Weird ACA Scenario

[HadEnuff]

In NY State if your MAGI is under 38,000, you are kicked out of the marketplace and are forced into Medicaid.

But, in 2016, while estimating your income you figure your MAGI will be 42K, so you are in a Bronze plan, heavily subsidized.

You estimate in Nov. 2017 the same thing. You get the same Bronze plan, again heavily subsidized.

You do your 2017 taxes in February of 2018, and you find that your MAGI is really lower than you estimated because your Social Security Benefits are taxed much lower than you estimated. Your MAGI is below that 38K threshold, but you were covered for 2017, which has come and gone, with the Marketplace Bronze plan, and you have already been declared eligible for 2018 due to your projected income.

So what happens? Will they kick you out of the marketplace in 2018, based upon your real 2017 income, or allow you to stay in the marketplace based upon your 2018 projections?

 

[jim584672]

In NY State if your MAGI is under 38,000, you are kicked out of the marketplace and are forced into Medicaid.

But, in 2016, while estimating your income you figure your MAGI will be 42K, so you are in a Bronze plan, heavily subsidized.

You estimate in Nov. 2017 the same thing. You get the same Bronze plan, again heavily subsidized.

You do your 2017 taxes in February of 2018, and you find that your MAGI is really lower than you estimated because your Social Security Benefits are taxed much lower than you estimated. Your MAGI is below that 38K threshold, but you were covered for 2017, which has come and gone, with the Marketplace Bronze plan, and you have already been declared eligible for 2018 due to your projected income.

So what happens? Will they kick you out of the marketplace in 2018, based upon your real 2017 income, or allow you to stay in the marketplace based upon your 2018 projections?

So you have 5 people in your household? That would make the Medicaid level $39,717.

In NY from 138-200% FPL has there are no metal plans, it is all the Essential Plan which is much better. And there is no PTC subsidy involved in the Essential Plans so nothing to reconcile.

I have no direct experience, but I think as long as they approve your estimate they are not actively going back to see if the estimate was accurate. My estimates are very close so the issue has never come up for me.

 

[HadEnuff]

So you have 5 people in your household? That would make the Medicaid level $39,717.

In NY from 138-200% FPL has there are no metal plans, it is all the Essential Plan which is much better. And there is no PTC subsidy involved in the Essential Plans so nothing to reconcile.

I have no direct experience, but I think as long as they approve your estimate they are not actively going back to see if the estimate was accurate. My estimates are very close so the issue has never come up for me.

No, I have only 2 people in the household. Am I wrong about the Medicaid threshold for 2 people?

 

[jim584672]

No, I have only 2 people in the household. Am I wrong about the Medicaid threshold for 2 people?

Two would be $22,412 or $1,868 per month.
Source: https://www.health.ny.gov/health_care/medicaid/

 

[Sue J]

You do your 2017 taxes in February of 2018, and you find that your MAGI is really lower than you estimated because your Social Security Benefits are taxed much lower than you estimated. Your MAGI is below that 38K threshold, but you were covered for 2017, which has come and gone, with the Marketplace Bronze plan, and you have already been declared eligible for 2018 due to your projected income.

So what happens? Will they kick you out of the marketplace in 2018, based upon your real 2017 income, or allow you to stay in the marketplace based upon your 2018 projections?

100% of Social Security benefits are counted for ACA MAGI. This is different than your 1040 AGI, which only counts 50%-85% of SS as taxable.

https://www.healthcare.gov/income-and-household-information/income/

Scroll down to see the details for SS benefits.
"Include both taxable and non-taxable Social Security income. Enter the full amount before any deductions."

I also found this helpful -

 

[HadEnuff]

Two would be $22,412 or $1,868 per month.
Source: https://www.health.ny.gov/health_care/medicaid/

Thanks for that information.

100% of Social Security benefits are counted for ACA MAGI. This is different than your 1040 AGI, which only counts 50%-85% of SS as taxable.

https://www.healthcare.gov/income-and-household-information/income/

Scroll down to see the details for SS benefits.
"Include both taxable and non-taxable Social Security income. Enter the full amount before any deductions."

I also found this helpful -

Well that's a game changer. 100% of my SS puts me above the Medicaid Threshold, so I don't have to worry about that. Nor do I have to worry about taking more than my RMD from an IRA to stay above the threshold.

Thanks folks! You're the best.

