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00:00:00
Brad: Hello and welcome to ChooseFI. Today on the show, we have Cody Garrett back to really do a deep dive on new rules on the health insurance landscape and specifically the ACA. As always here on ChooseFI, we try to keep a pulse on the new goings on in the world, and we have to understand that things change and things evolve, and this is certainly an area where that is precisely so.
00:00:21
Brad: Cody dove deep; he put a Facebook post out that I saw that I was just fascinated by, and I knew we had to do an episode. I’m not going to try to talk about everything here because there’s just so much, but we talk certainly about the ACA premium tax credit rule changes. We do a case study to talk about how zip code affects healthcare costs. We talk about Cobra, health shares, private insurance, and of course, the ACA. You’re going to really enjoy this episode. I don’t think this is the end by any means. This is always evolving. We’re always keeping on top of it, but it’s really important that we understand the rules as they are today and as they look to be going forward, and we just stay ahead of it, that’s what we do in the FI community. I think you’re going to enjoy this episode. And with that, welcome to ChooseFI.
00:01:11
Brad: All right, Cody, welcome back to the show. I appreciate you being here.
00:01:13
Cody: Thanks so much. It’s exciting to be here to talk about something that’s exciting and somewhat challenging this year, the health insurance marketplace.
00:01:21
Brad: Yeah, I don’t know that we’ve ever termed this as exciting, but it is really important, right? And you put this incredible post in the Facebook group that got hundreds of comments and many, many hundreds of likes. I’m going to read the post here because I think it’ll set up why we’re doing this segment today.
00:01:36
Brad: So you said, “I reviewed the health insurance marketplace websites for all 50 States and DC, and the results were eye-opening. A few examples of what I found: 25 states don’t offer out of network coverage, no PPO plans. Many states don’t offer catastrophic plans and those premiums aren’t always lower than the bronze plans. In some states, households pay over 30% of their income toward health insurance premiums. And even after open enrollment closes, premium tax credit eligibility needs to be considered year-round.”
00:02:07
Brad: And I think this is the most important thing. So that’s actually the takeaway I suspect from this episode is if you are on the ACA, if you’re getting premium tax credits, this is something now with the new changes in rules that you need to be aware of constantly. So, Cody, this is a really important deep dive, and I can’t imagine how much time you spent diving into 51 different marketplaces.
00:02:33
Cody: Yeah, it was a lot of fun. As you can imagine me being a deep dive person. I have a spreadsheet of every state. I looked at the zip code of every capital. You’ll notice in our conversation today that it’s really based on county. So you can’t just say, “Oh, like this state’s cheaper than this state.” It’s literally county to county. I found examples of people who literally live across the street from each other on similar plans and one paying, you know, $20,000 a year more than another family.
00:03:04
Cody: Right. So this is a county-to-county analysis that, you know, of course, you can’t find this on really any website as of now. But I looked at, I took all the capital cities of every state, looked at all the websites, and looked at the ranges of, you know, cheapest plan period, cheapest, what they call the second lowest cost silver plan, which is kind of the benchmark for the premium tax credits, which we’ll discuss today. And also notes about what type of plan types, whether it’s HMO, PPO, EPO, all that, you know, different kinds of network variables.
00:03:28
Cody: And then ultimately, hey, like how much does it cost a family in health insurance if they go even $1 over this 400% federal poverty level cliff that came back in 2026? Right. And that’s an important thing to bookmark for everybody listening. This 400% of federal poverty level is a really important figure. And that’s something we all need to be aware of, especially at a point where you’re at FI and you’re able to maybe massage your income a little bit. I think this is really, really critical because it is really potentially catastrophic to your finances on a year-to-year basis.
00:04:10
Cody: Like I’m saying, it could potentially be tens of thousands of dollars of a mistake if you happen to have income $1 over this cliff.
00:04:18
Brad: So, all right, Cody, I don’t know that necessarily we’re going to walk away with warm and fuzzies here, but I think the important part of what we always do here at ChooseFI and in our entire FI community is we try to understand the rules of the world and we try to maximize them as best we can. And sometimes, frankly, there’s no way to maximize, but we are just aware and we do the best that we can.
00:04:39
Brad: And I think that, to me, I’m hoping to walk away from your deep dive with just some knowledge that I can move forward and make decisions rationally. And there’s no preconceived notions. That’s the other thing. I think we’ve all for a long time for the last X number of years said, okay, well in FI, I suspect where many of us are going to have lower income, we’re going to be on the ACA and we’re going to get premium tax credits and therefore health insurance actually isn’t a major concern. I suspect that’s changed to some degree.
00:05:11
Brad: But that’s the nice thing is, okay, these are just line items in our budget and we need to be aware. So, all right, with enough preamble there, let’s, why don’t you dive in? As always, you wrote a very detailed outline, so I’m just going to help guide it, but why don’t you kick us off?
00:05:25
Cody: Yeah, I think even though we’re doing a deep dive today and again, we have like all 50 states of analysis, but we’re going to do just as a simple example, we’re going to take like one case study and just carry it through the education. So I’m just going to, you know, for basics and for maybe some fun clicks because this is a pretty fun example, again, exciting, fun, different synonyms that you’d like to use.
00:05:36
Cody: We’re going to assume for this analysis that this is a married couple; they retired at age 59 and a half. They were like, “Oh, yay. I can take money out of my retirement accounts without the 10% penalty or the exclusions from that penalty.” And now in 2026, they’re age 60, married couple, and they happen to live in Charleston, West Virginia, and their zip code is 25301.
00:06:04
Cody: So those are important variables. So, you know, now we have the household size, right? It’s a married couple, just two people in the household, no dependents. They live in the zip code 25301. So that county is specific to their cost and coverage for health insurance.
00:06:20
Cody: And then if I scroll up here, kind of, uh, in terms of my kind of education here, before they enrolled in the ACA, they said, “Okay, we’re going to retire next year, you know, in all of 2026, we’re no longer covered by our workplace plan, right?” So we retired, we’re off with our group coverage. The first thing we did is we looked at Cobra. So what’s the cost of Cobra, which effectively is that continued workplace health coverage for typically up to 18 months after you terminate employment.
00:06:44
Cody: And they said, “Okay, well, we have to now look at the combined employee plus the employer premium.” So when I was working, right, the employer maybe paid a portion and the employee pays a portion. When you retire and you go on to Cobra and continue that workplace coverage, you’ll be paying the combined employee plus employer premiums plus a little surcharge. So it’s about 102% of the combined premiums, which for many is, you know, very expensive.
00:07:04
Cody: If you look at your form W-2 from last year, I think it’s code DD in box 12. You’re probably getting that in the mail right now. So if you look at your W-2, if you’re employed, look at box 12 code DD, that is the combined employee plus employer premiums for health insurance through the workplace plan. That might be for you, maybe, you know, 10,000, 20,000, 30,000 a year. So that kind of gives you an estimate; maybe do 102% of that is what you might pay if you were to continue coverage after you terminate employment.
