Thursday, December 3, 2015

New Strategy For "Bridge" Health Insurance

Before Affordable Care Act (AKA "Obamacare") I often was asked to help find health insurance for people who were a couple of years from Medicare eligibility.  Most often it happened when a husband retired at age 65 and his wife was younger, usually by a few years.  Health insurance was easy for him because he was new to Medicare, and they could both collect Social Security if they wanted.  It made sense of both of them to retire while they were healthy enough to travel extensively if they wanted to.  Getting health insurance for the non-Medicare spouse required answering some health questions, but I could usually get her a decent rate by selling her a policy that excluded maternity and mental health coverage.  It was a safe bet that she wouldn't get pregnant, and if she hadn't had mental health issues by her early 60's, the odds were against her developing them suddenly.  I could get her a decent health insurance policy for around $200-300 per month.  That was affordable and reasonable.  Those days are gone.

Now for someone in the last few years before being eligible for Medicare, that "bridge" coverage costs two to three times as much because everyone is accepted regardless of health, and the policy has to cover maternity and mental health.  That drives up the cost, making doing the things people want to do in retirement less affordable.

As much as I dislike it, I'm wondering if the best solution is to manipulate income in order to qualify for a tax subsidy to cover health insurance cost.

For example, an Iowa couple with an income of $50,000 with him on Medicare could get a monthly tax subsidy in the neighborhood of $150 per month for her health coverage (per this calculator, at least).  If income is $40,000 instead of $50,000, the subsidy increases to just under $280.  That doesn't mean the couple has to have $10,000 less to spend, it just means that they need to decrease INCOME by $10,000.  There are lots of ways to do it.  For example, take $10,000 more out of a savings account and take $10,000 less from his 401K.  One of the screwy things about the ACA is that the subsidy doesn't care what you have for assets.  You can be a billionaire in term of assets but still qualify for a subsidy if your "income" is low.

Just one more reason to have some assets (Roth IRA, life insurance cash value, etc.) that can be used without increasing "income".

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