 

[ivinsfan]

I just got back from my broker assisted first year ACA signup. State of MN...our small farm simply cant handle the load of group insurance for two mid fifty year olds and a 64 year old.

Look at our realistic income levels with these lower crop prices, factored in subsidy amount and came up with about 35K..give or take..Decided on a Bronze HSA for myself since Imy DH is on Medicare and my subsidy isn't geared toward 2 insured.

The broker began to pressure me to go on MNSure for income from around 18-32K. I said don't want the local HMO which is the only option in our country for a MNSure policy...also not sure I'll come in under the 32ish number. He almost starts to browbeat me telling me "You know if you actually have income under 32K you'll get kicked out of the system and they will want the entire subsidy back. You'll be in a world of hurt. "I respond , never seen that anywhere thanks for telling me, Ill make sure I hit that number. He then seems to back off and tells me well that's the law as I understand it but I've never actually seen it happen.


My sign-up thru MN Sure went through smoothly as far as I know, but I'm flummoxed by what the guy told me and I'll probably overreact and come even a little higher then my 35K.

Do anyone know how I could actually verify this info? I'm curious and want to warn others in case the issue comes up.

 

[HadEnuff]

I just got back from my broker assisted first year ACA signup. State of MN...our small farm simply cant handle the load of group insurance for two mid fifty year olds and a 64 year old.

Look at our realistic income levels with these lower crop prices, factored in subsidy amount and came up with about 35K..give or take..Decided on a Bronze HSA for myself since Imy DH is on Medicare and my subsidy isn't geared toward 2 insured.

The broker began to pressure me to go on MNSure for income from around 18-32K. I said don't want the local HMO which is the only option in our country for a MNSure policy...also not sure I'll come in under the 32ish number. He almost starts to browbeat me telling me "You know if you actually have income under 32K you'll get kicked out of the system and they will want the entire subsidy back. You'll be in a world of hurt. "I respond , never seen that anywhere thanks for telling me, Ill make sure I hit that number. He then seems to back off and tells me well that's the law as I understand it but I've never actually seen it happen.


My sign-up thru MN Sure went through smoothly as far as I know, but I'm flummoxed by what the guy told me and I'll probably overreact and come even a little higher then my 35K.

Do anyone know how I could actually verify this info? I'm curious and want to warn others in case the issue comes up.

So the broker told you that if you came in too low with your MAGI, after the fact, they'd THEN take away your subsidy? But then when you challenged him he admitted, he'd never seen it done?

 

[ivinsfan]

I didn't challenge him at all. I thanked him for the info and said I didn't qualify for the Mnsure policy...he then seemed to walk it back.

 

[SecondCor521]

So what happens? Will they kick you out of the marketplace in 2018, based upon your real 2017 income, or allow you to stay in the marketplace based upon your 2018 projections?

I don't know about New York. In my state, there seems to be absolutely no reconciliation between the estimates and what might or might not actually happen later. It is an honor system where you are expected to guess as best as you can and update them if your situation changes.

If you were in Idaho, you'd be allowed to stay in the marketplace.

 

[SecondCor521]

Do anyone know how I could actually verify this info? I'm curious and want to warn others in case the issue comes up.

You can read the instructions to Form 8962 on the IRS web site here:

https://www.irs.gov/pub/irs-pdf/i8962.pdf

As I read through the instructions, you will not have to repay the subsidy - see in particular the bottom of the first column of text on page 7. And in fact, if your actual income is lower than your estimated $35K, you will get an additional premium tax credit. But I am neither an expert nor a CPA.

You could confirm the tax aspect of it by calling the IRS. You could confirm whether or not they would kick you off of the marketplace by calling your state exchange folks.

 

[ivinsfan]

I could but I would get a phone nerd who assists people with exchange signup.I'm not going to be affected by it but wanted th share my experience.it does seem very punitive.

 

[sengsational]

I think the whole story occurs in the instructions for the form 8962 (or easier, in the tax software you use).

Run a scenario where, on the exchange site, you enter a high enough income to evade Medicaid. Then enter into the tax software, some lower amount (that would have got you snagged into Medicaid). If there are no consequences there, then I don't see where the consequences would come from. The 8962 wraps it up and puts a bow on it (reconciles your estimate vs actual).

 

[ivinsfan]

The agent said said Mn is "special" because they have a state program for lower income families but it's a federal credit so I'm scratching my head over it. .