ACA Subsidy When Spouse Offered Affordable Insurance

[mcaterer]

Hello,
I was recommended this site on another website. I couldn't find anything on my issue with a search.

I am trying to determine the ACA subsidy calculation in the case where my spouse is offered "affordable" insurance as a retiree, but wants to consider ACA coverage. It looks like her current plan qualifies as affordable for herself, but not affordable to include me. It seems that I will qualify for a subsidy, but she will not. An IRS document confirms that she could still enroll in ACA coverage. When shopping on our state's marketplace, if I indicate that she has affordable coverage they only offer coverage to me with a low subsidy. In order to look for plans for both of us I need to indicate she does not have affordable coverage, and then we are offered a much higher subsidy and plans covering both of us. The helpline for our state told me to just indicate that she doesn't have affordable coverage and the application will be approved, but I'm concerned about this.

Using some approximate numbers in our case, it looks like the full premium to cover myself would be $650 and $1300 to cover both of us. However, with the same household AGI, the calculator indicates a $70 subsidy to cover just myself and $900 to cover both of us (when indicating no other affordable coverage). I understand that she would likely have to pay the full $650 for her insurance, but it seems like the subsidy for me should be much higher than $70. Why such a big difference in subsidy amounts? Shouldn't my subsidy in this case be $450?

Thanks for any help you can provide.

[qwerty3656]

I just google it and the attached link says "For coverage starting January 1, 2023, if you’re offered job-based coverage through a household member’s job, affordability is based on the premium amount to cover everyone in the household." So it would have to be "affordable" for both of you.

https://www.healthcare.gov/glossary/...able-coverage/

[bigreader]

I just started to look at this myself since one of my kids now has "affordable coverage" from their employer and no longer qualifies for their very good subsidized ACA plan. It's very clear from the employers' "welcome package" that you can stay on your ACA plan but you are no longer able to get a subsidy and need to pay full freight to keep it.

I can't help on your question regarding the differences in the amount of subsidies, but there is no way I'd misrepresent my entitlement to an ACA subsidy. I'm surprised at the response you got from your state helpline since I suspect that this is federal rule and not one a state can suspend.

BR

[MBSC]

Quote:

Originally Posted by mcaterer I am trying to determine the ACA subsidy calculation in the case where my spouse is offered "affordable" insurance as a retiree...

Quote:

Originally Posted by qwerty3656 https://www.healthcare.gov/glossary/...able-coverage/

Welcome to our forum. The word "employee" appears 14 times in the link above. The affordability rule applies to those currently employed, not retiree plans and not COBRA.

Quote:

In order to look for plans for both of us I need to indicate she does not have affordable coverage, and then we are offered a much higher subsidy and plans covering both of us. The helpline for our state told me to just indicate that she doesn't have affordable coverage...

If both of you decline the optional retiree plan, you should answer 'no' to the question 'Are you eligible for other coverage?' You are no longer considered eligible if you decline it.

If she is already on the retiree plan, she has to wait until the next ACA Open Enrollment Period to change. There is no Special Enrollment Period (SEP) to change mid-year.

[mcaterer]

Thanks for the replies. This is the answer I was hoping for, but I'm still confused on the apparent significant difference in the subsidy calculation. If my wife was still working and was offered insurance, our state's calculator would deem her cost as affordable up to about $800/month. Whereas, at the same AGI, the APTC calculation would imply that our expected family contribution should be a little less than $800 (for covering both of us). I found a reference that indicated the EFC is not adjusted for payments made for other insurance, but that would seem to leave us with the potential for paying over $1300 for coverage instead of less than $400 with the subsidy for both of us.

Is this the way it's supposed to work? Would there be anyway for me to get a reasonable subsidy in this scenario?

[Spock]

Quote:

Originally Posted by mcaterer Thanks for the replies. This is the answer I was hoping for, but I'm still confused on the apparent significant difference in the subsidy calculation. If my wife was still working and was offered insurance, our state's calculator would deem her cost as affordable up to about $800/month. Whereas, at the same AGI, the APTC calculation would imply that our expected family contribution should be a little less than $800 (for covering both of us). I found a reference that indicated the EFC is not adjusted for payments made for other insurance, but that would seem to leave us with the potential for paying over $1300 for coverage instead of less than $400 with the subsidy for both of us. Is this the way it's supposed to work? Would there be anyway for me to get a reasonable subsidy in this scenario?

I don't want to hijack the thread, but I'm curious if the answer is the same for "one spouse ACA/other spouse on Medicare" scenario. If so it might provide a more google search results.

