Well, we’re throwing out the old schedule and I am just trying to get episodes out as quickly as possible to answer your questions about finances in these times.
Question #1 (at time stamp 2:43)
I have a question… I have insurance thru work, and I think I’m going to have to go on unemployment like half of the world right now. What happens with insurance? If he has already paid it for April am I covered? And then what would I do for may assuming I am still off? I have never used unemployment or not had health insurance they work so I don’t know how any of it works.
Three Health Insurance Options
Option #1 COBRA or State Continuation
You can choose to pay COBRA to keep your same plan, which is more expensive than the exchange insurance usually but it would mean that if you’ve already hit your deductible or out of pocket max, you get to keep the same plan.
This can be a good option if you’re only temporarily laid off and expect to go back within 1-2 months and you can afford it, because it is a pain in the ass to switch insurance a bunch. COBRA is also retroactive, so if you only have a short gap and expect to go back to work, you can just not pay and then pay if you do end up getting hospitalized and needing care.
If you are someone who works for an employer smaller than 20 people, they have to offer you what is called “state continuation” which is where you pay them the full premium directly, but they keep you on the insurance for up to 1 year.
Option #2: Medicaid
If your income on unemployment (not counting the extra $600 a week, which does not count towards it) is low enough to qualify for Medicaid, and your state has expanded medicaid (22 states do not), you then you can get medicaid, which is free or extremely low-cost. This is a great option if you have access to it.
Option #3: Healthcare.gov
The most common option: go onto the state exchanges, and find a plan you can afford with the subsidy. Put in your new unemployment income as your income for subsidy (without that $600 extra). You can find your state exchange by going to healthcare.gov. DO NOT worry about “open enrollment” being over – losing coverage through work is a “life event change” that will qualify you for a special enrollment period.
You will be enrolled on the 1st of the month following your application, which will usually mean you don’t have a gap in coverage. Right now, I’d recommend a lower deductible plan (“silver” or “gold”) simply because the chance of requiring medical is higher for everyone right now, and paying an extra $100-$200 a month is a lot better than owing a $8,000 deductible if you are hospitalized.
Question #2 (at time stamp 13:49)
I’m a relatively new listener to Oh My Dollar, and I have loved spending some of my self-isolation free time backtracking through your old podcast episodes and listening to how compassionate you are when it comes to financial struggles. I’ve recently found out that I’m eligible for a stimulus check from the IRS (among many other Americans!) and I have no idea what that means. Is there a catch? Will I need to pay the money back in next year’s taxes?
I’m one of the lucky people who has a steady job through this pandemic, so I don’t need the money for bills. I’ve seen some sources recommending we spend the money on products or services in order to stimulate the stock market, and I’ve seen other sources saying we should add it to our emergency funds or pay down debt. The only debt I have is low-interest student loans, so I’m not sure how to prioritize. What are your thoughts on how to use this windfall?
Sending positive vibes from Massachusetts! You’re making a difference!
Send me your questions!
Many have questions about how personal finance is rapidly changing in these unprecedented times – it seems like many of the rules are now suspended. So I’ll be answering whatever your questions are about changes to universal credit, unemployment, student loans, health insurance – and if you ask, I will explain what’s going on with the stock and bond markets.
So, please write in your questions to firstname.lastname@example.org or tweet me @anomalily and I’ll try to answer every single question I get in a a few episodes over the next week. I’d also love to just hear just little audio updates about how you’re doing in the world. You can leave a voicemail in the US at (503) 877-4338 or you can email us a voice memo to email@example.com
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Episode Transcript (supported by our Patrons and provided by DSW Transcription).
[00:00:00] This show is supported by listeners like you through our Purrsonal Finance Society, which is a fancy name for our Patreon members. You can join up with other Oh My Dollar! community members to support episode transcripts, live streams, and more by making a pledge of $1 or more per month. Patrons get cool perks like cat stickers, discounts, and a special badge on our forums. Thank you to our newest patrons that joined this week – Hank, Clayton, and Amanda. To learn more, you can visit ohmydollar.com/support.
