B (3:04)

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, 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 $20,000 a year more than another family. Right. So this is a county to county analysis that 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, I 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, you know, hmo, ppo, epo, all the, you know, different kind of network variables. 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.

A (4:06)

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 in 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 this is, you know, I don't want to use the word catastrophic because that is actually pertinent to our conversation with insurance, but it is really potentially catastrophic to your finances in a year to year basis where like Cody's saying, it could potentially be tens of thousands of dollars of a mistake if you happen to have income $1 over this, this cliff. 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 and what we always do here at Choose a VI and in our entire FI community is we try to understand the rules of the world and we try to maximize them as best as we can. And sometimes, frankly, there's no way to maximize, but we are just aware and we do the best that we can. And I think that, 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 phi, 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. 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, why don't you kick us off?

B (5:52)

Yeah, I think even though we're doing a deep dive today, and again, we have like all 50 states of analysis, what 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. 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 yeah, I can take money out of my retirement accounts without the 10% penalty or the exclusions from that penalty.

A (6:21)

So.

B (6:21)

And now in 2026, they're age 60, married couple, and they happen to live in Charleston, West Virginia and their zip code is 2,5301. 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. And then if I scroll up here kind of 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 of our group coverage. The first thing we did is we looked at cobra. So what's the cost of cobra? Which effectively it's that continued workplace health coverage for typically up to 18 months after you terminate employment. 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 may be 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. If you look at your form W2 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 W2, 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. So 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.

A (8:01)

Okay, so that's the COBRA option, which is continuing the same insurance after your employment ends. And yeah, Roughly, yeah, it's 102%. But yeah, you can just look at that, the code dd on your W2 and quickly see that. 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 disassociated from how much health insurance actually costs because their employer pays for a portion, if not a significant portion of it. And, 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. 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 US Citizens, the employers are paying for it, get very little credit for it, and yet we continue on with this system. So anyway, total digression, but it's just the height of insanity to me.

B (9:14)

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, I pay 200 bucks a paycheck or 200 bucks a month through my employer. 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 W2 now to see, hey, if I did continue coverage through that, the one benefit of you say, like, why would I stay on cobra? First of all, like, let's say you like 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. 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.

A (10:19)

Okay, what's their next option?

B (10:21)

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. Whether 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 going to 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. But pensions are becoming less and less. Those what they call defined benefit pension plans have been drastically replaced by these defined contribution plans like the 401ks, 403bs, et cetera. So again, retiree health coverage is becoming more rare. 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 if one retires earlier, 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 going to. My plan when I retire early is just to sign up for my local university classes. But again you have to consider, does that restrict your lifestyle? Do you really want to 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? The next is becoming a lot more popular, especially considering the, 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, you know, that's not considered formal insurance, but it's a pooling of funds similar to insurance. So that's typically going to have lower premiums. But with that, you know, with the lower premiums, that's because pre existing conditions may be excluded. Right. There's no guaranteed payment. They're not HSA eligible. So if you want to contribute to an hsa, you cannot if you're covered by healthcare sharing ministry. And there's no ACA consumer protections. So again, you know, there's some risk to going to informal insurance option like a sharing ministry.

A (12:20)

Yeah. And this is really important. It is. We're not saying don't do this, but I just want to be entirely clear. This is not insurance. If you go through a health, 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, get hit by a bus, that the million dollars is going to be covered, it is not by definition. 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 a. Almost a decade ago. And that was the point of differentiation that it just eventually led me to stop using using it. It just, I. I could not pass that sleep well at night test. So. Very important.

B (13:09)

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 of the same. I can't imagine what would happen. I don't know what happened during like Covid era, but if something like that happened again with Sharing Ministries, I could imagine those costs could get pretty high.

A (13:30)

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 is 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 going to get some money to cover potentially lost income, essentially. So quite literally insurance in my estimation is in most cases for catastrophes. And that's why, like 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 citizen?

B (14:18)

That's right. Yeah. So, you know, insurance is a transfer of risk of low frequency but high financial severity peril. So yeah, like the thing that you don't want to happen but might. 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 a hundred percent is covered by the insurance company as a transfer of risk.

A (14:43)

Agreed.

B (14:44)

And the last option that this couple looked at was private individual insurance. 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 want to start looking into these private individual insurance. I don't sell insurance, so just, you know, 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, you know, they can't exclude those pre existing 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. So again, it's one of those things where like if you truly need to know that this is the max I'll pay, you know, 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, you know, even if I'm healthy. But I at least I know that I'm going to be 100% covered once I hit this number, which in most examples for you know, individual might be around $10,000 a year and for a married couple around 21,000 a year. 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.

