Money Pilot Financial Advisor Podcast
Money Pilot Financial Advisor Podcast
Episode 78 Transition Healthcare
When you separate from military or federal employee service without a retirement or a family member leaves a current job, you lose your healthcare associated that employment.
For active duty military and reservists covered under Tricare if you separate without a retirement you qualify for the Continued Health Care Benefit Program (CHCBP). The deductibles and cost shares are relatively low, but premium for individual coverage about $6,000 a year. For a family it’s a little over $16,000 a year. https://www.humanamilitary.com/beneficiary/benefit-guidance/special-programs/chcbp/
If you are a separating federal civilian employee, you can qualify for Temporary Continuation Coverage (TCC) which is a continuation of your existing FEHB policy. But you must pay the full premium for the plan you select, both your and the government's shares of the premium. So you can expect TCC to be about 4x as expensive . https://www.opm.gov/healthcare-insurance/healthcare/temporary-continuation-of-coverage/#url=separate
COBRA coverage is available for regular civilian employees of companies with 20 or more employees. COBRA is a federal law that gives you the right to keep their employer’s group health plan after a job loss. You will have to pay the full health insurance premium, including the employer portion. Check with HR for details.
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or all three of the current employer continuation plans temporary the service member or employee can get 18 months of coverage, eligible family members 36 months.
There are other options on the Health Care Exchange at https://www.healthcare.gov/ You'll see plans, costs, and possible premium tax credits that can greatly reduce your overall costs, Click the search box at the top of the website and enter Preview Plans. You’ll need to enter some basic info like your state and anticipated income for the year you want coverage for details. Your costs will depend on your income relative to the federal poverty level. If you qualify for the premium tax credit subsidies. You can have this credit applied to reduce your monthly healthcare.gov insurance premiums. Or you can wait to you file your tax return at the end of the year and apply it to the federal income tax you owe for the year.
If your income is below 138% of the federal poverty level, you may be eligible for Medicaid and /or Children’s Health Insurance Program (CHIP). But these are state based, whichcan be challenging if don’t know where you will be settling. If you qualify for Medicaid, but choose to buy health insurance on the exchange anyway, you are NOT eligible for for a premium tax credit.
For 2022, if you earn more than 400% of the poverty level the premium tax credit begins to phase out. In 2023 it will revert to being a cliff. One dollar past 400% and you get no subsidy.
You need to enroll in a particular Silver plan or better to receive the premium tax credit. Your costs are based on your expected household income for the year you want coverage. If your income doesn't match your estimate for the year it will be reconciled when you file your federal income taxes. For your household size count yourself, your spouse if you're married, plus everyone you'll claim as a tax dependent, including those who don’t need coverage.
You can also shop around with different health insurance companies or brokers. If you will earn too much for an exchange premium credit, you may find a cheaper alternative directly from an insurance company.
