Q&A: How your health insurance costs could rise because of a Roth IRA conversion

Dear Liz: With the recent stock market correction, I am considering doing a Roth conversion on an existing IRA now that it is worth less. I can handle the accompanying income tax hit. But while I see plenty of ink spilled on how a Roth conversion can increase Medicare premiums, what about Affordable Care Act costs? Is it the same story there: Will a one-time income spike this year due to Roth conversion impact what I pay all next year for ACA health insurance?

Answer: Potentially, yes. Roth conversions count as income for Affordable Care Act subsidies, so a large enough transaction could increase the premiums you pay.

A conversion allows you to transfer money from a regular IRA or 401(k), which would be taxable in retirement, to a Roth IRA, which would be tax free. If you expect to be in a higher tax bracket in retirement, conversions can make sense — you’re paying income taxes at the lower rate now, rather than the higher rate later. But obviously higher health insurance premiums would offset some of that benefit.

A tax pro can help you model conversions of different sizes to see the effects on all your finances, not just your tax bill. It’s possible that a partial conversion could help you take advantage of the current downturn without dramatically increasing your health insurance costs.

Tuesday’s need-to-know money news

Today’s top story: How to get therapy when cost and access are a barrier. Also in the news: Mortgage rates stay on the escalator in July, the NerdWallet small business financing index, and how to find out what your health insurance will pay beforehand.

Getting Therapy When Cost and Access Are a Barrier
Many things can prevent you from getting therapy or other mental health treatment. Thankfully, there are ways to access care within your budget.

Mortgage Rates May Stay on the Up Escalator in July
Mortgage rates are likely to rise in July, extending a seven-month streak.

NerdWallet Small-Business Financing Index: Businesses Are Steady Amid Worries
New index measures delinquency rates, new loan volumes and optimism among small-business owners.

How to Find Out What Your Health Insurance Will Pay Beforehand
A new federal law about price transparency just went into effect—but good luck making use of it.

Thursday’s need-to-know money news

Today’s top story: How to negotiate your way to a richer life. Also in the news: 4 signs we’re in a housing market primed for regret, Medicare and CPAP supplies, and could your health or life insurance rates increase if you’re not vaccinated?

How to Negotiate Your Way to a Richer Life
Learning best practices can help you earn more, get better deals and avoid strife over household finances.

4 Signs We’re in a Housing Market Primed for Regret
It’s a tough time to be a homebuyer.

Does Medicare Pay for CPAP Machines and Supplies?
Medicare Part B covers CPAP, but it requires a sleep test and a trial period.

Will Your Health or Life Insurance Rates Increase If You’re Not Vaccinated?
Insurers have yet to decide.

Q&A: Retiring early doesn’t mean losing affordable health insurance

Dear Liz: I am 55 and have health issues that I don’t talk about at work. I want to retire soon. I know that getting health insurance is going to be hard. I am just at a loss as to how I am going to keep working when I don’t feel well. What are my options?

Answer: In the past, getting health insurance could be difficult or prohibitively expensive if you had even relatively minor health conditions. That changed with the Affordable Care Act, which requires insurers to extend coverage without jacking up the premiums for preexisting conditions. In addition, most people qualify for tax subsidies that reduce the premiums, and those subsidies were expanded this spring when President Biden signed the American Rescue Plan into law. You can start your search for coverage at HealthCare.gov.

Before you quit, however, consider whether your employer could make accommodations that would allow you to continue working. Many people at 55 don’t have enough saved for a comfortable retirement that could last decades. Shifting to part-time work, if your employer allows it, could help you continue to save or at least reduce the amount you need to withdraw from your savings.

Q&A: What you need to do when free health insurance for unemployed people ends Sept. 30

Dear Liz: My husband lost his job and we are on COBRA continuation coverage for our health insurance. We won’t have to pay the premiums through Sept. 30, thanks to the American Rescue Plan, which passed in March. Is there anything we can take advantage of Oct. 1 if my husband is not back to work? I understand that there’s a special enrollment period right now for Affordable Care Act coverage that ends Aug. 15. My husband’s 18 months of COBRA coverage ends in December but it’s very expensive and we’d like something cheaper.

Answer: The two of you should be allowed to switch to an Affordable Care Act policy once your free COBRA coverage ends.

COBRA allows people to extend their workplace health insurance for up to 18 months after losing their job, but as you’ve noted, the costs can be high. COBRA coverage requires paying the entire premium that was once subsidized by the employer, plus an administrative fee. ACA policies, by contrast, are typically subsidized with tax credits that make the coverage more affordable.

The American Rescue Plan requires employers to pay COBRA premiums for eligible former employees for April through September. The employers will be reimbursed through a tax credit. (The subsidy may last fewer than six months if someone’s COBRA eligibility ends before September, or if they become eligible for group coverage through their job or their spouse’s job.)

