As if you needed even more evidence that the Affordable Care Act was nowhere near ready to be rolled out, here is one more ‘glitch’ to make you shake your head.
Turns out that the federal exchanges aren’t quite set up to accept online changes in income and life circumstances (family size, marriage, moving, etc.) as initially intended. The online feature isn’t working as expected, so that if you get married, divorced, have a baby or get a new job – you can’t report it on the exchange.
So what happens if you qualify for an advance premium tax credit based on your estimated annual income, but your income changes mid-year? The exchanges were supposed to be set up to accept your prompt notification of these changes to help you avoid having to repay the government for overpayment of subsidies at the end of the year.
What Kinds of Changes Require Reporting?
According to the IRS, a timely report of changes in your income or circumstances affecting your subsidy amount will protect you from a reduced refund or balance due on your tax return. These changes include:
• The death of a household member.
• The addition of a household member of any kind (not just a newborn).
• Loss of income, whether from a job loss or cut in pay or hours.
• Increase in income from a new job or increase in pay or hours worked.
• Marriage or divorce.
Why Is It Important to Report Changes Sooner than later?
If you want to avoid a rude awakening at tax time in the form of a reduced refund or a balance owed, it’s important to report a change in your income throughout the year so that your premium subsidy can be adjusted in real time. Otherwise, your estimated income will be reconciled with your actual income when you file your tax return. The government won’t let you get away with keeping any overpayments you’re required to give back.
Of course, if you over-estimate your income and receive a lower subsidy amount than you’re actually entitled to, you will be refunded the amount you were underpaid. But it’s a better idea to notify the exchange (when they are up and running in that department) if you are due a higher subsidy, so that you can begin paying less for your health insurance now.
If you are receiving more in subsidies than you should, based on your income and household, this could result in a tax bill in the thousands of dollars. If you receive $500 a month in subsidies but then get a new job that increases your income to over 400 percent of the poverty level, you will have to repay the government $500 for every month you received the subsidy.
Granted, there are caps in place if your income qualifies, so that you may not have to pay all of it back, but it’s a pretty safe bet that someone who qualified for the premium subsidy probably doesn’t have a lot of extra cash lying around.
Reporting a Change in Circumstances Isn’t Easy
If you have purchased a policy on the federal exchange and are receiving a premium subsidy, you will have a difficult time reporting such changes. In fact, although the government requires any type of change that affects the subsidy to be reported, the healthcare.gov website is not currently equipped to handle the reporting of said changes.
You can try calling our insurance carrier directly, but you will likely experience long wait times since no one can make these changes on the exchange right now.
I encourage you to call an HSA for America Personal Advisor. With some brief information, we can do the calling for you to help you report your circumstance or income changes, thereby helping you avoid headaches at tax time.
Private Insurance Companies Take Changes Directly
For people with private insurance (meaning coverage offered by a plan purchased off the insurance exchange and with no premium subsidy or tax credit), reporting a change such as the birth of a new child is easy. All it involves is making a call to the insurance company and reporting the change. Newborns are typically covered for thirty days, during which time you are given paperwork to fill out to add them to the policy.
Although reporting other changes such as a marriage or divorce may be slightly more complicated and may involve a bit more paperwork, the changes can usually be made with few problems.
Americans Pay the Price for Flaws in the Law
I understand that with any new undertaking there is a learning curve, so maybe I should be a bit more tolerant of some of the problems with the Affordable Care Act roll-out.
Since the ACA is, in fact, law many of us are rightfully frustrated when the mechanics that are supposed to allow us to comply with it don’t work!
As is so often the problem when the government gets involved in what should rightfully remain in the private sector, the American public is the group who pays the highest price for a “fix it later” approach.
There ARE Solutions
However, I do want to offer you a bit of comfort to by reminding you that here at HSA for America, we are committed as a whole to helping you navigate all of the aspects of the Affordable Care Act.
The healthcare.gov site says it’s your responsibility to notify them of changes in your income or circumstances. Your personal insurance advisor is your best ally in helping you to report any changes to avoid paying more than you have to later.
This includes helping you before, during and after your application for enrollment and subsidy. We will help you easily report changes in your life that affect your qualified subsidy amount as well. And we can help you with other health insurance questions, too, whether you’re shopping on or off the exchange.
Wiley Long is President of HSA for America, and a passionate advocate for consumer-based solutions that will improve price transparency and lower health insurance and medical costs for people purchasing individual and family health insurance plans.