ACA puzzler

[SecondCor521]

Hi all.

I have had an ACA Silver plan with CSR87 for the past several years.

Since I'm divorced, my ex and I get to agree each year on who is going to provide health insurance for our children. We have three kids, but two of them are in college, so the only relevant child here is our DD17.

There are two possibilities: I cover our DD17 on my ACA policy, or my ex covers our DD17 on her policy.

For 2020, all three kids will be my tax dependents, so my tax family size for ACA is 4. This is regardless of who provides coverage for DD17.

If I put my data for 2020 into the health exchange and include my DD17 on my policy, then the subsidized premium for one Silver plan is $227.76 per month. If I leave everything the same but exclude DD17 from my policy, the subsidized premium is $256.26 per month for the same Silver plan.

This, of course, seems backward. It should cost me more money to have DD17 on my policy. But it seemingly does not. This price difference occurs on four different Silver plans, all of which are by the same insurance company, which is the insurance company I've been with for the past several years.

The unsubsidized cost of the policies is as you would expect; it costs more to have her on my policy. However, the PTC jumps by more than the difference in cost.

Anyone ever seen this? Any idea why this might happen?

 

[cathy63]

Hmmm. The subsidy should be based off the income of all 4 of the people in your tax family, and the amount of the subsidy shouldn't change based on the number of people who get coverage under the ACA. This is figured on IRS form 8962, and you could double check by looking at the instructions for that form, but I'm pretty sure that's right.

Is there any chance you're looking at an out-of-pocket number that includes a CSR payment in addition to a PTC? If not, my next guess would be that there's a bug in the software that runs the exchange you're using.

Or I guess another possibility could be that your state is kicking in some additional money. California is doing that, but it's really clear on our exchange when I look at plans that $x of subsidy is coming from the Feds and $y is coming from the state.

If it seems like a bug in the exchange software, it'll all wash out when you file your 2020 taxes. You can calculate the expected true PTC now and either pay a little more in estimated taxes to cover the gap, or know that you'll be due a refund.

 

[RunningBum]

As I understand it, your cost for a silver plan is based solely on your family income for the number of people you have in your family. So if you have a family of 4 and have MAGI of $80000, you are expected to pay 9.78% of that $80K, or $652/month.

To determine the amount of subsidy, they take the 2nd lowest silver plan you are eligible for, and subtract the amount you are expected to pay.

If you add your daughter, you should almost certainly have a higher premium for that 2nd lowest silver, and thus a higher subsidy. But either way you should be paying $652/month if you chose that 2nd lowest silver plan. If you choose a different plan, you take that calculated subsidy and apply it to the plan you choose.

So I think if you choose the lowest silver plan, and it happens to be relatively cheaper than the 2nd lowest for your and your daughter compared to the difference with just you, you'll come out cheaper.

So say the 2nd lowest silver plan for just you is $952/month. You get a $300 subsidy ($952-$652). But instead of choosing the 2nd lowest silver plan, you chose the lower one at $900/month. You get the same $300 subsidy, so you pay $600/month.

Now for including your daughter. The cost of insurance is higher. Say it's $1252/month for the two of you. You get a $600 subsidy ($1252-$652). Remember your cost for the 2nd lowest silver plan is based on your income and family size, no matter how expensive the insurance actually is. Again, you choose a lower silver plan. For the two of you, that happens to be $1175. You get the same $600 subsidy, so you pay $575/month.

So you are paying a smaller subsidized premium with your daughter, because the difference between the plan you chose and the 2nd lowest silver premium was greater than the difference between those plans for yourself.

The Kaiser subsidy calculator at https://www.kff.org/interactive/subsidy-calculator/ might help you see this better.

I think I got this right. I've only had to insure myself during the ACA years so this is the first time I considered this, but it makes sense to me.

 

[zinger1457]

I believe RunningBum has it right, in the OP's situation the amount you end up paying each month should stay the same (if selecting the same plan) if you have one or two people being covered, the subsidy will increase for two people to offset the increase in the insurance plan cost.

 

[SecondCor521]

First, thanks everyone for the replies.

I did some more investigation and here's what I discovered:

The Silver plan I was looking at and mentioning the premiums for - which is one of the ones I am considering - happens to be the second lowest cost silver plan, both in the case where I include my daughter and the case where I don't.

If I go through the calculations on Form 8962 using the 2018 instructions, it calculates that my contribution should be $249.83 per month. I know the factors and stuff change slightly from year to year, so I tend to think that the $256.26 is probably the correct number. I think for some reason the case where it includes my daughter the subsidy is too high and therefore my premium is too low.

Specific replies:

@cathy63:

Your understanding and my understanding and the Form 8962 instructions all match.

Although CSRs are included in all of the plans I am considering, I am certain that I am just looking at the monthly premiums after PTC. The website and my prior history with it and the ACA make this clear.

It is a state specific exchange (Idaho), so it would not surprise me to see a bug.

My state does not kick in any additional money.

@RunningBum:

Good theory, and in general the numbers I am seeing line up with your theory and explanation. Except that, as noted above, in both cases (with DD17 and without) the policy I chose to look at is in fact the SLCSP. So the theory, while plausible, can't be right, unfortunately.

So right now I'm leaning towards the subsidy being calculated incorrectly in the case where it's me and DD17 seeking coverage, family size of 4. It could be their math, their logic, or their SLCSP data and/or logic. For about $29 a month, I don't really care enough to point it out and help them fix it (or maybe explain how I'm wrong).

...

I had a rant typed up about how this issue affects the insurance cost sharing for DD17 between me and her mother, but I deleted it after I realized it doesn't really matter that much other than that my ex might switch DD17 from my ACA policy to her ACA policy for next year. I'd rather have her on mine just because it's already set up that way and I don't like change, but either way works in the big scheme of things.

 

[RunningBum]

If you are looking at the SLCSP for both, your cost should be the same with or without you. I like solving math puzzles so I'd probably keep looking at it, but in any case, it'll get resolved at tax time.

I would put DD17 on whichever policy has the best coverage, whether that's certain doctors or drugs in plan, lower deductible or OOP max, or lower costs after the deductible is satisfied. If those are all the same, I'd probably avoid the change too, just because it seems there's more room for things to get screwed up with change.

 

[SecondCor521]

If you are looking at the SLCSP for both, your cost should be the same with or without you. I like solving math puzzles so I'd probably keep looking at it, but in any case, it'll get resolved at tax time.

I would put DD17 on whichever policy has the best coverage, whether that's certain doctors or drugs in plan, lower deductible or OOP max, or lower costs after the deductible is satisfied. If those are all the same, I'd probably avoid the change too, just because it seems there's more room for things to get screwed up with change.

I may call the exchange and claim that I may have found a bug and ask them to look into it. We're a small enough state where that actually can happen.

Since her Mom and I live in the same zip code, every ACA policy available to her is available to me and vice versa. Her income is different, and her family size is smaller (3 vs 4), so the edge is with me in terms of subsidy.

Historically, though, I've deferred to the ex in terms of the kids' health insurance. Partly relationship dynamic and partly because my ex actually worked in health insurance for a while and understands it better and has more patience to and interest in evaluating policies.