ACA Unpleasant SLCSP Surprise

[scrabbler1]

I just received my 1095-A form which shows key data I need to complete Form 8962 for my federal income taxes. For me, the key number is the premium for the SLCSP, or Second Lowest Cost Silver Plan.

To help me in my income tax planning, including estimated taxes, I try to predict what the SLCSP will be. In the ACA"s early years, I was able to get pretty close to the actual number, often copying down my county's Silver Plan rates for my family size and determining the second lowest. While that seems straightforward, it didn't work well after a few years. First, my state includes some health services in the basic package which are not required at the federal level. So, the rates shown for SLCSP are overstated. Second, there were other, unknown differences which made my simple calculation unworkable.

The next few years, I went over the ACA MAGI cliff, so I had to return all the ACA subsidy I had received anyway.

But, now that I am back on the subsidy train, the SLCSP matters again. This amount directly determines my actual subsidy on a one-for-one dollar basis. If I guess too high, every dollar I am off (per month) translates into a $12 increase in my taxes.

I can't really use inflation as an indicator for how much the SLCSP will change from one year to the next, because it can come from a different company, one which was granted a smaller rate change.

My quick-and-dirty estimate for the SLCSP in 2022 (using the sorted list) had it rising from just under $600 in 2021 to about $650. However, when I got the 1095-A form the other day, it showed the SLCSP nearly unchanged from 2021. My overestimate of just over $50 per month became an increase in my taxes due of just over $600.

The arrival of the 1095-A form comes after the deadline for making an estimated tax payment for the 4th quarter. I won't be facing any penalties (and I could justify not paying any anyway). But I wouldn't want to overpay estimated taxes and then wait 6-9 months for a refund, either.

As long as I can assure myself of staying in a safe harbor for tax penalties, I'll be fine. But I didn't like the recent, unpleasant surprise of the SLCSP being nearly unchanged from the year before.

 

[jim584672]

The SLCSP drives the whole subsidy calculation, the lower the worse it is. I have been locked in Medicaid but that will end this year and I may be in the QHP zone. Hopefully I can get income to under 200 FPL and get into the Essential Plan and avoid dealing with subsidies.

The SLCSP for NY 2022.

https://info.nystateofhealth.ny.gov/sites/default/files/English%20-%202022%20SLCSP%20Chart.pdf

 

[djsander]

I’m pretty confused on this as last year was my first year on an aca policy. Our states website had the enter estimated income and then told us our subsidy amount and listed the policy prices. It looks like we stayed under the estimated income so would there essentially be a net zero at tax time. I could see if your income goes over.

 

[PaunchyPirate]

Yep. All you can do is guesstimate. And deal with the consequences as they arise. Until someone chooses to implement a better healthcare system.

 

[retire48in2018]

I thought I saw this when I selected by plan. I don’t remember seeing “estimate”. Unfortunately, it did not show up on the “eligibility notice”. So, I am relying on memory.

But, I made my income match the plan, and I was dead on with planned extended subsidy, (beyond cliff).

 

[SecondCor521]

I'm surprised. My state used the SLCSP to determine my APTC for 2022, and my 1095-A shows the same SLCSP. To the penny.

@scrabbler1, are you not getting APTC? Or are you saying that the SLCSP that generated the APTC for you was different than on your 1095-A? If the latter, I would consider expressing disappointment to my state exchange.

Another idea which might work is to call your state exchange and ask them for the SLCSP number early in the year. They should have it and be able to provide it to you.

 

[scrabbler1]

I'm surprised. My state used the SLCSP to determine my APTC for 2022, and my 1095-A shows the same SLCSP. To the penny.

@scrabbler1, are you not getting APTC? Or are you saying that the SLCSP that generated the APTC for you was different than on your 1095-A? If the latter, I would consider expressing disappointment to my state exchange.

Another idea which might work is to call your state exchange and ask them for the SLCSP number early in the year. They should have it and be able to provide it to you.

SecondCor521, nobody at the state exchange knows what the SLCSP is going to be until Form 1095-A comes out. I have called them at various times, near the end of the year (last December) and early in the following year (January) and nobody knows what it will be. I have called the special hotline for inquiries about the 1096-A form, a group of reps who have been otherwise very good in handling my often thorny and complex issues over the years.

