Why does the same ACA plan change deductible based on subsidy amount?

[Aggie1999]

Can someone answer this? When looking at prices on www.healthcare.gov, a plan will increase in deductible, out of pocket and copay amounts based on the tax credit.

For example, I entered $20k as my income for a sinlge individual and a certain plan said the deductible was $0, out of pocket was $2700 and primary doctor copay was $8. I go back and change my income to $35k and the same plan (exact same Plan ID, plan name, etc) changes the deductible to $6000, out of pocket to $8100 and primary doctor copay to $30.

What am I missing? Screen shots attached.

 

[John Galt III]

Hi Aggie. You aren't missing anything. It is supposed to be that way. It's called 'cost sharing'. The costs being deductible, copays, coinsurance, max oop. I noticed the same thing when I was on the ACA. I got a great deal because of my low income of approx $16,000 per year. Monthly premium $20 or so, deductible $500, maxx oop $1000, $5 copay for primary care or specialist. The ACA becomes less of a great deal the more income you have. BTW, the premiums go up with higher income, too, lol.

 

[Aggie1999]

Hi Aggie. You aren't missing anything. It is supposed to be that way. It's called 'cost sharing'. The costs being deductible, copays, coinsurance, max oop. I noticed the same thing when I was on the ACA. I got a great deal because of my low income of approx $16,000 per year. Monthly premium $20 or so, deductible $500, maxx oop $1000, $5 copay for primary care or specialist. The ACA becomes less of a great deal the more income you have. BTW, the premiums go up with higher income, too, lol.

Thanks for the reply. How does it work at the end of the year? From what I understand, you put whatever income you want in the ACA website and the government pays the subsidies to the insurance company. Then at tax time, if your MAGI is not what you said on the ACA signup, the difference in the subsidy amount for the year goes on your taxes either as a tax or credit.

How do things like higher or lower deductibles you should have got, based on actual MAGI, get rectified at tax time?

 

[golfnut]

They don't get rectified from my experience (bronze plans is what we purchase)>

 

[Aggie1999]

They don't get rectified from my experience (bronze plans is what we purchase)>

Thanks. So is there any actual reason to put a valid income at signup, considering a higher income affects deductibles, etc for the same plan? Seems like a pretty big hole in the system.

 

[golfnut]

valid MAGI determines if subsidy applies and if so monthly amount of subsidy and then your monthly payment (with or w/o subsidy)>

 

[rodi]

I think the folks who are above the medicaid limit, but below 200% of federal poverty level and purchase a silver plan get cost sharing. This reduces or eliminates copays and deductibles. If you go $1 above the 200% of FPL level you lose that part of the premium.

And yes - the tax credits (subsidies) vary with income up to 400% of FPL... and are eliminated entirely above 400% of FPL.

 

[jim584672]

Cost Sharing Reductions (Silver Plans Only)

FPL range_____AV__Max OOP_/_ Max OOP Family
100% –150%__94%_$2,700 / $5,200
150% – 200%_87%_$2,700 / $5,200
200% – 250%_73%_$6,500 / $13,000

 

[Aggie1999]

Cost Sharing Reductions (Silver Plans Only)

FPL range_____AV__Max OOP_/_ Max OOP Family
100% –150%__94%_$2,700 / $5,200
150% – 200%_87%_$2,700 / $5,200
200% – 250%_73%_$6,500 / $13,000

I'm still not understanding why anyone would put their estimated income above 150% FPL at enrollment time, if the cost sharing reductions are not rectified one way or the other at tax time.

Truthfully, it seems like to me one should always put their estimated income one dollar above the FPL at ACA enrollment. Then not only do you get the cost sharing subsidy, but also get an interest free loan for the year on the premium subsidy your would end up paying at tax time.

Still think I must be missing something.

 

[MichaelB]

I'm still not understanding why anyone would put their estimated income above 150% FPL at enrollment time, if the cost sharing reductions are not rectified one way or the other at tax time.

Truthfully, it seems like to me one should always put their estimated income one dollar above the FPL at ACA enrollment. Then not only do you get the cost sharing subsidy, but also get an interest free loan for the year on the premium subsidy your would end up paying at tax time.