Welcome to the Money Pilot Financial Advisor podcast, where you team up with Money Pilot founder, former Army helicopter pilot and your host Katie Cannon to put your money where your heart is. Together, we'll tackle issues big and small so you can take charge and land your financial life Hello, and welcome back to the podcast. Today we're going to talk about health care when you leave your job. So what's the deal? When you separate from military or federal employee service without a retirement, or a family member leaves a current job, you lose your health care associated with that employment. Now remember, if you're retiring from the military or federal service, you usually qualify for coverage under Tricare or FEHB. But today we're talking about separating from service without a retirement, you may qualify for Medicare at age 65. But leave your job before that. And you can find yourself without health insurance. If you're jumping from one job right into another, you may be able to get health care immediately at your new job with no loss of coverage. But if you have a gap in employment, either because you're taking a planned break, or you're still job hunting, you can find yourself without health care is not cheap. And if you're healthy, safe and take good care of yourself and your family, you may be tempted to go without health care coverage, especially if you never get sick. I have one word for you, don't. Don't skip on health insurance, even for a short time being hit by a car and becoming seriously injured, really need an appendectomy, or even just miss that last step at home and break an ankle and it could cost you 1000s of dollars in medical bills. And it can go quickly higher if you need surgery or any kind of ongoing rehabilitation. So let's take a look at your options and the costs, including a recent change that may make healthcare coverage more affordable for 2022. For active duty military and reservists that are covered under Tricare, if you separate without a retirement, you qualify for the Continued Health Care Benefit program or CHCBP. The service member can get up to 18 months of coverage, and eligible family members up to 36 months. The continued health care benefit program coverage is very similar to Tricare. The deductibles and cost shares are relatively low. But the quarterly premiums can be kind of shocking if you're used to free or low cost health care. Premium for an individual is about $6,000 a year if you're single. For a family, it's a little over $16,000 a year. And you can get more information from Tricare's website. And I'll put a link to that in the show note. If you're a separating federal civilian employee, you can qualify for Temporary Continuation Coverage or TCC. This is a continuation of your existing FEHB policy for up to 18 months for you and up to 36 months for qualifying family members. You will receive the same care as your existing FEHB policy. But at a higher cost. TCC enrollees must pay the full premium for the plan that you select. That is both your employee and the government shares of the premium plus a 2% administrative charge. So you might not know it, but the government shares more than 70% of the premium. So you can expect TCC to be around four times more expensive than it is while you're still working. And you can find more information at OPM.gov website. Again, I'll put a link to that in the show notes as well. Now COBRA coverage is available for regular civilian employees of companies that have 20 or more employees. COBRA is a federal law that gives workers in their families the right to keep their employers group health plan after job loss. So kind of like TCC for our federal employees, the cost of COBRA insurance is higher than it is while you're working, because you'll have to pay the full health insurance premium, including the portion your previous employer was paying. Because different employers shoulder different portions of the premium, you'll need to check with your HR at your company to see how much it would cost to continue coverage. You can also get up to 18 months of COBRA coverage as a former employee, and up to 36 months for your eligible family members. Alright, so I've already said don't go without health insurance, and then went on about how expensive it could be to continue your existing coverage. Are there any other options? Yes. And the place to go to explore these is the health care exchange at healthcare.gov. There's a lot of good information so you can get a whole load down there. If you want an idea of the plans, costs, and the possible premium tax credits that can greatly reduce your overall costs, go to the website healthcare.gov. Click the search box at the top of the website and enter"preview plans". You'll need to enter some basic information like your state and anticipated income for the year you want coverage. Spending time looking around healthcare.gov. And playing around with their calculators is a great way to get to know your options. But there are a few quirks with getting health insurance through the exchange. So Now hang with me. I'm going to dive into some details and numbers here. You don't need to memorize this. But it's important background to understand some confounding things you'll see shopping on the exchange. First, what you pay for a policy will depend on your income relative to the federal poverty level. And you may earn too much or too little to qualify for the premium tax credit subsidies. premium tax credits subsidize what you pay by giving you a credit toward your federal taxes. You can have this credit applied to reduce your monthly healthcare.gov insurance premiums. Or you can wait to file your tax return at the end of the year and apply it to the federal income tax you owe for the year. Quirk number two. If you have no income at all, or your income is below 138% of the federal poverty level, you may be eligible for Medicaid and or the Children's Health Insurance Program or CHIP. There are no premiums and very low cost shares for these programs. But Medicaid and CHIP are state based, so you apply in the state where you live. This can be challenging for transitioning military families that are job hunting, or if you just don't know where you'll be settling. If you qualify