Figuring Out My ACA Health Insurance: More Thoughts on SEP IRAs and Subsidies

As you might remember from my last ACA post, I had three financial goals for this month: setting up YNAB, setting up Frugal and the Beast, and setting up my 2019 ACA health insurance (while also deciding whether I should open a SEP IRA to reduce my adjusted gross income and increase my subsidy).

As of today, all three goals are COMPLETE.

If you also need ACA health insurance for 2019, the Healthcare.gov system is easier to use than ever; in my case, all my information had been auto-populated into my 2019 application and all I had to do was confirm everything was accurate and choose my plan. If you need to make changes to your address or your income or anything else, that’s easy too — because I made several changes to my income in an attempt to see if I could adjust my AGI low enough to get that precious subsidy.

Unfortunately, I couldn’t get the math to work. I need my AGI to fall below $48,560 (that’s 400 percent of the poverty level for a single-person household) to be entitled to a subsidy, and my current estimated AGI (which includes my income plus The Billfold’s) is about $10K over that.

I could, in theory, put $10K into a SEP IRA — I’m already planning to max out my HSA and IRA, so they’ve already been calculated into my AGI — but that would require an $833 SEP IRA contribution per month, and where is that money going to come from? My dollars already have jobs, and The Billfold’s dollars already have jobs too.

If I did put $10K into a SEP IRA, that would reduce my monthly health insurance premium from $442.83 to around $136 (according to the various subsidy calculators out there) saving me $3,682 over the course of the year. That money could go towards the SEP IRA, but I’d still need to pull another $6K out of my budget (or $500/month) to fund the SEP and keep the subsidy.

Plus, as a freelancer, my health insurance premiums are tax deductible. Above-the-line tax-deductible, even. So while you could argue that I’m throwing money away by not finding an extra $833 every month to put towards a SEP IRA, you could also argue that paying the full premium is fine, I’ll pay a little less in taxes, it’ll all be okay. Not to mention that if I’m running a small business and I’m bringing in more than 400 percent of the poverty level after expenses and deductions (even if part of that income is earmarked for future Billfold operations and freelance business expenses, not personal expenses) I’m doing pretty well for myself. I don’t actually need a health insurance subsidy; I’m just curious if I can save a little money.

You could even argue — and this is the argument I’m sticking with — that I can open and fund a 2019 SEP IRA all the way through April 2020, so if my income or expenses change and it makes sense to put money in the SEP, then I can do it and get a refund on my taxes if it turns out I did in fact become eligible for a subsidy.

That’s also the plan for my 2018 taxes, by the way. I’m pretty sure my 2018 AGI will be above the subsidy level, but I’ll have a few months to figure out if I can reallocate some of my cash towards a SEP and get that subsidy back.

Until then, I’ll leave you with my non-subsidy Bronze health insurance costs for 2019:

Monthly premium: $442.83

Deductible: $6,200 (up $200 from last year)

Out-of-pocket maximum: $6,750 (up $100)

Estimated total yearly costs based on past usage: $5,747 ($5,314 in premiums, $433 in deductibles, copays, and other costs)

YAY HEALTH INSURANCE! I’m still glad the ACA exists, though. It’s so so so much better than what we used to have.

Photo by rawpixel on Unsplash.

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