Estimating Income for Obamacare Subsidies Can Be Tricky!

Estimating Income for Obamacare Subsidies—And What Happens If You Get It Wrong

estimating incomeWhen applying for tax credits to help you pay for your health insurance, you must estimate your income for the coming year. If you estimate under 400 percent of the federal poverty level, and the government approves your estimate, you will be granted immediate tax credits. This is money that will be sent to the insurance company by the government, to help cover some or all of your premium.

 

Underestimating Your Income Could Cost You at Tax Time

 

If you estimate your income accurately, you will not owe any additional fees for insurance when you pay your taxes. But for many people, guessing what their income will be for the coming year may not be so easy. Many self-employed people have incomes that vary greatly year to year.

 

If you underestimate your income, you may receive a higher subsidy than you should have. Since the subsidy amount will have already been paid directly to your insurance company, you will be responsible for paying the IRS the difference in what you received, as opposed to what you should have received, come tax time.

 

An Example of How Underestimating Can Cause Financial Problems

 

Here is an example. If your estimated Modified Adjusted Gross Income (MAGI) is $46,123, this is 200 percent of the federal poverty level (FPL). Using this amount, you estimate that your 2014 MAGI is going to be $47,105 and calculate your premium subsidy amount to be $200 per month, or $2,400 annually.

 

When you file your taxes for the year, however, you find out that you really made $48,987, which means that your premium subsidy amount should have only been $75. To make up for the additional subsidy amount you received, you will be required to repay the government the extra $125 per month you received, which adds up to $1,500.

 

As a second example, take a family earning $35,000 at the time they apply for an advance subsidy arrangement.  One spouse, who was unemployed at the time they applied for a subsidy, gets a job and the family’s annual income rises to $65,000.

 

Although this second income allowed the family to leave the exchange after six months on the exchange plan in favor of the second spouse’s employer-based insurance, they still collected $5,371 in advance payments for premium subsidies—well above what they are now eligible for with their new income level.

 

But You May Not Have to Pay It All Back

 

If you receive a subsidy overpayment, the amount you have to pay back will be capped with a limit based on your income level. For example, if you were overpaid for your subsidy amount due to incorrect income estimates, and your income is at 200 percent of the federal poverty level, the cap on the subsidy amount you have to repay is only $600. If it falls between 200 and 300 percent, the cap is $1,500; 300 and 400 percent, the cap is $2,500. You can even earn up to 500 percent of the federal poverty level and have to pay back no more than $3,500. This could be thousands of dollars less than the value of the subsidies you received.

 

Dollar limits for repayment of excess subsidy advances are routinely half these amounts for single filers. More information about these repayment limits can be found on the Kaiser Family Foundation site.

 

Share Your Stories!

 

Are you concerned about correctly estimating your income? I’d love to hear your stories or questions.

Wiley Long

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.
 

This entry was posted on Friday, December 13th, 2013 at 10:00 am and is filed under Health Care Reform, Health Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

  • dennis

    capping want people have to pay back , gives people incentive to under estimate income.

  • Wiley Long

    Indeed it does. Those who are more “aggressive” in their income estimates will definitely benefit.

  • andy johnson

    What happens if you overestimate your income for 2014? I just graduated college with a teaching degree and assume that I will have a job by this September. But what happens if I don’t get a regular job and my income is too small to qualify for health insurance subsidies?

  • admin

    Hi Andy,

    Very good question!

    If you overestimate your income AND you purchase your health insurance on the federal exchange (or state marketplace, depending on where you live), then you will receive all of your qualify subsidy as a tax credit when you file taxes at the end of the year.

    If you decide to purchase insurance off the exchange/marketplace, then you are disqualified for a subsidy no matter what your income might be.

    If you don’t get a regular job and your income is too small, then you will likely get approved for Medicaid. In fact, if you apply for insurance on the exchange/marketplace they automatically check to see if you qualify for Medicaid.

    Do let us know if that brings up more questions!

