First time with Obamacare

[RenoJay]

I recently finished paying years of alimony. My ex does not work outside the home and generally claims the two kids on her tax return. Next year her declarable, taxable income is likely to be very low, perhaps $10k or so. The child support I pay is not declarable on her tax return. (And don't worry for her, she's got plenty of assets and has made a choice not to hold a paying job.)

Because of her big drop in income, it seems she and the kiddos may qualify for an Obamacare-subsidized plan. But from what we can tell, there's a MINIMUM income level required for these plans, and she thinks it's in the ballpark of $30k.

My questions are:

1. Does child support count towards calculating her income for ACA coverage?
2. Why is there a minimum income, and what does someone typically do if they fall below it?

Thanks.

 

[RetiredAt49]

My questions are:



1. Does child support count towards calculating her income for ACA coverage?

2. Why is there a minimum income, and what does someone typically do if they fall below it?



Thanks.

1) child support does not count as income but alimony does (if divorced before 12/31/2018).
2) don’t know why (dealing with same issue) but if they fall below the level they force you on Medicaid.

 

[TripleLindy]

These are the income parameters for ACA insurance in 2023:

To get assistance under the Affordable Care Act you must earn between 100% – 400% of the poverty level. For 2023, that is $13,590-$54,360 for an individual and $27,750- $111,000 for a family of four.

You probably don’t want your kids on Medicaid, so I’d make sure your ex has a plan to ensure meeting the minimum income level.

 

[EastWest Gal]

It looks like the minimum threshold for the family you described (adult with two dependents) is $32,012. She would have qualified for a subsidy starting in 2021 with the American Rescue Plan for an income up to ~$200K. I suppose you were supplying health insurance as part of alimony, and now that is gone for her and the kids. If she's living on anything other than cash (investments, real estate, etc.) wouldn't she have reportable income? If she has plenty of assets, can she not manipulate enough income to qualify for the ACA by selling assets?

Also, nontaxable income (qualified dividends, LTCG, etc.) is still income for ACA purposes.

There are two choices if one falls below 138% FPL: Go on Medicaid, increase income. Maybe she'll decide to get a job.

 

[jim584672]

There is no max income cap through 2025 for subsidies. Max cost for the benchmark Silver plan can never exceed 8.5% of MAGI.

Children's Medicaid is actually very good from everything I have heard, Around 40% of all children are on it. MAGI Medicaid is very much YMMV, nut personal experience is good.

 

[EastWest Gal]

There is no max income cap through 2025 for subsidies. Max cost for the benchmark Silver plan can never exceed 8.5% of MAGI.

Children's Medicaid is actually very good from everything I have heard, Around 40% of all children are on it. MAGI Medicaid is very much YMMV, nut personal experience is good.

Children’s Medicaid is good coverage but few pediatricians take Medicaid. In our area, very few pediatricians accept Medicaid. This was also true during my ten years in office practice in California. I was a hospitalist when I moved here, then worked in a public clinic for 3years. I then joined a solo practitioner-the only pediatrician who took Medicaid. Truth be told, that was wonderful. But I could not get enough hours to make ends meet, so I took a new hospitalist job. That’s when I found out how bad it was. I saw unassigned newborns. Many moms hadn’t picked a pediatrician, so I developed and maintained a list. There were over 20 pediatric groups. Only that one pediatrician and two clinics took Medicaid.

If the kids are older, family practitioners do a very good job filling the same role, and most take Medicaid. Medicaid pays everything. But sometimes choices are limited. Truth be told for the vast majority, it works well, if you can find a provider.

 

[DayDreaming]

If she can do Roth conversions, maybe she can boost her income enough to stay out of Medicaid. But still low enough to get a decent subsidy on the ACA.

 

[RetiredAt49]

If she can do Roth conversions, maybe she can boost her income enough to stay out of Medicaid. But still low enough to get a decent subsidy on the ACA.

Exactly what I’m doing

 

[Aerides]

2. Why is there a minimum income, and what does someone typically do if they fall below it?.

Because of the history of the law and the negotiations required back in 2009-10 to make it happen. In some states, there's a gap between Medicaid and ACA plans.

Medicaid covers folks under the FPL. The ACA kicks in at 150% of FPL. Many states expanded Medicaid to close this gap, so it varies based on where she lives. Nevada has the expanded coverage. So there's no donut hole for her to fall through.

However, unlike having excess income, if one estimates income to qualify for the ACA plans, then falls short at tax time, there's no penalty, or getting kicked off, assuming one continues to estimate in good faith that they meet the threshold.

 

[jim584672]

If you want to stay out of Medicaid in an expansion state you need >138% to go to ACA with subsidies. In a non-expansion state you need income over 100% to go to ACA with subsidies, lower and you get nothing. CHIP levels are much higher.

 

[RenoJay]

If she can do Roth conversions, maybe she can boost her income enough to stay out of Medicaid. But still low enough to get a decent subsidy on the ACA.

Thank you to all who've replied. I spoke to her last night, and she totally agrees that we do not want her or the kids on Medicaid. (And FYI, lest anyone thinks I've cut off my family, please understand that the ex has well into seven figures of assets that I gave her in the divorce and she lives in a much nicer home than I do.)

The ROTH Conversion idea is a great one. She has enough in a traditional IRA to get to the threshold, and she could do the conversion likely without any tax penalty. So to confirm the income from the Roth conversion would count towards the min. for ACA, correct?

 

[Markola]

Won’t her income have to rise post-alimony to support her lifestyle, even investment income?

 

[cathy63]

... So to confirm the income from the Roth conversion would count towards the min. for ACA, correct?

Yes, the Roth conversion is ordinary income and is counted in the ACA subsidy calculations.

 

[jim584672]

To avoid Medicaid report equal monthly amounts, not one big month and nothing the next, that will put you in Medicaid because it is monthly based.