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This article was first posted November 1, 2017. Back in March, Retire Early outlined a strategy where multi-millionaire early retirees are getting their Obamacare for $50/month and asked, "How much cheaper can Trump make their insurance? (See link: Obamacare Repeal? My amazing story of drastically lower premiums.) If you live in a state with an insurance commissioner who is actually trying to do right by the governed, he's likely handling the Trump Obamacare Repeal innumeracy with the Silver Plan Switcheroo Strategy. This approach loads all the cost of the missing CSR payments to the on-exchange Silver Plans where people getting the tax subsidy are completely made whole on the additional cost. Insurers are then directed to also offer an off-exchange Silver Plan with the same benefits, but without the premium surcharge for the missing CSR payments. People with incomes above 400% of the Federal Poverty Level are advised to buy their coverage off-exchange since they wouldn't be getting the tax subsidy anyway.
One unintended consequence of this move is that if you are a wealthy and healthy early retiree living off capital gains you can likely get an Obamacare Bronze Plan for the monthly premium of near zero dollars per month. This year I'm paying $54/month for my Obamacare plan. For 2018, my preliminary analysis of the Trump plan shows I could get my current Bronze policy for a premium of near zero dollars per month while realizing an additional $5,000 to $10,000/year in capital gains. This is possible because the tax subsidies are pegged to the premium on the 2nd cheapest Silver Plan available in your zip code. Silver Plans also happen to be the ones that get the additional cost sharing reductions (CSR). So if you jack up the premium on the Silver Plan, a healthy customer could opt for the much cheaper Bronze plan which won't be hit with the premium increase for losing the CSR. Reporters at Vox.com have helpfully done the analysis. (See link:
Imagining Obamacare in 2020 -- Fast forward three years. This is what health care will look like.
Resources for additional information. Cost sharing reduction weeds: “Silver loading” and the “silver switcheroo” explained Commonwealthfund.org -- Essential Facts About Health Reform Alternatives: Eliminating Cost-Sharing Reductions Time Magazine -- Bitter Pill: Why Medical Bills Are Killing Us How Millionaires Get Obamacare Subsidies Intended to Aid the Poor, by Dan Mangan,CNBC,January 26,2016
Why I'm Not Worried About Obamacare Premium Increases, Retire Early Home Page, November 2014
CBO estimate of health insurance premiums under Obamacare, Nov. 30, 2009
Health Care Reform in Indian Country
Health Insurance Premium Credits in the Patient Protection and Affordable Care Act (ACA) Kaiser Family Foundation - Health Reform Subsidy Calculator Federal Register - Health Insurance Premium Tax Credit IRS - Affordable Care Act Tax Provisions Actuarial Value and Cost-Sharing Reductions Bulletin Plan Levels and Standardization of Coverage Commonwealth Fund -- Choosing the Best Plan under Obamacare |
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