    • Amy

      I have a follow-up question to piggy back on Andy’s question. If i overestimate my income, AND purchase it on the exchange, then I will receive extra in the form of a tax refund for the additional subsidy amount I would have qualified for.
      Does this also apply to cost-sharing measures? For example, if I estimate my income to be a certain (lower) amount, I would receive a greater subsidy AND a lower deductible and out of pocket maximum. But if I estimate my income to be a little higher just to be safe, I get a little less in subsidy AND a higher deductible than the first way.
      So let’s say I do overestimate my income. When it comes to tax time and I receive the extra, say $30/month in subsidies that i qualified for, will I also receive a refund of, say, the extra $1000 in “out of pocket” money since I would have had an out of pocket max that was much lower due to ‘cost saving’? (Assuming that I met my out of pocket max for the year.)

      I hope my question makes sense!

      • Wiley Long

        Hi Amy,

        Same with my response on the other blog, you will receive any additional premium tax credit in the form of a tax refund (less any taxes you might owe) but that cost-sharing amounts are not re-calculated, repaid, or refunded.

  • Jen

    Not all states have expanded Medicaid… I am in a bad situation like Andy but my state didn’t expand Medicaid… I think we’re just screwed and have to pay for all of it.

  • Wiley Long

    Jen, indeed you are correct – unfortunately. You may be one of many who will fall through the cracks of Obamacare. However, if your income is over 100% of the federal poverty level, you will be able to get a private plan, and it may cost you very little. I encourage you to talk to one of our Advisors to see if they can help.

    Andy – If you are single and your income falls beneath $11,490 this year and your state DID NOT expand Medicaid, you will not qualify for premium assistance. You will be required to pay back any premium assistance you receive this year (although this amount is capped and ranges from $600 to $1,250 – and will be based upon your final 2014 adjusted gross income). Keep in mind – the IRS will not actively seek to recover this over payment, but it will be recovered from any future refunds you are due to receive.

  • Bob Kelley

    Wiley, I live in NY which has expanded medicaid. If I overestimate my income to a point where I am receiving a (federal) subsidy on Obamacare…and then fall beneath that level where I should be on (state) medicaid…..what happens? Am I liable for the subsidy even though I would have received Medicaid free?

  • Wiley Long

    Bob – yes, you would be liable for repaying the subsidy; however, you may not be required to repay the full amount as there is a cap on the amount required to be repaid based on your modified adjusted gross income. The most you would have to repay is $300 as an individual, or $600 as a family. Also note that the IRS will not actively seek to recover this over payment; however, this will be deducted from any future tax refund you are due.

  • Ron Tilley

    When I called into the obamacare helpline they said that there is no penalty for overestimating your income. Is this correct? Also, even if it isn’t correct, if you live in one of the States that opted out of expanding Medicaid, and you are earning less than 100% FPL and make too little to qualify for Obamacare, you’re better off including in your reported income the estimates from self-employment (if you have a job where you get a w-2 then this would be a “side” self-employment venture) that brings your income up to 100% FPL. Then you (and your family possibly) will qualify for not only the premium subsidy but perhaps just as important the cost sharing allocation which lowers your deductibles and max out of pocket costs. If I understand that the cap on the penalties is 300/individual and 600/family then even if overestimating when you’re in reality under 100%, then the $300 or $600 is well worth it. Also, ministers have a weird dynamic in that our housing allowances make our modified adjusted gross incomes artificially low because our housing allowance isn’t included in this figure. It will be interesting to see how the feds handle things when ministers find out that a good deal of them fall under 100% FPL in one of the States that opted out of Medicaid expansion and therefore being under 100% locks you out of qualifying for obamacare.
    But like I said at the beginning of my post, I was told that overestimating doesn’t carry with it a penalty…but perhaps the representative on the phone was incorrect. Even if they were incorrect, it’s still worth it to put together a self-employment forecast to make sure you reach the 100% FPL because the premium subsidies and cost sharing allocation are HUGE at that level. I ended up paying $8/month for a fantastic PPO plan with a major blue for my family of 3, and the max out of pocket for the year is $1000 if someone in my family were to need a huge amount of medical care. The out of pocket limit is hard to reach because you’re only paying a low percentage of the bills for in-network coverage, and the co-pays are real small. Not to mention the great preventative care and prescription coverage I get with the plan as well.

