ACA subsidy: recoup at tax time?

[BarbWire]

This was discussed a couple of years ago but I can't find it. Sorry.

If you do not want to (or cannot) estimate and "prove" your 2017 income when applying for an ACA exchange policy, can you eschew subsidy now -- pay the full premium each month -- and then get the subsidy you qualified for when you do your 2017 tax return?

At this point, for convoluted reasons, I cannot estimate (and substantiate) my income for 2017. And I am striving now and will be in 2017 to modulate my income to qualify for subsidies as well as be in the 15% tax bracket (for example, just switched mutual funds to equivalent ETFs to avoid cap gain distributions, am shifting dividend-paying assets to retirement accounts, and so on).

So, if I say "no subsidy" when I apply for an exchange policy, and then at tax time find my MAGI is, say, $24,000, will I get the subsidy retroactively as a 2017 tax refund?

Thanks!

[Senator]

When in doubt, estimate your income low. Worse case, you pay the subsidy back. As far as I know, there is no penalty, or interest charges for making a mistake like this.

[SecondCor521]

Yes, provided you otherwise qualify for the subsidy (AGI in the FPL range, not filing MFS, purchased your insurance through the exchange, etc.). You will file Form 8962 to calculate the subsidy.

Note that you can also submit an income estimate ahead of time (even if it turns out to be way off) and get a subsidy throughout the year, and then reconcile the subsidy you received with the one you are actually entitled to. Again, this is done on Form 8962.

I have had good luck so far with making estimates even though they may be way off. My state has been very understanding with accepting my estimates, even with very little substantiation - sometimes it is just a letter from me saying what I plan to do.

[FrankiesGirl]

I had odd circumstances for 2017's income. I was conditionally approved, but because my estimate was so much lower than previous years, they wanted proof of income.

I provided:

1. My 2015 tax return.
2. Letter stating the facts - I quit work to be a SAH spouse in 2015, husband laid off in 2016 with unemployment running out in the fall of 2016. As of 2017, we would be living off of our saving/retirement/investments. This would mean that line 7 on the tax return (wages, tips, etc) would be zero dollars - no earned income in 2017 (this was all written out). They could plainly see then that there was additional income of retirement distribution and dividends above the amount over the Medicaid cliff (my state did not expand Medicaid, so making less than ~17K would make us ineligible for ACA, but unable to get on Medicaid). And then stated that to my best ability the estimated income was accurate.

I expected to have to go round and round with them up through January, but they approved my proof of income letter/tax return submission and I'm good to go with full subsidy... in less than a week too.

My understanding is if you do make more and can see income changes happening in the near future you should contact them, and technically you are required to do so if there are any changes in status OR income up or down to be reassessed.

[BarbWire]

Ah, there's a good thought: use my 2015 tax return to establish an amount and say that 2017 should be roughly similar (which I hope is true -- at least that's my target).

Thanks!

[scrabbler1]

BarbWire, I have had some odd things happen with regard to the ACA subsidy which may be relevant to your situation.


When I first enrolled in late 2013 for an ACA policy through the NY Exchange, I attached a pdf file with YTD investment income from my main brokerage company through November. But I kept getting letters from the NY Marketplace telling me my so-called "proof" was insufficient. I remember calling them at the Exchange to tell them that I had no income from their list of several types on nonwage income (i.e. SS, unemployment, pension, etc,) which seemed to mess up their system.


I wasn't worried because my income was near the top end of the max MAGI amount so the subsidy would be small. Furthermore, all of my income had zero taxes withheld so I simply used the subsidy as a partial payment toward my tax bill, like a backhanded withholding method.


I did this for 2014 and 2015 but when I changed insurance companies for 2016, after I had provided an income estimate for 2016 in the Exchange website(again, without any proof), my new company told me I qualified for an Advanced Premium Tax Credit, so my monthly premium would be a little lower although my tax bill would rise to offset that.