00:07:33
Cody: Okay. So that’s the Cobra option, which is continuing the same insurance after your employment ends. And yeah, roughly it’s 102%, but yeah, you can just look at that, the code DD on your W-2 and quickly see that.
00:07:47
Cody: And frankly, Cody, that number is going to be eye-opening to a lot of people. I think this is also one of the fundamental flaws of the dozens of fundamental flaws of the health insurance and healthcare system in the United States. This is one of the fundamental ones is most people are totally dissociated from how much health insurance actually costs because their employer pays for a portion, if not a significant portion of it, and they don’t realize that this is part of their salary, whether they know it or not, that is part of their salary, right? The employer is paying that.
00:08:11
Brad: And what’s so fascinating and what I, not to totally digress, but employers are paying this and usually getting very little credit for it from employees. And that’s what’s so striking to me about this continued employer-sponsored health insurance is that it’s the worst of all worlds. The cost is hidden from employees, from our citizens. The employers are paying for it, get very little credit for it.
00:08:40
Cody: And yet we continue on with this system. So anyway, total digression, but it’s just the height of insanity to me.
00:08:46
Cody: Yeah. And I would say that thankfully some payroll systems, if you look at your pay statement, you’ll definitely see your employee contribution, but some pay statements also include an employer paid benefits area where it says how much the employer paid. I think that should be really, you know, not required, but of course, like just added at some point because again, some people say like I’ve paid 200 bucks a paycheck or 200 bucks a month through my employer.
00:09:04
Cody: And like when I retire, it’ll probably be something close to that. When you realize that maybe you were paying 200 and the employer is paying 1800, right? So definitely, even while you’re employed, go ahead and look at your W-2 now to see, “Hey, if I did continue coverage through that.”
00:09:17
Cody: The one benefit of you say like, “Well, why would I stay on Cobra?” First of all, like let’s say you terminate employment in the middle of the year. And let’s say you only have coverage through your employer through the end of June, and maybe you continue it just for the rest of that calendar year. You don’t have a deductible reset, right? So let’s say you already hit your deductible, and you want to go ahead and just continue that plan and not have to reset deductible out-of-pocket max with a new plan.
00:09:42
Cody: That might be worth doing. But most people don’t continue Cobra, you know, past a calendar year for that reason, because it’s typically more expensive than other options. We’ll see today if it actually ends up being more or less expensive.
00:09:52
Cody: Okay, what’s our next option?
00:09:53
Cody: Yeah, so the next option that they consider was retiree health coverage, saying, let’s say that I have a pension, maybe I’m retiring you. So it’s like military, private or public pension; there might be retiree health insurance tied to that. Unfortunately for the FI community, that usually comes with an age of years of service requirement. So if you’re gonna be retiring early at 40, you’re most likely, you might not be eligible for that pension and the retiree health coverage. But if you’re retiring in 55, 60, you might have something tied to the employer. However, pensions are becoming less and less; those defined benefit pension plans have been drastically replaced by defined contribution plans, like the 401Ks, 403Bs, et cetera. So again, retiree health coverage is becoming more rare.
00:10:35
Cody: Another is, hey, one spouse retires before the other spouse. First of all, that requires one spouse to continue working, which might not be the FI dream for a couple, but maybe staying on one employer’s plan, especially if there’s a big difference in age, for example. Next is part-time work, university enrollment. This is something in the FI community that people often say like, “Oh, I’m just gonna, my plan, I wanna retire early. It’s just to sign up for my local university classes.” But again, you have to consider like, does that restrict your lifestyle? Do you really wanna be retired early and maybe going to class and maintaining a certain level of grades in those classes to continue your maybe cheaper health coverage?
00:11:13
Cody: The next is becoming a lot more popular, especially considering the increased cost of marketplace plans and private plans, which is the healthcare sharing ministries. These have typically been known to be like religious-based. Those are really like a pooling of funds similar to insurance. So that’s typically gonna have lower premiums. But with that, with the lower premiums, that’s because pre-existing conditions may be excluded, right? There are no guaranteed payments. They’re not HSA eligible. So if you wanna contribute to an HSA, you cannot if you’re covered by a healthcare sharing ministry. And there are no ACA consumer protections.
00:12:01
Cody: So again, there’s some risk to going to an informal insurance option like a sharing ministry. Yeah, and this is really important. We’re not saying don’t do this, but I just wanna be entirely clear. This is not insurance. If you go through a health share, it is not insurance. That health share company is not legally bound to pay for anything. That doesn’t mean they won’t, and certainly in many situations that they won’t, but they are not legally bound. So if you think you’re sleeping well at night, thinking that if you get cancer or get hit by a bus that the million dollars is gonna be covered, it is not by definition.
00:12:40
Cody: So it’s very, very, very important that people know that. I was actually a member of a health share for a number of years, a while back, probably about almost a decade ago. And that was the point of differentiation that it just eventually led me to stop using it. I could not pass that sleep well at night test. So very important.
00:12:54
Cody: Yeah, from what I’ve heard from people, healthcare sharing ministries is something you love until you absolutely hate it, right? It’s something that you love for a while until you like really need it. And you’re like, wow, now I realize the downsides to this, especially when there’s a lot of people within the pool who get sick at the same time. I can’t imagine what would happen. I don’t know what happened during the COVID era, but if something like that happened again with sharing ministries, I could imagine those costs could get pretty high.
00:13:23
Cody: Which ironically is the entire point of insurance, right? For us, especially for people in the FI community, health insurance is not to pay for the $70 doctor visit. It’s to cover a catastrophic scenario, right? Like that’s what life insurance is for. Like that’s why we think, “Oh, it’s super, there are many reasons why it’s silly to have whole life insurance and other ridiculous life insurance plans.” But it’s conflating things. It’s just, what is life insurance? Life insurance is if you die, you get a term life insurance policy. If you die during that term, the people who rely on you are gonna get some money to cover potentially lost income essentially.
00:14:06
Cody: So quite literally insurance in my estimation is in most cases for catastrophes. And that’s why my concern with the health share is it’s there until you actually need it. So was it ever actually there? Or did they just pay for the $70 doctor’s visit?
00:14:21
Cody: Yeah, so insurance is a transfer of risk of low frequency, but high financial severity peril. So yeah, like the thing that you don’t wanna happen, but we pay over 30% of our household expenses toward insurance. And it’s something I gladly pay because I’d much rather kind of know that I have a max out of pocket. That’s effectively what I’m doing is I’m paying for health insurance just so that I have a max out of pocket. So that once I hit that, I know that 100% is covered by the insurance company as a transfer of risk.
00:14:53
Cody: Agreed. And the last option that this couple looked at was private individual insurance. So this is something that I think a lot of us in the FI community have kind of ignored. We kind of say, okay, I’ll just assume I’ll do ACA. They’ll probably use some premium tax credits. But if you don’t receive premium tax credits, which we’ll cover in a moment, you definitely wanna start looking into these private individual insurance options.
00:15:17
Cody: I don’t sell insurance, so just find a broker agent in your state where you live. But one thing with the private insurance is that it’ll require medical underwriting. So again, if you do have a preexisting condition, that could be denied. They can’t exclude those preexisting conditions and they might have annual limits on the amount of coverage and they might have caps based on what type of coverage that you need.
