Patient Protection and Affordable Care Act

[Katsmeow]

For subsidy purposes what tax year do they use? DH is going on medicare later this year and for purposes of the part B premium they use the tax return from 2 years ago.

For medicare SSA says:

To determine your 2012 income-related monthly adjustment amounts, we use your most recent Federal tax return that the IRS provides to us. Generally, this information is from a tax return filed in 2011 for tax year 2010. Sometimes, IRS only provides information from a return filed in 2010 for tax year 2009. If we use the 2009 tax year data and you filed a return for tax year 2010 or did not need to file a tax return for tax year 2010, call us or visit any local Social Security office. We will update our records.

So basically they use your 2010 income to decide what premiums you will pay in 2012. If they use the same way of doing things with healthcare subsidy they would determine what you would pay (or what subsidy you would receive) in 2014 based upon 2012 income (or possibly even 2011 income).

If that is so, if you retire for the first couple of years after you retire they might be basing premiums on much higher income you received while working.

Does anyone know which taxable year they use for the healthcare act?

 

[M Paquette]

I'm still trying to find a complete Section 911 of the IRS Tax Code to see what all the possibilities there are in Section 911. There are a multitude of links I can find to disparate parts of it, but none so far to the whole Section 911. The 1986 Tax Code is relevant, due to this note at the starting of the PPACA Section 1401 on pdf page 105:

That's the foreign earned income exclusion, and foreign housing allowance exclusion.

Income for the PPACA subsidy is adjusted gross income plus all that income you could otherwise hide.

 

[ziggy29]

Does anyone know which taxable year they use for the healthcare act?

Determining Income for Adults Applying for Medicaid and Exchange Coverage Subsidies: How Income Measured With a Prior Tax Return Compares to Current Income at Enrollment - Kaiser Slides

(my emphasis added)

Due to income variation, a key issue for determining coverage eligibility is the method by which income will be measured. Income variation is common over a period of time- salaried workers may receive a bonus, the income of hourly workers could change as the number of hours worked changes, or an employee may experience job loss or gain. This frequent fluctuation may lead to enrollees being inaccurately assigned to a type of coverage. For example, for Health Insurance Exchanges, income will be measured based on the most recent tax return available. For many people, this will reflect their income from two years prior to the year for which assistance is being requested.

So what would that mean? On 1/1/2014 your most recent tax return would be for 2012 (due 15 April 2013). People who retired to lower incomes this year wouldn't be hit with a high bill in their first year of retirement as folks will have a tax return with their 2012 income already reduced by retirement. If you retired in 2013, though, in anticipation of being able to get individual health insurance on 1/1/2014, your subsidy (if any) would be based on your (possibly much higher) 2012 income. So that first year would really hurt, but in 2015 a larger subsidy appears to kick in based on lower income in 2013.

 

[pb4uski]

I'll have to factor that into my 2012 Roth conversions (if any). I may have to hunt up some capital losses to offset capital gains that I had earlier in the year. Yuk.

 

[M Paquette]

Determining Income for Adults Applying for Medicaid and Exchange Coverage Subsidies: How Income Measured With a Prior Tax Return Compares to Current Income at Enrollment - Kaiser Slides

(my emphasis added)

So what would that mean? On 1/1/2014 your most recent tax return would be for 2012 (due 15 April 2013). People who retired to lower incomes this year wouldn't be hit with a high bill in their first year of retirement as folks will have a tax return with their 2012 income already reduced by retirement. If you retired in 2013, though, in anticipation of being able to get individual health insurance on 1/1/2014, your subsidy (if any) would be based on your (possibly much higher) 2012 income. So that first year would really hurt, but in 2015 a larger subsidy appears to kick in based on lower income in 2013.

You've got it.

Enrollment for coverage under PPACA plans that start on 1/1/2014 opens on October1, 2013. At that time the most recent tax return for income determination willl be the 2012 return for most folks. We're planning our income accordingly (hope springs eternal and all that...).

 

[Animorph]

You've got it.

Enrollment for coverage under PPACA plans that start on 1/1/2014 opens on October1, 2013. At that time the most recent tax return for income determination willl be the 2012 return for most folks. We're planning our income accordingly (hope springs eternal and all that...).

My understanding of the final result is that actual subsidies will depend on the tax return for the year of coverage. So although a good 2012 tax return might get you good or bad subsidy payments, there will be a reconciliation with your 2014 tax return in which you will receive a subsidy refund or pay back excess subsidy. Like withholding. Sorry I'm not going to link to a source, but it was one already mentioned in this thread (as if that helps!)