[cathy63]

Quote:

Originally Posted by mcaterer Thanks for the replies. This is the answer I was hoping for, but I'm still confused on the apparent significant difference in the subsidy calculation. If my wife was still working and was offered insurance, our state's calculator would deem her cost as affordable up to about $800/month. Whereas, at the same AGI, the APTC calculation would imply that our expected family contribution should be a little less than $800 (for covering both of us). I found a reference that indicated the EFC is not adjusted for payments made for other insurance, but that would seem to leave us with the potential for paying over $1300 for coverage instead of less than $400 with the subsidy for both of us. Is this the way it's supposed to work? Would there be anyway for me to get a reasonable subsidy in this scenario?

Yes, it's correct that the expected family contribution does not change if one or more family members gets insurance through an employer or retiree plan. The EFC is entirely based on your household's MAGI and does not account for any other medical insurance. The online tool you are using is just running the calculation from the top part of IRS form 8962 to figure your expected contribution, so if you take a look at that form (https://www.irs.gov/pub/irs-pdf/f8962.pdf) you'll see how it works and what might affect it.

To figure your max subsidy, look at the full premium for the Second Lowest Cost Silver Plan that's available to you alone, then find the one that's available when you and your wife both have ACA. These may be two different plans or the price for covering two may not be exactly double the price for covering one person. In any case, your max subsidy is the full premium for the SLCSP minus your EFC. Different SLCSP premiums for your two scenarios are the reason why you are getting different subsidy amounts.

There's no way to use an affordability calculation to increase your subsidy. About the only ways to do that are to decrease your MAGI or move to a ZIP code that has more expensive silver plans.

[cathy63]

Quote:

Originally Posted by Spock I don't want to hijack the thread, but I'm curious if the answer is the same for "one spouse ACA/other spouse on Medicare" scenario. If so it might provide a more google search results.

Yes, it's the same. Non-ACA coverage is non-ACA coverage whether it's provided by an employer or the government.

[mcaterer]

Quote:

Originally Posted by cathy63 To figure your max subsidy, look at the full premium for the Second Lowest Cost Silver Plan that's available to you alone, then find the one that's available when you and your wife both have ACA. These may be two different plans or the price for covering two may not be exactly double the price for covering one person. In any case, your max subsidy is the full premium for the SLCSP minus your EFC. Different SLCSP premiums for your two scenarios are the reason why you are getting different subsidy amounts.

Interesting. I think you're saying that basically the cost for the SLCSP for just myself is much lower than the SLCSP for covering both of us. Therefore the subsidy is much higher to cover both of us even though the EFC remains the same.

This still seems like a harsh penalty for a member of the family having other coverage. Was this by design to discourage use of ACA?

Edit: Is this is why you can't get ACA if Married Filing Separately, as your MAGI could potentially be modified to increase your subsidy?

[RetiredAndLovingIt]

Also be aware
For the 2023 tax year, the excess subsidy repayment limits will vary from $350 to $3,000, depending on income and tax filing status (as always, repayment caps only apply if your income is under 400% of the poverty level; above that amount, any excess premium tax credit must be repaid, regardless of how much it is).
This was my first year as an AARP Tax Volunteer and I had a couple that got hit with a massive subsidy clawback. It turned out their income had increased a lot since she first signed up with a broker a few years ago they had never updated their income. Fortunately with what I've learned on this site, I was able to explain to her what she needed to do to prevent the same thing from happening next year.

[cathy63]

Quote:

Originally Posted by mcaterer ...This still seems like a harsh penalty for a member of the family having other coverage. Was this by design to discourage use of ACA? Edit: Is this is why you can't get ACA if Married Filing Separately, as your MAGI could potentially be modified to increase your subsidy?

I think you are giving Congress a bit too much credit for anticipating all the various scenarios as they made numerous compromises to get the law passed! It's not that somebody didn't want people who have other options to use an ACA plan, just that you weren't the primary target of the law.

[RunningBum]

Quote:

Originally Posted by mcaterer Interesting. I think you're saying that basically the cost for the SLCSP for just myself is much lower than the SLCSP for covering both of us. Therefore the subsidy is much higher to cover both of us even though the EFC remains the same. This still seems like a harsh penalty for a member of the family having other coverage. Was this by design to discourage use of ACA? Edit: Is this is why you can't get ACA if Married Filing Separately, as your MAGI could potentially be modified to increase your subsidy?

Using the SLCSP is an imperfect way to calculate subsidies, but usually it works out fairly reasonable. Ignore the actual subsidy amount in your case for a moment. In your first post you said

Quote:

it looks like the full premium to cover myself would be $650 and $1300 to cover both of us.

Doesn't that seem reasonable, that it would cost you double to add the second person? Or maybe not, considering that it is subsidized. Are you looking at the same plan for you solo and the two of you together? Just so we can see what you're talking about, please post the SLCSP premium, the premium for the plan you would be using, and your estimated MAGI or % of FPL.

