Adventures in health insurance enrollment

Being newly FIREd in August, this open enrollment season was my first experience with purchasing health insurance through our state exchange. I chose to maintain COBRA coverage through my previous employer through the end of 2019. We had already gotten most of the way toward our out-of-pocket maximum on that plan earlier in the year, and I felt it was unwise to start all over on deductibles with an ACA plan for the last few months of the year even if the premiums would be a bit lower.

When November 1 came around, I was all prepared. I had a letter written about what I expected my income to be in 2020, a set of financial statements all ready to support my estimates, and I got it all submitted the first day of the open enrollment window.

Children in Washington in a family of four are put on Apple Health (our state’s Medicaid program) up to a household income of $6,802 per month (more than $81k annually). Meanwhile adults in that same family are only eligible for Apple Health up to an income of $2,961 per month (less than $36k annually).

I submitted an estimate for 2020 income between these two numbers, which should result in my wife and me on a paid ACA plan and my kids on Apple Health.

All looked well at first. The system let me sign my wife and me up for a subsidized ACA plan, put my kids on Apple Health, and I received insurance cards for everyone for the upcoming year.

A few weeks ago I received a notification that they needed confirmation of my income for the last 60 days from two companies: the employer I left in August, and also the company I spent three days with as a background actor. At that point I had not worked for either organization in the past 60 days. I had collected a letter confirming termination of employment from my corporate job before I left, so I sent that in plus all my pay statements for the acting gig and crossed my fingers that this would satisfy the bureaucrats.

Spoiler alert…it didn’t.

Two weeks later they sent me a notification that they had not received the requested documentation in the required timeframe and so my sons would have their health insurance canceled effective at the end of the month.

Needless to say, I was displeased with this. In response I (gasp) made a phone call. After explaining the situation and waiting on hold for about half an hour while they looked things over, they told me that they had verified my income based on the documents I had submitted, and that my sons should be back on Apple Health.

Fast forward to this morning and I received an email notification from the exchange, with official written documentation of the new change in our status. I logged in to look it over and discovered that not only were my sons added back to Apple Health, but my wife and I were as well! Something the phone representative did must have bumped our estimated income below the threshold, and they didn’t see fit to mention “and oh by the way we’re cancelling your private insurance and moving you to Apple Health.”

Since it’s a holiday I’m not trying to call back now, but you can bet I will be doing so first thing in the morning. Here’s hoping I can get everything resolved before the new year rolls around.

17 thoughts on “Adventures in health insurance enrollment”

  1. The federal exchange has a nifty checkbox that essentially says “yeah my projection is very different from the previous year, because changes in circumstances, trust me plz”.

    I didn’t have to provide a single doc or talk to a single human, so I consider that a win.

    1. A win indeed!

      What I was told on my follow-up call the other day:
      * Apple Health eligibility is based on your ongoing month-to-month income. Things like ongoing quarterly dividends can be averaged across months for this purpose. A one-time piece of lump sum income cannot be averaged across the year in this way. It doesn’t count at all for this purpose because it’s a one-time thing.
      * To lose Apple Health eligibility, your monthly income needs to increase above the threshold in a way that is expected to continue for at least two consecutive months. I could win the PowerBall one month and not lose Medicaid eligibility as long as our income the next month drops back down to previous levels.
      * As roughly half the income we’re expecting next year will be paid out as a lump sum from my former employer’s deferred compensation plan, the income that counts for Apple Health purposes is therefore about half of my expected overall income for next year. What does count? Mainly dividends and interest from our taxable investments. These are less than the Medicaid threshold for adults, so we’re considered eligible.
      * Furthermore they can’t consider income projections in any way. Even though my deferred compensation payout is guaranteed to me as long as my former employer evades bankruptcy for the next few months, I haven’t received that income yet and they can’t consider its effect on my eligibility until after I actually receive it.
      * Once the state has determined you’re eligible for Apple Health coverage, you’re of course free to decline that coverage and buy a private plan from the marketplace, but you’ll pay full price. No tax credits are available for months where the state offered you this other coverage.

      At this point if I wanted to get us off of Apple Health on to a subsidized private plan, I’d need to start manufacturing some more regular income. I could do some Roth conversions or capital gain harvesting for this purpose. There doesn’t seem to be a way to lose eligibility before the end of February, as they need you to show two months of an increased income before they believe it’s your new normal.