 

[ejw93]

Now that ObamaCare has been declared legit, what really burns me as a middle class person is that the Flex Spending Account (FSA) is cut in half starting next year. Make no mistake that cutting the FSA tax credit from $5k to $2.5k is a tax on the middle class.

Not-so-hypothetical example:
- Married w/ 2 kids, oldest going in to braces (orthodontia) next year (2013).
- Already using $2500 in FSA-reimbursible costs per year.
- 25% Marginal Federal Tax /9% State Tax bracket (CA) = 34% combined taxes.
- Pre-ObamaCare cost of $5000 braces is $3300 After Taxes. = (1-0.34)*$5k.
- Post-ObamaCare cost of $5000 braces is $5000 After Taxes. This is an After-Tax additional cost $1700.

Of Note, the hypothetical earner must now earn $7575 before taxes to pay the same $5000 procedure ($5k/(1 - 0.34).

Or in other words, the hypothetical wage earner must earn an additional $51 bucks in salary (before taxes) just to pay the Orthodontist the same charge for $100.

Is anyone anticipating a salary increase of 51% next year? Why is the media focused on the ObamaCare aspects of (a) persons making more than $250k or (b) increased Medicaid enrollments- this strikes me as arguing about the margins. The FSA is really where middle class wallets get raided.

The 2013 FSA cut was either a deliberate ObamaCare tax on the middle class, or a push to put more people on Health Savings Accounts (HSAs). I'm not sure the legislators were clever enough to figure on the latter...

 

[FinanceDude]

Now that ObamaCare has been declared legit, what really burns me as a middle class person is that the Flex Spending Account (FSA) is cut in half starting next year. Make no mistake that cutting the FSA tax credit from $5k to $2.5k is a tax on the middle class.

Not-so-hypothetical example:
- Married w/ 2 kids, oldest going in to braces (orthodontia) next year (2013).
- Already using $2500 in FSA-reimbursible costs per year.
- 25% Marginal Federal Tax /9% State Tax bracket (CA) = 34% combined taxes.
- Pre-ObamaCare cost of $5000 braces is $3300 After Taxes. = (1-0.34)*$5k.
- Post-ObamaCare cost of $5000 braces is $5000 After Taxes. This is an After-Tax additional cost $1700.

Of Note, the hypothetical earner must now earn $7575 before taxes to pay the same $5000 procedure ($5k/(1 - 0.34).

Or in other words, the hypothetical wage earner must earn an additional $51 bucks in salary (before taxes) just to pay the Orthodontist the same charge for $100.

Is anyone anticipating a salary increase of 51% next year? Why is the media focused on the ObamaCare aspects of (a) persons making more than $250k or (b) increased Medicaid enrollments- this strikes me as arguing about the margins. The FSA is really where middle class wallets get raided.

The 2013 FSA cut was either a deliberate ObamaCare tax on the middle class, or a push to put more people on Health Savings Accounts (HSAs). I'm not sure the legislators were clever enough to figure on the latter...

Don't know why FSA keeps getting cut. first is was outlawed for non-prescription stuff, and now its cut in general. It was use or lose anyway, so what's the big deal with lowering the amount??

 

[teejayevans]

IIRC the income used is the (MAGI) Modified Adjusted Gross Income...means IRA deductions and others are added back into your AGI.
Roth conversions will be expensive...if income <400% FPL...guess I'll be doing my 2013 taxes ASAP...the treasury is suppose to pay the premium credit directly to the insured, I wonder if you will be able to wait until 2013 before applying or will you need to sign up by beginning of the year?
Also I think only those that go through exchanges (Silver plan only) get the subsidies, so if you have insurance, when you 2013 taxes are complete, can you cancel your current insurance, then apply to get the cheap exchange insurance?
TJ

 

[teejayevans]

I found this site: Handling Income And Job Fluctuations Under The PPACA
and a study that mentions

Recognizing this issue, the Affordable Care Act
requires the secretary of Health and Human Services
(HHS) to specify additional procedures for deter-
mining advance credits for taxpayers with significant
income changes in 2013

Nice to know the govt is here to help
TJ

 

[prototype]

Does any anybody really understand what all 2700 pages of this bill actually say and mean? The key points have been discussed here and elsewhere, but I would imagine many other parts are going to be tieing up state and federal courts forever, It will be a bonanza for the lawyers.

(I have seen different numbers of total pages but I'll go with the 2700)

 

[M Paquette]

Does any anybody really understand what all 2700 pages of this bill actually say and mean? The key points have been discussed here and elsewhere, but I would imagine many other parts are going to be tieing up state and federal courts forever, It will be a bonanza for the lawyers.