00:15:42
Cody: So again, it’s one of those things where if you truly need to know that this is the max I’ll pay in terms of health insurance this year, the ACA, the Affordable Care Act, the marketplace has been kind of the go-to of saying, I might pay a little bit more here even if I’m healthy, but at least I know that I’m gonna be 100% covered once I hit this number, which in most examples for individuals might be around $10,000 a year and for a married couple around $21,000 a year.
00:15:58
Cody: So just knowing that you have that max out of pocket might make people stay on the marketplace plan, pay a little bit more, even without a premium tax credit.
00:16:08
Brad: Cody, quick question about private insurance, and I’m not sure that you would know this necessarily, but so you said there is medical underwriting to get on the plan, but now let’s say hypothetically you do get cancer in the end of 2026. Can they toss you off for 2027? Or once you’re approved, is it insurer by insurer? Do you have any sense of that?
00:16:32
Cody: Yeah, so you really have to look at the details of the preexisting conditions that are excluded. So even though you go under medical underwriting and you’re healthy, the plan could still include exclusions along the way. With that said, on average, I’ll just say, not as a health insurance expert, that this is usually done on an annual basis during the open enrollment period, that once you’re on a plan, that you’re covered through that period. But you definitely need to make sure whether it’s the sharing ministries or private insurance that you read the small print of what’s excluded.
00:16:55
Cody: Another one that’s really popular to be excluded in private insurance is mental health type of things, whether it’s going to see a mental health professional. So looking at your network, which medical providers, which prescriptions, right? There are lots of little things that you can kind of dig into the details of, but just keep in mind that if you have a preexisting condition or you expect, “Hey, I have asthma, there’s a certain medicine I take,” et cetera, you definitely wanna talk to a broker who can really dig down and say, “Hey, based on your exact health background, et cetera, this is the best plan for you moving forward.”
00:17:34
Brad: Okay, that is a great overview of our options. I really like that. So Cody, where do we go from here as far as, so I know you set up, you did all this research, where did you go next?
00:17:47
Cody: Sure, so this family says, hey, we’re gonna check out the ACA, Affordable Care Act, also called the Health Insurance Marketplace. Thankfully, even though there are dozens of different health insurance marketplace websites because some states have their own network, you can go to healthcare.gov forward slash C-plans, that’s S-E-E-plans. I’m sure we’ll have Brad and Jonathan put that in the show notes for us.
00:18:05
Cody: So yeah, healthcare.gov is the place to start. So this married couple, they simply type in their zip code to start. That says, okay, you’re in this county; we wanna make sure you’re looking at the right marketplace. Right, you think about kind of going to your local marketplace, your local farmer’s market, this is the health insurance market based on where you live.
00:18:29
Cody: They type in their zip code, they type in the number of household members and their ages. So again, this is a married couple, just two people, both age 60. Then you type in your tobacco usage, which may or may not apply to you. You might filter by medical providers, prescription drugs, the things we mentioned before, things that are specific to you.
00:18:46
Cody: But most importantly, in this conversation today, I’m not a health insurance professional, but I love the tax planning around this, which is the cost of health insurance in the marketplace is based on yes, your county, yes, your number of household members, your ages, but most importantly, it’s based on your household income. So this has been kind of, you know, people throw this around, like it’s crazy that millionaires can pay nothing for healthcare. So the health insurance marketplace, these plan prices are not based on your assets; they’re solely based on your income.
00:19:13
Cody: And the definition of that income is your modified adjusted gross income. So your modified adjusted gross income for simplicity, if you look at your tax return from last year, is your AGI, your adjusted gross income, but then you’re gonna add, which doesn’t necessarily apply to most people, your foreign earned income, tax-exempt interest, maybe you have municipal bonds…
00:18:41
Cody: And your tax and brokerage account, that interest will be included. And also, very important, the non-taxable portion of social security benefits. So if you are claiming social security between age 62 and when you’re enrolled in Medicare, you need to make sure that 100% of your social security benefits are included in that income number. Most within the FI community are probably gonna wait until 67 or 70 to claim social security. But just keep in mind that that modified part of AGI is really important.
00:19:09
Cody: So when they type in their county, members, ages, household income, the next page on that website is going to say what your estimated premium tax credit is. The premium tax credit is a refundable federal income tax credit, refundable meaning that even if you owe no taxes, you could still actually receive a premium tax credit. So you can actually owe like kind of negative, have a negative tax liability for the year, assuming that you’re eligible for this premium tax credit.
00:19:36
Brad: Okay, wait, talk me through that as far as how the refundable would work, because my assumption would be you get a tax credit, let’s say your potential premium tax credit is $2,000 a month, and you sign up for a plan that costs $1,700 a month. Right. I would assume it would just wipe that down to zero. Are you saying you actually would get a refund of the difference?
00:19:57
Cody: So they’re only gonna cover you up to the cost of the health insurance. So if you sign up for the health insurance that costs $1,700, they’re going to give you what’s called an advanced premium tax credit. So you can say, I’m going to use $1,700 a month toward my health insurance. So what this really means is, let’s say that you’re eligible for a premium tax credit of $2,000 a month, and you sign up for the one that’s worth $1,700, but you end up telling them that you only want to use $1,000 of the $1,700 toward your advanced credit, which means that’s paid every month toward your health insurance. Whenever you file your taxes, the next spring, for example, there’s a reconciliation of what you actually should have received for a premium tax credit versus what you’ve used throughout the year, and the difference you can actually get paid back in a refundable tax credit. If you choose a cheaper plan, you don’t just get paid extra for not taking advantage of the credit.
00:20:48
Cody: I’m thinking of like a housing allowance or something for a military member. I just pocket the difference. But actually, this is very important because I suspect this is going to be really critical in the next 20 minutes is now that we have this cliff, as far as that 400% of the federal poverty level, this is potentially catastrophic.
00:21:05
Cody: So what you just said was you can actually elect to take a smaller advance. So I’m thinking of a scenario where I’m someone who has assets. I’m assuming my income is going to be under the 400%. But just to be safe, I don’t want to take an advance. I just choose to take zero, let’s just say. I’m assuming that’s possible. But in my hypothetical, I’ll just pay the $1,700 out of pocket. And then when the time comes to file my tax return, assuming that I’m under that federal poverty cliff, then I would get the $20,400, which is just $1,700 times 12. I would get that refunded on my tax return. So for me, in terms of my safety brain, and also someone who has assets, that’s probably how I would do it rather than having to pay back the $20,400 if I was a dollar over.
00:21:59
Brad: I know you’re going to get into this in greater detail, but is that a way to think about this?
00:22:03
Cody: Well, here’s what’s challenging, though. Let’s say that instead of taking the advance credit, you’re going to pay out of pocket $1,700 a month. Well, then you have to say, okay, well, how do I get access to that $1,700 a month? And how does that impact my income? Because if I’m going to have to take that money out by selling securities or taking money out of a retirement account. So yeah, most people will say, I’m going to take the advance credit based on my estimated income. And then let’s say that my income ends up being a little over a little under, there’s a reconciliation.