A (15:53)

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, is it insurer by insurer? Do you, do you have any sense of that?

B (16:15)

Yeah, so you really have to look at the details of like the pre existing conditions that are excluded. So even you know, you go under medical underwriting, you're healthy, the plan could still include exclusions along the way. With that said, on average, I'll just say you're not as a health insurance expert that you know, this is usually done on an annual basis during open enrollment period that you know, once you're on a plan that you're covered through that period. But you definitely then make sure whether it's the sharing ministries or private insurance that you read the small print of what's excluded. Another one that's really popular to be excluded and private insurance is mental Right. Like mental health type of things. You know, whether it's, you know, going to see a mental health professional. So looking at your network, which medical providers, which prescriptions. Right. There are lots of, like, little, like, 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, like, I have asthma, there's a certain medicine I take, et cetera, you definitely want to 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.

A (17:13)

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?

B (17:25)

Sure. So this family says, hey, we're going to check out the aca, you know, Affordable Care act, also called the Health Insurance Marketplace. Thankfully, even though there are like dozens of different health insurance marketplace websites, because some states have their own network, you can go to healthcare.govc-plans. That's S E-Plans. I'm sure we'll have Brad and Jonathan put that in the show notes for us. 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 want to 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. The. This is the health insurance market based on where you live. 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, you know, your tobacco usage, which you know, 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, but most importantly in this conversation today. I am 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. 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. 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, your AGI, your adjusted gross income. But then you're going to add, which doesn't necessarily apply to most people, but your foreign earned income tax exempt interest, maybe you have municipal bonds in your taxable 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, you know, between age 62 and when you enroll 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 going to wait until 67 or 70 to claim Social Security. But just keep in mind that that modified part of AGI is really important. 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. So 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.

A (20:04)

Okay, we 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.

B (20:20)

Right.

A (20:20)

I would assume it would just wipe that down to zero. Are you saying you actually would get a refund of the difference?

B (20:25)

So they're only going to cover you up to the cost of the health insurance. So if you sign up for the health insurance that costs 1700, they're going to give you what's called an advance premium tax credit. So you can say, I'm going to use 1700amonth 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 1700. But you end up telling them that you only want to use $1000 of the 1700 toward your advanced credit, which means that's paid every month toward your health insurance.

A (20:55)

Okay.

B (20:56)

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 used throughout the year. And the difference, you can actually get paid back in a refundable tax credit. So you don't if you choose a cheaper plan, you don't just get paid extra for the, for not taking advantage of the credit.

A (21:16)

Thinking of like a, like a housing allowance or something for a military member, like, I'll 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. So we. 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 this 1700 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 1700 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. But is that a way to. I know you're going to get into this in greater detail, but is that a way to think about this?

B (22:29)

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 1700 bucks a month. Well, then you have to say, okay, well how do I get access to that 1700 bucks a month and how does that impact my, my income? Because if I'm going to have to take that money out my 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 like, let's say that my income ends up being a little over, a little under. You know, there's a reconciliation. 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 onto the marketplace and what they say is, okay, we expect our income based on, you know, we're going to do some, maybe some tax dean harvesting, maybe I'll do A little Roth conversion. I've got a little, you know, 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. 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 go, you know, 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 3,900amonth, we have a lot of options. Like, we could even sign up for a bronze plan for no monthly premium, for $0 premium, because that advance credit is paying it directly toward the provider. 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.

A (24:15)

Sounds pretty good.

B (24:16)

So here is where. This is why this whole episode happened. Now you're maybe 20 minutes into the episode.

A (24:21)

Yeah, I definitely want to. Want to keep going on the. 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, depending 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 3900, I would go for the gold plan in that case. 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. So it might actually change the behavior of what we pick, which makes this potentially even more catastrophic.

B (25:39)

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 4,000amonth. They're going to cover 3,900 and we only have to pay 100 bucks a month. That's great, right? So here's the fun part. Fun and you know, quote that dripping

A (25:57)

in spasm and air quotes.

B (25:59)

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, etcetera, you need to be very careful about what that advanced credit is. You can change the advance 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.

A (26:16)

You can change that.

B (26:17)

Yeah. You can change your advance payment month by month. You just can't change your plan. You can't change, 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.

A (26:28)

Now, would you do that through the healthcare.gov website or through like, like, you know, Cigna or Anthem or whoever you had your insurance through?

B (26:35)

You'd go right back to healthcare.gov and click on your 2026 application and you can change the advanced credit amount.

