ACA CSRs and Change in Income

[medelste]

I'm having trouble finding on the internet anyone that explains what happens with ACA CSRs (cost sharing reductions) when you have mid-year income change? Plenty is written about ACA subsidies changing, but what about CSRs that come with Silver plans if your income is low enough?

My wife is considering going back to a seasonal summer job next year that would pay her about $4,000. If we assume she doesn't go back, our annual income (we file jointly) will make us eligible for the silver plan we like that comes with CSRs that provide a $375 family deductible, $5,400 out-of-pocket-max, and other benefits. If, say in June 2020 she decides to work and we update healthcare.gov with an estimated income of $4,000 higher, will all that change? I can see during open enrollment that if we estimated our income today to include that $4,000 for next year, the deductible jumps to $3,600, the OOPM jumps to $13,000, and more. So do CSR's change mid-year?

And if it does change, does it change from that point forward, or could the insurance company go back and adjust your previous bills in 2020? In other words, will the insurance company try to "claw back" the bills they've paid earlier in the year that they wouldn't have paid had we had the higher income from the start? We anticipate a costly surgery early in 2020. So if we were to hit our $5,400 OOPM by March, and then increase our income estimate in June if she goes back to work, could they go after the thousands that we did not have to pay earlier in the year based on our lower OOPM at that point? (It could be quite the disincentive for her not to work!)

Thank you for any insights you can share!

 

[VanWinkle]

Cost subsidies are not reconciled. To my knowledge, there will be no change in your cost sharing due to income changes. I would confirm this with the marketplace representative.

 

[Dtail]

Cost subsidies are not reconciled. To my knowledge, there will be no change in your cost sharing due to income changes. I would confirm this with the marketplace representative.

This is my understanding too.
One kind of gets a break if the reconciled MAGI ends up being higher than the estimated MAGI, as it relates to CSR's but subsidies will be reduced.

 

[MBSC]

So do CSR's change mid-year?

Yes, the CSR changes mid-year if you report a mid-year income change that crosses one of the CSR FPL thresholds. When you start a Marketplace application, you agree to report income changes. There is no CSR reconciliation for those who report the change at tax filing.

And if it does change, does it change from that point forward, or could the insurance company go back and adjust your previous bills in 2020? In other words, will the insurance company try to "claw back" the bills they've paid earlier in the year that they wouldn't have paid had we had the higher income from the start?

No intentional reconciliation with a mid-year change either but keep in mind:

1. The updated cost sharing applies if the insurer has to reprocess an older claim. Examples include billing providers submitting corrected claims (ie. incorrect diagnosis code). Or, the insurer runs a bulk adjustment after fixing a processing error.
2. New claims may apply the updated cost sharing regardless of when the provider was seen. A slow biller waiting until June to submit claims for February services.

If you qualify for cost-sharing reductions and you have a change of income during the year, your discount may change or even make you ineligible for cost-sharing reductions, depending on your new income level.

Reference: https://www.wahbexchange.org/new-customers/financial-help/

What happens if someone receiving a cost-sharing reduction experiences a change (such as a change in income) during the course of the year?

A change in circumstances during the year may result in a change in eligibility for cost-sharing reductions. A person could no longer be eligible and move to a standard silver plan without a cost-sharing reduction, or a person could become eligible for a lesser or more generous cost-sharing reduction level. Unlike with the premium credits, no reconciliation or repayment of cost-sharing reduction amounts occurs in these situations.

Reference: https://www.healthreformbeyondtheba...in-marketplace-health-insurance-plans-part-2/

IMPORTANT: Changes in circumstance that affect CSR eligibility may result in a change in CSR amounts.

Note about changes in CSR eligibility: If a consumer’s CSR amount decreases mid-year following a change in circumstance, she does not have to repay CSRs already received. Additionally, a consumer does not receive a refund for previously paid out-of-pocket expenses if CSR award amounts increase.

Reference: http://coveraz.org/wp-content/uploads/2013/06/In-The-Loop-Cost-sharing-reductions.pdf

 

[Dtail]

Yes, the CSR changes mid-year if you report a mid-year income change that crosses one of the CSR FPL thresholds. When you start a Marketplace application, you agree to report income changes. There is no CSR reconciliation for those who report the change at tax filing.

No intentional reconciliation with a mid-year change either but keep in mind:

1. The updated cost sharing applies if the insurer has to reprocess an older claim. Examples include billing providers submitting corrected claims (ie. incorrect diagnosis code). Or, the insurer runs a bulk adjustment after fixing a processing error.
2. New claims may apply the updated cost sharing regardless of when the provider was seen. A slow biller waiting until June to submit claims for February services.

Noting there are "loopholes" already in the ACA program, I wonder why they left the CSR loophole in when it would appear easy to fix no different than a tax subsidy reconciliation.

 

[bingybear]

I believe you are still obligated to inform healthcare.gov when you know your income is going to change (has chabged)... not just at the end of year.

 

[Fermion]

I believe you are still obligated to inform healthcare.gov when you know your income is going to change (has chabged)... not just at the end of year.

This is the dilemma with the early retiree. Technically, maybe you are supposed to notify healthcare.gov almost every single day if you are invested in the stock market, since your income will fluctuate based on various market forces (dividend increases, bond early redemptions, stock sales with capital gains or losses).

We took the approach of using the historical average return of the stock market for the past ~100 years and estimating our yearly income based on how much of our taxable assets are invested in the stock market. This seems more reasonable than notifying healthcare.gov when a stock in your index fund increases the dividend by $30/year.

 

[bingybear]

This is the dilemma with the early retiree. Technically, maybe you are supposed to notify healthcare.gov almost every single day if you are invested in the stock market, since your income will fluctuate based on various market forces (dividend increases, bond early redemptions, stock sales with capital gains or losses).

We took the approach of using the historical average return of the stock market for the past ~100 years and estimating our yearly income based on how much of our taxable assets are invested in the stock market. This seems more reasonable than notifying healthcare.gov when a stock in your index fund increases the dividend by $30/year.

the OP was describing one spouse going back to work. That is a bit different than a small increase in a dividend that likely became known at the end of the year.

The one year I applied for a APTC the process made you agree legally to notify the ACA of changes. I expect they could be a pain if they wanted to.

 

[GTFan]

Are you supposed to report income changes? Yes. Should you do it for, say, a $5-10k change? No, it's way better to reconcile at tax time and there are no penalties for doing so, CSRs being a prime reason not to.

 

[ncbill]

Are you supposed to report income changes? Yes. Should you do it for, say, a $5-10k change? No, it's way better to reconcile at tax time and there are no penalties for doing so, CSRs being a prime reason not to.

Yep, an ER here can "estimate" income just over 100% FPL to get the maximum CSRs.

Go over the cliff and pay the premium difference, but still keep the CSRs for that year...and if you end up under 100% FPL your repayment is strictly limited (e.g. $600 max for married filing jointly...had to pay that one year)

 

[Dtail]

Yep, an ER here can "estimate" income just over 100% FPL to get the maximum CSRs.

Go over the cliff and pay the premium difference, but still keep the CSRs for that year...and if you end up under 100% FPL your repayment is strictly limited (e.g. $600 max for married filing jointly...had to pay that one year)

Umm that is effectively my reference. I am surprised they don't reconcile the CSR's and thus are setting up potential "getting over" reporting.