[00:00:34] Welcome to Oh My Dollar!, a personal finance show that usually tries to have a dash of glitter, but right now, we’re just trying to keep it together. Dealing with money can be scary and stressful. Here we give practical, friendly advice about money that helps you tackle the financial overwhelm, and boys, there are a lot of it these days! I’m your host, Lillian Karabaic.
[00:00:56] Well, it’s been approximately five days since the last Oh My Dollar! episode, which means the way that things have been going in 2020 feels like a year. There is a lot to cover. I asked last week about your questions related to how the economy has rapidly changed in the past two weeks; what you were confused about; what you needed support on, and, boy, did you deliver! My inbox is completely overflowing with questions, and I’m trying to make sure that everybody can get the information that they need and that I can explain it in accurate, and friendly, and easy-to-understand ways because there is a lot of things changing very quickly!
[00:01:39] Because of that, I also want to get this to you fast. So, that means that this episode is going to be mostly unedited, and it’s going to take a day or two to get the transcript ready just because I did not want to wait to be able to get it transcribed. That being said, let’s dive into what’s going on. A common theme that came up – even though this is a global pandemic, and there is a lot of that affects everyone around the world the same – the Americans wanted to know health insurance – how the heck to deal with it – because a lot of people haven’t really had to worry, so to speak, that much about their health insurance in the past. They’ve gotten it through their employer before, and they just kind of figured it’s gonna be okay.
[00:02:23] But, as of right now, with health being at the top of everyone’s mind and having jaw-dropping unemployment numbers … Last week, we had 3.2 million people file unemployment claims, versus an average week, where we see around 200,000 people file unemployment claims in the United States. There’s a lot of people that are about to look down not having health insurance, when we have the biggest collective health threat we’ve had in a really long time.
[00:02:54] Let me walk you through the options. Let’s say that your job has laid you off or put you on furlough, which is a term for temporary unemployment. A couple of things changed last week as part of the fiscal bill, but the basics of how you get insurance are still roughly the same. If your insurance is ended because either your hours at work get cut, or you get laid off, or furloughed, then you should legally be given a date at which your health insurance is going to stop being paid for. Sometimes, it’s common, as part of a severance package, to say, “Hey, we’ll pay your health insurance through July 1,” or something like that, even if you get laid off in April. That’s quite common, and it gives you a little bit more time to figure things out.
[00:03:45] They do legally have to offer you COBRA, if they have more than 20 employees; that doesn’t have to be 20 employees on health insurance, that’s just 20 employees for more than half the year that are either full or part time. And COBRA just means that they need to offer you this option. What COBRA is, is mostly a relic of the old system, but the key here is that 1) it is going to be a lot more expensive than what you are probably paying right now because your employer probably pays part of your plan. 2) it has an admin fee topped onto the top. Let’s say that your health insurance plan costs your employer $400 a month, but they pay half of it for you. That means that you’re used to seeing $200 a month come out of your paycheck for your health insurance. With COBRA, you will have a 104-percent admin fee, altogether. That means that you will be paying $440 a month, which is probably a big jump for you.
[00:04:45] The thing about COBRA, though, which, if your employer has less than 20 employees, the alternative is called state continuation. I’ll get to that in a bit, but know that it’s roughly the same pros and cons. The big thing here is that if your health insurance, right now, you’ve already hit the deductible, or the out-of-pocket maximum, you may want to stay with the same plan. That’s because you might not want to deal with the ups and downs of changing plans, and if you’re only temporarily furloughed, or laid off, you don’t want to get on, say, Medicaid, or state health insurance plan, and then get back on your employer plan, once you come back to work and have to hit that deductible again. That can be an upside of actually opting in, even though you might be paying more. For example, it is only March, but I have already hit my out-of-pocket maximum for the year on my health insurance, so it’s to my advantage to stay on the plan.
