- 4,716
Right, but the affordability rule is based on present income...which in almost all cases will be low enough to make cobra un-affordable especially if the person is single or the couple is not working.
COBRA and The New Laws
- Thread starter 0b1kanobee
- Start date
Right, but the affordability rule is based on present income...which in almost all cases will be low enough to make cobra un-affordable especially if the person is single or the couple is not working.
Wrong. The affordability rule is based on household MAGI for the entire calendar year.
- 4,716
Wait a second. Which calender year? The previous year or the current year.
If it is the current year and your not working and don't know when you will get a job and you don't know what you will be getting paid when or if you get a job then what? You estimate....what happens if you estimate wrong but you're still under 400% of FPL?
Today is January 26, 2014. Let's say you lost your job today. The "affordability" rule will be based on household income for all of 2014. You are lucky it's January, because you might persuade the Exchange that your income will be low for the whole year, and therefore the premium is unaffordable.
Let's pretend that today is July 26, 2014. You made 700% of FPL for the first 7 months of the year. You lost your job. You now make zero and anticipate that you will make zero for the remaining months of 2014. Let's do some math. For a single person, 700% of FPL is $80,430. For the first 7 months, that means he earned $46,917. He earned nothing for the remaining 5 months and let's say he doesn't take unemployment checks or have any other kind of adjustments to MAGI income. So 2014 household MAGI income is $46,917. Is his premium affordable? Yes, if it is less than $371.43. Quite often it is more than $371.43, especially with COBRA, where you are paying the whole premium. But not always. I have several clients on COBRA who are paying less than that for self-only coverage. (hahahaha, the "affordable" care act will probably raise those premiums!)
Clearly, the issues are WHEN you lost your job and if you will get another source of income soon, HOW MUCH money you made before you lost your job, and HOW COSTLY the premium is.
Remember also, that COBRA isn't always from losing your job, sometimes it's divorce or a dependent aging out, etc. Then, of course, the issue of additions to income is important. Add just $2,000 of income for each of those last 5 months of the year, and the guy's 2014 household MAGI income goes up to $56,917, and an "affordable" premium must be less than $450.60 monthly.
To answer your last question, "You estimate....what happens if you estimate wrong but you're still under 400% of FPL?" There is a safe harbor in the IRS rules for this kind of thing. It's complicated. But basically, if you give the Exchange the facts in good faith and you aren't misrepresenting the facts, and then if the Exchange decides your employer's plan is not affordable, you are allowed to use the exchange's determination. From the IRS TD9590
(3) Employee safe harbor. An employer-sponsored plan is not affordable for an employee or a related individual for a plan year if, when the employee or a related individual enrolls in a qualified health plan for a period coinciding with the plan year (in whole or in part), an Exchange determines that the eligible employer-sponsored plan is not affordable for that plan year. This paragraph (c)(3)(v)(A)(3) does not apply to a determination made as part of the redetermination process described in 45 CFR 155.335 unless the individual receiving an Exchange redetermination notification affirmatively responds and provides current information on affordability. This paragraph (c)(3)(v)(A)(3) does not apply for an individual who, with reckless disregard for the facts, provides incorrect information to an Exchange concerning the portion of the annual premium for coverage for the employee or related individual under the plan.
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Oh man Ann, this "safe harbor" last point is about as clear as MUDDY WATER
- 4,716
Yeah my take on that is it gives the Lawyers room to flop around and make money.
- 948
So, I have a gal that says she's going to be leaving her job mid March and will need coverage on 4/1. I know that with her projected new income for 2014, she will qualify for subsidy. Is she simply screwed here? Even if she doesn't enroll in COBRA, are we going to be unable to apply since she's still going to be covered by the group through the end of March? Did they make no provision for people with these types of timing issues? COBRA will definitely be unaffordable for her and these people are starting a business . . . .thanks for any input. This thread has been very helpful.
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2 times today, got calls about keeping COBRA vs. going to exchange. How to bridge the disenroll/enroll process so there is no one month gap in coverage. (per the prior posts on this thread)
1. employer is offering to pay COBRA for 6 months to recently retired employee. He won't be 65 until March 2015. Somewhere on this timeline employee will get much better deal from subsidy. Also, employer's paying the COBRA seems like it would be income to the retiree.
Now on this one, just read prior post "there is no SEP created if you drop COBRA".
This prospect could be better off to convince the former employer to give him a bonus he could use to just buy coverage on the exchange. It would be necessary to somehow account for the fact that the bonus would be income, therefore reduce his subsidy.
2. Another retiree and wife are on COBRA until he's 65 in August. He wants to know if he can get better deal with subsidized ACA plan. Will run #'s tomorrow, but same problem with possible gap if drops COBRA, say 1/31 or end of Feb.
....
1. employer is offering to pay COBRA for 6 months to recently retired employee. He won't be 65 until March 2015. Somewhere on this timeline employee will get much better deal from subsidy. Also, employer's paying the COBRA seems like it would be income to the retiree.
Now on this one, just read prior post "there is no SEP created if you drop COBRA".
This prospect could be better off to convince the former employer to give him a bonus he could use to just buy coverage on the exchange. It would be necessary to somehow account for the fact that the bonus would be income, therefore reduce his subsidy.
2. Another retiree and wife are on COBRA until he's 65 in August. He wants to know if he can get better deal with subsidized ACA plan. Will run #'s tomorrow, but same problem with possible gap if drops COBRA, say 1/31 or end of Feb.
....
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- 948
So, basically she's screwed . . . .
If COBRA eligibility is foreseeable, in the future, you have a chance to avoid the time gap.
This timing problem is really for the ones who find they are suddenly losing their coverage, without enough time to apply for a new policy with an effective date that will coincide with the termination date of their group coverage.
Let's talk about the ones who are given advance notice. Let's say there's a retirement happening, or a planned job termination effective April 1st. Today is January 27th. Apply on the exchange for new insurance to be effective April 1st.
(You can apply for the subsidy, too, and go ahead and tell them that the client will not be eligible for employer-sponsored insurance on April 1st. I believe I read a post earlier in another thread that says that there's a way to do this.)
But nonetheless, even if you don't get a subsidy, get the insurance in effect (through the exchange) to coincide with the termination date of the group coverage.
Then, if you were turned down for the subsidy, go back and appeal or apply for the subsidy again once the loss of employer-sponsored coverage occurs.
This timing problem is really for the ones who find they are suddenly losing their coverage, without enough time to apply for a new policy with an effective date that will coincide with the termination date of their group coverage.
Let's talk about the ones who are given advance notice. Let's say there's a retirement happening, or a planned job termination effective April 1st. Today is January 27th. Apply on the exchange for new insurance to be effective April 1st.
(You can apply for the subsidy, too, and go ahead and tell them that the client will not be eligible for employer-sponsored insurance on April 1st. I believe I read a post earlier in another thread that says that there's a way to do this.)
But nonetheless, even if you don't get a subsidy, get the insurance in effect (through the exchange) to coincide with the termination date of the group coverage.
Then, if you were turned down for the subsidy, go back and appeal or apply for the subsidy again once the loss of employer-sponsored coverage occurs.