Because there often aren't many silver plans added, sometimes the numbers are less reasonable. Early in the ACA days my subsidized premium, always based at right around 400% FPL MAGI, has varied a lot even while choosing the same basic bronze HSA plan. The last few years have been more consistent year to year.

[RetiredAndLovingIt]

And zip code

[mcaterer]

My goal is to cover both of us with the cheapest possible HSA-eligible plan. My concern with subsidy amounts was only when I thought that my wife qualified for other affordable insurance as a retiree. Based on previous comments, this does not seem to be the case and it looks like we can get a plan for both of us next year for about $400/month with a $900 subsidy.

I appreciate all the comments - this is really helping me better understand the system. Regarding the calculation, I've been using the following data:

Zip Code 05495

MAGI $109250
Which I believe is the 2022 max for 0% cap gain tax for MFJ (83350+25900). It looks like this goes to $116250 for 2023. I've been trying to determine the best strategy for resetting the cost basis of my taxable accounts, doing Roth recharacterizations, and factoring in ACA subsidies. Still struggling with this, but I should probably start a different thread for that.

EFC = 8.5% of MAGI = $773.85 monthly

Subsidy Amount = $908 from state online calculator

SLCSP Cost = EFC + Subsidy = $1681.85
The Silver plans offered don't match this exactly, but the second lowest cost one is very close to this amount.

Thanks again for all the help.

[MBSC]

Quote:

Originally Posted by mcaterer MAGI $109250 Which I believe is the 2022 max for 0% cap gain tax for MFJ (83350+25900). It looks like this goes to $116250 for 2023. I've been trying to determine the best strategy for resetting the cost basis of my taxable accounts, doing Roth recharacterizations, and factoring in ACA subsidies. Still struggling with this, but I should probably start a different thread for that. EFC = 8.5% of MAGI = $773.85 monthly

The EFC for a SLCSP is capped at 8.5% MAGI through the end of 2025. Barring any changes, the 'subsidy cliff' returns in 2026 meaning there is no PTC above 400% FPL and you pay the full premium. 400% FPL is $73,240 in 2023 for a family of two in the lower 48 states. Your planning may need to include a future reduction of Roth conversions or other measures.

Quote:

These rules continue enhanced subsidies through the end of 2025 that were first introduced in 2021. Unless a further extension happens, the law will revert to less generous subsidies in 2026. As part of that reversion, the “subsidy cliff” will return, as there can be a steep drop in subsidies by thousands of dollars as soon as income exceeds 400% of the federal poverty level for the household by just $1. Reference: https://www.advisorperspectives.com/...dable-care-act

[RunningBum]

I'd need your ages too to get an exact match on numbers, but this is close enough.

Your expected contribution is 8.5% of your $109250 MAGI, which is $9286, or $774/month. They subtract that from the second lowest cost silver plan to give you your subsidy, which you can apply to any plan, but basically it means if you choose the SLCSP, in either case you'll be paying $774/month.

For two of you, the cost of that SLCSP is around $1700, giving you that ~$900 subsidy.

For just you, the SLCSP is half that, around $850. This gives you the ~$70 subsidy.

Since you seem to be looking at a lower cost bronze, the unsubsidized premiums are smaller, and for the two of you the amount it is smaller is twice that of your single premium. So you'd be paying a higher subsidized premium for just yourself than for the both of you. If instead you were looking at a higher priced gold policy, your single subsidized premium would be a little less than for both of you.

I'm agreeing with you, this doesn't sound fair. It seems the ACA subsidy is set up single people, or marrieds/families where all are on ACA. If only one is on ACA you are penalized by having to spend 8.5% of your joint income.

The right way in my mind is that they should treat you as a single, with half the MAGI you have as a couple. 8.5% of half your MAGI works out to $387/month, and applying that to your individual SLCSP gives you a subsidy of around ~$450, just as you said it should be in your OP.

I apologize if you did all of this math already, and I'm not telling you anything new. I needed to work out the numbers myself to believe it.

I suspect Congress just overlooked this scenario.

I found this at https://www.healthcare.gov/retirees/

Quote:

If you have retiree coverage and want to buy a Marketplace plan instead, you can. But: You can’t get premium tax credits and other savings based on your income. This is true only if you’re actually enrolled in retiree coverage. If you’re eligible for but not enrolled in retiree coverage, you may qualify for premium tax credits and lower out-of-pocket costs based on your household size and income.

It appears that state helpline worker was correct, you can answer No if your spouse did not enroll in retiree coverage. I think MBSC found similar wording elsewhere.

So it works out fair if you both use the ACA. But if she wants her retiree coverage, you get shorted on your ACA subsidy. At least you have an option.