00:22:30
Cody: But here’s the really important part. Let’s just dive right into the details here. So this family, this is the fascinating part. So they don’t know how this works, right? This family just goes on to the marketplace. And what they say is, okay, we expect our income based on we’re going to do some tax gain harvesting, maybe we’ll do a little Roth conversion. I’ve got a little income that’s coming from over here, my income from the year for 2026, we expect our income as a household to be $84,000.
00:23:01
Cody: Okay, so they type that into the marketplace website. And it says, hey, based on an income of $84,000, you can receive up to $3,900 a month toward your health insurance. And they’re like, wow, that’s amazing. And they say, how much of that would you like to elect? And they say, okay, well, let’s just take the whole 3,900 based on that income of 84,000. Then it shows them the plans. And now the plans it says, hey, wow, like with that premium tax credit of 3,900 a month, we have a lot of options, like we can even sign up for a bronze plan for no monthly premium for $0 premium, because that advanced credit is paying it directly toward the provider.
00:23:36
Cody: And I pay nothing out of pocket every month. And this could be a family, for example, you know, our income is 84,000 a year, but we’re millionaires on paper, right? Our assets are in the millions. But we just saw that with this premium tax credit, we can pay zero a month for health insurance. Sounds pretty good.
00:23:48
Cody: So here is where this is why this whole episode happened. You know, now you’re maybe 20 minutes into the episode. Yeah, I definitely want to keep going on that. So why, why are we starting this episode? But I wonder actually, so that’s an interesting one where they would get up to 3,900. That might actually depend on where they’re located, like if they were located where I live in Henrico County, Virginia, a family of four plan for bronze is dramatically less than $3,900 a month. So I actually in that case, if I’m like, oh, wow, you mean I get premiums for free up to 3,900, I would go for the gold plan in that case.
00:24:16
Cody: So I would actually, it would change my selection, which in essence, the way that the gold plans work, as far as the way that I think about it, and it might be counter to how some people think, but in essence, on most of these gold plans, your deductible is dramatically less. So in essence, you are prepaying in a sense by paying more in premium, you’re prepaying some of the deductible. So if you’re telling me, okay, this premium tax credit is going to help me cover my entire premium, even up to a gold plan. And therefore my deductible is dramatically lower than it would be on a bronze plan, like a bronze plan, it could be $17,000 and change on a gold plan, Cody, I imagine it can be as low as a couple thousand dollars.
00:25:10
Cody: So it might actually change the behavior of what we pick, which makes us potentially even more catastrophic.
00:25:15
Cody: Yeah. So this family says, hey, if we’re going to get $3,900 a month, based on our income, our anticipated income of 84,000, you know, let’s get a much better plan for 4,000 a month, they’re going to cover 3,900. And we only have to pay 100 bucks a month. That’s great, right?
00:25:24
Cody: So here’s the fun part, fun and quote, dripping in sarcasm and air quotes. Yeah, here’s the scary part. I’m not trying to drive fear, but this is why you need to, even though, you know, you probably already enrolled in a plan, etc., you need to be very careful about what that advanced credit is.
00:25:36
Cody: You can change the advanced credit, by the way, if you, after this episode, you’re like, oh, we better be more careful. You can go in and change the monthly amount that they pay month by month. You can change that.
00:25:44
Cody: Yeah. You can change your advanced payment month by month. You just can’t change your plan. You can’t change, uh, you know, open enrollment ended, but that doesn’t mean you can’t change how much per month is paid directly to the provider for you.
00:26:00
Brad: Now, would you do that through the healthcare.gov website or through, like, you know, Cigna or Anthem or whoever you had your insurance with?
00:26:05
Cody: You’d go right back to healthcare.gov and click on your 2026 application and you can change the advanced credit amount. OK, wonderful. And now, again, that doesn’t mean you’re not getting it if you are under that cliff because you’ll get it on your tax return in April of next year.
00:26:23
Cody: Yeah. And the fascinating part about this is this is based on your income for the whole year, regardless of what happens month to month. So here’s a crazy example. So they assume their income was going to be eighty-four thousand dollars. OK, then, you know, at the end of the year, they heard this ChooseFI episode about tax gain harvesting and they were like, oh, I can harvest some capital gains at the zero percent long-term capital gains tax bracket.
00:27:00
Cody: That’s so exciting. And I’m sure to put in the show notes that episode. But that’s kind of why I come back today is saying, hey, their income was at eighty-four thousand and they decided to do some tax gain harvesting. And now their household income, instead of eighty-four thousand, is now eighty-five thousand dollars.
00:27:11
Cody: So they added a thousand dollars of long-term capital gains taxed at the zero percent long-term capital gains tax bracket. But by doing that, they just knocked themselves from 400 percent of the federal poverty level to 401 percent of the federal poverty level, which means they are no longer eligible for the premium tax credit at all.
00:27:28
Cody: So their premium tax credit eligibility went from thirty-nine hundred dollars a month to zero by their income actually going over literally by one dollar over eighty-four six hundred. But now when they file their tax return, if they took that full advance credit of thirty-nine hundred bucks a month, they’re going to have a federal income tax liability, probably unexpectedly, of forty-seven thousand dollars, even though their income for the year was only eighty-five thousand dollars.
00:27:42
Brad: Wow. OK, that is unbelievable.
00:27:50
Cody: That is absolutely OK. And this cliff now, Cody, this came about with the hard to say the name out loud. One big, beautiful bill. That’s a that’s a mouthful. That was changed recently, right?
00:28:06
Cody: So, yeah, this wasn’t it wasn’t in the one big, beautiful bill, but the cliff was expected to come back. But so that’s what it was. That’s what it was. Yes. What they had done previously. So affordability in twenty twenty-one to twenty twenty-five, that was based on the one hundred percent to a four hundred percent of the federal poverty level. But it was intended for that applicable what they call the second lowest cost silver plan. So based on your household size, where you live, etc., the second lowest cost silver plan is kind of the benchmark for affordability.
00:28:36
Cody: And from twenty twenty-one to twenty twenty-five, it was intended for that number to never exceed eight and a half percent of household income, even if your income went above the four hundred percent federal poverty level. So they really just took away that cliff temporarily; it was already expected to come back in twenty twenty-six, and they simply didn’t extend that waiver moving forward.
00:28:54
Brad: That makes perfect sense. So now in twenty twenty-six, the four hundred percent federal poverty level cliff is back based on your household size.
00:29:04
Cody: And this year, if you’re at four hundred percent, it’s intended not to exceed nine point nine six percent. You kind of think about 10 percent of household income. But you can see in that example that that’s if you’re at right at the top of the cliff, if you’re at the four hundred percent, you’re not expected to spend about more than 10 percent of your income toward your health insurance premiums. But even if you go one dollar over that cliff, that intention just goes away.
