Retirement FIRE Wannabees
1

Hypothetical…

Let’s say I retire in three years at 50.

Anybody have any experience using the Affordable Care Act exchange?

I probably can live off my brokerage account/cash until 55, when I will get health insurance part of my retirement package…

Someone was mentioned that you don’t want to “low” of an income to qualify for the Medicaid/Medi-Cal programs, but just need enough “income” to get the subsidized credit on the “exchange”…

If the same insurance provider is available through medi-caid and the exchange, why is there a need to finesse your income???

2

The ideal is you only pay taxes on what you spend. All other profits accumulate in tax advantaged accounts like IRA, Roth IRA, 401k, etc or as paper profits in taxable accounts.

If your taxable income is low enough you qualify for subsidized medical under Medicaid. But many physicians no longer accept Medicaid patients due to low compensation.

Physician posted recently that Medicaid payment did not cover his malpractice insurance cost when calculated as cost per patient served.

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3

Yes, in Washington state.

ACA income limits are generally based on the FPL (Federal Poverty Level), which is dependent on your household size and your state. Here is a link to the 2025 FPL schedule detailed-guidelines-2025.pdf The schedule is updated for inflation each year, so what you see for 2025 is probably lower than what it will be in future years. But just as an example, in the lower 48 for 2025, FPL for a 1-person household is $16,650 and for a 2-person household, it’s $21,150.

In states with expanded Medicaid, those with incomes up to 138% of their FPL qualify for Medicaid. In states that haven’t expanded Medicaid, Medicaid is generally limited to those with incomes less than their FPL, and there may be other requirements, too.

Under the initial law, to qualify for premium tax credit subsidies, your income had to be between 100% and 400% of FPL. The 400% limit was (and will be) a cliff - $1 over and you lose all subsidies (and will have to pay back any you’ve received). During COVID, the premium tax credits were expanded so that even with income over 400% of FPL you can receive subsidies. With the expansion, the top income limit to receive subsidies is dependent on the cost of the plans available to you. However, if the law is not changed, that expansion ends as of Dec 31, 2025 and the income limits revert to the 400% of FPL cliff.

Frankly, given the budget framework that was signed into law by the current administration, I would expect the subsidies to be changed significantly, if not completely eliminated, due to the decrease that the law requires for Federal spending on healthcare. And expanded Medicaid will probably be eliminated, too, due to those cuts and the fact that many states that expanded Medicaid have trigger laws that revoke the expansion if Federal subsidies for expanded Medicaid are decreased.

So, if you believe that the current Congress can actually pass a budget (instead of perpetuating the continuing resolution parade that’s been going on for years), planning for future spending based on ACA subsidies is kind of pointless until you actually see what the new law does to the subsidies.

To maximize the subsidy you will get - thereby minimizing the net premiums you pay. That said, there is a significant range of insurance available on the exchange, and, depending on your state, the Medicaid provided isn’t necessarily like any of the insurance available on the exchange. Yes, it’s insurance, and may even be administered by one of the insurers offering insurance on the exchange, but coverages and costs are likely significantly different.

AJ

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Why is that ‘ideal’? If, as @darrellquock indicated, you are using taxable brokerage accounts to pay for living expenses, depending on the assets you sell, you could actually pay taxes on significantly less income than you are spending. And if you have any dividend payers in your taxable account, you have to pay taxes on those dividends, even if you don’t spend them.

AJ

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Indeed you can sell your losers for cash and then the ones with high cost and little gain. Not much point in keeping those around. Then what? Yes, qualified dividends and long term capital gains get better tax rates.

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In addition to @aj485’s excellent analysis…

Let me add that DH and I did use ACA insurance before we aged into Medicare. This worked well for several years.

However, DH is a year older than I am. When he became eligible for Medicare I was blindsided by a huge tax bill. The IRS imputed our entire income to me that year which meant that we were no longer eligible for the ACA. I had to pay back the entire year’s ACA subsidy in an unexpected lump sum.
Wendy

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And how does that have anything to do with what you are spending? It’s pointless to tie the taxes that you are paying to the spending you are doing. Minimizing taxes, either in the short term, or over your lifetime (depending on the strategy you’ve chosen), is more likely to be the ‘ideal’. As long as you can generate enough cash to pay for all of your expenses (including the taxes), spending is irrelevant to how much you pay in taxes.

AJ

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I still like the idea of keeping your assets in tax preferenced investments whenever you can. You take taxable income only when needed to pay expenses.

Yes, there are a zillion variations out there but “let’s not plan because its hopeless” is not one of them

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Did I ever say that you shouldn’t? I don’t disagree with this.

Again - you are trying to make a false equivalence between taxable income and expenses. As I said before, as long as you can generate enough cash flow to pay for your expenses (including the taxes), the amount that you spend is irrelevant to how much you pay in taxes.

Where am I saying you should “not plan because it’s hopeless”? All I’m saying is that trying to pay taxes only on the amount that you are spending because that’s ‘the ideal’ is a false equivalence. Your tax planning needs to ensure you can generate enough cash flow to pay for all of your expenses (including the taxes), but should attempt to minimize the taxes you pay. To do that, it needs to take a lot more into account than just your spending.

You can generate cash flow without generating taxes (like when selling an asset at a loss). You can generate taxes without generating cash flow (like with Roth conversions). You can generate both cash flow and taxes (like by taking a distribution from a Traditional IRA). You need cash flow for your expenses. But tax planning is about so much more than expense planning that there isn’t an ‘ideal link’ between them.

AJ

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