When the premium-free coverage ends, your husband would be qualified for a special enrollment period that allows him to switch to an Affordable Care Act policy.

Not only that, but anyone who is unemployed at any point during 2021 will qualify for a premium-free comprehensive policy through the ACA for the rest of the year. HealthCare.gov will have details later this month.

Q&A: If you lost your job, here’s how to find free health insurance

Dear Liz: I have read that the unemployed can qualify for free health insurance through the Affordable Care Act exchanges. I’m trying to confirm whether my state, which did not accept expanded Medicaid coverage, is offering this to its residents. My position was eliminated with no warning because of the pandemic and I’m finding Healthcare.gov rather convoluted to navigate.

Answer: It may be July before the ACA exchanges reflect the extra tax credits that will make comprehensive health insurance free for anyone who receives unemployment benefits in 2021.

Some of the health insurance changes authorized by the American Rescue Plan, which President Biden signed in March, went into effect April 1. Those included providing larger tax credits that lowered costs for most people who buy health insurance on the exchanges and increasing the number of people who qualify for those premium-reducing credits.

In the past, people with incomes above 400% of the poverty line typically didn’t qualify for subsidies that lowered their costs, but now people with incomes up to 600% of the poverty line — up to $76,560 for a single person or $157,200 for a family of four — can qualify, according to medical research organization KFF (formerly Kaiser Family Foundation). The law also created a new special enrollment period that extends through Aug. 15, 2021.

The exchanges have been slower to reflect the increased tax credits for people who receive unemployment benefits at any point during 2021. These credits will effectively allow those who don’t have access to other group coverage to qualify for a free silver plan with a $177 deductible. The U.S. Centers for Medicare and Medicaid Services has promised that the credits “will be available starting this summer.”

You shouldn’t be without health insurance, so you could sign up for coverage now and update your information when the increased tax credits become available.

But you may have another option. The American Rescue Plan also requires employers to provide free COBRA coverage from April 1 through Sept. 30 to eligible former employees who lost their healthcare coverage because of involuntary termination or a reduction in hours. (Employers will get a federal tax credit to cover their costs.)

Even if you turned down COBRA coverage when you lost your job — as many people do because it’s so expensive — you could still get free coverage if it hasn’t been more than 18 months since you lost your job. Employers are required to notify eligible former employees by May 31. If you haven’t heard from yours by then but think you’re eligible, reach out to the company’s human resources department.

Friday’s need-to-know money news

Today’s top story: What to do if your refund is delayed and your bills aren’t. Also in the news: Former Simple customers undergo a rough transition to BBVA, why a credit card’s looks aren’t everything, and how to keep health insurance after losing your job.

What to Do If Your Refund Is Delayed and Your Bills Aren’t
The IRS is running behind.

Former Simple Customers Undergo Rough Transition to BBVA
Things haven’t gone smoothly.

Why a Credit Card’s Looks Aren’t Everything

How to Keep Health Insurance After Losing Your Job
A look at the options.

Thursday’s need-to-know money news

Today’s top story: You may qualify for free or cheaper health insurance now. Also in the news: Big banks join effort to ease path to credit cards, 3 ways technology can help minority-owned businesses recover, and the 12 states ending the extra $300 per week in unemployment benefits.

You May Qualify for Free or Cheaper Health Insurance Now
The latest coronavirus relief package made health insurance free or significantly less costly for millions of people.

Big Banks Join Efforts to Ease Path to Credit Cards
Large lenders are participating in a pilot program allowing them to share bank account information with the credit bureaus, easing access for credit card applicants.

3 Ways Technology Can Help Minority-Owned Businesses Recover
Start by embracing e-commerce.

These 12 States Are Ending the Extra $300 Per Week in Unemployment Benefits
Find out if yours is one of them.

You may be entitled to free health insurance now

The latest coronavirus relief package did more than dole out $1,400 checks. The law also made health insurance free for millions more people and reduced costs for others, at least for now.

The American Rescue Plan, which President Joe Biden signed in March, expanded subsidies for people buying their own insurance on Affordable Care Act exchanges. In addition, anyone who receives unemployment benefits this year can qualify for zero-premium health insurance through the exchanges, regardless of income.

In my latest for the Associated Press, find out if you qualify for free health insurance.

Monday’s need-to-know money news

Today’s top story: How insurance fraud costs you money. Also in the news: A new episode of the Smart Money podcast on lottery winners and what to do with extra COVID cash, how to decide if your first house should be a condo, and how to choose your ACA plan.

How Insurance Fraud Costs You Money
Insurance fraud adds an extra $400 to $700 to your premiums every year and costs about $80 billion overall.

Smart Money Podcast: Jackpot Windfall and Extra COVID Cash

Should Your First House Be a Condo?
A condo can make a great starter home, but weigh the pros and cons of buying a condo vs. a house to decide whether it’s right for you.

How to Choose Your Obamacare Plan
Finding the right amount of coverage.