00:29:23
Cody: So rather than spending maybe 10 percent of your income toward health insurance, now this family in this example, if I type in how much they had to pay back, they’re paying back forty-seven thousand dollars. So in this case, they just paid about 56 percent of their household income toward health insurance, just being unaware of the implications of one, assuming the premium tax credits and two, choosing a plan based on how much they were receiving and eligible advanced credits.
00:29:54
Cody: Is there a listed figure for that 400 percent of federal poverty level for household size? Yeah, so I’ll go ahead and share. If you go to Measure Twice, I’ll put a little chart there, but I will just say briefly that a household of one, so an individual, 100 percent is 15,650 and 400 percent is 62,600. For a household of two, you can effectively add 5,500 on the low side and, you know, times four is 22,000 on the high side.
00:30:25
Cody: So I’ll put a chart on the website there, but you can see that 400 percent of the federal poverty level, 400 percent sounds like a large number, but for an individual, that’s 62,600. For a family of two, 84,600. For a family of three, 106,600. So you can see that that cliff is a pretty low number, you know, if you compare that to kind of the wealth that we see in the ChooseFI community, right?
00:30:44
Cody: Are the premium tax credits, does the amount that you’re eligible for vary depending on your income if you are still below the 400 percent? So let’s say your income, if you’re a family of two, your income is $40,000. Now we know the 400 percent of the federal poverty level is up to 84,600, but do you get a larger premium tax credit if your income is 50,000 as opposed to 84,599?
00:31:11
Cody: Yeah. So as long as you’re under the 400 percent federally, you know, the calculation, the premium tax credit is based on your household income, your family size, the federal poverty level again, federally, and then the second lowest cost silver plan in your area. So that’s the part that if you’re within 100 percent to 400 percent, some states, by the way, they have Medicaid expansion all the way to 138. So kind of on average, you can kind of think 138 to 400 in most states, you’re going to be eligible period from a federal level.
00:31:39
Cody: But then based on where you live, household size, and you know, the plans in your area, that’s where it can be significantly higher or lower, and you can’t just base it on the federal level.
00:31:48
Brad: Okay.
00:31:49
Cody: So for most of those people, and I’m sorry to keep asking clarifying questions, I think this is important.
00:31:54
Brad: So, right. The 100 or the 138 percent that’s on the lower side because, yeah, you might get onto Medicaid. Correct?
00:32:01
Cody: Yes, that’s right. But then as long as you’re within that 100 or 138 to 400, depending on your state, that second lowest silver now does virtually everyone I know there there’s no absolutes and I never want to set it up, but does virtually everyone get a premium tax credit equal to the entire premium for the second lowest silver plan?
00:32:21
Cody: So the way it’s set up is that the second lowest cost silver plan based on your household size in your area based on your county should not exceed 9.96 percent of household income after the credit. So even after the credit, you could still be paying out of pocket depending on which plan you choose.
00:32:37
Brad: Okay. All right. That makes sense.
00:32:40
Cody: So, all right. I think I could continue asking further clarifying, but I think I’m going to bog us down. So let’s keep moving forward.
00:32:46
Cody: So, you know, you can see here that, you know, it’s really based on which county you’re at. I had an example here that if that family moves from Charleston, West Virginia to Richmond, Virginia to hang out with maybe Jonathan and Brad over there, you know, if they don’t have a premium tax credit, they could be potentially paying, you know, twelve hundred bucks a month less for health insurance for a comparable plan.
00:33:04
Cody: So it’s hard to make absolutes in these episodes because this is a county by county household by household decision. But just know that the 400 percent federal poverty level cliff is a federal income tax rule law.
00:33:20
Cody: But your actual coverage and cost is based on where you live. County by county. So it’s a combination of federal, state, and local decisions that you have to be considering here to add further complication to everything.
00:33:28
Brad: Yeah. As we’re talking here, I went to that healthcare.gov/c-plans and yeah, they asked you to put in your zip code and then it’s OK. That’s not good enough, because in my case, that zip code crosses two counties. So I have to actually select my particular county, not the neighboring county.
00:33:41
Cody: I mean, these things. So we’re talking 50 states, probably literally thousands of counties across the country. I mean, that’s the complexity we’re talking about here.
00:33:50
Brad: And it makes me to think about, you know, people who own multiple doors and real estate and they say, oh, I’m going to like maybe I’ll live in this one this year, I’ll live in this one this year. Maybe, you know, which rental property you turn into your primary could be based on where you want to live from a county perspective for your health insurance. Again, not that we’re just going to make decisions based on that, but so there are just a few extra little add-ons I want to mention today.
00:34:10
Cody: That the cost of health insurance, period, especially through the marketplace, is based on your age.
00:34:17
Cody: Right. So I can see an example here. I look at one example in Richmond here that the cheapest plan at age 50 for an individual is four hundred seventy-five bucks a month, but at age 60 is seven hundred twenty bucks a month. So you might be thinking kind of, okay, well, how should I think about the cost of coverage every year as I get older? Let’s say I retire at age 50. How might it increase in cost?
00:34:40
Cody: So there’s kind of two factors. One is age. On average, every year you’re older, it’s going to increase your premiums by about four to five percent every year. Every year you get older is going to add like four to five percent just based on age. Then you have to add kind of the premium growth increase based on inflation for medical costs. So kind of on average, what I’m seeing here is like we should assume about seven to eight percent increase per year between age 50 and 64.
00:35:06
Brad: Wow. OK. Without a premium tax credit, of course.
00:35:10
Cody: Right. Right. Right. And 64 is important because it’s 65. Medicare kicks in.
00:35:14
Cody: Yeah, that’s right. So you might be asking, OK, if I’m in a place where I have to be very careful about keeping income low because I definitely don’t want to cross over above the 400 percent federal poverty level, there are a few ways to keep household income low. A lot of these things we’ve talked about in the tax planning to enter early retirement episode.
00:35:30
Cody: The first is, hey, you know, if you ask yourself, how do I keep my income low? First is maybe I’m going to live off of my checking and savings accounts first. Right. So when you take money out of your checking your bank account, there’s no income added to your taxes there.
00:35:42
Cody: Once you’re out of cash from your checking and savings accounts, then you might go into a taxable brokerage account and use what we call specific identification spec ID, which is a way to choose the specific lot. So whenever you have securities, you know, VTI, VXX, whatever you own, you can go in there and say, I want to sell this specific lot that has the lowest unrealized capital gain.
00:36:02
Cody: So maybe I look at all the different purchases I’ve made and look at how much realized gain or loss I have in there as a percentage. And I’m going to specifically sell the lots with a lower realized gain. And of course, tax loss harvesting is great too, because that would lower that would reduce your income.
00:36:19
Cody: The next is saying, OK, I’m going to reduce the amount of investment income in my accounts by implementing what we call asset location. So if you’re getting a lot of interest income, right, in dividends from maybe some bond mutual funds, ETFs, maybe you have CDs, you might consider, again, be careful about selling them because you might end up incurring capital gains by selling them. But maybe moving forward, maybe you’re moving toward early retirement or planning to go on the ACA.