      That said, I’m not really in a hurry to do this. I have no particular attachment to the private insurance industry, or moral qualms against participating in whatever government programs the law says I’m entitled to. I’m therefore willing to give Apple Health a try for the time being, continue withdrawing from our accounts as per our previous plan, and see what happens.

      If I just stick to our prior income plan for 2020 (living off dividends and the deferred compensation payout as long as we can, maybe do a one-time Roth conversion toward the end of the year up to the point where we can claim the maximum child tax credit), I don’t see us losing Apple Health eligibility all year.

      At some point in 2021 we’ll probably need to start selling taxable shares. Once that happens I’ll probably make sure to do it every month. I recognize that the system treats a family who earns $50k all at once differently from a family who earns $50k from regular paychecks, but I don’t exactly feel right exploiting that fact to the extent that I would sell a year’s worth of stock all in one day solely to avoid increasing our recurring income for Apple Health purposes.

  2. Are there any onerous reporting/application processes required for Apple Health? E.g. do you have to file something every week or month describing your income?

    Additionally, if you have had any experience with trying to get care via Apple Health, please share 🙂

    Thanks for the in-depth blog post and comment!

    1. The initial application process is through the same website as the paid ACA plans. They just put you on one plan or the other based on your income. It’s possible that they try harder to collect and verify your proof of income up front for Apple Health than they do for the paid plans, as the full cost is with the state and there’s no true-up process at the end of the year like there is with the ACA premium tax credits. It sounds like we’ll have to submit proof of income annually. We’re also supposed to do so if our income changes by more than $150 from month to month and we expect that change to last at least two months. In essence, any one-time bit of income (no matter how large) is not required to be reported, but an ongoing change is.

      We haven’t actually received any care yet, but I did have to talk to our kids’ pediatrician about whether they would still be able to work with us. The state contracts with five different private insurance companies to administer the program. Clients can choose any of these five, each with their own networks of physicians. Only one of these five has our pediatricians in network, so that choice was pretty easy.

  3. I will probably go through a similar situation in Aug 2020. Currently I live in NJ and have my employer sponsored insurance but HDHP plan, contributing to HSA and paying a small premium. In August we will move to Delaware state.

    Here are some of my questions and curious on your thoughts..

    1. Is there a reason I should go for COBRA till year end? (Especially since I am on HDHP)
    2. Resigning from a job will be oconsidered as life event I assume and will qualify to apply for ACA, correct?
    3. If we live out of dividends and capital gains by selling shares, should we list that as our potential income? If so, can I just estimate my expenses and plug that as an income? What income proof do they need?
    4. For a $25-30k (income/spending) for a family of 4, the system is putting me in Medicaid during on my test run at site. Is that okay? Or should I shoot for creating artificial income by converting IRA to ROTH and get into ACA?. Why would one do that if Medicaid is free and ACA has premium?
    5. Any guidance on how to transition from working to FIRE especially covering for the health insurance part.

    1. 1) I had a couple of reasons for going with COBRA. First, we made enough money in 2019 before I left my job in August that we would not have received any subsidies for a plan purchased from our state exchange. Therefore we thought it was a question of paying full price on my employer’s plan or full price on an exchange plan. The COBRA premiums were more expensive than several of the exchange options, but for a four-month period the difference wasn’t that big in the grand scheme of things. Second, we had already used up our deductible and most of our out-of-pocket maximum earlier in the year. I felt it was unwise to reset our deductible back to zero with four months left in the year just to save a little bit on premiums. In hindsight we would have been better off doing so as we didn’t need any medical care during that time, but it could easily have been otherwise.

      If we had known about the month-to-month income standard they use for Medicaid we could have maybe gotten on that a few months sooner and saved a bit of money.

      For HDHP coverage specifically, it’s important to consider the effect that switching off of an HDHP may have on your HSA limit for the year. In our case we had maxed that out earlier in the year, so if we had switched to non-HDHP coverage we would have needed to take a prorated refund of our 2019 contribution to avoid overcontribution penalties for the HSA.

      2) Yes, provided you decline COBRA. If you choose COBRA you may need to wait until an open enrollment period or the end of your COBRA eligibility to switch to an exchange plan.

