Obamacare: what’s income and what’s not

When I retire in 2015, I know that I will need supplemental insurance in addition to Medicare. My main concern is getting affordable insurance for my wife, who is 58 years old. The only income for both of us will be my Social Security and a 403b account from my employer. I know that Social Security counts as income , but does a withdraw from my 403b count as well ? Will I be able to get affordable insurance for her ? I will get 1500 dollars a month on social security. When I retire I will be 66.

Don in Pennsylvania

Dear Don,

Your withdrawals from your 403b account will count as income.  All taxable and certain non-taxable income counts toward your Modified Adjusted Gross Income (MAGI).  If you have some leeway, you can “engineer” your cost for your wife’s insurance.  Taking less from your 403b and lowering your income will also lower your cost for her insurance, if you qualify for subsidies.

Your Social Security income puts you at just under 133% of Federal Poverty for a household of two.  At that level, your wife would qualify for Medicaid in Pennsylvania; here is the online application for Pennsylvania’s Medicaid coverage.  You could also qualify for Medicaid.  If you had Medicaid, you would not need to purchase a Medicare supplemental plan.

As your income rises above 133% (i.e. you take income from your 403b account), you qualify for subsidies for her insurance.  You would qualify for  subsidies for both the monthly cost of her plan, and her deductibles and co-pays on a sliding scale.  You might want to go to healthcare.gov and try a few different scenarios of income/subsidy/ plan choice.  Or you can try the Kaiser Family Foundation’s Subsidy Calculator and do some “what ifs”.  You can see how your income will affect the subsidies and your monthly costs.

What I would do if I were you:

1)      Decide how much income you have to take from your 403b in order to make ends meet.

2)      Do the what-ifs on healthcare.gov or the subsidy calculator.

3)      Apply for Medicaid, even if you think your income will be above 133%.  (There may be other programs that would help defray your Medicare premiums or co-pays.)

Congratulations on your upcoming retirement!

Linda Riddell

About Linda Riddell

A published author and health policy analyst with 25 years’ experience, Linda Riddell's goal is to alleviate the widespread ailment of not knowing what your health plan can do for you.