for Medicaid, but still choose to buy health insurance on the exchange anyway, you're not eligible for premium tax credit. This means you may pay more health insurance on the exchange than someone who earns more than you do, but doesn't qualify for Medicaid. I know it sounds kind of crazy and confusing. But the poverty line is a pretty low bar. If you work part of the calendar year before you transition or your you or your spouse can find work at least part time you will probably earn enough to qualify for an exchange policy and a premium tax credit. Okay, quirk number three. You can earn too much for the premium tax credit. Normally if you earn more than 400% of the federal poverty line level, you are not eligible for a subsidy. But for 2022 There is an exception. For this year. If you earn more than 400% of the poverty level, your premium tax credit begins to phase out. But unless there's a change in 2023, it will revert back to being a cliff. $1 passed 400% and you get no subsidy. Quirk number four, you need to enroll in a particular silver plan or better on healthcare.gov iIn order to receive the premium tax credit. Lower bronze level plans don't provide as much coverage and have a lower sticker price. But it's very possible that you will actually pay less for a better silver plan with a premium tax credit subsidy than you would for a Bronze plan that does not qualify for the credit. Okay, a couple more pointers when shopping around on healthcare.gov. Your costs and eligibility for the premium credit are based on your expected household income for the year you want coverage. So your 2022 health care insurance costs are based on your 2022 income, which may or may not match your estimate. So making your best guess is important. And healthcare.gov has an income calculator to help you. And when you input your household size, count yourself, your spouse if you're married, plus everyone that you'll claim as a tax dependent, including those who that don't need coverage. What happens if you choose to get insurance through healthcare.gov and then your income ends up being different than your estimate for the year. It will be reconciled when you file your taxes after the end of the year. If you receive the more premium tax assistance and you should have, you'll need to pay it back at tax time. If you should have gotten more credit than you did, it will reduce your taxes that you owe Uncle Sam. Now one way to avoid having to pay back all are part of your premium tax assistance, which might happen if you end up getting a good job or job earlier than you expected is to report to the health exchange any changes in your income during the year. Exchange could then decrease the amount of the premium tax credit you receive for the remainder of the year. Another way to avoid a possible hit at tax time is to elect to have all or part of your premium assistance sent to you as a tax refund when you file your tax return instead of paid in advance to your health insurer during the year. In other words, you pay the entire amount out of your own pocket during the year and then are reimbursed by the amount of premium assistance you qualify for a tax time. Okay, if you're still with me, you're doing awesome. I know this can be overwhelming. But choosing health care coverage wisely while you're in transition can keep you covered without paying more than necessary. So let's do a quick review of choices and where to go for more details. Military separating from service without retirement are eligible for the Continued Health Care Benefit Program. Program details are available on Tricare's website. It's a very good nationwide coverage with a simple set premium. The downside is the cost is high. Federal employees separating without retirement qualify for temporary continuation coverage for TCC. You get the same coverage and cost shares as the FE HB plan you choose. But you have to pay the full premium, which is about four times what you pay as an employee. For more info, go to opm.gov. Regular civilians that lose or leave their jobs that a company with 20 employees or more can continue your workplace coverage thanks to the COBRA law. You will need to pay the full premium, including what your employer has been paying for you and an administrative fee. Your HR department can tell you how much that would cost. So it's the same coverage you had just at a higher cost. And for all three of these temporary solutions. The service member employee can get 18 months of coverage, eligible family members can get up to 36 months. Alright, and lastly, there's a wide range of possible options on the healthcare.gov. Exchange costs, options and possible help with premiums will depend on where you live, how much your estimated income for the year will be, and your family size. I definitely recommend that you take time to learn, explore and shop around on the website and compare that to extending your workplace coverage. Remember, your income can be too low or too high to qualify for a subsidy. So doing some extra planning, like maybe finding a side gig to earn more money, or quitting a little earlier to reduce income in one calendar year may put you in a sweet spot for the most affordable coverage with the best options for you. Try plugging in different possible incomes into the healthcare.gov website to see what might work for you. And remember, if your actual estimated income is off, it'll be reconciled when you file your income taxes at the end of the year, so be as accurate as you can. You can also shop around with different health insurance companies or brokers outside healthcare.gov. If you'll be earning too much for an exchange premium tax credit, you may find a cheaper alternative directly from an insurance company. And lastly, don't go without health insurance. One unforeseen accident or serious illness could literally bankrupt you. Then good luck landing a mortgage or renting an apartment, getting a car loan or finding a new job. They'll all be checking your credit report. If you have money questions in your military or federal employee career, transitioning out or going into retirement, reach out. I love helping you succeed. And we'll talk with you again next week.
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