I agree that they should know the SLCSP much earlier in the year, even if it is a published rate minus the premium going toward non-mandatory ACA coverages within the policy.

That being said, whatever they actually did use this year when determining my APTC at the start of the year turned out to be pretty close, meaning that the net difference between my total APTC and my actual credit was small. I was expecting the difference to be larger because of the SLCSP I determined from the list of Silver plans offered in my county was more than $50 larger. I suppose in the future I should simply trust that the APTC is appropriate, given the income I report (which was very close to my actual income).

 

[niven]

When I sign up for ACA, I do the same sorting of the silver plans to get the SLCSP premium. I then use my tax estimation spreadsheet to verify what I think is the right SLCSP based on my estimated MAGI and the full subsidy I was told was available to use.

Perhaps not helpful in your situation, but it is possible to verify the SLCSP at enrollment. If they are actually changing it after that, I'd be annoyed as well.

 

[PaunchyPirate]

As scrabbler1 mentioned in his first post, the manual method of just sorting all the Silver plans and noting the second highest one may not be the SLCSP that is used at tax time and reported back to you on the 1095-A.

From https://www.cms.gov/cciio/resources...t-cost-silver-plan-technical-faqs12162016.pdf

“How is essential health benefits (EHB) percent of premium used when determining SLCSP?
Only the portion of the premium allocable to EHBs (the EHB premium) is considered when finding the SLCSP and its premium. Silver plans are compared in terms of EHB premiums to determine which plan is the second lowest cost silver plan, and the premium tax credit is no greater than the difference between EHB premium of the SLCSP and the taxpayer’s contribution amount. Some plans’ premiums may exceed its EHB premiums, for example, because it provides services in addition to EHB, such as routine adult dental coverage. As a result, some families may have to pay more than the expected contribution amount to purchase the SLCSP.”

The type of “extras” and their costs likely vary by region. If your region has no companies that add any extras to the plans, then the SLCSP seen during enrollment might match the one seen at tax time.

 

[niven]

As scrabbler1 mentioned in his first post, the manual method of just sorting all the Silver plans and noting the second highest one may not be the SLCSP that is used at tax time and reported back to you on the 1095-A.

Then the question (to me) is does the SLCSP used actually change after enrollment? If it can't be determined from the sorted list, it can still be estimated from the other information known (the MAGI and full subsidy amount).

 

[PaunchyPirate]

Then the question (to me) is does the SLCSP used actually change after enrollment? If it can't be determined from the sorted list, it can still be estimated from the other information known (the MAGI and full subsidy amount).

I don’t think it changes after enrollment, but I suppose it could. We don’t know when The insurance companies are required to submit the portion of their premiums that cover only the required EHB portions of coverage. Personally, I think sorting the stated premium prices at enrollment is the best estimate to use even if it’s not exact. It is an estimate. Just that.

I don’t see another formula that gets you closer. But if you have one, I’d love to hear it.

 

[SecondCor521]

SecondCor521, nobody at the state exchange knows what the SLCSP is going to be until Form 1095-A comes out. I have called them at various times, near the end of the year (last December) and early in the following year (January) and nobody knows what it will be. I have called the special hotline for inquiries about the 1096-A form, a group of reps who have been otherwise very good in handling my often thorny and complex issues over the years.

I agree that they should know the SLCSP much earlier in the year, even if it is a published rate minus the premium going toward non-mandatory ACA coverages within the policy.

That being said, whatever they actually did use this year when determining my APTC at the start of the year turned out to be pretty close, meaning that the net difference between my total APTC and my actual credit was small. I was expecting the difference to be larger because of the SLCSP I determined from the list of Silver plans offered in my county was more than $50 larger. I suppose in the future I should simply trust that the APTC is appropriate, given the income I report (which was very close to my actual income).

Well that would be disappointing to me. Maybe switch to using an SLCSP calculated from your APTC since it's closer? I'm sure you've thought of that.

As scrabbler1 mentioned in his first post, the manual method of just sorting all the Silver plans and noting the second highest one may not be the SLCSP that is used at tax time and reported back to you on the 1095-A.

