Health insurance subsidy calculator

[rbmrtn]

This articles says that is the "most recent tax filing"

"The amount of the MAGI used to determined the amounts of these advance payments will be based on the individual’s income from the most recent taxable year for which it is determined that information is available. (For example, for a person enrolling on January
1, 2014, a determination of the amount of subsidy would be based on his or her income from 2012, as reflected in his or her tax return filed in the spring of 2013.)"

http://healthconsumer.org/New_Health_Law_CA_IssueBrief_4_Final.pdf

 

[Fermion]

This articles says that is the "most recent tax filing"

"The amount of the MAGI used to determined the amounts of these advance payments will be based on the individual’s income from the most recent taxable year for which it is determined that information is available. (For example, for a person enrolling on January
1, 2014, a determination of the amount of subsidy would be based on his or her income from 2012, as reflected in his or her tax return filed in the spring of 2013.)"

http://healthconsumer.org/New_Health_Law_CA_IssueBrief_4_Final.pdf

If that is the case, then it just means you may have to come up with the full premium for the first year of your ER but would get it back at tax time. With fixed rate investments paying so little, this isn't a huge deal...1% of $10,000 is only $100.

 

[marko]

Underlines are mine.​

Per http://healthconsumer.org/New_Health...ef_4_Final.pdf​

"For purpose of the subsidies, “adjusted gross income” is “modified” by the inclusion of foreign
income and housing costs paid for individuals living outside the United States (which is excluded from gross
income for tax purposes), and the inclusion of any amount of interest received or accrued by the taxpayer
during the taxable year which is exempt from tax. In other words, some income which may be excludable
for federal tax purposes will nonetheless be included in household income for the purpose of calculating the​

subsidies available"

Might that include what is inside one's IRA? Note 16 states that SS is not included in MAGI.

My take: even though we're 15 months away, nobody really knows the deep details.

 

[Fermion]

Might that include what is inside one's IRA?

If they included what was in your IRA, then they would have to include the future value of a person getting a pension to be fair. I really doubt they would do either.

I do think they will include earnings from municipal bonds in the health care subsidy credit calculation.

 

[marko]

If they included what was in your IRA, then they would have to include the future value of a person getting a pension to be fair. I really doubt they would do either.

I hope so. They specifically mention "interest" income that may otherwise be exempt from Federal Tax.

Again, with only 15 months before implementation, I'm hoping for a lot more clarity soon.

 

[rbmrtn]

Does anyone know if you are in an existing state high risk pool, would you have the option of moving to an ACA exchange plan. I have not found anything on that.

I know that if you, for example qualify for medicaid , then you have to take it versus buying an exchange plan. Hence a lot of maneuvering to keep income high enough to avoid medicaid but low enough to qualify for subsidies.

But some states already have high risk pools in place. If your in one of those does it exclude you from buying an ACA plan.

 

[pb4uski]

This articles says that is the "most recent tax filing"

"The amount of the MAGI used to determined the amounts of these advance payments will be based on the individual’s income from the most recent taxable year for which it is determined that information is available. (For example, for a person enrolling on January
1, 2014, a determination of the amount of subsidy would be based on his or her income from 2012, as reflected in his or her tax return filed in the spring of 2013.)"

http://healthconsumer.org/New_Health_Law_CA_IssueBrief_4_Final.pdf

Thanks for that document. But then it later explains the reconciliation process:

As explained above, the subsidies will be paid in advance based on tax returns from prior years. However, the ultimate amount of tax credit to which the individual is entitled will be based on actual MAGI for the year to which the tax credit applies. Thus, there will be a “reconciliation” process between the tax credit amount for which a taxpayer is determined eligible and the advance tax credit payments.

If an individual or family receives higher advance payments than the total amount of tax credit for which they are later determined eligible, they may face an increase in taxes due for the taxable year upon filing of their tax return.

So it sounds like the credits would be provisionally based on 2012 tax return MAGI and then trued up on the 2014 tax return based on actual 2014 income.

So if I use the top of the 15% bracket as a constraint on Roth contributions in 2012 and 2013 and some percentage less than 400% of FPL as a constraint in 2014 and 2015, I would get less credit that I deserve during 2014 and 2015 and would be a tax refund for the shortage on mu 2014 and 2015 tax returns filed in 2015 and 2016.