00:36:45
Cody: You start moving your assets around kind of mentally by saying, OK, I’m going to keep my bonds, for example, in my pre-tax retirement accounts, and I’m going to keep my equities, my stocks that don’t pay high dividends right in my taxable brokerage account so that when I retire early, I have more control over my income without being hit by a lot of my dividends, interest, and capital gain distributions throughout the year.
00:37:07
Brad: OK, that’s very important.
00:37:08
Cody: So that’s thinking about your net worth and your investments holistically as opposed to. So for instance, let’s say you want to have 20 percent of your portfolio in bonds. All right. Well, like Cody’s saying, bonds kick off a lot of income that is taxable in the current year. So if you can hold your bonds in retirement accounts, because, right, Cody, it actually doesn’t matter if it’s pre-tax or a Roth account, that income, that interest income in that case would not be taxable in the current year.
00:37:34
Brad: So that’s something to consider, again, looking in your portfolio holistically. So all things equal, if you can do that, like Cody said, now, naturally, if you’re holding something that spits off income, that has unrealized capital gains, that by selling it in your taxable brokerage account, you’re going to realize hundreds of thousands of dollars of gains. OK, well, maybe that’s not exactly that’s clearly not what Cody’s saying. But if you can massage this at the margins or you can make changes where there are not major tax ramifications for doing it, well, then you want to really think about the asset location for where interest and income-bearing or generating securities and assets are held.
00:38:16
Cody: I think that’s really important.
00:38:17
Cody: The next part I’m going to say is something I really want the FI community to start thinking about. We often think about HSAs as health savings accounts and Roth IRAs as the last money I’ll touch because we get really excited about this long-term tax-free growth, Roth IRA for any reason, and the HSA for those qualified medical expenses that can be reimbursed tax-free in the future.
00:38:38
Cody: But one great thing about using an HSA and a Roth IRA withdrawals in early retirement, assuming they’re qualified, no penalty on them, is that they don’t add income. They don’t add income to your household. So let’s say that I need an extra $10,000 this year. But if I sold my taxable brokerage investments, I would knock myself out of above the 400 percent federal poverty level. Maybe I take that $10,000 out of an HSA as a qualified reimbursement or I take it out of my Roth IRA as just taking some of my contributions back tax and penalty free by taking maybe a few thousand bucks out of those accounts that, yes, they could have grown tax-free, but by taking just maybe a thousand or two out of that to avoid going over the cliff, you could be potentially saving yourself $10,000, $20,000 in health insurance premiums this year.
00:39:24
Cody: So again, just keep in mind that your HSA and Roth IRA should be tactically used to control income, not necessarily just thought of as like the last spend and inherited by my grandkids someday.
00:39:36
Brad: I love that tactically use.
00:39:38
Brad: That is a beautiful, beautiful phrase, Cody, because I think that’s when people talk about assets, having some diversity of their assets, having Roth accounts, having traditional accounts, having Roth contributions, having money sitting in taxable accounts that are even just interest-bearing things, right? Like having an HSA, it’s because you can use it, use this very tactically when it actually matters, right? Like, as you’re saying, the obvious advice is okay, save those, the Roth, et cetera, like to the end, that’s the last dollar you hear that pretty frequently, but we are now getting into the real granular aspects of how can we make a material difference, Cody, right? Like we’re talking a material difference, 10, 20, 30,000 plus dollars in premium tax credits, if you were really smart about this.
00:40:27
Brad: So yeah, like you referred to before, and it was episode 517 that we talked about capital gains, maximizing capital gains and capital gains harvesting. That was a wonderful episode. Everybody should listen to it, but yeah, it sounds really alluring to capital gains harvest as much as you can, right? But it’s really myopic to do that, especially at the margins. If it’s just to get you over that premium tax credit cliff up to the max of where you can capital gains harvest, then we’re only talking a couple thousand dollars of potential tax savings, but potentially losing 10, 20, 30 thousand dollars in premium tax credits. So that’s incredibly short-sighted and myopic, but you have to know the rules. And again, that’s why you did this deep dive because everybody needs to know this.
00:41:10
Brad: Now it’s wonderful to put everything on autopilot, et cetera. We’d love a utopian world where we can do that, but we need to know the rules, and these are the rules, and we need to be aware of it. So, all right, Cody, this is awesome. Keep on rolling.
00:41:24
Cody: Yeah. So we talked about taking money out of an HSA Roth IRA. Another great opportunity is to contribute to an HSA. So we often hear about contributing to an IRA. When you contribute to an IRA, you need earned income. So you need earned income from a job, whether self-employed or W-2, but health savings accounts do not require earned income. Not only that, but all catastrophic and bronze ACA plans are HSA eligible starting in 2026. So here’s a fun example.
00:41:51
Cody: That family, they assume their premium tax credits based on an income of $84,000. And then they did a little bit of tax gain harvesting that brought them up to $85,000. And they’re like, oh my gosh, we’re going to have to pay back your $47,000 of premium tax credits, but what’s nice is they have until April 15th of the following year, so they’re about to do their taxes. And it said, you’re going to owe $47,000 in excess premium tax credits. And they go, wait a minute.
00:42:18
Cody: We were on a bronze plan through the marketplace. We’re going to contribute to an HSA. Let’s say, for that family, they could contribute $87.50. Actually, they could do $87.50 plus $1,000 for a person age 55, whatever all the catch-ups. But by making an HSA contribution, they didn’t need earned income. By making an HSA contribution by April 15th of the following year, because their plan was HSA eligible as a bronze plan, they now brought their income back down to like $80,000 and now they don’t have to pay back the $47,000 of premium tax credits.
00:42:52
Cody: Interesting. And what’s fascinating, right? In this scenario, we’re saying they made the $85, right? And the cliff was that $84,600. So if we’re using that as an assumption, they would have only had to make a $401 HSA contribution. And then $47,000 in tax liability goes poof. It’s gone. It’s down to zero, which is remarkable.
00:43:13
Cody: So now, naturally, they could, if they wanted to, put the extra amount in the HSA. That’s all fine and dandy. But the nice thing we’re saying here is this is very tactical.
00:43:24
Cody: Yeah. And I would say, too, this is kind of the scary part to me is that if you’re going to TurboTax, if you’re hiring a tax preparer who just kind of takes what you give them, like they might not say, hey, I see an opportunity that you didn’t make an HSA contribution. You said, hey, you could make a $500 contribution to an HSA and wipe out this $47,000 tax liability. Most tax professionals simply aren’t going to notice. And you’re not going to bring that up to you. And you’re just going to be freaking out when you get that $47,000 bill for excess premium tax credit.
00:44:01
Cody: So this is something that, again, I don’t want you to be fearful, but I want you to be aware that throughout the year you have to be thinking about how you control your income. And if you elected those advanced credits, maybe go back in there and adjust your assumptions. Some people are saying, well, what if my income is lower? I’ll just tell you, like, don’t worry if your income is lower. As long as you’re well-intentioned with your estimates, you’re going to be okay.
00:44:17
Cody: Again, that’s kind of going into the actual legal language there in the IRS. But if your income is going to be higher than you expected, please be very careful. And I’ll say, you know, I’m not accepting financial planning clients, but I’ll say this is a case where hiring a financial planner for 250 bucks, you know, 500 bucks for a few hours of their time to save potentially 20, 30, 40 thousand dollars in tax liability is probably worth your money this year.