[...]

The type of “extras” and their costs likely vary by region. If your region has no companies that add any extras to the plans, then the SLCSP seen during enrollment might match the one seen at tax time.

Sure, but they have to use SLCSP (adjusted however for EHBs) to calculate APTC at enrollment. And since it affects people's taxes, they should be able to do it accurately at enrollment IMHO.

Then the question (to me) is does the SLCSP used actually change after enrollment? If it can't be determined from the sorted list, it can still be estimated from the other information known (the MAGI and full subsidy amount).

In theory it can if marketplace insurers enter or leave a market mid-year such that the SLCSP changes. It can also change if the enrollee moves from one coverage area (ZIP code) to another within a state. And obviously if someone moves from state to state.

I agree with you that they should be able to provide an accurate SLCSP at enrollment since they need it to calculate APTC.

 

[PaunchyPirate]

Correct me if I’m wrong. If you estimated your income at, say $65,000 during enrollment and the calculated subsidy was, say $356 per month this would be based on the SLCSP.

At tax time, I believe if your ACTUAL MAGI indeed turns out to be $65,000, Isn’t your tax credit also accurately calculated to $356? I think the issue scrabbler1 is discussing is that he is being bitten by being slightly off his income estimation.

 

[niven]

I don’t think it changes after enrollment, but I suppose it could. We don’t know when The insurance companies are required to submit the portion of their premiums that cover only the required EHB portions of coverage. Personally, I think sorting the stated premium prices at enrollment is the best estimate to use even if it’s not exact. It is an estimate. Just that.

I don’t see another formula that gets you closer. But if you have one, I’d love to hear it.

Let's assume the full subsidy is $650 per month. That's the full subsidy from the eligibility notice you get when signing up, before selecting a plan.

The eligibility notice also shows the yearly income you estimated. So let's say that's $60,000, or $5,000 per month.

$60,000 income is 344% FPL for 2022. That puts you in the 6% to 8.5% range for the part of the premium you're responsible for - or 7.1% interpolated (6% for the 300% FPL, plus 1.1% (2.5% * .44) for the additional 44% FPL equals 7.1%). Multiply $5,000 per month times 7.1% and that's $355 per month that's your responsibility.

So that would make the SLCSP used $650 (full subsidy) + $355 (your responsibility) or $1,005 per month.

 

[PaunchyPirate]

There you go scrabbler1. ^^^ there is how to estimate the true SLCSP each year.

 

[SecondCor521]

Correct me if I’m wrong. If you estimated your income at, say $65,000 during enrollment and the calculated subsidy was, say $356 per month this would be based on the SLCSP.

At tax time, I believe if your ACTUAL MAGI indeed turns out to be $65,000, Isn’t your tax credit also accurately calculated to $356? I think the issue scrabbler1 is discussing is that he is being bitten by being slightly off his income estimation.

You're correct in that if your estimated AGI and your actual AGI are equal, your APTC should equal your subsidy and your Form 8962 should show a $0 adjustment either way.

I read scrabbler1 as being fairly close on his income estimate but off on his SLCSP estimate.

 

[cathy63]

I think this problem may be unique to NY and possibly a few other states that have broader coverage requirements than ACA. In my state, which has no such requirements, my experience has been that the SLCSP on my 1095-A (which I did receive before the Q4 estimated tax due date) exactly matches what I find during enrollment. I don't estimate it, I just look it up and make a note of it and it's always been correct to the penny.

I looked at the list at the link that jim584672 posted in #2, and for the two zip codes I tried, it was impossible to actually purchase the SLCSP. All the plans available in 2022 were more expensive than the numbers in that list, which I guess reflects the additional items they're required to cover that aren't eligible for a Fed subsidy.

I was also going to suggest what niven said in #14. You should be able to take Form 8962 and work it backwards to calculate the premium that the NY exchange used to figure your subsidy.

 

[jim584672]

You can see what the subsidy calculator estimator says since it assumes a SLCSP for 2023 to make the estimate. Looks like $661 for 2023.

https://www.kff.org/interactive/subsidy-calculator/

For NY is is only valid over 200% FPL, under is would not be accurate since it doesn't account for the BHP plan from 138-200 in NY.

