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ACA subsidy timing question
Old 10-14-2015, 02:16 PM   #1
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ACA subsidy timing question

I'm planning to retire in December and have one last puzzle piece related to health insurance to understand before pulling the trigger.

When I apply for HI through the exchange in December do I provide an estimate of my 2016 income to determine the policy price or do I give my 2015 income?

I believe I'm supposed to estimate 2016 income but want to be sure since I'll have almost no income in 2016 so will be eligible for a large subsidy. If I use 2015 income there will be no subsidy.

Thanks. I know this has probably been asked and answered many times but I wasn't able to find my exact question in my searches.
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Old 10-14-2015, 03:31 PM   #2
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You would provide an estimate of 2016 income. Open enrolment starts Nov 1st for coverage starting in January. You could free ride on COBRA for December.
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Old 10-14-2015, 03:49 PM   #3
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Just as an FYI, there will be a subsidy no matter which income you use... all it matters if when you get it...

If you put in a low income, they will reduce the price of insurance as an estimate of your subsidy. NOTE: it is not your real subsidy... that is determined when you file your tax return.

If you put in high income and will have low income, you will get all your money back when you file your tax return....


Now, did your state expand Medicaid? If so, then you might actually fall into that system if your income is too low... I remember someone on this board said they had to make sure they earned enough to keep out of that system....
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Old 10-14-2015, 04:21 PM   #4
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Just as an FYI, there will be a subsidy no matter which income you use... all it matters if when you get it...

If you put in a low income, they will reduce the price of insurance as an estimate of your subsidy. NOTE: it is not your real subsidy... that is determined when you file your tax return.

If you put in high income and will have low income, you will get all your money back when you file your tax return....
This is not the OP. Let me see if I understood this correctly.

I plan to use ACA from June 2017. I plan to adjust my income in 2016 to be high and have low income for future years till I get to 65 (Medicare).

When I apply for ACA insurance, I put in some income estimate like $60,000 (2 people). They charge me $375 instead of $800 for a subsidy of $425 (hypothetical numbers). When I do my taxes for 2017, the tax software will see my low MAGI income and adjust the subsidy, which won't change much as long as my income is around that $60K level (or less than 400% FPL for 2017).

Is this how it works?
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Old 10-14-2015, 04:38 PM   #5
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Now, did your state expand Medicaid? If so, then you might actually fall into that system if your income is too low... I remember someone on this board said they had to make sure they earned enough to keep out of that system....
For states that didn't expand medicaid, a single person only needs a MAGI of $11,670. If your state did expand, your minimum income jumps to $16,243.

(I left my position with megacorp last December, thinking I only needed to report the lesser amount--then Pennsylvania went ahead and expanded their Medicaid program too.)
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Old 10-14-2015, 05:10 PM   #6
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Just want to add:
The Silver plan Cost Sharing Reductions (CSR) are based on your estimate, not your actual income, since there is no reconciliation for them at the end of the year.
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Old 10-14-2015, 05:17 PM   #7
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In a non-expansion state you could always be overly optimistic in your estimate to get to 101% FPL and eligible for subsidies if you were close to it anyway.
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Old 10-14-2015, 06:27 PM   #8
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This was the trickiest part of the ACA maze for me. You are retiring, so your income will drop significantly in 2016. But how do you document what hasn't happened yet? Our subsidy was revoked twice in 2015 over documentation questions and reinstated after lengthy phone conversations with Healthcare counselors.

In retrospect, I think I may have averted the headaches if I had downloaded documentation of my severance along with income records. I suggest you try that and see if it helps.

You also might enlist the help of a private sector health insurance broker. They get their commission from the insurer, so it shouldn't cost you anything.
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Old 10-14-2015, 07:22 PM   #9
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I don't know how things have changed, but when I first enrolled in an ACA policy on the Exchange for 2014 (in November 2013), the most recent info the IRS had was my 2012 tax return where we had an AGI of about $110,000. I had no problems enrolling for 2014 estimating an income of about $40K after my layoff, and getting the commensurate subsidy.
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Old 10-14-2015, 09:04 PM   #10
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When I applied for ACA coverage in 2015, my income was down considerably from 2013 and in early 2015 I was asked to provide documentation to support my estimate of 2015 income. I was given a couple of months to get the info together. So I did my 2014 taxes early and was able to provide that info as well as brokerage/banking statements showing that my 2014 income had dropped so they accepted my estimate for 2015. I'd just say that you're probably better to overestimate your income so you don't get a bad surprise come tax time. However, you'd be better not to overestimate your income if you're eligible for cost sharing benefits.
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Old 10-15-2015, 07:53 AM   #11
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Originally Posted by DEC-1982 View Post
This is not the OP. Let me see if I understood this correctly.

I plan to use ACA from June 2017. I plan to adjust my income in 2016 to be high and have low income for future years till I get to 65 (Medicare).

When I apply for ACA insurance, I put in some income estimate like $60,000 (2 people). They charge me $375 instead of $800 for a subsidy of $425 (hypothetical numbers). When I do my taxes for 2017, the tax software will see my low MAGI income and adjust the subsidy, which won't change much as long as my income is around that $60K level (or less than 400% FPL for 2017).

Is this how it works?

Yes.... when you do taxes the real subsidy amount is calculated and you then settle up with the gvmt....


For me, since I did not adjust my income for this year I will be getting a HUGE refund as it represents 9 months of subsidy that I did not receive....
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Old 10-15-2015, 08:03 AM   #12
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Yes.... when you do taxes the real subsidy amount is calculated and you then settle up with the gvmt....


For me, since I did not adjust my income for this year I will be getting a HUGE refund as it represents 9 months of subsidy that I did not receive....
Thanks for explaining this to me. I keep learning from this forum.
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Old 10-15-2015, 08:42 AM   #13
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Thanks for explaining this to me. I keep learning from this forum.
Note that is an option when you apply. You can take the subsidy, if you get one, in the form of a Premium Tax Credit where it is paid in advance against your premium. Or you wait until tax filing and get a refund for it like any other tax refund you qualify for.

https://www.irs.gov/Affordable-Care-...ium-Tax-Credit
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Old 10-15-2015, 08:56 AM   #14
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Thanks everyone for the guidance.

I'll be sure to keep copies of my severance which is a pittance since I just found out that the company has reduced layoff payments from 2 weeks/year of service to one week AND they're not going to recognize my years of service in the company that they bought. So instead of getting 36 weeks I get 11!!! (I'm in an unusual situation in that I've known since last March that I'm being released and the timing is up to me).

I'm beyond mad, but not surprised. If the two founders of this Palo Alto company knew how employees were treated today they'd be rolling in their graves.
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Old 10-15-2015, 09:54 AM   #15
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Note that is an option when you apply. You can take the subsidy, if you get one, in the form of a Premium Tax Credit where it is paid in advance against your premium. Or you wait until tax filing and get a refund for it like any other tax refund you qualify for.

https://www.irs.gov/Affordable-Care-...ium-Tax-Credit

Excellent link....
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Old 10-15-2015, 10:08 AM   #16
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Note that is an option when you apply. You can take the subsidy, if you get one, in the form of a Premium Tax Credit where it is paid in advance against your premium. Or you wait until tax filing and get a refund for it like any other tax refund you qualify for.

https://www.irs.gov/Affordable-Care-...ium-Tax-Credit
This is an excellent link and answers a lot of questions. Thanks.
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