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ACA income estimates and cost sharing with Silver plans
Old 11-10-2014, 06:06 AM   #1
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ACA income estimates and cost sharing with Silver plans

Silver plans with cost sharing -
100-150 FPL Actuarial value for cost sharing 94%
150-200 FPL Actuarial value for cost sharing 87%
200-250 FPL Actuarial value for cost sharing 73%
FPL = (Federal Poverty Level)

When someone signs up for ACA they have to estimate income. Now if the estimate is low they may have to pay back some subsidy at tax time. From what I have read they would NOT have to pay back the cost sharing amounts. So why not just purposefully underestimate the income to say 149 FPL (when you know it will be 249 FPL in reality, for example) to get the better cost sharing and then pay back the extra subsidy amount at tax time? Would someone get in trouble for doing this?
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Old 11-10-2014, 09:22 AM   #2
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When I filled out the ACA application last fall the income estimate asked for was a good faith (best guess) estimate. This is supposedly checked against prior tax year records and any major change should be explained (e.g. retirement, layoff, etc.). Exchange participant is also supposed to keep HHS updated on any significant changes in income or personal status (e.g. child birth, etc.) DURING the year.
Theoretically if someone were found to be negligently or (worse) deliberately under-reporting income (either on app or by not keeping HHS updated) they could be prosecuted under ACA. Specifically ACA states that anyone who "fails to provide correct information" through "negligence" or "disregard" is subject to fine up to $25,000. Worse, someone "knowingly" provides "false or fraudulent information" is subject to a "penalty of not more than $250,000". Those fines are "in addition to any other penalties prescribes by law". FWIW- ACA specifically says definitions of "negligence" and "disregard" to be used for determining violations are to be IRS Code definitions.
See pages 148-9 of ACA here:
And restated by IRS ACA-related eligibility info handling here:

Since IRS is agency responsible for processing/reconciling subsidies, I suppose this is likely to be handled like other tax matters. But since 2014 is the 1st full yr of subsidies, no one really knows how this will work in real life. Even if no new ACA-related legislation is enacted, I'm sure there will be new "implementation" rules/regulations issued by Feds (HHS, IRS, etc.) as time goes on.

IMHO- Best just to be honest on the application
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Old 11-10-2014, 10:27 AM   #3
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All applications that involve subsidy are based on estimated income. Guidelines were established to deal with this, including what documents are required, how they will be verified, how they will be reconciled and how differences will be settled. The process doesn't lend itself to willful misrepresentation of income. That probably does happen, was probably more likely when the system was first rolled out, and probably less likely going forward as the exchanges gain experience and the verification process itself is improved.
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