(I have seen different numbers of total pages but I'll go with the 2700)

Here's the final version as printed. It's 974 pages including title and table of contents.

http://housedocs.house.gov/energycommerce/ppacacon.pdf

Much of the length comes from the formal specification of revisions to various existing laws, where existing law text is deleted, replaced, or extended with new content. There are about 300 pages that actually specify the new program policies and requirements.

If you are used to reading legal documents, it's actually pretty straightforward, if tedious to get through.

This web site has the Act broken out by sections, as well as the House and Senate versions and the Reconciliation act.

http://www.healthcare.gov/law/full/

The final document, like many other laws, contains a couple of "scriveners errors", editing goofs that I am certain will be used by some party or other for litigation.

 

[shotgunner]

Here is something I just realized. Currently my HI is a an HDHP with HSA. I am single and 55 so my 2012 taxes will include a $4100 deduction for my contribution this year.

If in 2014 I purchase HI through an exchange AND the subsidy is based on 2012 income BUT I will no longer have the HSA deduction in 2014 without the HDHP/HSA policy, which will increase my AGI in 2014 and reduce the amount of subsidy.

I expect to have an HSA contribution in 2013 as well, does this mean my subsidies in 2014 and 2015 will be too large and the government will recoup the overpayment in 2016? (2016 subsidy based on 2014 tax return with no HSA deduction).

Have I got this straight?

 

[explanade]

What is this health insurance deduction?

 

[shotgunner]

What is this health insurance deduction?

If you do not have employer provided HI and you have a qualified High Deductible Health Policy with Health Savings Account there is an annual contribution that can be made to your HSA that is tax deductible. For a single person in 2012 it's capped at $3100 with and an extra $1000 catch up provision for those 55 and over. See line 25 on IRS 1040.

The cost of health insurance premiums over 7.5% AGI is also deductible but Obamacare changes that to 10%.

 

[explanade]

Hmm, but you can't have an HSA without getting it through an employer, right?

 

[shotgunner]

Hmm, but you can't have an HSA without getting it through an employer, right?

You can have an HSA on your own as long as you have a qualified HDHP HI policy and do not have employer provided coverage.

 

[MichaelB]

If you have a high deductible policy that is HSA eligible and you are paying the premiums you can take an above the line tax deduction (really an exemption). It does not matter who provides the policy, only who pays for it.

 

[shotgunner]

If you have a high deductible policy that is HSA eligible and you are paying the premiums you can take an above the line tax deduction (really an exemption). It does not matter who provides the policy, only who pays for it.

Yes indeed and I do. I don't want my question to be lost in the shuffle and that is in 2012 and 2013 I will have an HSA deduction reducing my AGI. That means my subsidies in 2014 and 2015 will be based on a lower income than my actual income in those years due to the loss of the HSA deduction. How is that handled, does it all catch up with a big adjustment lowering my subsidy in 2016?

Maybe nobody knows yet, but if you have a HDHP w/HSA your 2012 income will be used for your 2014 subsidy but even if your income is stable your AGI will rise by as much as $4100 in 2014 due to losing the deduction for the HSA.

MichaelB, my understanding of my taxes is the HSA deduction reduces AGI. The amount of premiums over 7.5% of AGI are deductable if you itemize but that deduction does not lower AGI. The AGI appears to be what is used for calculating one's income for the amount of subsidy. So losing the deduction for the HSA has an effect on the amount of subsidy whereas losing the deduction for HI premium over 7.5% of AGI does not.

 

[easysurfer]

You can have an HSA on your own as long as you have a qualified HDHP HI policy and do not have employer provided coverage.

That's one of the beauties of an HSA. For me, having an HSA with a HI policy was my get out of jail free card when I decided to call it a career back in 2008.

 

[MichaelB]

Yes indeed and I do. I don't want my question to be lost in the shuffle and that is in 2012 and 2013 I will have an HSA deduction reducing my AGI. That means my subsidies in 2014 and 2015 will be based on a lower income than my actual income in those years due to the loss of the HSA deduction. How is that handled, does it all catch up with a big adjustment lowering my subsidy in 2016?

Maybe nobody knows yet, but if you have a HDHP w/HSA your 2012 income will be used for your 2014 subsidy but even if your income is stable your AGI will rise by as much as $4100 in 2014 due to losing the deduction for the HSA.

MichaelB, my understanding of my taxes is the HSA deduction reduces AGI. The amount of premiums over 7.5% of AGI are deductable if you itemize but that deduction does not lower AGI. The AGI appears to be what is used for calculating one's income for the amount of subsidy. So losing the deduction for the HSA has an effect on the amount of subsidy whereas losing the deduction for HI premium over 7.5% of AGI does not.