[00:05:51] Normally, I would tell people to consider that, hey, it’s best if you can keep the same … If you’re attached to your providers, or the kind of appointments that you get for your health insurance, you may want to stick with the same plan, even if it’s a little more expensive on COBRA. But, right now, most people are not going in for any routine appointments, or providers, so, for you, it’s really about making sure that you have coverage in the case of really big events, because one of the problems with this disease is that you can end up hospitalized. Because we live in America, hospitalization is very expensive. So, that’s one of the things to understand.
[00:06:33] There is one advantage to COBRA, as well. It is legally retroactive. If you’re only temporarily laid off, and you expect to go back to work within one to two months, that means that if you only have a short gap, and you kind of want to play the odds because you’re probably not going into any regular appointments at all, you can pay for COBRA, for as long as you’re eligible for it, which is usually six months … If you pay your premiums back to the date at which you qualified for it, which would be the day at which your coverage ended from your job …
[00:07:06] Say, in June, you end up sick, and you had lost coverage in April, you would be able to back pay for June, May and April, for the premiums, and then you would be able to get coverage for COBRA. So, it can be a good way to do it because you can kind of play the odds. Sometimes, that can make sense. Obviously, even though COBRA is expensive, four months of premiums is probably a lot less than paying out of pocket, if you do end up needing very serious medical care. So, that’s one thing to consider.
[00:07:40] If your income on unemployment is low enough … If you get laid off, then you will qualify for unemployment, and I am going to do a more in-depth episode on unemployment because a ton of things have changed, but for the next 13 weeks – through July 31 -, unemployment is paying out an extra $600 a week on top of whatever your benefit amount is. In most states, the benefit you get on unemployment is between 45 percent and 65 percent of whatever your income was before.
[00:08:14] Let’s say you made $1,000 a week at your job; you got laid off; your state would normally pay you $450 a week on unemployment. There’s always a maximum amount. Most of the time, the maximum amount is somewhere around $500-ish a week, sometimes $600 a week. Let’s say you would normally make $450 a week on unemployment. That’s obviously not a lot of money, if you’re used to making $1,000 a week. But now, with the extra $600 a week, for a lot of people, that is enough to almost make them make the same amount.
[00:08:50] That being said, the thing to know is that extra $600 a week will not count towards your income for the subsidies on the exchange, or for Medicaid. So if your income on unemployment – not counting that extra $600 a week – is low enough to qualify you for Medicaid, and your state has an expanded Medicaid, then you can get Medicaid, which is free and has low or no copays, depending on your income. This is a great option, if you have access to it, and most states now do have the Medicaid expansion.
[00:09:28] That being said, there are some mostly Southern states that don’t have the Medicaid expansion, in which case – and if your income is over the Medicaid limits, which, in each state, is somewhere around $15,000 to $17,000, annually – what you are going to want to do is go on to what is your third option. It’s called state exchanges. The most common option here is go onto the state exchanges, which you can find by going to healthcare.gov and selecting your state from a dropdown menu. Then you can find a plan that you can afford with a subsidy. Please plug in your new unemployment income as your income for the subsidy.
[00:10:11] You will then be enrolled on the first of the month following your application, which usually means you don’t have a gap in coverage because usually your coverage from your employer will run through the end of the month. Let’s say you get laid off on April 11. Usually- not always, but usually, your health insurance will run until the very end of the month, so that means you’ll have coverage until April 30. Then, if you apply sometime in April for your insurance on healthcare.gov, that means your new plan will start on May 1.
[00:10:43] The great thing about this is that you will be able to pick a plan, and you will know how much the subsidy is going to be. You’ll probably get a pretty large subsidy because that extra $600 doesn’t count for your income, in this case. So, right now, I’d recommend a lower deductible plan – they’re called Silver, or Gold – simply because the chance of requiring medical is higher for everyone right now. So, even if you have relatively low needs, paying an extra $100, or $200 a month for a couple months is a lot better than owing an $8,000 deductible on a high-level plan, if you are hospitalized. That being said, not everybody can rock that higher Silver-, or Gold-level plan, but that is the thing to know.