Still think I must be missing something.

Well, there’s honesty. Not everyone looks to take advantage of subsidies for which they are not eligible. In most cases there’s also a need to provide some documentation to support the income estimate.

 

[PaunchyPirate]

I don't think you're missing anything. The government "expects" you to do a good-faith estimate of your expected income. They also may (and frequently do, from what I've read on this site) ask you to provide written documentation to justify the estimated income you have specified at the time you submit your application. But, in the end, yes... you can game the system if you try.

 

[jim584672]

I'm still not understanding why anyone would put their estimated income above 150% FPL at enrollment time, if the cost sharing reductions are not rectified one way or the other at tax time.

Truthfully, it seems like to me one should always put their estimated income one dollar above the FPL at ACA enrollment. Then not only do you get the cost sharing subsidy, but also get an interest free loan for the year on the premium subsidy your would end up paying at tax time.

Still think I must be missing something.

I guess they could go after someone if they thought the estimate was fraudulent. But I don't think that is a real priority for them.

 

[Dtail]

I'm still not understanding why anyone would put their estimated income above 150% FPL at enrollment time, if the cost sharing reductions are not rectified one way or the other at tax time.

Truthfully, it seems like to me one should always put their estimated income one dollar above the FPL at ACA enrollment. Then not only do you get the cost sharing subsidy, but also get an interest free loan for the year on the premium subsidy your would end up paying at tax time.

Still think I must be missing something.

You are not missing anything.
This was discussed on a recent other thread.
If you underestimate MAGI, you keep the CSR's in the end, but must pay back your relevant share of the tax subsidies which you received upfront.
If they request proof of income at the time of application, you might have to get a little more creative.

From what I gather based on many ACA threads on this site, most folks including me do try to give a good faith estimate at application time.
I am already thankful that this concept of managing MAGI for ACA costs exists for us folks.

 

[pb4uski]

I guess they could go after someone if they thought the estimate was fraudulent. But I don't think that is a real priority for them.

+1 but if they did and the facts and circumstances were particularly eggregious, then they might throw the book at you to make you an example.

If multiple years in a row your estimate was consistently a lot lower than your actual income then they might want to make an example of you... if I was a regulator I would.

 

[FrankiesGirl]

You could only get away with grossly underestimating your MAGI 1-2 years I imagine before they'd likely take action, and I would be quite concerned at them going after the ones that blatantly lied to take advantage.

They do ask you to justify when there is a significant drop in income.

When I quit my job and reported our income to be 75% lower, they contacted me and asked for a statement of why. I explained that I was no longer employed and income would be from investments/retirement accounts and swore the reported income was the closest estimate I could come up with to the best of my ability.

I'm pretty sure if you lied on that statement, it would be noted the following year when you trued up the subsidies, and they wouldn't fall for it twice.

 

[scrabbler1]

Last month, when I was going through my struggles to regain the advanced premium subsidy I hadn't been able to get in a few years, I had to provide income proof (which was eventually accepted). But along the way, I had to modify my original application, so I first included a lowball income estimate which happened to be 250% of FPL. Here, in NY, that triggered cost sharing and a set of plans different from the one I already had. They were called, "Essential Plans," but none were with my current insurance company. This sent me into a panic because that meant I might have to change doctors, change insurance companies, etc., a hassle I didn't want to deal with.


Once I figured out that it was the lowball income estimate I entered which triggered this unwanted turn of events, I entered a slightly larger income estimate and my current plan returned to the list of plans I could (re)select. Phew, I thought, as I chose it and checked with my insurance company to make sure I had uninterrupted coverage with them (I did).


I'm quite happy just getting the subsidy back and having my income estimate being approved for the whole year. I don't need any CSR, as my OOP expenses are rather small.

 

[Spock]

I think the point being missed is that plan deductibles and copays changed with income, not just the subsidies.
Different income levels will change the subsides, but the details within a given plan (deductibles, co-pays, max OOP, etc) should stay the same.


