ACA Sticker Shock

[scrabbler1]

The ACA premium subsidy is not taxable as a straight income amount the way dividends, interest, and wages generally are. But it could be taxable in an indirect way the way it was for me a few times back in 2014 and 2015. What happened with me was that I did not receive it on an advanced basis, paying the full HI premium each month before I reconciled the subsidy the following year when I prepared my federal income tax return. Because I had itemized my deductions, including medical expense, I had deducted the full premium amount I actually paid. The subsidy I determined on the tax return the following year became a negative (offset) to the premiums I paid the following year, effectively increasing my taxes due a little bit. The principle here was the same as having to include a state income tax refund for overpayment of state taxes if I had deducted the original amount on my federal return. But, unlike state tax refunds, there is no income line to post them on, so reducing a deductible expense is the only way.


Another way the subsidy might appear taxable is if you receive the subsidy on an advanced basis (a reduction to the monthly insurance premium) but go over the cliff and have to repay it, something which has also happened to me. That repayment is added to the income tax owed (or reduces a refund). The subsidy is itself not taxable but losing it may make it appear to be taxable.

 

[daylatedollarshort]

Well yes and no. Its is a credit against what you would pay vs Cobra or any other private plan. I paid a much smaller premium for the subsidy. So I assumed when I got a huge tax bill it was because I was drawing more than I needed for expenses so cut back there. Then I talked to my accountant who explained that what I was drawing was not nearly enough to push me over the income cliff but that the subsidy benefit was considered disposable income if you made a certain amount and could be taxable. So yea I did go over the cliff but the subsidy is not always a writeoff like say property taxes or charity. Or at least thats how he explained it to me. (the subsidy savings still paid my IRS bill but I'm in the medical profession and still felt sorry for working mid-class who have to pay full price for rxs and visits an will never meet their deductible)

The subsidy is a tax credit, property taxes or charity may be deductions. If you go over the ACA MAGI cliff, you can lose your credits. It sounds like you didn't go over the income cliff and received your tax credits for having an ACA plan. I'm not really clear what your issue is. It sounds like the ACA tax credits lowered your total income tax bill.

 

[pb4uski]

Welcome to the reality of the ACA. Sent the cost of private plans 30% higher for the cheapest dogfood plan. And even if you qualify for a subsidy depending on your income it may well be taxable. I know because I just sent the IRS a big check. Fortunately just got on Medicare. But don't think about ER w/o seeing an accountant first and see what you're looking at for health care options.

Well yes and no. Its is a credit against what you would pay vs Cobra or any other private plan. I paid a much smaller premium for the subsidy. So I assumed when I got a huge tax bill it was because I was drawing more than I needed for expenses so cut back there. Then I talked to my accountant who explained that what I was drawing was not nearly enough to push me over the income cliff but that the subsidy benefit was considered disposable income if you made a certain amount and could be taxable. So yea I did go over the cliff but the subsidy is not always a writeoff like say property taxes or charity. Or at least thats how he explained it to me. (the subsidy savings still paid my IRS bill but I'm in the medical profession and still felt sorry for working mid-class who have to pay full price for rxs and visits an will never meet their deductible)

There are a lot of people here who have a lot of experience with ACA subsidies and taxes.... and much what you wrote above makes no sense at all and some is just plain wrong.

I had a private plan pre-ACA and post-ACA and the costs didn't change much at all. In 2012 we paid $556 a month and in 2013, the last year before ACA, the same policy increased to $629... a 13% increase. In 2014, the first year of ACA, the premium increased to $682... an 8% increase. Coverage was comparable all of those years. So while I'll give you the benefit of the doubt that it went up in your area and I recall that were parts of the country that saw big increases, to make a blanket statement that it increased the cost of private plans by 30% is just plain wrong.

Subsidies have NEVER been taxable. Disposable income isn't really a tax concept, more of an economic concept. I would like to know what really happened in your situation that caused you to think that ACA subsidies were taxable, but it isn't really the way it works. Also, you don't get subsidies on COBRA policies since they are not ACA policies and only ACA policies are eligible for subsidies.

It is true that a lot of people with HDHI policies will pay a lot before insurance kicks in, but they get the benefit of negotiated rates and many policies have cost sharing so they don't have to pay the deductible in those cases.

BTW, welcome.

 

[Clover5]

Yes it’s really expensive. We are looking at between 2700-3,000 a month once COBRA ends. Live in FL and have many prescriptions. No way we go under FPL unless we sell our rental property. I put away, in a separate savings account, enough money to pay for 5.5 years of Cobra + ACA just so I didn’t have to worry about it. So it doesn’t figure into the money we need for day to day.

 

[Dtail]

Yes it’s really expensive. We are looking at between 2700-3,000 a month once COBRA ends. Live in FL and have many prescriptions. No way we go under FPL unless we sell our rental property. I put away, in a separate savings account, enough money to pay for 5.5 years of Cobra + ACA just so I didn’t have to worry about it. So it doesn’t figure into the money we need for day to day.

That is very expensive premiums for FLA. What plan are looking at if you don't mind?

 

[Time2]

There are a lot of people here who have a lot of experience with ACA subsidies and taxes.... and much what you wrote above makes no sense at all and some is just plain wrong.


snip;


So while I'll give you the benefit of the doubt that it went up in your area and I recall that were parts of the country that saw big increases, to make a blanket statement that it increased the cost of private plans by 30% is just plain wrong.