[00:11:30] If you are going to lose health insurance coverage, first thing to know is find out about COBRA, or what is called state continuation. State continuation is for employers that are smaller than 20 and, legally, they need to offer that you can pay the full amount of the premium. You do have to write your employer a check, but they have to offer you the option, for up to a year, to stay on the plan. So, COBRA or state continuation – that’s your first option. That will keep you on the same plan but will be more expensive.
[00:11:58] Second option is, if your income is low enough, then you can qualify for Medicaid, as long as your state has it. That can be a nice, simple, easy option. In most states that have the expansion, it’s actually pretty good insurance. Third option would be probably the most common one, which would be to go onto the state exchanges. The problem here is that you will now be switching insurance, so you will have a new deductible, and you will also have a new out-of-pocket maximum to meet. That being said, you’ll be able to pick a price that appeals to you, and you will qualify for the subsidies, which you do not qualify for the healthcare subsidies on COBRA, or on state continuation.
[00:12:40] Those are the simple answers for a very complicated question. Let me know if you have more questions about specific problems. One thing to do check out is, if you have regular kinds of medications that you need, I wouldn’t recommend worrying about physicians, right now, unless there’s someone that you’re definitely going to need in the next couple months, simply because a lot of people are not able to get appointments right now. Generally, something like vision, and dental doesn’t make a lot of sense, if you’re paying for it yourself out of pocket, and a lot of people can’t even go in for those appointments, right now.
[00:13:14] But if it’s something like a drug, or a therapy that you need on a regular basis, you can always put that in on healthcare.gov, and you can type it in, and you can make sure that the plan covers that drug. That can end up being very important. If you have a long list of drugs, you’ll want to put them all in to make sure it’s on the formulary. I know this is really important for me because my main drug is extremely expensive, so it’s not something I can pay out of pocket because who can pay for a $5,800-a-month drug out of pocket? Because of that, I always have to make sure that the plan will cover it.
[00:13:48] All right, here is our next question from Christie. Christie says, “I’m a relatively new listener to Oh My Dollar!, and I have loved spending some of my self-isolation free time backtracking through your old podcast episodes and listening to how compassionate you are, when it comes to financial struggles. I recently found out I’m eligible for a stimulus check from the IRS, among many other Americans, and I have no idea what it means. Is there a catch? Will I need to pay back the money in next year’s taxes? I’m one of those lucky people who has a steady job through this pandemic, so I don’t need the money for bills. I’ve seen some sources recommending we spend the money on products or services, in order to stimulate the stock market. I’ve seen other sources saying we should add it to our emergency funds or pay down debt. The only debt I have is low-interest student loans, so I’m not sure how to prioritize. What are your thoughts on how to use this windfall?”
[00:14:37] Christie, that is an excellent question, and thank you so much for writing in! Oh, this $1,200; this magical amount of money that we’re all going to get. Here’s the thing – most people are actually going to get it. It’s single adults with Social Security numbers, who have an adjusted gross income of $75,000 or less. So, what is that income based on? Well, if you’ve already filed your 2019 taxes, which were originally due on April 15 – however, they extended that deadline out to July 15 – if you’ve already filed that, it’s going to be based on your 2019 income. However, if you haven’t filed that, it’s going to be based on your 2018 tax return, because that’s what they have.
[00:15:17] You won’t have to pay it back, and it doesn’t count as income, unless this one case, which is that you’re in the lucky position, where you earned more than $99,000 this year, which is the upper limit, in which case you may have to pay it back at tax time next year, because technically, this is an upfront payment they are giving everyone for a tax credit for the 2020 tax year. So, you’ll get the full amount of $1,200, if you make $75,000 or less in adjusted gross income, which, remember, is your income after you take out money for student loan interest deduction, traditional IRA, and traditional 401(k).