      3) I think an estimate based on your expected dividend and capital gain income should suffice, but the exact procedure for income verification probably varies from state to state. In my case I initially supplied an estimate with a letter of explanation and a few financial statements to back the estimate up. I think this estimate was basically accepted by the state exchange for the purpose of the tax credits for a private plan. They don’t have a ton of incentive to really drill down into these estimates because the tax credits are adjusted to your actual income once tax time rolls around. If they end up loaning you a bit of money that you have to pay back in a few months, no huge loss on their end. However the Medicaid folks did want to see some more proof of my income, as they have real costs to pay from the first day you’re on the plan. They requested more proof for the past 60 days of income, specifically including pay statements from my former employer. At that point it was more than 60 days after I left my job, and I supplied a letter from them confirming my termination date. This might be a good thing to obtain on your way out if possible.

      4) My understanding is that Medicaid may vary greatly from state to state. In theory it’s a pretty great plan: no premiums, no copays, no out-of-pocket costs of any kind. In practice the quality will depend on to what degree you can find qualified practitioners who accept this coverage, as it does tend to pay providers less than many private plans would. We were able to confirm with our sons’ existing pediatrician that they would accept this coverage. That’s really the most important factor for our family. Childbirth aside, my wife and I haven’t really needed any medical attention in recent memory. We’re giving the Medicaid coverage a try for the time being. If we find it doesn’t meet our needs for whatever reason we do have the ability to manufacture income high enough to kick us off the program.

      5) Be prepared for some bureaucratic headaches at the beginning. We early retirees are a rare enough breed that they don’t always know how to handle us. Be persistent but polite and it should eventually work itself out. Take comfort in the fact that your savings gives you the opportunity to weather some one-time costs should that become necessary.

      Congratulations on your upcoming FIRE and good luck!

      1. Thank you seattlecyclone, much appreciated!. I am in a high income job right now, so even if I resign in August I would be ineligible for any credits. Good to know Medicaid is month to month but I will have to decide either Medicaid route or get COBRA till year end. Since my HDHP premium is very low at this point COBRA and HSA may be a better option.

        For the income proof, won’t they frown to give subsidies (medicaid or ACA) after seeing the brokerage statement with over half a million in assets?

        Good point on getting the termination letter from my current employer once I put down the paper. However, let’s say my last date is August 31. If I have to get the medical coverage without a gap, shouldn’t I apply a couple weeks before to Medicaid? in that case, I won’t have the letter plus ‘technically’ would still be employed so have to produce income statement which will put me out of the system in Medicaid and ineligible for subsidies in ACA due to high income?? no? any thoughts on this?

        1. Be aware that your COBRA premium will likely be significantly higher than what your employer currently charges you. Most employers subsidize premiums for current employees, but once you leave they have no requirement or desire to do so anymore.

          For ACA premium subsidies, all that matters is your income. Whether they “frown” upon people with large assets receiving subsidies is mostly irrelevant. If your state expanded Medicaid it’s the same story. Assets don’t matter, only income.

          I doubt you would be allowed on Medicaid until after you can prove to them that your income has in fact decreased prior to your application. A speculative change will not be accepted. If you quit on the first of the month it’s likely that your subsidized employer coverage would continue through the end of that month. Look into whether this is the case for your employer’s plan.

          1. If Medicaid wouldn’t be allowed until after I leave my job then probably only option is wait till new enrollment begins, otherwise, I don’t see a way to have insurance without a gap (with subsidies). I will cross the bridge when it comes but seems like COBRA or ACA without subsidies. Looks like I should budget ~$1500/month as a transition cost.
            I will check on continued coverage if I quit on 1st of the month but really doubt it. Thank you!

  4. I saw a comment elsewhere on the internets indicating that you’re now selling investments monthly to hit an income target.

    Does this mean you weren’t satisfied with Medicaid and decided to switch to a marketplace plan?

    1. No problems with Medicaid so far. I’m just trying to make sure I sell a few stocks every month to pay the bills, keeping my monthly income even, rather than having some higher-income months and some lower-income months. The last thing I want to do is have to deal with bouncing between private and public coverage due to having income above the line in some months and below it in others.