My 2016 tax return will be a little strange because I will have ACA subsidies appear in 2 different places. One will be in the ACA tax subsidy area (Form 8962) but the other will be a negative offset to the Itemized Medical expenses shown in Schedule A (for 2015). If I continue to receive the subsidy in 2017 on an advanced basis, then the latter will disappear.

[Bamaman]

The ACA makes us that just hit 65 years old to be proud and glad we made it to Medicare.

Now, if we can just get the politicians to leave Medicare alone (as long as possible) and not fold a failed ACA healthcare system into Medicare.

[MBSC]

Quote:

Originally Posted by BarbWire If you do not want to (or cannot) estimate and "prove" your 2017 income when applying for an ACA exchange policy, can you eschew subsidy now -- pay the full premium each month -- and then get the subsidy you qualified for when you do your 2017 tax return? So, if I say "no subsidy" when I apply for an exchange policy, and then at tax time find my MAGI is, say, $24,000, will I get the subsidy retroactively as a 2017 tax refund?

Only the premium subsidy will be refunded at tax time. Silver plan Cost Sharing Reductions (CSR) that reduce deductibles and out-of-pocket maximums can only be taken if you submit a low income when applying for coverage.

[easysurfer]

I'm expecting a premium subsidy refund at tax time this year. Might make me want to do my taxes a bit earlier. But I only said might .

[BarbWire]

Quote:

Originally Posted by MBSC Only the premium subsidy will be refunded at tax time. Silver plan Cost Sharing Reductions (CSR) that reduce deductibles and out-of-pocket maximums can only be taken if you submit a low income when applying for coverage.

Yes, but I'm not al all sure that a silver plan makes sense for me: I use very little health care (about $250 this year against a $6,350 deductible). Instead I have assumed -- perhaps incorrectly -- that with little health care use and income about 300% of FPL that an HSA-eligible bronze plan makes most sense.

I am now trying to figure out what it means when the insurer says, for out of network coverage:

• deductible: $12,700
• OOP Max: $12,700
• cost of out-of-network services: deductible + 50% coinsurance

Huh? I thought that coinsurance applied between meeting the deductible and hitting the OOP max -- it sets the "slope" or "glide path" for how quickly you reach the OOP max after the deductible. So when the deductibnle = OOPMax I am not really sure how coinsurance factors in.

And the two people at the 800 number have no clue ...

[bingybear]

Quote:

Originally Posted by BarbWire Yes, but I'm not al all sure that a silver plan makes sense for me: I use very little health care (about $250 this year against a $6,350 deductible). Instead I have assumed -- perhaps incorrectly -- that with little health care use and income about 300% of FPL that an HSA-eligible bronze plan makes most sense. I am now trying to figure out what it means when the insurer says, for out of network coverage: deductible: $12,700 OOP Max: $12,700 cost of out-of-network services: deductible + 50% coinsurance Huh? I thought that coinsurance applied between meeting the deductible and hitting the OOP max -- it sets the "slope" or "glide path" for how quickly you reach the OOP max after the deductible. So when the deductibnle = OOPMax I am not really sure how coinsurance factors in. And the two people at the 800 number have no clue ...

the healthcare.gov 800 number? or the insurance company phone number.
I'd communicate directly with the insurance company.

[BarbWire]

Definitely the insurance company (Florida BCBS, now Florida Blue).

I suspect they've had to staff up the phone banks for open enrollment and given scant training to the CSRs. They keep dodging my specific questions about policy coverage details and instead pivot to "How much do you want your premium to be? What is your income?"

ARRRRGH! premium and deductible are the visible, and in many ways least important, features of an insurance policy! I do wish they would train their CSRs in all facets of how insurance policies work....

Or that I could find a broker who would handle on-exchange BCBS policies in FL, and knows the answers!

[GTFan]

Quote:

Originally Posted by Bamaman Now, if we can just get the politicians to leave Medicare alone (as long as possible) and not fold a failed ACA healthcare system into Medicare.

ACA has not failed yet but the fat lady is warming up. We'll see this time next year I'd imagine.