[00:15:57] The amount goes down slightly from $1,200, for each additional $1000 you make over that, until it completely phases out at $99,000. However, if you are a married couple with no children and, together, you earn $150,000 or less, you will get the full amount for both of you. So, you’ll get $2,400. If you’re a taxpayer that files as head of household, you will get a full payment, as long as you earned $112,500 or less. Does that all make sense? Remember, this will be based on whatever their most recent tax return that they have is. Then, additionally, if a family has a kid under the age of 16, they will get an additional $500 for each kid. That’s pretty much the basics. A family with two children will no longer be eligible for any payments, if their income surpasses $218,000, in which case, I think you’re probably not that worried about the $500. But maybe you are, I don’t know.
[00:16:59] There are a couple exceptions. You cannot get a payment, if someone claims you as a dependent, even if you’re an adult. In any given family, and in most instances, everyone must have a valid Social Security number in order to be eligible. But there is an exception for members of the military, where that is not necessarily true. Here’s the thing. If you are in the situation, where you earned more in 2019 than in 2018, and you haven’t filed yet, then you might want to file for 2019, even if it’s just a tax return you’ll amend later because, if you’ve made too much in 2018, and you wouldn’t qualify, but you made little enough in 2019 that you would qualify, you would get that $1,200.
[00:17:46] The IRS’s current guidance is that all of this money is coming to us via ACH, and it’s whatever their most recent ACH number that they have on file. ACH is electronic bank transfer. That’s how they try to get most people their tax returns. So, if they have any of that information on file from you – whatever they have for your 2019, or 2018 taxes – they are apparently just going to magick it all into our bank accounts in the next two-and-a-half weeks. I don’t know, sounds like fake news to me, but sure, that sounds great.
[00:18:21] If they don’t have bank account information for you, they’re going to cut you a check. I’m not really very ambitious about how quickly the IRS is going to get those checks out. So, currently, the idea is if you go on and just file something like an amended tax return, even if you don’t change the information and update with ACH information … Or another thing that I’ve seen someone I know try is that they updated the “split-payment” form, which is on the IRS website, and they did it so that they split it, so it went between two different checking accounts, that allowed them to update their ACH information with the IRS. Of course, there’s no just form on the IRS website to update your ACH information because that would be too easy.
[00:19:11] So, what happens if you haven’t filed a tax return in 2018 or 2019? Will you get a payment? It could … You do need to file some sort of return. Once again, remembering not filing is technically a criminal act to not file, if you are required to. If you are worried that you owe the IRS money, and you don’t want it to be garnished, or you don’t want them to know about it, they are saying the only thing that this $1,200 could be garnished for is people that are behind on child support. If you are getting tax refunds currently garnished for student loans, repaying IRS debt, any of those things, this is not eligible to that. Also, they’re actually suspending student loan payments, now, for the next six months. We will get into that in another episode because there is way too much about that.
[00:19:59] If you are someone unemployed, you will still get the stimulus payment. You’re still going to get it, if you’re a veteran. If you are a U.S. citizen living abroad, you will also get it, as long as you meet the income requirements and have a Social Security number. So, if you are someone living abroad who has been putting off filing your U.S. tax return, go ahead and do it. If you are low income, they’re also recommending that people file now because most low-income people actually do get refunds back. That’s more money into this world that we live in, now, this scary, scary, uncertain world that we live in now. A lot of people can get that direct amount.
[00:20:36] That’s the basics on the $1,200. A lot of people asked me what they should do with it, if they are in the lucky position of not needing it. I’m also in that situation. I have relatively stable income. I am not one of the 3.2 million people that had to file for unemployment. My general recommendations are, first, shore up your cash reserves. I always recommend, in these uncertain times, act like your job isn’t stable. Unless you’re in healthcare, just make the assumption that there’s a possibility things can change overnight. Usually, the best thing to do is to make sure you have enough cash reserves.
[00:21:14] I’m in that fortunate situation where I actually think, while saving would be the advice I’d give to a lot of other people, I know I have enough savings, so what I want to do is use that $1,200 to support other people. I think, for some people, it could be things as simple as direct payments, or assistance to friends that you know are hurting, like buying grocery delivery for someone else, or giving cash to a friend that needs it to pay rent. There’s also a lot of different cities have set up mutual aid societies, and some of those are even things like tip jars for service workers, where service workers that have either lost their job or are dealing with very significant loss of income can post their Venmo or cash app, and you can give directly to people.
