ACA question re:subsidy

[Lisa99]

I estimated capital gains for 2018 and when I updated our application the subsidy went down as expected.

What I didn't expect was that the insurance plan changed too. Instead of a zero deductible it's now 6,000 per person!

Our income will be $2000 per month until December of next year. So what would happen if I reported a life change next December to incorporate the capital gains?

Other question - if I estimate our income at $30k for exampe, and it ends up being $60k, would we simply be penalized on our taxes? Are there other ramifications? I’d rather pay the tax hit than have a $6k deductible!

 

[brucethebroker]

I have a hard time guessing our income due to self employment. Can be a $20k or larger swing from year to year-I usually guess somewhere between historic min. and max. Our CPA just adjusts our tax credit advance when we file. I am not aware of any penalty, but maybe I missed something.

Most likely a good discussion to have with your CPA/accountant.

 

[jim584672]

PTC gets reconciled at tax time based on yearly income.

 

[Lisa99]

Thanks Jim,

Then why are there different plans based on income if the only penalty is at tax time?

If I leave our income at $24k we qualify for a plan with 0 deductible. If I say our income is $60k, for example, the only plan we can buy has a $6,000 deductible.

I'm really not understanding the system.

 

[bingybear]

I estimated capital gains for 2018 and when I updated our application the subsidy went down as expected.

What I didn't expect was that the insurance plan changed too. Instead of a zero deductible it's now 6,000 per person!

Our income will be $2000 per month until December of next year. So what would happen if I reported a life change next December to incorporate the capital gains?

Other question - if I estimate our income at $30k for exampe, and it ends up being $60k, would we simply be penalized on our taxes? Are there other ramifications? I’d rather pay the tax hit than have a $6k deductible!

Remember that with getting an APTC is that you will update your income estimate if it changes thru the year.

 

[bingybear]

Thanks Jim,

Then why are there different plans based on income if the only penalty is at tax time?

If I leave our income at $24k we qualify for a plan with 0 deductible. If I say our income is $60k, for example, the only plan we can buy has a $6,000 deductible.

I'm really not understanding the system.

For people with low incomes there are Cost Sharing Reductions to make the insurance help people who really have low income. This is a modification to the plans based on income. It happen only on silver plans. The CSR add help by reducing deductibles and MOOP.

Estimate honestly. Include all you will likely do that effects income.

Also, if you are looking at a HSA compatible plan and are using CSR, the CSR may invalidate the HSA compatibility. However, the plan documentation does not update. So be careful of contributing to an HSA without a compatible plan.

 

[jimbee]

Thanks Jim,

Then why are there different plans based on income if the only penalty is at tax time?

If I leave our income at $24k we qualify for a plan with 0 deductible. If I say our income is $60k, for example, the only plan we can buy has a $6,000 deductible.

I'm really not understanding the system.

The $0 deductible at $24k of income is probably due to cost sharing reductions (CSR). If your MAGI is within 250 percent of the federal poverty level, you are eligible for additional savings in the form of reduced deductibles, co-pays, and maximum out of pocket cost when you choose a silver health insurance plan. You can read more about it here: https://www.healthcare.gov/lower-costs/save-on-out-of-pocket-costs/

 

[RunningBum]

Remember that with getting an APTC is that you will update your income estimate if it changes thru the year.

You say that like it happens automatically ("remember that ... you will update ... "). My understanding is that you can fix this when you file your taxes. That's my plan. I don't even know how to update my income estimate. I thought you only update change of life situations.

Anyway, OP, it sounds like you went over 250% FPL and lost cost sharing. I don't know much about that but check your numbers to see if that happened, and google for that. I won't guess what happens to your deductible if you unexpectedly go over 250%.

 

[pb4uski]

+1 with those who think that loss of CSR is why the OP is seeing the change in deductible.

 

[bingybear]

You say that like it happens automatically ("remember that ... you will update ... "). My understanding is that you can fix this when you file your taxes. That's my plan. I don't even know how to update my income estimate. I thought you only update change of life situations.

Anyway, OP, it sounds like you went over 250% FPL and lost cost sharing. I don't know much about that but check your numbers to see if that happened, and google for that. I won't guess what happens to your deductible if you unexpectedly go over 250%.

I put in my income estimate for 2018 (first time) on healtcare.gov and one of he checkboxes that you agreed to was to update income estimates when it changes. I have not had to do any updates yet, but it seems to be just another page on healtcare.gov.

Yes the APTC is reconciled at tax time even if you don't update estimates and I expect many don't update estimates. There were just many reminders on the website and I think on the eligibility notice about updating.

From what I've heard there is no way to claw back CSR.

On the OP seeing the deductible jump, it could be income being above 250% or they may have not selected a silver plan. Only silver plans have CSR options.

 

[jim584672]

Due to the CSR funding removal the Bronze and Gold plans may be a better value compared to the Silver plans this year.

The Silver CSRs are not reconciled at tax time.

 

[wmc1000]

Lisa since the POTENTIAL capital gains would cause you to lose the CSR reductions and there is no guarantee of those gains, ( severe market correction, etc.), I personally would not include them in my estimated income for 2018. Then, if they indeed get distributed in 2018 I would reconcile the income difference on my tax return and pay any adjusted PTC due to that income. There will be no clawback of the deductibles if there are any that would have cost you money OOP.

 

[VanWinkle]

Lisa since the POTENTIAL capital gains would cause you to lose the CSR reductions and there is no guarantee of those gains, ( severe market correction, etc.), I personally would not include them in my estimated income for 2018. Then, if they indeed get distributed in 2018 I would reconcile the income difference on my tax return and pay any adjusted PTC due to that income. There will be no clawback of the deductibles if there are any that would have cost you money OOP.

+1 to this

There is no reconciliation for the cost sharing subsidies(lower deductible and out of pocket max) so no penalty if you actually make more than you thought. The penalty for premium subsidy will be reconciled in you 2018 tax return.

 

[GTFan]

Huge loophole for those that take advantage of it IMO, but definitely the way to go because CSRs are substantial.

 

[AllDone]

Due to the CSR funding removal the Bronze and Gold plans may be a better value compared to the Silver plans this year.

The Silver CSRs are not reconciled at tax time.

Congress removed the funding to reimburse the insurance companies for the CSRs, but not the responsibility for the insurance companies to provide the CSRs, so people with incomes below 250% FPL will still receive CSRs. That was the cause of the last minute rate jumps this year. As long as your income is below 400% FPL, you won't be hurt by the rate jump, though, because the subsidy will increase to cover it.