A (26:41)

Okay, 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 April of next year.

B (26:50)

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 assumed their income was going to be $84,000. Okay. Then, you know, at the end of the year, they heard this choose fi episode about tax gain harvesting and they were like, oh, I can harvest some capital gains at the 0% long term capital gains tax bracket. That's so exciting. And I'm sure put in the show notes that episode, but that's kind of why I come back today is saying, hey, their income was at 84,000 and they decided to do some tax gain harvesting. And now their household income, instead of 84,000, is now $85,000. So they added $1,000 of long term capital gains taxed at the 0% long term capital gains tax bracket. But by doing that, they just knocked themselves from 400% of the federal poverty level to 401% of the federal poverty level, which means they are no longer eligible for the premium tax credit at all. So their premium tax credit eligibility went from $3,900 a month to zero by their income actually going over, literally by $1 over $84,600. But now when they file their tax return, if they took that full advance credit of 3,900 bucks a month, they're going to have a federal income tax liability, probably unexpectedly, of $47,000, even though their income for the year was only $85,000.

A (28:13)

Wow. Okay. That is unbelievable. That is absolutely okay. And this cliff, now, Cody, this came about with the. It's hard to say the name out loud. One big beautiful bill. That's a, that's a mouthful. That was changed recently, right?

B (28:29)

So, yeah, this wasn't. It wasn't in the one big beautiful bill, but the cliff was expected to come back. But.

A (28:34)

So that's what it was. That's what it was, yes.

B (28:37)

What they had done previously. So affordability in 2021-2025, that was based on, you know, the 100% to a 400% of the federal poverty level, but it was intended for that applicable that 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. And from 2021 to 2025, it was intended for that number to never exceed 8 and a half percent of household income, even if your income went above the 400% federal poverty level. So they really just, they just took away that cliff temporarily, but it was already expected to come back in 2026, and they simply didn't extend that waiver moving forward.

A (29:19)

That makes perfect sense.

B (29:20)

So now in 2026, the 400% federal poverty level cliff is back based on your household size. And this year, you know, if you're at 400%, it's intended not to exceed 9.96%. You can kind of think about 10% of household income. But you can see in that example that, you know, that's if you're at right at the top of the cliff, if you're at the 400%. You're not expected to spend about more than 10% of your income toward your health insurance premiums. But even if you go $1 over that cliff, that intention just goes away. So rather than spending maybe 10% 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 $47,000. So in this case, they just paid about 56% 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 in eligible advance credits.

A (30:17)

Cody, is there a listed figure for that 400% of federal poverty level for household size?

B (30:24)

Yeah, so I'll go ahead and share. If you go to measure twice, money.com choosefi all under caps. I'll put a little chart there. But I will just say briefly that a household of one, so an individual 100% is 15,650 and 400% 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. So I'll put a chart on the website there. But you can see that 400% of the federal poverty level, you know, 400% sounds like a large number, but for an individual, that's 62,600. For a family of 2, 84, 600. For a family of 3, 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 shoes of I community.

A (31:11)

Right. 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%. So let's say you are your income. If you're a family of two, your income is $40,000. Now, we know the 400% 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?

B (31:38)

Yeah. So as long as you're under the 400% 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% to 400%, 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. 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.

A (32:16)

Okay. But for most of those people, and I'm sorry to keep asking clarifying questions, I think this is important. So. Right. The 100 or the 138% that's on the lower side because. Yeah, you might get onto Medicaid, correct?

B (32:29)

Yes, that's right.

A (32:29)

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, so I never want to set it up. But does virtually everyone get a premium tax credit equal to the entire premium for the second lower silver plan?

B (32:49)

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% 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.

A (33:05)

Okay. All right, that makes sense. 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.

B (33:14)

So 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, 1200 bucks a month less for health insurance for a comparable plant. 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% federal poverty level cliff is a federal income tax, you know, rule law.

A (33:45)

Okay.

B (33:45)

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

A (33:53)

be considering here to add further complications to everything. Yeah, I, as we're talking here, I went to that healthcare.govc-plans and yeah, they asked you to put in your zip code and then it's okay, 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. Because 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.

B (34:21)

And it makes me to think about, you know, people who own multiple doors in 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. 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 that the cost of health insurance, period, especially through the marketplace, is based on your age. Right. So I can see an example here. I look at, you know, one example in Richmond here that the cheapest plan at age 50 for an individual is $475 a month, but at age 60 is 720 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? So there's kind of two factors. One is age. On average, every year you're older is going to increase your premiums by about 4 to 5% every year. And then you, every year, every year you get older is going to add like 4 to 5% 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 7 to 8% increase per year between age 50 and 64.