[00:21:57] If you don’t want to do that, which I totally understand, consider charitable organizations that are particularly focusing on people that aren’t going to be helped by the stimulus bill – undocumented workers, people that aren’t going to qualify for unemployment, even with this expansion. Locally, here in Portland, there’s something called Voz Workers’ Rights Group. It is a group led by migrant farm workers and undocumented workers, and they are specifically, right now, dealing with a huge amount of need within that community; or a community that serves either the food bank, or a community that serves people that are houseless, because those are extremely vulnerable populations, right now.
[00:22:40] If charitable donations are not quite the way you want to go, and you’re trying to figure out ways to spend it to support your local businesses, one of the straight-up best things you can do is ask the businesses that you care about, the small local businesses you want to support, how you can help them. Some of them don’t know, but some of them are going to straight-up say, “Hey, as your hairdresser, can you please pre-book the service for after, and pay me now for when we all get out of this? Because I know your hair is going to need it, and that’s gonna help me pay rent for the next couple months on my chair while I can’t work.” Or, the donut shop in my neighborhood, I still really want to be there buying a gift certificate because I know I’m going to eat those donuts as long as they’re still around, once the gathering restrictions are lifted. That can be a really great way to do it.
[00:23:29] I personally think I’m going to try to divide mine, half and half, and I’m going to spend half buying gift certificates, and services, and supporting local businesses. Probably work some directly to like small artists. I going to use it as an excuse to get myself some nice earrings off Etsy, or whatever, so I can support some people who have really unstable income. Then, the other half, I’m going to be using for charitable organizations.
[00:23:54] I’m also going to make the last shout out, which is that media organizations, like the radio station that I work at, that helps me produce this show, are suffering because they … Media organizations still have to operate. They’re considered essential. For example, my home station is a radio station that operates four 24/7 signals. However, a lot of how we support ourselves is member donations, and business underwriting from concert venues, and small businesses.
[00:24:23] We are one of those organizations that’s been hit really hard. That’s true of a lot of your local newspapers, and the kind of people that are so essential, right now, because they’re keeping you updated on what is happening in your local community. So, I’m also spending part of that on just supporting media organizations because I know the news is important to me, right now. Or, you can always support a Patreon, if you’re in that camp. Otherwise, use it to support yourself. That is what it’s for. Make sure you can pay those essential bills. But if you’re in the fortunate position of someone like Christie that wants to know how you can help other people with it, then that’s great.
[00:25:00] Okay, that is a lot. I’m going to try to release two more shows over the next week. I’m throwing out our normal schedule because these aren’t normal times, are they? So, coming up, please continue to send me your questions; send me your voice memos; whatever you can do. You can always send us voice memos, as a voice mail, at (503) 877-4338. That’s (503) 877-4338. That’s just a voicemail line. I won’t pick up. Don’t get scared. Or, if you’re international, you can take a voice memo on your phone and email the file to firstname.lastname@example.org, or you can just old-fashioned write me a question and send it to email@example.com. You can always tweet at me @anomalily, or @ohmydollar. Email us any questions you have. We’re going to cover the student loan interest suspension that is going on right now. I’m going to try to talk about what’s going on with the stock market and our 401(k)s, and we’re going to do an entire episode on unemployment, so please send them to me. Also, international folks, let me know what your questions are because this is pretty American-centric, this week.
[00:26:13] Oh My Dollar! is normally recorded at the XRAY.FM Studios in Portland, Oregon, but this week it’s recorded from a phone box that smells kind of funny, in my home office. This episode was engineered, and edited, and hosted by me, Lillian Karabaic. Our intro music is still by Aaron Parecki. Thanks for listening, and til next time, remember to manage your money so it doesn’t manage you.
Oh, my god … I swear my upstairs neighbor is having a freaking tap dancing competition while wearing ankle weights!!!