Unbelievably Great Healthcare Insurance

1/15/2025

Could the ACA be right for you too?

The ACA (Affordable Care Act, also known as "Obamacare"), provides us with great health insurance at an unbelievably low rate. We're sharing what we've learned about it, in case you find the info helpful.
Remember: We're just a couple of yahoos stumbling through this. We're not experts or advisors :)

HOW IT WORKS (as far as we can tell):

Each state has an ACA marketplace (or "exchange"). In Colorado it's called "Connect for Health Colorado".
Go to the ACA marketplace website for your state and
-- Set up an account
-- Fill out the application including your projected income and other info
-- Select a health insurance plan from the listed options (there are lots in Colorado)
Your projected income determines the value of the "Advanced Premium Tax Credits" you will receive.
These "tax credits" are paid directly to the insurance company to cover a portion of your premium each month; you pay the remaining balance of your premium.
(e.g. We qualify for $2,028.46/month in "Advanced Premium Tax Credits", and pay the remaining $111.76/month.)
Your projected income also determines your "Cost-sharing Reduction" benefits.
These benefits lower what you pay when you receive healthcare by reducing deductibles and out-of-pocket costs.
(The reductions can be drastic. e.g. Our individual deductibles are reduced from $5,000/year to $100/year.)

Our Experience
We've found the sign-up process and "system" to be complicated, and hope that the info provided here might make it easier for you. The first year we used the ACA (2020), Jim spent ~40 hours on the phone* getting it all to work. This year we dug into the details and feel like we have a much better understanding of the hows and whys. Also, this year our rates are 25% lower than last year and lower than they've ever been. We wonder if maybe the "Infrastructure Act" has something to do with this, but don't really know.
* In hindsight, this was the result of us asking too many questions. We should have just filled out the online forms and shut up.

INCOME Determines Monthly Premium and Some Benefits

"Income" is defined as MAGI (Modified Adjusted Gross Income )
The more MAGI you report on your taxes (& in the ACA tool), the lower your Adv Premium Tax Credits become (so the more you will pay toward your premium each month)
Medicaid: A projected income below ~$29K/yr automatically applies us for Medicaid (called "Health First Colorado" in CO) instead of the ACA. Note that income thresholds vary by state and maybe even by county.
Medicaid is not our desired outcome, and even entering "projected income" numbers that low into the online tool created huge headaches that took many hours to resolve. Note: Some people report satisfaction with Medicaid.
We've found the joint MAGI "sweet spot" to be ~$30-35K/year to qualify for great "Advanced Premium Tax Credits" so we pay almost nothing toward our premiums each month

Non-Retirement and/or Roth IRA SAVINGS Enable You to Increase ACA Benefits
A layoff and start-up experiences led us to border on financial paranoia during our working years, so we stashed savings in non-retirement investment accounts. This enables us to postpone use of our retirement accounts and receive great ACA benefits. However ...

It's possible that the savings we're realizing now may be more than lost in future taxes because our IRA RMDs (Required Minimum Distributions) will be higher in the future.
Two financial experts have advised "it's hard to know" if we're hurting ourselves long-term, so they think our plan seems reasonable

Our Healthcare Insurance for 2025
Healthcare Plan: Anthem Silver Pathway 5000 $0 Select Drugs (an HMO)
Premium cost to cover both of us: $2,140.22/month
Amount we pay to be on the plan: $111.76/month
NOTE: The published individual deductible for this plan is $5,000/person, but because of our low income status, our deductible is $100/person. Max out-of-pocket expenses are also greatly reduced for us.

INCOME and BENEFITS: Another data point
We pay little because our income is low. We know of a person who is single (in Colorado) who will also be using the ACA in 2025. This person pays ~$700/month for an Anthem Gold plan comparable to a plan that would have cost ~$2,400/month via the previous employer's retirement offering. This friend's MAGI is higher than ours. Obviously, you'll need to run your numbers to figure out what value you may (or may not) be able to get from the ACA given your MAGI.

You may be wondering:

How do we control our income so precisely?
We lower our income by spending non-retirement assets and raise it with Roth conversions.
What happens if actual income doesn't match income projections?
When this happens, you have to "true up" at tax time (and re-pay at least some "Advanced Premium Tax Credits"). One year we did have to pay back a fair amount. Thankfully, we'd set the savings aside.
What if I have a catastrophic health event? Will the insurance hold up?
For us, the answer has been yes. In fact, the benefits have greatly exceeded our expectations.

The benefits we receive via the ACA still feel too good to be true and the system causes us varied amounts of angst each year during the open enrollment period. Some years this angst is even significant, but the savings seem worth it. If you want more info, see the comments below, and/or feel free to contact us. We're happy to share what we've learned.

Update added Jun 9, 2025: There is talk that the "One Big Beautiful Bill" could change these benefits in the future.

-- Kathy

P.S. THANK YOU to the friend who casually asked, "Have you looked into the ACA?" back in 2019 when I was lamenting the high cost of healthcare insurance which we were purchasing through our previous employers' retirement offerings. The story she shared seemed unbelievable, but she was credible so we followed up, and now that we've been using it for five years, we're convinced it's real :)

12 Comments

Jim Haselmaier

1/15/2025 11:32:01 am

How is "income" defined?

For ACA purposes "income" is Modified Adjusted Gross Income (MAGI). This is AGI plus some other things that IRS Form 1040 doesn't capture. Note MAGI is NOT Gross Income, or Adjusted Gross Income, or Taxable Income.