A (35:33)

Wow. Okay.

B (35:34)

Without a premium tax credit, of course.

A (35:37)

Right, Right, right. And 64 is important because it's 65. Medicare kicks in.

B (35:41)

Yeah, that's right. So you might be asking, okay, 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% 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. First is, hey, 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. So when you take money out of your checking, your bank account, there's no income added to your taxes there. 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 lots. So whenever you have securities, vti, vx, ux, whatever you own, you can go in there and say, I want to sell this specific lot that has the lowest unrealized capital gain. 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. The next is saying, okay, I'm going to reduce the amount of investment income 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, you start moving your assets around kind of mentally by saying, okay, 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.

A (37:35)

Okay, that's very important. 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% 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. 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. Okay, 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. I think that's really important.

B (38:45)

That's right. And 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, those Health Savings Accounts and Roth IRAs is the last money I'll touch because we get really excited about this long term tax free growth, right. Roth IRA for any reason and the HSA for those qualified medical expenses that can be reimbursed to tax free in the future. But one great thing about using an HSA and Roth IRA withdrawals in early retirement, assuming they're qualified, not, you know, no penalty on them, is that they don't add income, right? They don't add income to your household. So let's say that, you know, I need an extra $10,000 this year, but if I sold, you know, my taxable brokerage investments, I would knock myself out of the, you know, above the 400% 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 1,000 or two out of that to avoid going over the cliff, you could be potentially saving yourself 10, $20,000 in health insurance premiums this year. 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 money.

A (40:04)

I love that tactically used. That is a beautiful, beautiful phrase, Cody, because I think that's when people talk about having assets, having some diversity of their assets, having Roth accounts, having traditional accounts, having Roth contributions, having money sitting in, in taxable accounts that are, you are even just interest bearing things, right? Like having hsa. It's because you can use this very tactically when it actually matters, right? Like as you're saying, like 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.

B (40:48)

Right.

A (40:48)

Like we're talking a material difference. 10, 20, 30,000 plus dollars in premium tax credits, if you were really smart about this. So yeah, like you referred to before, and it was episode five, 17 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 getting 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 of thousand dollars of potential tax savings, but potentially losing 10, 20, $30,000 in premium tax credit. So that's incredibly short sighted in myopic. But you have to know the rules. And again, that's why you did this deep dive, because everybody needs to know this. And now it's wonderful to put everything on autopilot, etc. 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.

B (41:52)

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 W2. But health savings accounts do not require earned income. Not only that, but all catastrophic and bronze ACA plans are, are HSA eligible starting in 2026. So here's a fun example. So 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, you know, $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, we were on a bronze plan through the marketplace. We're going to contribute to an hsa. Let's say, you know, for that family, they could contribute 8,750. Actually, they could do 8,750 plus $1,000 per 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 15 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've, now they don't have to pay back the $47,000 of premium tax credits.

A (43:20)

Interesting. And what's fascinating, right in this scenario we're saying they made the 85 right in the cliff was at 84,600. So if we're using that as an assumption, they would have only had to made a $401 HSA contribution. And then $47,000 in tax liability goes poof, it's gone, it's down to zero, which is remarkable. 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.

B (43:52)

Yeah. And I would say too, this is the 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, you know, $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. You're just going to be freaking out when you get that $47,000 bill for excess premium tax credit. 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 advance credits, maybe go back in there and maybe 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. Again, that's kind of, you know, go 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, $40,000. And you know, tax liability is probably worth your money this year. So even if you're very like 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, you know, don't mess this up.

A (45:21)

Yeah, don't mess it up indeed. So right. A couple 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 FI 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. 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, 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. 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. But Cody, I wouldn't have known you could do that before we jumped on. So I just wanted to to reiterate those. I know we're obviously not done yet, but I really, really, as you know, the actionable stuff, it just, it matters to people.

B (46:46)

Right, right. And one, one last note on that is that even though catastrophic plans are HSA eligible, I don't believe the premium tax credit applies toward 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 who are receiving premium tax credit, you're most likely on a bronze, silver, gold, platinum plan. So just keep that in mind. 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 Dash A, which is your health insurance marketplace. So that's going to tell you kind of, you know, how much premiums you paid, how much premium tax credit you received, and then that's going to be entered on Form 8962. 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 advance credit or if you're going to have to pay back some excess credits after the fact. But we've gone through a lot of material today, but is there anything that you want to cover before we head out today?

A (47:59)

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 had set up this Charleston, West Virginia, the zip code 25301. But then you, 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.

