Navigating Health Insurance | With Cody Garrett | Ep 588

Summary of Navigating Health Insurance | With Cody Garrett | Ep 588

by ChooseFI

59m•March 2, 2026
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Overview of Navigating Health Insurance | With Cody Garrett | Ep 588

This ChooseFI Deep Dive (Ep. 588) is a practical, tax-focused walkthrough of the U.S. individual health insurance marketplace for 2026 — especially how the return of the 400% Federal Poverty Level (FPL) “cliff” affects premium tax credits (APTC). Cody Garrett reviews county-level marketplace pricing across all 50 states + D.C., explains options (COBRA, retiree plans, private insurance, health sharing ministries, ACA marketplace), and gives concrete tax and planning strategies (HSA/Roth use, asset location, careful APTC selection) to avoid unexpectedly large repayment liabilities at tax time.

Key takeaways

  • The 400% FPL cliff returned in 2026: if your modified adjusted gross income (MAGI) exceeds 400% FPL by even $1 you can lose eligibility for the premium tax credit and may owe significant repayment.
  • Marketplace subsidies (premium tax credits) are based on MAGI (income), not assets.
  • Advanced Premium Tax Credit (APTC) is paid monthly to insurers but is reconciled on your tax return (Form 1095‑A and Form 8962) — you can change the APTC amount month-to-month via healthcare.gov.
  • County-level differences are huge: the same household can see wildly different premiums and subsidies county-to-county (even across nearby cities).
  • Tactical use of HSA and Roth withdrawals — and correct asset location — can control MAGI and preserve subsidy eligibility.
  • Bronze/catastrophic plans became HSA-eligible in 2026. Catastrophic plans generally do not receive premium tax credits.
  • If you take APTC and later exceed eligibility, repayments can be substantial — in examples discussed, a seemingly small income change produced a $47,000 repayment.

Topics discussed

  • How APTC works (advance vs. reconciliation)
  • Modified AGI (what counts toward marketplace income)
  • The 2026 reinstatement of the 400% FPL cliff and the practical consequences
  • County-by-county marketplace pricing and the second-lowest-cost silver plan (SLCSP) as the benchmark
  • Health insurance alternatives: COBRA, retiree plans, keep-one-spouse-employed, part-time/university coverage, health sharing ministries, private individual insurance
  • HSA and Roth strategy for early retirees to control taxable income
  • Asset location, tax-loss harvesting, and specific-lot selling to manage annual taxable income
  • Practical tax forms: 1095‑A and 8962
  • Premium and out-of-pocket examples and premium growth considerations (age and inflation)

Notable numbers & examples

  • Example household: married couple, both age 60, zip 25301 (Charleston, WV). Estimated MAGI $84,000 → eligible APTC ≈ $3,942/month.
  • SLCSP example (Charleston): SLCSP ≈ $4,646/month → after APTC the couple pays $704/month (≈10% of income) and the plan OOP max ≈ $21,200.
  • Small income bump (e.g., $1,000 long-term capital gain) could push MAGI from 400% to 401% FPL and eliminate APTC eligibility — leading to large repayment (example: ~$47,000).
  • MAGI reference (approximate 2026 FPL multiples): 400% FPL ≈ $62,600 (single), ≈ $84,600 (household of 2), ≈ $106,600 (household of 3). (Cody posted a chart at measuretwicemoney.com/CHOOSEFI.)

Practical strategies & action items (checklist)

  1. Project MAGI for the full year before electing APTC; remember MAGI includes:
    • AGI + tax-exempt interest + foreign earned income + non-taxable portion of Social Security.
  2. Decide APTC conservatively:
    • You can elect lower or zero monthly APTC (receive credit when filing) to reduce repayment risk — but that increases monthly out-of-pocket cash needs.
    • You can change APTC month-to-month on healthcare.gov.
  3. Use HSA contributions strategically:
    • Bronze/catastrophic plans are HSA-eligible in 2026.
    • HSA contributions (no earned income required) can reduce MAGI and can be made up to tax-filing deadline (usually Apr 15) for the prior year — useful to undo an income bump that would cause APTC repayment.
  4. Use Roth / HSA withdrawals tactically in early retirement:
    • Qualified Roth withdrawals and qualified HSA reimbursements do not count as MAGI — use them to fund living expenses without increasing subsidy‑counted income.
  5. Asset location & tax planning:
    • Hold interest-generating assets (bonds, high-dividend) inside tax-deferred accounts where possible; hold low‑yield equities in taxable accounts.
    • Use specific‑lot selling and tax‑loss harvesting to control realized gains in any given year.
  6. Consider alternatives and shop around:
    • Check COBRA cost (roughly 102% of combined employer + employee premium; see W‑2 Box 12 code DD for employer-paid amount).
    • Evaluate private individual plans (medical underwriting, possible exclusions) via a local broker.
    • Health sharing ministries are not insurance; they can have gaps/exclusions and are not legally obligated to pay.
  7. Verify household forms:
    • Ensure you receive Form 1095‑A and complete Form 8962 at tax time to reconcile APTC and avoid surprises.
  8. If uncertain, hire help:
    • A few hours with a tax or financial planner could save tens of thousands in subsidy repayment risk.

Important caveats & risks

  • Health sharing ministries are not insurance — they have no legal guarantee to pay claims.
  • Private individual plans often have medical underwriting and exclusions; read small print and consult a broker if you have pre-existing conditions.
  • Premium tax credit rules and marketplace offerings vary county-by-county — “state-level” comparisons can be misleading.
  • Age increases premiums: roughly 4–5% per year due to age factor, plus medical cost inflation — expect ~7–8% annual increases between ages 50–64.
  • This is a fast-changing policy area — continue to monitor legislation, marketplace rules, and IRS guidance.

Notable quotes from the episode

  • “Insurance is a transfer of risk of low frequency, but high financial severity peril.”
  • “This is potentially catastrophic to your finances in a year-to-year basis … it could be tens of thousands of dollars of a mistake if your income is $1 over this cliff.”
  • “Tactically use an HSA and Roth withdrawals to control income, not just as the last-dollar accounts.”

Resources referenced

  • healthcare.gov/see-plans — start point to view marketplace plans and change APTC.
  • Form references: 1095‑A (marketplace statement), 8962 (premium tax credit reconciliation).
  • Cody Garrett resource: measuretwicemoney.com/CHOOSEFI (FPL chart and Cody’s research).
  • Cody's book: Tax Planning To and Through Early Retirement — Chapter 13 covers premium tax credit calculation.

Summary for listeners: treat the ACA premium tax credit as a year‑long tax planning issue (not a one-time enrollment box). Project full-year MAGI, be conservative with monthly APTC if your income is uncertain, use HSAs/Roth strategically to control MAGI, and consider county-level differences or private alternatives if you’re likely above subsidy thresholds.