  • Ron Tilley

    Recently healthcare.gov has required income verification of most people within a couple of months of their approval for a premium subsidy. Ministers and clergy will have a modified adjusted gross income that is much lower than their paystub shows. Also, I’d be stunned if the systems in place were sophisticated enough to analyze the paystubs of ministers in such a way as to not count their housing allowance toward their income. Therefore, ministers and clergy might consider using the tax provision which treats them as self-employed and able to file a Schedule C as a self-employed person with their 1040 (even if they only receive a w-2 as an employee); and submit for their income verification to healthcare.gov a self-employed ledger which leaves out their estimated spent housing allowance (which won’t be included in their modified adjusted gross) and shows their “business expenses” and portrays their income at a level that is close to what their modified adjusted gross income will appear on their 1040. The one caveat is that if their modified adjusted gross income will be less than 100% of the federal poverty level for a family of their size, and they live in a State that has opted out of the Medicaid expansion for those under 100% of FPL; they’ll want to interpret their earnings on the self-employed ledger so that they are reporting a level that reaches at least 100% of the federal poverty level and lines up with what they reported on healthcare.gov as their estimated earnings (which should be no lower than 100% of FPL if they want to qualify for obamacare AND they live in a State that has opted out of Medicaid expansion). A phone call today with the obamacare 800 number again confirmed that having your modified adjusted gross income (MAGI) come in under their estimate they provided on healthcare.gov will not result in a penalty. If anything, they might get a greater subsidy (in the form of a refund from the IRS) if their MAGI falls within a range that qualified for a greater subsidy than the income they reported when they first signed up for Obamacare.

  • Wiley Long

    Ron–yes, the information you were provided is correct. If you over estimate your income, there is no penalty and you will likely receive a credit in the form of a tax refund. The caps on penalties for those who under estimate their income is also correct, and I agree, this may certainly be “worth it,” or an appealing alternative to many; however, I should also warn individuals using this technique that when you complete your subsidy application, you must confirm that the information you provided was accurate to the best of your knowledge, so there is the possibility you could be penalized for providing false information. I am not a tax advisor, so please consult with the appropriate consultants.

    Thanks for posting the tips for ministers and clergy.

  • Dave

    Wiley,

    I was employed last year but lost my job in December. I’m currently unemployed, but I expect to find a job sometime this year and expect my total gross income for 2014 to fall within the 100%-400% guidelines. Can I go ahead and sign up for a plan even though I’m currently unemployed? And what happens if I fall just below the 100% fpl? I was told by one of the marketplace agents not sign up if I’m currently unemployed. But if I wait past the open enrollment period I’m out of luck, even though my total gross income will most likely fall within the 100%-400% range. It’s frustrating because my state chose not to expand medicaid, so I don’t qualify for that. Do you have any advice for me?

  • Wiley Long

    Dave,

    Yes, you can currently sign up for a plan. You will be asked to estimate your 2014 income, and that’s what your subsidy will be based on. However, when you apply for coverage they will do their own check to see if you qualify for Medicaid now. If they do determine that you do, you will not be able to get coverage. If you do sign up for coverage and are later found to qualify for Medicaid, you may have to pay back some of the subsidies you received, but it will capped, probably at $600. You may want to contact one of our Advisors this week, and we can see what we can find for you.

  • Kristin

    My husband has 2 jobs. He’s a pastor and has a job on the side. For the church position, he receives a housing allowance that makes up his entire pay from the church. This can be deducted on income taxes as “housing.” When applying for coverage in the exchange, would I include the housing allowance in the income or no?

  • Wiley Long

    Kristin, Great question! Because “housing allowance” is not included in your modified adjusted gross income (MAGI), no, you would not include it.

  • Bess

    1) If I did not file a tax return last year because I had no income, but started a new self-employed business this year and am projecting an income of $12,000, how can I prove I am entitled to the subsidies that I am entitled to?? I live in Texas, so I won’t qualify for Medicaid even if my business doesn’t make as much as I expect it will…

    2) I have a lot of credit card debt. If some of it is forgiven in 2014 and they file a 1099-C, does that count as part of my MAGI?? Because it isn’t actually income, even though I have to pay taxes on it, I obviously didn’t earn that money in 2014 and won’t be able to use it to pay for my premiums…

    Thank you so much for all the info and any help you can provide!!!