00:44:41
Cody: So even if you’re very anti-advisor, like I can do this all myself, it might be worth measuring twice by hiring somebody for a few hours of their time to make sure that you don’t mess this up.
00:44:52
Brad: Yeah, don’t mess it up. Indeed.
00:44:54
Cody: So, right. A couple of just little actionable things you said in there. So starting in 2026, all bronze plans and you said all catastrophic plans are HSA eligible. So you just quickly Google what’s the HSA max if you’re single or if it’s family and you can put up to that amount in an HSA. I know many people in the community use, if they don’t have an HSA somewhere else. Fidelity is, when I did my research, Fidelity seemed to be the lowest cost brokerage to have an HSA. So that is personally what I chose.
00:45:26
Cody: I’m not giving advice, but that’s based on my research, at least a couple of years ago. That was a great option. So these are readily available. You can open an HSA at the major brokerages. Again, I found Fidelity to be the lowest cost. I know I saw a post in our community not a couple of weeks ago, and a lot of people suggested the same. So again, not advice, but that’s something to certainly consider.
00:45:47
Brad: So, yeah, that’s a really, really important one. And again, going back to the very beginning of the episode is, as you said, these advances on the premium tax credit, you can always go back in and basically say, okay, no, I want to lower that or, okay, I want none of it. I’m just going to take it at the end if there’s some concern that you really are going to be over as opposed to paying it back. So just something to think about.
00:46:07
Cody: But Brad, I wouldn’t have known you could do that before we jumped on. So I just wanted to reiterate those. I know we’re obviously not done yet, but I really, as you know, the actionable stuff, it just matters to people.
00:46:18
Cody: Right, right. And one last note on that is that even though catastrophic plans are HSA eligible, I don’t believe the premium tax credit applies to our catastrophic plans. Catastrophic plans were effectively created for people who are, you know, they added exceptions for this year, but most of you listening who are on a premium tax credit or receiving a premium tax credit, you’re most likely on a bronze, silver, gold, platinum plan. So just keep that in mind.
00:46:38
Cody: The last thing I want to mention is that when you’re filing your taxes, if you were covered by let’s say you’re receiving all your tax forms in the mail right now, this will happen next year, too. When you get your tax forms is you’re going to get Form 1095-A, which is your health insurance marketplace. So that’s going to tell you how much premiums you paid, how much premium tax credit you received. And then that’s going to be entered on Form 8962.
00:47:01
Cody: Right. So if you received a premium tax credit, if you were covered by the marketplace plan, you know, 2025 and you’re doing your taxes in 2026, make sure that you got that 1095-A and that you have Form 8962, which is going to reconcile that premium tax credit to ensure whether you’re going to receive an additional premium tax credit that you didn’t take as an advanced credit or if you’re going to have to pay back some excess credits after the fact.
00:47:25
Cody: But we’ve gone through a lot of material today. Is there anything that you want to cover before we head out today?
00:47:31
Brad: Yeah, we’ve covered a lot. So this is almost just for sport more than anything, just because it’s so egregious. But you had written down a couple examples of the difference of a married couple age 60 and age 55. So you would set up this Charleston, West Virginia, the zip code 25301. But then you compared them to Richmond, Virginia, zip code 23219. And it is absolutely striking how different the premium tax credits can be just living in these two capital cities five hours apart.
00:48:05
Cody: Yeah. So just in this example, for the age 60 couple, the second lowest cost silver plan in Charleston, West Virginia, was about fifty-six thousand dollars a year. Wow. And the second lowest cost silver plan in Richmond, Virginia, was about twenty-two thousand dollars. So that’s why you’ll see the big difference in premium tax credits because they’re based on that second lowest cost silver plan.
00:48:26
Cody: So if you have a cheaper lowest cost silver plan, you’re going to have a lower premium tax credit. So just lastly, on this example, the cheapest plan that they could get on in Charleston, West Virginia, without a premium tax credit, was about thirty-one thousand dollars a year. The absolute cheapest plan they could sign up for. Whereas if they lived in Richmond, Virginia, without a premium tax credit, seventeen thousand dollars a year.
00:48:46
Brad: Right. So you’re looking at potentially twelve hundred dollars a month difference just by living in a different county across different states.
00:48:54
Cody: Okay, so we’ve long talked about geo-arbitrage in terms of moving to lower cost countries. But frankly, people in the ChooseFI might really need to consider geo-arbitrage even within the US if this is a material difference, obviously. So again, going back to what the premium tax credit covers. So in this example, this is the same married couple, age 60 in Charleston, West Virginia. So I want to ask about this.
00:49:18
Cody: So this is the example we use the entire episode. Their premium tax credit is up to three thousand nine hundred and forty-two dollars a month. That’s forty-seven thousand three or four, you’ve referenced a number of times. So the second lowest cost silver plan is, like you said, this astronomical four thousand six hundred and forty-six dollars a month.
00:49:36
Brad: So if they elected this, they would get the thirty-nine forty-two a month and then they would have to pay. It looks like seven hundred and four dollars out of pocket a month. Is that right?
00:49:47
Cody: That’s right.
00:49:49
Brad: Okay. And that’s at the 400 percent federal poverty level.
00:49:52
Cody: Exactly. At the eighty-four six.
00:49:53
Brad: Right. Yeah. So at the end of that. So after getting the thirty-nine forty-two and subtracting that from that plan, they chose of 46, 46, yeah. So they’ll pay $704 out of pocket per month, which divided into their income of 84,600 is about 10%.
00:50:10
Brad: So that’s where that like 9.96% comes in earlier, that if they choose that plan, they’ll be paying about 10% of their income toward their premiums. One thing to keep in mind, and last thing on this is those are just the premiums. That plan that they’re on has out-of-pocket maximums of $21,200, right? So that’s just the premiums before they go to the doctor. So you can see that this is, again, we’re not gonna politicize any of this, but I’ll just say that, just keep in mind that health insurance, we always talk about the biggest expenses being housing, food, and transportation. Like we definitely need to add health insurance to that list starting in 2026, especially.
00:50:43
Cody: Yeah, yeah, that is a crazy number. Just one last clarifying question on this. So again, in this example, if they have that 84,600, they can get up to $3,942 of premium tax credit. But you said the cheapest bronze plan is $2,602. Now, since they qualify for this 3,942, they can elect to get that cheapest bronze plan, correct? And that would wipe that down to zero and that would be their health insurance premium. Is that accurate?
00:51:13
Brad: Right, yeah. So they would pay zero for that plan, but they wouldn’t get the 1,300 for John. It just goes poof.
00:51:19
Cody: Yeah, it just goes poof. So yeah, that’s the case where, I think that you mentioned earlier, some people see their available premium tax credit based on their estimates. And they’re like, “Oh, well, let’s just get the best plan we can get for free.” Then they can get hit really hard if their income ends up being higher than they expected. So yeah, a conservative approach would say, maybe I’ll just take enough to get the plan I actually needed to begin with versus getting the most expensive plan I can get for free.