  5. Hi SC, I understand you recently retired and moved from COBRA to ACA/Medicaid. I would like to bounce a couple of things off you if that is okay?
    I retired early in July 2020 and in COBRA for this year. High monthly premium but this was better than ACA premium.
    In the year 2021, my expense will be under $30k. I have cash saved for expenses so don’t have to sell bonds/equities. I am also planning to convert some Trad IRA to ROTH. I would like to keep the 2021 premium as low as possible but not get into Medicaid for me/wife. ACA 2021 calc puts my children in CHIP (which I am okay). My questions are…
    1. For ACA, I believe, I don’t have to show any proof of future income as long as my ROTH conversion is done before I file my taxes. Is this assumption correct?
    2. For my kids on CHIP – I won’t have monthly income other than the quarterly dividends. What proof is required and how do I show the income?
    3. I am permanently moving from one state to another on 12/4 and the enrolment ends 12/15. Any thoughts on when I should start my enrolment so I don’t miss out on credits and have an action plan come Jan 1 for both ACA and CHIP. Is it all online / phone or mail/paperwork do you know?
    4. Any other pointers??
    Thank you very much!

    1. A lot of the specifics may depend on what state you’re in and how they run their exchange and Medicaid/CHIP program.

      If you want to avoid getting you and your spouse on Medicaid, but you expect your kids to be on CHIP, you might want to start doing some Roth conversions or capital gains every month starting now, just to show that your monthly income is above the 138% of poverty threshold. This is what initially got my wife and I onto Medicaid. Our annual income this year is more than 138% of the poverty level and we had initially signed up for a private plan on that basis, but most of that income came from just one month when my deferred compensation paid out. When they looked into the monthly figures for the kids’ CHIP eligibility they saw that our ongoing income was low enough for the whole family to be on Medicaid. Once they notice this and offer you Medicaid coverage, you’re ineligible for subsidized private plans until they decide you’re no longer Medicaid-eligible.

      Hard to say exactly what proof will be required. When I initially signed up for the private plan I had to submit some documentation to support that income, but I think it was accepted without any question. If my income ended up higher than I estimated I’d have to pay back the extra tax credits anyway, so maybe they see it as not worth a whole lot of effort to verify this up front for the marketplace plans. Could totally depend on your exchange though. The Medicaid folks, on the other hand, did want quite a bit more proof of income for the kids, and that’s what led them to offer this coverage to the whole family.

      On the Washington exchange they initially have you state your income broken down by type (work income, self-employment, dividends, etc.), and they let you upload files to prove it. It’s pretty free-form for the documentation, just a file upload box. Statements from your brokerage accounts could help establish dividend income, for example. If there’s something they think is insufficient or incomplete, they’ll eventually let you know. In my case they asked for more documentation, I provided it, then they told me I didn’t provide enough and they’d be cancelling my coverage. I had to call them at that point to sort it out, but it all worked out in the end. FIREd people are rare and they don’t always know what to do with us. You may need to be persistent.

      As to the moving situation, I really don’t have many tips there. It should all be online, at least until they screw something up and you need to call them. You should be able to look up your new state’s exchange and start an application pretty soon just to see what they require from you. They probably won’t accept a submitted application from someone who doesn’t live there yet. You could try to enroll the day you move and hope it works out during the regular open enrollment period. If it doesn’t for some reason, moving is a qualifying life event for a special enrollment process, so if you don’t quite make the deadline for a January 1 enrollment you might be able to take advantage of the special enrollment window to get covered in February.

  6. Thank you for the response. I am moving to Delaware which is a ACA and Medicaid expansion state.
    I’ll have to check what documents they need. I am wondering what happens if CHIP/Medicaid sees that I don’t have a consistent monthly income (except some inconsistent dividends and no ROTH conversation income as of now)?
    What are you going to do this enrollment year? All family ACA or continue with Medicaid with selling equities/bonds every month and generating income? Just curious.

    Thanks again.

    1. At least in my state they’ve stopped kicking people off Medicaid until the pandemic is over, so even our income did drift up we’d be on it for a while. So far I’ve been mostly satisfied with this coverage, and haven’t had any trouble keeping our income below the threshold each month. We’ve even been selling some of our lowest-basis shares to pay the bills, realizing more capital gains than are strictly necessary.

  7. If you don’t mind sharing, what are you doing for dental? Just paying cash? (My dentist seemed bewildered when I asked about cash pay and just pointed me to their list of accepted insurance providers…)

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