Which is Better? PTC or Monthly Subsidy?

[Felix Mulier]

I looked for a post with this question but didn't find one. If I missed it, please point me to it.

Otherwise, here it is. Is it better to get the monthly subsidy on an ACA policy, or to take the Premium Tax Credit at the end of the year?

For the past 2 years, we didn't take the monthly subsidy and took the PTC at the end of the year (mostly to be able to convert just a little more into our Roth IRAs). But if I look at amount that the state is willing to give us in a monthly subsidy, that total figures to be about 10% higher over the course of a year.

I always thought it was a "wash". Am I missing something? Your thoughts appreciated.

 

[bingybear]

I've not had a PTC or subsidy, so this is just based on understanding from the sideline. The PTC and subsidy should be equal excepting the time value of money. That is the subsidy is paid throughout the year and the PTC at the end.

When you do your taxes you calculate the amount of your PTC. So if you got more in subsidy than your PTC at tax time, then you would be paying it back with your taxes.

 

[Taxman59]

The biggest potential difference is the reduction in the policy costs (copayment, deductibles and total OOP) that you don't get if you go for the PTC.

 

[Felix Mulier]

The biggest potential difference is the reduction in the policy costs (copayment, deductibles and total OOP) that you don't get if you go for the PTC.

Meaning, I could afford a better policy (e.g. Gold vs. Silver) if I had help paying out of pocket?

 

[Taxman59]

Meaning, I could afford a better policy (e.g. Gold vs. Silver) if I had help paying out of pocket?

I have a policy this year (2016) that has a $400 premium and total OOP for a family of 3 of $1400 per year. If I went for the PTC credit, then net premium cost would have been about $400 / month, but I would have had a $5000 deductible and OOP of $11,600. Given health events for DW and pending knee surgery for me, taking the monthly support saved me about $10,000 this year.

 

[MichaelB]

I have a policy this year (2016) that has a $400 premium and total OOP for a family of 3 of $1400 per year. If I went for the PTC credit, then net premium cost would have been about $400 / month, but I would have had a $5000 deductible and OOP of $11,600. Given health events for DW and pending knee surgery for me, taking the monthly support saved me about $10,000 this year.

That looks like it has a cost sharing benefit, which is additional to the premium assistance.

Meaning, I could afford a better policy (e.g. Gold vs. Silver) if I had help paying out of pocket?

If you are eligible for cost sharing, you definitely need to sign up for it now. If you are eligible only for premium assistance, no matter which way you take it you will need to reconcile at tax time, and the net benefit you receive will be the same either way.

 

[sengsational]

It usually works out exactly the same (taking the subsidy on a monthly basis vs balancing out when you do your taxes). There are a few odd cases, for instance, there's something about a limitation on how much they can claw back if you get the monthly subsidy, then later your income is higher. And as stated above it would benefit you if you get silver policy cost sharing. But edge cases aside, it's usually the same.

Under ObamaCare Cost Sharing Reduction subsidies are offered on Silver Plans purchased on the Health Insurance Marketplace to those making between 100%-250% of the Federal Poverty Level.

 

[bingybear]

Several mentioned plans with cost sharing. If your income is low enough, you can not only get a subsidy, but get "cost sharing" that lowers deductibles and max out of pocket as well. You must go for the subsidy and get a silver plan. This does not work for non-silver pans. You also can't get this retroactively at year end.

this would be a reason to do the subsidy.

 

[MBSC]

The Silver plan CSR has to do with submitting an income estimate below 250% FPL, not how you receive the PTC. There are two methods.

Method 1: Deliberately submit an income estimate over 400% FPL knowing you will earn less. You can only receive the PTC during tax filing and do not qualify for Silver plan CSR. This avoids the income verification process.

Method 2: Submit an income estimate below 400% FPL. You are presented the options of receiving some, all, or none of the PTC monthly. If you submit an income estimate below 250% FPL and select a Silver plan with CSR, you can still opt to receive none of the PTC monthly. This is useful when you can pay the full premium by 2% cash back credit card and would otherwise have the difference sitting in a 1% savings account.

You can use all, some, or none of your premium tax credit in advance to lower your monthly premium.

Source: https://www.healthcare.gov/glossary/premium-tax-credit/

 

[Felix Mulier]

Thanks everyone!

When you do your taxes you calculate the amount of your PTC. So if you got more in subsidy than your PTC at tax time, then you would be paying it back with your taxes.

That's the part I was missing! It's the same credit whether you take it monthly or in a lump sum at the end.

Method 1: Deliberately submit an income estimate over 400% FPL knowing you will earn less...This avoids the income verification process.

It would be nice to get the State out of my knickers! I've submitted income verification for 2 years even though I've never taken the subsidy. If I stated income > 400% FPL maybe they'd stop bothering me to update it every year. If I qualify anyway, I could still take the credit on my taxes.

you can pay the full premium by 2% cash back credit card and would otherwise have the difference sitting in a 1% savings account.

Very clever! I like clever!

 

[sengsational]

Method 2a (income 'too high' for cost sharing) works for me, but 2b (income low enough for cost sharing) doesn't. For two reasons.

First, I don't use enough services to make the cost sharing worth more than the delta between the bronze and silver premiums.

Second, if I make my income low enough to qualify for a silver cost sharing plan, then I am not offered a subsidy. Instead it says I need to apply for Medicaid. I think it depends on what state you live in.

 

[GTFan]

Well yeah you have to keep income between 100% (or 138% in Medicaid expanded states) and 250% of FPL to get the Silver CSR plans.

But in doing so, no matter how your income/tax credit resolves at the end of the year (even if you're way over 250%), you get the benefit of a MUCH better plan with lower OOP costs. You can get a good plan if you can come reasonably close to justifying the income to qualify. And get the marketplace to accept it of course.