Yes, the HSA reduces AGI and medical expense deductions do not. AFAIK this continues in 2014 and beyond.

Here is a link to a PDF that details the MAGI (page 6). http://www.ncsl.org/documents/health/DefIncACAMedicdProv.pdf There is a possibility this formula may change before 01/14 so I would wait until we are closer to implementation before taking any actions and in the meantime keep my options open.

 

[explanade]

Under the PPACA though, the kind of policies you'd be buying wouldn't be the high-deductible ones which are advantageous to the insurers, right?

You'd get policies more along the lines of comprehensive ones where you don't have to pay a high deductible in order to get payouts?


On a related note, I got a solicitation in the mail from CA Blue Shield (I'm currently covered by my employer) promising plans starting at $99*. The asterisk said it's for the "Shiled (sic) Saver 6000 plans" for individuals 19-24 in good health, residing in Alameda County, except zip codes 95377 and 95391. "Rates vary on age, location and health history."

So under the PPACA, we wouldn't have rates varying based on age or health history?

For that matter, presumably these are high deductible plans so those would become less popular as "better" policies become more available in the individual market?

I also didn't know that rates would vary depending on zip code. I thought red-lining was had dubious legal status even for car insurance.

 

[MichaelB]

Under the PPACA though, the kind of policies you'd be buying wouldn't be the high-deductible ones which are advantageous to the insurers, right?

You'd get policies more along the lines of comprehensive ones where you don't have to pay a high deductible in order to get payouts?

Insurance companies current policies are "grandfathered", that is, they can continue being offered. The PPACA mandates are:

Create four benefit categories of plans plus a separate catastrophic plan to be offered through the Exchange, and in the individual and small group markets:

– Bronze plan represents minimum creditable coverage and provides the essential health benefits, cover 60% of the benefit costs of the plan, with an out-of-pocket limit equal to the Health Savings Account (HSA) current law limit ($5,950 for individuals and $11,900 for families in 2010);

– Silver plan provides the essential health benefits, covers 70% of the benefit costs of the plan, with the HSA out-of-pocket limits;
– Gold plan provides the essential health benefits, covers 80% of the benefit costs of the plan, with the HSA out-of-pocket limits;

– Platinum plan provides the essential health benefits, covers 90% of the benefit costs of the plan, with the HSA out-of-pocket limits;

– Catastrophic plan available to those up to age 30 or to those who are exempt from the mandate to purchase coverage and provides catastrophic coverage only with the coverage level set at the HSA current law levels except that prevention benefits and coverage for three primary

These policy mandates all have high, HSA type deductibles.

On a related note, I got a solicitation in the mail from CA Blue Shield (I'm currently covered by my employer) promising plans starting at $99*. The asterisk said it's for the "Shiled (sic) Saver 6000 plans" for individuals 19-24 in good health, residing in Alameda County, except zip codes 95377 and 95391. "Rates vary on age, location and health history."

So under the PPACA, we wouldn't have rates varying based on age or health history?

For that matter, presumably these are high deductible plans so those would become less popular as "better" policies become more available in the individual market?

I also didn't know that rates would vary depending on zip code. I thought red-lining was had dubious legal status even for car insurance.

Yes, they can charge based on age, location, family size and tocacco use.

• Require guarantee issue and renewability and allow rating variation based only on age (limited to 3 to 1 ratio), premium rating area, family composition, and tobacco use (limited to 1.5. to 1 ratio) in the individual and the small group market and the Exchange.

There are 3 area rating levels, but I have not found a source that tells me by zip code how they break down.

You can see specifics of the PPACA at the KFF here

 

[shotgunner]

Insurance companies current policies are "grandfathered", that is, they can continue being offered. The PPACA mandates are:

These policy mandates all have high, HSA type deductibles.

Thanks Michael. I think unless something medically catastrophic happens I will be better off under the Silver plan in the PPACA. IF......I understand it correctly.

Currently if I were to have a procedure done that costs $4000, with my current HDHP w/HSA $5K deductible I would pay $4000.

Under the Silver plan I would pay 30%, $1200. The annual deductible under the Silver plan for single person is estimated at $5950 but I would have to have something really major or a lot of Dr. and hospital visits to reach it with a 70% benefit (about $20,000 of medical bills).

 

[FinanceDude]

There is still a lot of the law that needs to be "fleshed out". The final format and rules and such will not be completed for a couple years or so. The 2700 pages was merely a basic infrastructure...........