1/16/2025 11:10:46 am

Each year in December, I estimate our MAGI for the year. If it looks like it will fall below the Medicaid threshold, we perform a Roth Conversion to increase our MAGI.

Having MAGI that is eligible for Medicaid likely won't have any impact on our ACA benefits for the remainder of the current year, but it could complicate the ACA application process for the next year by flipping the "Eligible for Medicaid" switch - which we've always wanted to avoid. It triggers a bureaucratic process that we’ve found very difficult to manage.

Jim Calder

1/18/2025 03:35:45 pm

Are you estimating the MAGI for the year you are completing or the next year? I assumed your premions are based off the previous years MAGI. Is this correct.

Kathy Haselmaier link

1/18/2025 09:42:43 pm

Premiums are based off your projected MAGI for the year. If your MAGI ends up being higher than you projected, you have to "true-up" at tax time and pay back some of of your premium supplements.

There were people in online forums recommending that people estimate low for 2 reasons:

1. You have use of the money until "true-up" time

2. You get lower deductibles (which we don't *think* you have to pay back, but we're not 100% sure about this)

We'd done a lot of Roth converting the year before we went onto the ACA, so our MAGI was way over $30K that previous year.

Recall from the blog post that Jim spent ~40 hours on the phone trying to figure this all out our first year. Half the time we didn't really understand what we were talking about! i.e. Our memory may be faulty.

1/16/2025 11:12:04 am

When you estimate next year's income (i.e. MAGI) it's not important to be super accurate. It is important that the projection be above the maximum income limit for Medicaid if you’re trying to avoid Medicaid. But you don't want it to be too high because that will reduce the amount of “Advanced Premium Tax Credits” and “Cost-sharing Reduction” benefits you'll receive.

At the end of the year there is no penalty for guessing incorrectly beyond repaying what you owe. If actual MAGI ends up being higher than projected MAGI, some of the Premium Tax Credits may need to be paid back, as Kathy stated above. (As far as we can tell, deductible and out-of-pocket expense benefits don’t have to be repaid, but we’re not 100% sure about this.)

1/16/2025 10:28:00 pm

Interestingly, not long after you posted this comment we learned that I've been on Medicaid since Dec 1, 2024 and my coverage will end Jan 31, 2025. At the same time, I'm covered by an Anthem Plan via the ACA. For the life of us, we can't figure out what action triggered this. The say that you (Jim) applied for it on Dec 27, 2024, but we've confirmed via your browser history that you did not touch the ACA site that day. This is what we mean when we say this is complicated. At this point, we've decided to just hope that this isn't a problem. (We've also had to pay the full premium, but just for Jan 2025. We're having great debates about whether or not the tax credit will be refunded at the end of the year. Today I inched toward Jim's position that it won't be refunded to us at the end of the year. As we said, "It's Complicated!"

Jodi

3/6/2025 09:46:44 am

I just spoke with an insurance broker who confirmed that the only part you have to repay is the Premium Tax Credits - but the low deductible etc. doesn't change or have to be recalculated or repaid :)

3/6/2025 11:54:22 am

Wow, Jodi, that's valuable info. Thank you!

1/16/2025 11:13:15 am

It may be worth mentioning that for non-retirement asset accounts, withdrawals are NOT included in MAGI. However, Capital Gains, Dividends and Interest that result from either selling securities in the account or distributions from other assets within the account ARE included in MAGI. MAGI increases when the non-retirement accounts realize Capital Gains, Dividends and Interest, not when those funds are withdrawn. This is the opposite of retirement accounts where Capital Gains, Dividends and Interest received are not taxable until the asset is withdrawn.

Very often, ETFs do not force distributions each year (unlike Mutual Funds). Therefore, broadly speaking, holding assets in ETFs makes lowering your MAGI a bit easier.

1/18/2025 03:44:15 pm

I fell like I need a worksheet on the ADA site to layout my plan to see what my estemated plan cost will be.

1/18/2025 03:52:23 pm

Is this the "ACA Tool"? Can I do this even though I don't know when I'll retire?

1/18/2025 10:04:32 pm

I'm guessing that you can put bogus info in the online ACA tool to estimate some scenarios, but our warning is that you never estimate your MAGI below your state's Medicaid threshold or else you end up in Medicaid Hell and aren't allowed to participate in the ACA until you get it erased.

And ... remember, the laws can change at any time (which could affect your rates).

We've tried to pick the same sort of plan every year and here's what we've paid per month (for both of us):

2020: $183.91
2021: $310.52
2022: 275.32
2023: 196.90
2024: 400.83
Jan 2025: $2,140.22
Feb-Dec 2025: $111.xx

(One of those years before 2024 we had to "true-up" and pay quite a bit back because we had some unexpected capital gains and dividends.)

We went into Medicaid Hell in January 2025. For the life of us, we don't know how it happened, but two days ago we learned we're on both Medicaid and insured via Anthem at the full cost of our plan since we qualified for Medicaid (i.e. we're paying $2,140.22 for the month of January). Maybe we'll get the money back at tax time, but we don't think so, and we've decided to just let it go. We're 99% sure that starting Feb 1, 2025 we'll be back to the low premiums, and we'll be off Medicaid. Fingers crossed!

Unbelievably Great Healthcare Insurance

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