00:51:46
Brad: Yeah, okay, all right. Yeah, this is really important stuff. There’s no question. And then, yeah, like you said, there’s still that out-of-pocket maximum is still very important to consider. So if we’re doing five plans, we need to consider worst-case scenario. Now, how many years out of 10 are you gonna get anywhere near your out-of-pocket maximum? Probably not that many. But that’s considering that you’re healthy and considering that, okay, barring something catastrophic, you’re not gonna get anywhere near that. But Cody, we know you don’t plan for best-case scenario. You have to plan for the understanding that there is some expected value; there’s some mathematical possibility that you’re gonna get close to that amount in some years.
00:52:24
Cody: Now, am I, in my own five-year plan, going to calculate $21,200 out-of-pocket maximum every single year? No, I’m not. But I need to consider that there are, that it’s not just the health insurance premiums, that there are then healthcare costs that you need to factor into your five. These are distinct. In America, these are completely distinct things. It’s not like, “Oh, look, I have health insurance; therefore everything else is free.” It doesn’t work that way at all. In my particular case, I have a bronze plan, and yeah, for me and my girls, I think I’m paying over $1,000. And that essentially, as far as I’m concerned, is just catastrophic insurance. Because if I go to the doctor, my health insurance company doesn’t pay anything. They do all the paperwork, and I might get a negotiated discount, which you can’t say that’s worth nothing.
00:53:18
Brad: Now, naturally, if you went in and asked for the cash price, it might be pretty darn close to what that negotiated discount is. But putting that aside, you’ll see an insurance adjustment. Now, that’s not your insurance company paying anything. They’re just, they’re doing the paperwork. This is the amount that they’ve agreed upon to pay for this. But all of that is coming out of my pocket until I reach my deductible. And then after I get over my deductible, then there’s some convoluted coinsurance and yada, yada, yada up to this out-of-pocket maximum.
00:53:44
Cody: So, Brad, of course, this is outside the scope of going into every little detail. But the more that we talk about this and the more that people understand generally how it works and that these terms, these terms mean something. They’re not just on the sheet of paper. Like, “Oh, what’s a deductible? What’s coinsurance? What’s out-of-pocket maximum?” You need to have some sense of this. So if you’re listening to this and you don’t, I mean, not for nothing, but go to ChatGPT and just start asking questions. Now, don’t rely on it 100% at ChatGPT, but it’s pretty darn close. And that’s a good way to start. Or just Google and just read up on this and just get some passing familiarity with it because, as Cody has shown here, very starkly, this is really important and it’s very material to our FI plan.
00:54:28
Brad: Yeah, and I’ll just end here, again, not with fear, but just saying that a lot of people haven’t thought about health insurance as part of their FI number, right? They say, “Yeah, I’ll probably get premium tax credits, et cetera.” But assuming you don’t get a premium tax credit, the range that I’m seeing about retiring between 45, 50, 60, that you should expect to pay between this is a very wide range, you might be mad at me for this, but effectively, based on where you live, you should expect to pay between 500 a month and $1,500 a month per adult for health insurance without a premium tax credit, right? So in terms of kind of dollars and cents, that’s $6,000 a year to $18,000 a year per adult covered through the marketplace.
00:55:10
Cody: So that’s why I come back to the very beginning that if you’re not receiving a premium tax credit and you are healthy, I would definitely urge you to find a broker or an agent in your state to look at private individual coverage with medical underwriting. I think in the FI community, we’re gonna start thinking differently about the marketplace, assuming that that 400% cliff remains for the coming future.
00:55:31
Brad: Okay, so that’s eye-opening, right? This private insurance, it was not something that I considered at all. I’m still leery and dubious of the fact that there’s no pre-existing conditions; they can toss you off, et cetera, et cetera. But it is what it is, right? Like, Cody, it’s fun to think of a utopian world where everything works right, but that’s not the world we live in. We have to deal with the rules, right? And this is an option that I would not have suggested before an hour ago that people really consider, but I think the fact of the matter is we need to really think strongly about our options.
00:56:04
Cody: So as always, Brad, you are incredibly impressive and such an absolute treasure for our community. We really, really appreciate everything you do.
00:56:12
Brad: Well, I enjoy anybody who lasted this long on the episode. I appreciate you all. Anytime you see Deep Dive, you can either swipe to the next one or dig right in with us. I suspect there are a lot of people sticking around for the end of this.
00:56:22
Cody: So, okay, Brad, everybody can reach you at measuretwicemoney.com. And also, your book, “Tax Planning to and Through Early Retirement,” with you and Sean Mulaney, has become an absolute breakthrough success. It’s remarkable to see. I love seeing you guys post how many copies you’ve sold. I mean, in book terms, you guys are certainly in the top 1% of all books, is my understanding. It’s a remarkable thing.
00:56:48
Brad: Hello, yeah, we’re definitely best sellers within the FI community, that’s for sure.
00:56:52
Cody: You certainly are. But I mean, listen, for a topic such as tax planning to and through early retirement to sell over 10,000 copies is, I mean, that is, you cannot, I can’t even describe how absolutely mind-blowing, I don’t even have the words. It’s mind-blowing. It’s truly mind-blowing. It’s a testament to the work that you guys did. This is a really important book. Guys, if you are listening to this and you haven’t read the book, buy it on Amazon, grab it from your library. It’s really, it’s something very, very special, and I highly recommend it.
00:57:21
Brad: So, Cody, as always, thank you, my friend. And if you do read the book, check out chapter 13, “Health Insurance Before Medicare and the Premium Tax Credit.” We actually share step-by-step how the premium tax credit is calculated for both 2025 and 2026. I would appreciate you checking out the book. By the way, if you don’t wanna buy the book, check it out at your local library. Just give them the name of the book, and they might order it for you. Chapter 13 on health insurance. We appreciate you.
00:57:43
Brad: Love it. All right, until next time, everybody, this is really important stuff. This might be worth a re-listen. Frankly, if you made it to this point, I know when I download this episode when it comes out, I’m gonna listen a couple of times because this is critical, and it is a material difference. I know I’ve said that phrase 15 times already. This really matters, and Cody has done the work for us. This is something, Cody, we might ask you back. I suspect there are gonna be a lot of questions about this. So as always, everyone, if you have questions in our ChooseFI platform, every week when the podcast comes out, you can comment specifically on this episode. Cody’s gonna be in there when this comes out answering questions.
00:58:26
Cody: We’re gonna collate a lot of them, and I suspect there’s gonna be a real clamor for a follow-up to this. So just go to ChooseFI.com slash login, and if you don’t have an account, you can create an account right there, but if not, when you log in, just right across the top, there’s gonna be a banner that says, basically, this episode’s title. Just click on it and leave a comment, and get in there and see what other people are asking. So as always, thank you for being part of the ChooseFI community and for listening to the podcast.
00:59:00
Podcast Extro: You’ve been listening to ChooseFI Podcast, where we help middle-class America build wealth one life hack at a time.