ACA regulations came into effect in 2012.

I'm in Fl with a private BCBS policy.
In the years before ACA , '09, '10, and '11, I had 7% to 8.1% increases. '12 I had a 19.4% increase, '13 I had a 21% increase and '14 I had a 18.8% increase. That's effectively 71% over three years. But, yes there would have been normal increases. So, the 3 years before the ACA increases averaged 7.6%, If I subtract that 7.6% from each of the 3 ACA year increases, I get an additional 11.7%,13.3% and 11.1%, over the three years, that compounds to 40.6%.

Only 30% would have been great!

 

[Clover5]

That is very expensive premiums for FLA. What plan are looking at if you don't mind?

Looking at FL BCBS, I have many high cost prescriptions. The Bonze or Silver appear to have high deductibles that a month of my meds could consume. The cheapest for 2 persons I am seeing that takes my doc is 1950.00, the cheapest Gold is 2900.00 that has fairly low deductible. I need to the run the calc on paying large deductible vs high monthly based on my situation. And verify if all my drugs would be affected by deductible.

 

[Dtail]

Looking at FL BCBS, I have many high cost prescriptions. The Bonze or Silver appear to have high deductibles that a month of my meds could consume. The cheapest for 2 persons I am seeing that takes my doc is 1950.00, the cheapest Gold is 2900.00 that has fairly low deductible. I need to the run the calc on paying large deductible vs high monthly based on my situation. And verify if all my drugs would be affected by deductible.

The FLA BCBS 1443 Silver plan is my plan.
It's a shame you can't maneuver your financial situation to take advantage of subsidies.

 

[PaunchyPirate]

Looking at FL BCBS, I have many high cost prescriptions. The Bonze or Silver appear to have high deductibles that a month of my meds could consume. The cheapest for 2 persons I am seeing that takes my doc is 1950.00, the cheapest Gold is 2900.00 that has fairly low deductible. I need to the run the calc on paying large deductible vs high monthly based on my situation. And verify if all my drugs would be affected by deductible.

Do read the plan details closely. My Gold plan has prices for the various tiers of prescriptions ($25, $50, $100, 50%) and they are not subject to the deductible. I'm in Pennsylvania, however. The plans are all over the map in terms of when deductible applies or not. Some of the lower-coverage plans do indeed make you pay deductible before paying anything for prescriptions. Study each plan.

Each year at renewal time, I create a spreadsheet of anticipated costs to me for each plan and then make my decisions based on that.

 

[bobbyr]

our cobra runs out in a few months....i plugged in our tennessee zip code and income of 65k for next year - and the BCBS Bronze B09S Network S has our doctors in it and shows a $0 premium for us.

We rarely go to the doctor, so with the $16k max out of pocket and the ~$10k deductable, we will just hopefully dodge illness and if we get unlucky our maxout cost is still only $1333/month. Much less than our retirement insurance would cost us.

So I hope aca is around for awhile. (I paid for it with what i paid for health coverage since 2012)

 

[hanginthere]

I'm not going to go back and and and find my original response but I will clarify. Yes the premium will most likely go down substantially on ACA from what you are paying now. I was actually with BCBS and signed up with them after leaving Cobra. My premium was actually a lot less but I didnt realize that they had automatically signed me to an ACA policy till several months later which was nice. But then I got my tax bill which was 1000% higher than what I was used to. I assumed this was because I had made some withdrawals on my portfolio until I called my CPA who told me I would not have had to pay anything based on my current bracket but it was because I had worked a few month before declaring and because ACA could be considered taxable for those in certain brackets. I am in the medical field and was not referring to my own present premium going up 30% but rather to folks like yourself, typically families with 4 kids w/o a company policy or for folks who own their own business whose deductibles I typically saw go througth the roof after ACA. My suggestion is that you just talk to your FA or CPA and find out the tax ramifications based on your income pre facto. I'm just repeating what my CPA told me. Any responder who disagrees is welcome to talk to him.

 

[daylatedollarshort]

I'm not going to go back and and and find my original response but I will clarify. Yes the premium will most likely go down substantially on ACA from what you are paying now. I was actually with BCBS and signed up with them after leaving Cobra. My premium was actually a lot less but I didnt realize that they had automatically signed me to an ACA policy till several months later which was nice. But then I got my tax bill which was 1000% higher than what I was used to. I assumed this was because I had made some withdrawals on my portfolio until I called my CPA who told me I would not have had to pay anything based on my current bracket but it was because I had worked a few month before declaring and because ACA could be considered taxable for those in certain brackets. I am in the medical field and was not referring to my own present premium going up 30% but rather to folks like yourself, typically families with 4 kids w/o a company policy or for folks who own their own business whose deductibles I typically saw go througth the roof after ACA. My suggestion is that you just talk to your FA or CPA and find out the tax ramifications based on your income pre facto. I'm just repeating what my CPA told me. Any responder who disagrees is welcome to talk to him.

Most people who post here are really into tax planning and familiar with the ACA rates and income requirements and alternative options and costs. It is what we discuss almost daily. Many early retirees here would never have been able to retire at all if not for the ACA and the elimination of pre-existing condition clauses as we could not get insurance at any price.