B (48:33)

Yeah. So just in this example for the age 60 couple, the second lowest cost silver plan in Charleston, West Virginia was about $56,000 a year. Wow. And the second lowest cost silver plan in Richmond, Virginia was about $22,000. 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. 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 31,000 a year. The absolute cheapest plan they could sign up for. Whereas if they lived in Richmond, Virginia without a premium tax credit, $17,000 a year. Right. So you're looking at potentially $1,200 a month difference just by living in a different county across different states.

A (49:22)

Okay. So we've long talked about GR arbitrage in terms of moving to lower cost countries. But frankly, people in 5 might really need to consider geo arbitrage even within the US if, 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. So this is the example we use the entire episode. Their premium tax credit is up to $3,942 a month. That's at 47,304 referenced a number of times. So the second lowest cost silver plan is like you said, this astronomical $4,646 a month. So if they elected this, they would get the 3,942amonth and then they would have to pay, it looks like $74 out of pocket a month, is that right?

B (50:16)

That's right.

A (50:17)

Okay.

B (50:18)

And that's at the 400% federal poverty level.

A (50:20)

Exactly at the 84 6.

B (50:22)

Right? Yeah. So at the end of that, so after getting the 3942 and subtracting that from that plan, they chose 4646. Yeah. So they'll pay $704 out of pocket per month, which divided into their income of 84,600 is about 10%. 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.

A (50:45)

Okay.

B (50:45)

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 you know, that's just the premiums before they go to the doctor. So you can see that this is again, we're not going to 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.

A (51:11)

Yeah, yeah, that is, that is a crazy number. Just, just one last clarifying question on this. So again, in this example, if they have that 84 6, 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 3942, 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?

B (51:41)

Right? Yeah. So they would pay zero for that plan, but they wouldn't get the 1300. Yeah, it just goes poof. So, yeah, that's the case where I think that you mentioned earlier, it's. 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.

A (52:14)

Yeah, okay. All right. Yeah, this is, 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 going to 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 going to get anywhere near that. But Cody, we know you don't plan for best case scenario, right. You have to plan for the understanding that there's some expected value, there's some mathematical possibility that you're going to get close to that amount in some years. Now, am I, in my own 5 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 fi. These are distinct, right? Like 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. Like, in my particular case, I have a bronze plan. And yeah, for me and my girls, I'm. I think I'm paying over a thousand dollars. And that essentially, as far as I'm concerned, is just. That's 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. 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, 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. So, Cody, of course, this is outside the scope of, 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 co insurance? What's out of pocket maximum? Like, 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 a hundred percent. It's ChatGPT, but, 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 five plan.

B (54:57)

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 you all probably get premium tax credits, et cetera. But assuming you don't get a premium tax credit, the range that I'm seeing about, you know, like retiring between, you know, 45, 50, 60 that you should expect to pay between, this is a very wide range. They might be mad at me for this, but effectively based on where you live, you should expect to pay between 500amonth 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. So that's why I come back to the very beginning that if you're not receiving your 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 going to start thinking differently about the marketplace, assuming that that 400% cliff remains for the coming future.

A (55:59)

Okay, so that's. 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 preexisting conditions, they can toss you off, etc. Etc. But it is what it is, right? Like, Cody, that 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. So, as always, Cody, you are incredibly impressive and such a. An absolute treasure for our community. I really, really appreciate everything you do well.

B (56:40)

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.

A (56:48)

I suspect there are a lot of people sticking around for the end of this, so. Okay, Cody, everybody can reach you@measure twice money.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, I love seeing you guys post how many copies you've sold. It's. I mean, in book terms, you guys are in certainly in the top 1% of all books. Is. Is my understanding. It's. It's a remarkable thing.

B (57:16)

Hello. Yeah, we're definitely. We're bestsellers within the FI community. That's for sure.

A (57:20)

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. How absolutely mind blowing. I can't. I don't even have the words. It's mind blowing. It's truly mind blowing. So it's. 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. So, Cody, as always, thank you, my friend.

B (57:51)

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. So I appreciate you checking out the book. By the way, if you don't want to 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.

A (58:12)

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 going to listen a couple 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 they're going to be a lot of questions about this. So as always, everyone, if you have questions in our Choose a Vibe platform every week when the podcast comes out, you can comment specifically on this episode. Cody is going to be in there when this comes out answering questions. We're going to collate a lot of them and I suspect there's going to be a real clamor for a follow up to this. So just go to choose.com 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 going to 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 choose of I community and for listening to the podcast. Sam.