How A Family of 3 Uses The Affordable Care Act for Health Insurance While Coasting to Financial Independence.
Spoiler alert: It’s likely much easier than you anticipate.
I recently co-hosted a webinar with Jess from The Fioneers about my experience coasting to financial independence.
We had a great discussion, and we took questions from the audience towards the end. One of the questions that came up was about health insurance. Since I’m self-employed all year and work seasonally as well, I am not eligible for health insurance through an employer. So, the attendee was wondering what I do for health insurance for my family and me. This question comes up a lot, and rightfully so.
Most people (in the US) who want to retire early are seriously concerned about health insurance coverage before they reach age 65 and are eligible for Medicare.
That’s because, for most people, their employer provides their health insurance and covers a significant portion of the monthly premiums. As a result, many people fear that the costs will be prohibitive if they have to cover them entirely on their own. And frankly, they’re not wrong, but they’re also not entirely correct.
There’s another option for those who are eschewing the traditional path and need to sign up for health insurance on their own: the Affordable Care Act (ACA), also known as Obamacare, HealthCare.gov, or The Health Insurance Marketplace—I know, too many names right?
In this article, I want to discuss my experience using the ACA and provide some tips I have for others looking to do the same. I won’t be diving into the ethical or moral arguments for or against using the ACA—we will have to save that conversation for another day.
My Experience With the ACA so far:
If I had to rate my experience using the ACA for health insurance, I would give it 5/5 stars.
For me, it’s been simple, straightforward, and has provided the vital necessity of health insurance coverage for my family and me. We originally signed up for health insurance through the ACA around February of 2021 after I left my full-time job (and existing health coverage) in exchange for seasonal and freelance work.
I had done my research, so I knew what to expect.
Special Enrollment Period and our decision to work with an Insurance Agent.
I knew that I was eligible to enroll using a special enrollment period because I had recently lost coverage after leaving my job. I also knew that I wanted to work with an insurance advisor I had met in the past who would be able to help me navigate the ACA.
His name is Lloyd Coleman, and he owns Clarity Insurance Advisors. (Quick side note: I won’t receive any commissions or compensation if you decide to work with Lloyd. I am just sharing him as a resource because I know how good he is at what he does.)
Long story short, Lloyd was able to help explain the process from start to finish. He helped me understand the application and made plan recommendations based on my family's needs. He even searched by specific prescription drug needs to find a plan that would be the best fit. He was also able to help me map out different income scenarios, helping me estimate what I could expect to pay depending on how much I anticipated earning in the coming year.
Now, I have a quick video call with Lloyd once a year to enroll in a plan and make any necessary changes.
And the best part is that Lloyd can help at no cost to me—he gets compensated directly by the insurance company for selling plans through the Health Insurance Marketplace.
If you’re in Utah and looking for an insurance agent to help you navigate the ACA Marketplace, I recommend calling Lloyd to discuss your situation.
Plan selection—we went with an HDHP that’s HSA eligible.
Lloyd was able to walk me through the various plans available, and ultimately, I decided to go with a high-deductible health plan that’s HSA eligible.
This allows me to contribute to a Health Savings Account throughout the year, creating a valuable tax deduction and letting us pay for health care expenses tax-free. It also keeps our monthly premiums low, so if we don’t need to use our insurance much in a given year, we can come out ahead.
But, when selecting a plan, make sure you choose something that will be a good fit for you based on your and your family's health needs. For example, if you anticipate high medical bills in a given year, it might be best to go with a lower deductible plan, even if it’s not HSA eligible.
My experience with subsidies and filing taxes.
Many people get anxious about how the subsidies work with their annual tax filing.
Here’s what you need to know: the ACA is designed to make health insurance affordable. The way that’s done is through subsidies that help cover the cost of your health insurance plan. Long story short, the lower your income, the lower your cost of health insurance. Alternatively, the higher your income, the more you pay.
But, when you sign up for a plan, you don’t exactly know how much you’ll make that year, so you have to estimate your income on your application.
That estimate determines the cost of your health insurance for the year. Then, at the end of the year, the ACA issues you a form called a 1095-A. This 1095-A gets filed with your tax return and essentially shows how much you received in subsidies for the year, based on your estimated income.
Now here is the important part.
If you made more money than you thought you would, you will likely have to pay back some or all of your subsidies as an increased tax bill. But, if you made less, you might receive more subsidies as an increased tax refund. The point is: you want to do your best to estimate accurately to avoid any big surprises at the end of the year.
And, if your income changes throughout the year, you can report those changes to help adjust the cost during the year.
Keep in mind that the amount you receive in subsidies is based on the following factors:
Your estimated income
Your household size
Your zip code
Here is a tool to help you estimate the cost of health insurance through the ACA: Health Insurance Marketplace Calculator.
So that is a bit about my experience so far. I’m sure I didn’t cover everything, but at least that is a high-level look at my experience with the ACA. So next, let’s cover some tips to help you navigate the ACA.
Here Are 3 Tips to Help You Navigate the Affordable Care Act:
First, work with an insurance advisor.
I think my experience has been so good because I have had Lloyd Coleman to help me navigate.
Sure, I did my research beforehand, but there were questions on the application that I got hung up on that Lloyd was able to explain clearly and confidently. Unfortunately, I can’t speak to all Insurance Agents as I am sure many aren’t as good, but I highly recommend reaching out to an agent in your area to help you navigate the ACA.
Insurance Agents are bound to state licensing requirements, so if you’re outside of Utah, Lloyd won’t be able to assist you.
But, here is a search directory from the HealthCare.gov website that lets you find Insurance Agents using your zip code. If you only did this step, I think you could navigate the ACA successfully and confidently.
Second, understand how the subsidies work.
Next, do your homework regarding subsidies.
I recommend using an online calculator to estimate what you could expect to pay based on your zip code, income, and family size. The estimate won’t be perfect, but it should give you a ballpark idea of what you can expect. Then, work with your Insurance Agent to get a more concrete idea of what it will cost.
In addition, do some research around filing the 1095-A with your tax return.
Ultimately, if your income projection is off and you don’t report that change throughout the year, you could get a surprise bill or refund at tax time. As a side note: If you prepare your return with TurboTax or a similar product, then I don’t think you will have any issue filing the 1095-A, and if you work with a paid preparer, then they should have no issue either.
Third, know when open enrollment is.
Lastly, you need to know when you can enroll.
Health insurance is a bit weird because there are only certain times you can sign up. For the ACA, open enrollment begins on November 1st and goes until January 15th (for most states). But, if you missed open enrollment, you may still be eligible to sign up if you qualify for a special enrollment period.
Generally, you qualify for special enrollment if you’ve had one of the following life events within the last 60 days:
Lost health coverage
Moved
Got married
Had a baby
Adopted a child
Household income is below a certain amount.
But again, no need to navigate this alone—just reach out to an Insurance Agent to help you understand the ins and outs of signing up.
Conclusion:
In the end, I hope this was able to answer some of your questions and ease some of your fears about using the ACA for health insurance. I am sure there are things I’ve missed, so if you have any additional questions or comments, please leave your feedback in the comment section below.