 

[pb4uski]

If they included what was in your IRA, then they would have to include the future value of a person getting a pension to be fair. I really doubt they would do either.

I do think they will include earnings from municipal bonds in the health care subsidy credit calculation.

+1 I think the MAGI will include any non-taxable income like municipal bonds, nontaxable SS, etc but it is very unlikely that it would include inside buildup on an IRA or 401k or pension or cash value life insurance or deferred annuity.

 

[pb4uski]

And Why do some folks want to repeal this?

because it is highly questionable whether as a nation we can afford it.

 

[Cut-Throat]

because it is highly questionable whether as a nation we can afford it.

It's mostly about Power politics rather than about affordability. The CBO has said that this will actually save money. Currently about 46 Million Americans use the Emergency Room as their 'Insurance' and pay zero Premiums. The ACA will collect some premiums from these folks. America cannot afford the current situation, the ACA was a solution to this.

Medicare has problems with the escalation of Medical Costs, no doubt about it....And something has to be done for cost control soon. (Americans Pay twice as much as other countries for healthcare)..... Americans should be more afraid of Cancer than a terrorist, but we seem to have never ending resources to protect against terrorists.

If the Private sector could handle this issue on its own, this would not be an issue. It has been brewing since the 1980s when costs got out of hand.

 

[MichaelB]

Let's leave repeal out of this. Elections in a couple of weeks and then that question will be mostly settled. Still lots of implementation topics we can spend lots of time discussing.

 

[pb4uski]

Another reason why I shouldn't have contributed excessively to my 401k over the years. Will Roth distributions count as MAGI for the subsidy?

As I understand it, Roth conversions would be included in MAGI but Roth distributions would not.

 

[Fermion]

Let's leave repeal out of this. Elections in a couple of weeks and then that question will be mostly settled. Still lots of implementation topics we can spend lots of time discussing.

Looks like everything is staying the same: President, Senate, House

Excellent news for those looking foward to affording healthcare in ER on a modest budget.

 

[ShokWaveRider]

Repeal..... What Repeal..... Unfortunately it will probably not be made any better in the next 4 so we should be thankful for what we have.

For a lot of us (me in particular) the healthcare variable is the ONLY potential fly in the ointment of a happy and affordable retirement. I feel a lot better about costs now, but it is not perfect..... yet....

 

[ziggy29]

At the very least it would seem like any significant gutting of PPACA will not happen. There are still some parts of it which many believe seriously need work and may still change, but the core provisions are likely to remain intact.

It may be a bit safer to retire and start taking COBRA now, if you can afford it into 2014...

 

[marko]

No, they will advance you the money in 2014 to pay the HC premium and you won't have to pay back the advance if you are able to claim the subsidy as a tax credit on your 2014 return you file in 2015. Like i said, it kind of works like the stimulous checks they mailed out a few years ago, except I am not sure in what form they will advance the money or if they will just pay the insurer for you.

I re-read this thread and I'm still not sure (is anybody sure?) on how this will work.

Whether they advance money to the insurers or the individual, they cannot be serious about advancing $10K for every family in the country (who will be self paying) and then plan to chase down those who don't meet the criteria, are they? Or are they? Or....as is most often the case, am I missing something.

 

[Cut-Throat]

I re-read this thread and I'm still not sure (is anybody sure?) on how this will work.

Whether they advance money to the insurers or the individual, they cannot be serious about advancing $10K for every family in the country (who will be self paying) and then plan to chase down those who don't meet the criteria, are they? Or are they? Or....as is most often the case, am I missing something.

They're pretty good at collecting taxes, and issuing refunds already; aren't they?

 

[JoeWras]

Marko: I found this. Not sure it clears things up:

http://www.irs.gov/pub/irs-drop/reg-119632-11.pdf

Section 1411(a) of the Affordable Care Act directs the Secretary of the Department of Health and Human Services (HHS) to establish a program under which Exchanges will determine whether individuals are eligible to enroll in QHPs through the Exchange, and whether they are eligible for advance payments of the premium tax credit and cost-sharing reductions. Section 1412 of the Affordable Care Act directs the Secretary of HHS to establish a program for determining eligibility for advance payments of the premium tax credit and cost-sharing reductions that may be paid directly to an insurance company on behalf of a taxpayer.