I'd call and talk with Ambetter to ask them why the same plan ID has a such a wide swing in co-pays. Something must be screwed up.

 

[karen1972]

I assumed that is why they asked if they could have access to your tax returns. Thus if you are "inaccurate" several years in a row I think you are going to have to start proving that your situation has changed. I can't see that oversight going on forever, but yes at this point you could make a mistake and not be penalized for it.

 

[Aggie1999]

I think the point being missed is that plan deductibles and copays changed with income, not just the subsidies.
Different income levels will change the subsides, but the details within a given plan (deductibles, co-pays, max OOP, etc) should stay the same.

I'd call and talk with Ambetter to ask them why the same plan ID has a such a wide swing in co-pays. Something must be screwed up.

One would think a plan being modified by Cost Sharing Subsidies would have a different plan ID that one not being modified.

 

[MRG]

One would think a plan being modified by Cost Sharing Subsidies would have a different plan ID that one not being modified.

Subsidies, deductibles, and cost are attributes of the plan, not a new entity.

 

[Aggie1999]

Subsidies, deductibles, and cost are attributes of the plan, not a new entity.

I would agree on the subsidies, as the overall premium the insurance company receives seems to be the same. To me though, something like deductible amounts, out of pocket, etc fundamentally change the plan.


Of course, really doesn't matter as long as one understands what is going on. Having a different plan ID probably wouldn't have made it any more obvious. I thank everyone on this thread of educating me on this stuff.

 

[MRG]

I would agree on the subsidies, as the overall premium the insurance company receives seems to be the same. To me though, something like deductible amounts, out of pocket, etc fundamentally change the plan.


Of course, really doesn't matter as long as one understands what is going on. Having a different plan ID probably wouldn't have made it any more obvious. I thank everyone on this thread of educating me on this stuff.

I'm sorry, I should have explained. Attributes vs. entities is a data modeling discussion. In a physical data model, a column in a table vs. a new table.

 

[MichaelB]

Subsidies, deductibles, and cost are attributes of the plan, not a new entity.

Exactly. The plan is 1) what medical services are covered by the insurer, and 2) what provider network is included. The ACA mandates highly standardize coverage, so most ACA compliant plans are almost identical in coverage. Plans vary widely in network and it is critical to understand exactly how broad the network is before enrolling.

Copays, deductibles and total out of pocket are just different ways to pay for the same plan. What matters is the total cost of health care: premiums + copays + deducibles. One really needs spreadsheet to calculate that. One of our members put together an easy to use excel sheet to help with that. Animorph’s spreadsheet can be found here https://www.early-retirement.org/fo...nd-coinsurance-copay-68965-3.html#post1374536

 

[ncbill]

You could only get away with grossly underestimating your MAGI 1-2 years I imagine before they'd likely take action, and I would be quite concerned at them going after the ones that blatantly lied to take advantage.

They do ask you to justify when there is a significant drop in income.

When I quit my job and reported our income to be 75% lower, they contacted me and asked for a statement of why. I explained that I was no longer employed and income would be from investments/retirement accounts and swore the reported income was the closest estimate I could come up with to the best of my ability.

I'm pretty sure if you lied on that statement, it would be noted the following year when you trued up the subsidies, and they wouldn't fall for it twice.

Which would require proving an intent to defraud...a high bar to overcome.

There are all sorts of reasons household income can be higher than initial estimates...e.g. a family member unexpectedly re-employed during the year, investments had to be sold to meet unexpected needs, etc.

Note that if household income turns out to be lower than expected (I.e. you should have been in Medicaid rather than the ACA) repayment is limited...i.e. $600 for MFJ.

 

[GTFan]

You could only get away with grossly underestimating your MAGI 1-2 years I imagine before they'd likely take action, and I would be quite concerned at them going after the ones that blatantly lied to take advantage.

You'd think so, but recently one of our members admittted underestimating income by at least 100% to get max CSR plans with no adverse actions over the last few years.

Given that, there really is no reason not to estimate below 150% FPL and just reconcile PTC at tax time. They don't care after your initial estimate is approved.