 

[niven]

In theory it can if marketplace insurers enter or leave a market mid-year such that the SLCSP changes. It can also change if the enrollee moves from one coverage area (ZIP code) to another within a state. And obviously if someone moves from state to state.

If someone moves and has to select a new plan, I can of course see the SLCSP changing. Form 1095-A would then show each month not being the same (e.g. one premium, SLCSP premium and tax credit for the first six months, then different amounts for the other six months after a move). You wouldn't be blindsided in that case, or shouldn't be. And you really wouldn't lose anything either since the subsidy doesn't change for before the move, assuming the estimated income was correct.

But changing the SLCSP after enrollment when someone may have made a plan decision on what they could afford, and then they don't know about it until tax time seems somewhat harsh. Of course, that doesn't mean it doesn't happen.

 

[zinger1457]

I was on ACA since it first started up until the end of last year, never had any issues with the SLCSP used at the beginning when calculating the subsidy, income estimates may have been off a little but not much.

 

[scrabbler1]

After reading all of your replies (and thanks for all the good discussion), I see I can back into the SLCSP used to determine my APTC subsidy.

I went back to the confirmation letter I received from my state's (NY) exchange to remind me of the estimated MAGI I reported to them a year ago (I needed to show proof again due to a technical reason, but that did not affect my ATPC subsidy, nor was it different for January versus subsequent months).

I plugged the estimated income I reported into a spreadsheet which mimics the calculations shown on Form 8962, along with the appropriate FPL. When I included the SLCSP amount I received a few days ago, the actual and calculated subsidies were nearly identical, about $2 apart, as SecondCor521 suggested.

This means, as Cathy63 suggested, I can do for next time, by trial and error, enter the MAGI and FPL amounts (are the FPLs published somewhere in advance?) into my spreadsheet, then the APTC amount. I can then enter different SLCSP amounts to see which one gets me to a zero difference between the actual APTC and the calculated one. This does assume that the %-of-MAGI figure from that big table (Table 2) changes little or not al all from the prior year. Some years, it changed a little. It remained unchanged from 2021 to 2022.

This will, at least, greatly reduce any unpleasant surprise I see with the SLCSP, as it is known by my state's exchange at the start of the year even though their phone reps have no idea what it is.

Thanks to you all for an educational discussion which will help me going forward. I can build this into my 2023 tax spreadsheet.

 

[sengsational]

Good thread. I learned that it's not always as simple as jotting down the price of the SLCSP for self and spouse at the time of purchase.

 

[PaunchyPirate]

This topic will become much more important if the income cliff is actually restored in 2025(?) as currently planned. For people who cut their income estimate too close based on simply finding the SLCSP at time of enrollment could be in for a shock if the tax-time SLCSP is different enough to push their income over the cliff.

Thanks to everyone for the good comments in this thread.

 

[jim584672]

This topic will become much more important if the income cliff is actually restored in 2025(?) as currently planned. For people who cut their income estimate too close based on simply finding the SLCSP at time of enrollment could be in for a shock if the tax-time SLCSP is different enough to push their income over the cliff.

Thanks to everyone for the good comments in this thread.

I'm not sure how a SLCSP number would have any impact on if someone goes over the cliff, am I missing something?

 

[cathy63]

... are the FPLs published somewhere in advance?...This does assume that the %-of-MAGI figure from that big table (Table 2) changes little or not al all from the prior year. Some years, it changed a little. It remained unchanged from 2021 to 2022...

You can find FPL figures in lots of places. The official ones are in the Federal Register, but it's easy to google for them on many other sites. ACA uses the prior year's numbers because the current year info isn't published until January. Here's a page that has them for the past few years: https://obamacarefacts.com/federal-poverty-levels-for-aca-coverage/

Here are the ones for 2023 that will be used in next year's ACA calcs (they aren't 100% guaranteed final, but it's unlikely that they'll change now): https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines

I think the percentages table in the form 8962 instructions should be good through 2025. The Inflation Reduction Act extended the change that was put in place by ARPA for 2021/22.