​

It then goes into a lot of discussion on the application process, and coordination with Medicaid, and all sorts of things about making the application process efficient, etc.. I have to say, this is going to be really interesting!

A lot more reading here: Affordable Care Act Tax Provisions

 

[MichaelB]

I re-read this thread and I'm still not sure (is anybody sure?) on how this will work.

Whether they advance money to the insurers or the individual, they cannot be serious about advancing $10K for every family in the country (who will be self paying) and then plan to chase down those who don't meet the criteria, are they? Or are they? Or....as is most often the case, am I missing something.

Premium assistance is advanced directly to the insurance provider based on the insured person's eligibility, which is in part based on previous year MAGI.

+1 on the link provided by JoeWras

 

[marko]

Thanks to MichaelB and JoeWras.
So, in general it WILL be based on the previous year MAGI, that would mean starting with 2013's MAGI.
I expect that there would be adjustments in situations where one's current year could be lower/higher than the previous year.

 

[Mulligan]

At the very least it would seem like any significant gutting of PPACA will not happen. There are still some parts of it which many believe seriously need work and may still change, but the core provisions are likely to remain intact.

It may be a bit safer to retire and start taking COBRA now, if you can afford it into 2014...

My state won't let the issue die. Just voted 62% to 38% to not let the state elected officials set up a health insurance exchange unless it is approved by the voters. If I understand law correctly the federal government will just come in and set one up anyways.

 

[MichaelB]

My state won't let the issue die. Just voted 62% to 38% to not let the state elected officials set up a health insurance exchange unless it is approved by the voters. If I understand law correctly the federal government will just come in and set one up anyways.

Yep. HHS will set up and run the exchange. Some State specific info here http://www.early-retirement.org/forums/f38/health-insurance-exchanges-under-the-ppaca-63631.html

 

[pb4uski]

I re-read this thread and I'm still not sure (is anybody sure?) on how this will work.

Whether they advance money to the insurers or the individual, they cannot be serious about advancing $10K for every family in the country (who will be self paying) and then plan to chase down those who don't meet the criteria, are they? Or are they? Or....as is most often the case, am I missing something.

My understanding is that the health insurance subsidies will be paid directly to the insurers based on MAGI from your 2012 tax return (since your 2013 tax return information will not be available when the first payment is made in January 2014). There is a true-up mechanism that will happen when you file your 2014 taxes. Conceptually, the true-up is the same as what we do now on our income taxes.

On your 2014 tax return (filed in early 2015) you will need to reconcile the health insurance subsidy you were entitled to based on your 2014 MAGI and compare it to the health insurance subsidy that you received in 2014. If you received more than you were due based on your actual 2014 MAGI you will need to pay it back - if you received less than you were due you it will get a refund. I suspect as a practical matter it will be netted with any amounts due or refundable on your 2014 income taxes.

 

[ziggy29]

My state won't let the issue die. Just voted 62% to 38% to not let the state elected officials set up a health insurance exchange unless it is approved by the voters. If I understand law correctly the federal government will just come in and set one up anyways.

Yeah, it's mostly symbolic and much ado about nothing as I see it. If a state won't do it, that state's residents can just use the federal exchange. It's not as if the state residents can't buy through an exchange. One early concern I had about having no state-level exchange was that the federal exchange would not be eligible for the subsidies as the state exchanges would, but I think that has been addressed to the contrary.

 

[marko]

My understanding is that the health insurance subsidies will be paid directly to the insurers based on MAGI from your 2012 tax return (since your 2013 tax return information will not be available when the first payment is made in January 2014). There is a true-up mechanism that will happen when you file your 2014 taxes. Conceptually, the true-up is the same as what we do now on our income taxes.

On your 2014 tax return (filed in early 2015) you will need to reconcile the health insurance subsidy you were entitled to based on your 2014 MAGI and compare it to the health insurance subsidy that you received in 2014. If you received more than you were due based on your actual 2014 MAGI you will need to pay it back - if you received less than you were due you it will get a refund. I suspect as a practical matter it will be netted with any amounts due or refundable on your 2014 income taxes.

Ok, my MAGI for 2012 and 2013 will be high and I'll have DW's HI until the end of 2013, but if I have to withdraw an extra $15K in 2014 to pay for our HI it would put me over the $60K. If I had the subsidy to start with, I'd be under the $60K