[sengsational]

Quote:

Originally Posted by BarbWire Huh? I thought that coinsurance applied between meeting the deductible and hitting the OOP max -- it sets the "slope" or "glide path" for how quickly you reach the OOP max after the deductible. So when the deductibnle = OOPMax I am not really sure how coinsurance factors in.

It doesn't factor-in, but it's not about being factual, it's about marketing.

I've been buying policies where the OOPMax and deductible are so close as to make what happens in between irrelevant. But I think way too many people just don't grok the way health insurance works. How about this, it's the yellow state of the traffic light...if they make it long enough (a big difference between deductible and OOPMax), people tend to hit the brakes, but if they make it too short (little or no difference), you might as well stomp on it and get as many health services as you can before December 31.

[shotgunner]

On another note does anyone know what would happen if one projected an income that qualifies for a subsidy but in the end your MAGI was below the minimum income needed for a subsidy when you file your taxes?

[MBSC]

Quote:

Originally Posted by shotgunner On another note does anyone know what would happen if one projected an income that qualifies for a subsidy but in the end your MAGI was below the minimum income needed for a subsidy when you file your taxes?

When you file your tax return in early 2017 you keep the subsidy if your actual 2016 income ends up below 100% FPL (138% FPL in expansion states). Some people mistakenly believe you will then be placed into Medicaid but that decision is made in Nov/Dec 2016 when you submit an income estimate for 2017.

Quote:

If you receive an advance premium tax credit and then your income actually ends up being under 100 percent (or 138 percent in Medicaid expansion states) of poverty level, you do not have to pay back the subsidy. The protection against having to pay back subsidies in this scenario is helpful for people who have variable and/or self-employed income and don’t really know what their income will be until the end of the year. Reference: https://www.healthinsurance.org/faqs...over-my-bases/

Quote:

IRS Form 8962, Line 6: If the amount on line 5 is at least 100% but no more than 400%, check the “No” box on line 6 and continue to line 7. You may qualify for the PTC if your household income is less than 100% of the Federal poverty line and you meet all of the following requirements. You or an individual in your tax family enrolled in a qualified health plan through a Marketplace. The Marketplace estimated at the time of enrollment that your household income would be at least 100% but not more than 400% of the Federal poverty line for your family size for 2016. APTC was paid for the coverage for one or more months during 2016. You otherwise qualify as an applicable taxpayer (except for the Federal poverty line percentage).

[bingybear]

Quote:

Originally Posted by shotgunner On another note does anyone know what would happen if one projected an income that qualifies for a subsidy but in the end your MAGI was below the minimum income needed for a subsidy when you file your taxes?

I think you asked the question backwards... did you mean just above the minimum income needed for a subsidy?
If your estimated income was lower than your actual income and you took an APTC, when you do your taxes it will come up with you should repay the overage in PTC that was paid during the year. If your income did not qualify you for any subsidy, then all the APTC would come up needed paid back.
I think the real question is "can they make you pay it back?". I believe they can take it from any refund, but may not be able to force you to pay it back. Not sure what happens if you go for an APTC in the future... or health insurance thru the government system.

[GTFan]

No, see MBSC's answer which is correct. You do not pay back subsidies if your estimated income was above min MAGI but your actual ends up below.

[shotgunner]

Thank you MBSC and GTFan, this is what I needed to know. If I fall short I may pull some money out of an IRA to get into subsidy range and get some money out of the IRA and not be taxed on it.

[Texas Proud]

Just me....

The last two years I paid 100% of the premium and got back the subsidy at tax time.... that was so I could use my 1.5% rebate CC to make the payments....

BUT, earlier this year BCBS stopped accepting CC as payments so I have been losing out for maybe 6 months.... if I stick with BCBS I will put down an income estimate to get subsidy each month for next year... might even see what silver plan is available.... I might have to go with one of the 'Medicaid' insurance companies since BCBS has gone WAY up and everybody else dropped out...