  • Wiley Long

    Bess, these are very good questions. First, as far as proving you are entitled to a subsidy, your proof will be your 2014 tax return once it is filed next year. If you make less than the required amount to qualify for a subsidy (or more than initially predicted), you will be required to repay any subsidy amounts you were overpaid (Up to a maximum of $600 if you make less than 200% of the federal poverty level). The IRS will not actively pursue collecting this over payment; however, it will be withheld from any tax refund you are due. As far as the credit card debt, if you receive a 1099-C, according to IRS guidelines, this must be included on your tax return as “income”. Although it is not earned income, it is considered income in the eyes of the IRS. I hope this helps and I wish you luck in your new business venture!

  • Jerry

    At the beginning of 2014 I was unemployed, did not have any employer sponsored heath care insurance and my family was eligible for a monthly $800 subsidy/tax credit. I anticipated eventually getting a job which I knew would reduce the subsidy so I elected to get the tax credit at the end of the year. if I get a job that offers qualified employee sponsored health care insurance in the middle of the year how does that affect my tax credit at the end of the year. Do I still qualify for the tax credit for the first part of they year when I didn’t have a job that offered healthcare insurance? Or do I not get any tax credit just because I was offered employee sponsored health care during a portion of the year? I understand that the higher income will impact my tax credit but my confusion is how getting employee sponsored health insurance in the middle of the year impacts the tax credit.

  • Wiley Long

    Hi Jerry,

    Yes, you would qualify for the tax credit for the months in which you had individual coverage, based as you realize on your 2014 annual income, and pro-rated so that you would get credit just for those months.

  • Shelby

    I am a recent college grad and am very uncertain about what my income will be for 2014. I signed up for health insurance through the marketplace estimating my 2014 income to be $13,500. With this I was eligible for a monthly $212 subsidy. I chose not to apply it because I didn’t want to owe any large sum of money at the end of the year. I am starting to realize that I am probably the only person in the US who did this… Am I guaranteed to receive this money back on my tax return?

  • Wiley Long

    Shelby,

    Great question. And you’re correct-many are choosing to apply their subsidy immediately but I’m sure you’re not alone in your decision. Yes, you will receive your subsidy back in the form of a tax refund. Your subsidy will be based upon your modified adjusted gross income for 2014 – less any taxes you may owe for 2014.

  • k

    Hi. Thanks for this forum and answering all of our questions.

    What happens if we move out of state for a job?

    Currently in Washington state, on Apple Health/medicaid – no premium because our income is so low. We are hoping to move to Idaho for employment.

    Will we have to pay something back at tax time? Or because we would be out of state, and on a private plan through the employer, does that help us out?

  • Wiley Long

    K-Great question! Because you were on Medicaid and did not receive an advanced tax credit, you will not have to pay anything back. You are in the clear! Hopefully your new employer offers coverage at a reasonable cost to you. (As long as the cost to you is not more than 9.5% of your income, you can’t apply for a tax credit or apply for a plan on the federal exchange or state marketplace-so take this into consideration when deciding whether or not to sign up for coverage through your employer. Failure to have health insurance coverage could result in you owing a tax penalty). Best of luck with your move and your new employment opportunity!

  • Todd A

    Hello, My question is I have been receiving the Subsidy since I first signed up. Im self-employed and estimated my Income. My application 12-2013 Healthcare.gov listed Income information needed to verify. I scanned and uploaded a copy of all tax work W2 & company taxes and personal yearly payroll check copy after filling 2013 taxes around 4/2014, I just received a letter for needing documents that they received information but needed more…
    I have 30 days to supply a list of items or It says lose my coverage…. really If I do nothing they will stop my Insurance, I overestimated some for caution of not paying back.
    What is a Self-Employment Ledger??? there is No definition on H.Gov of it and Internet is trying to sell something of the sort which H.Gov need to define so people don’t spend money.
    There is on final page of documents needed to prove citizenship?? Question is do I scan in B.Certs and send that?? I’ve gotten little help from call center as they help with filling line by line application and not Questions about application which is frustrating with no one to ask for answers or help explain what is need. So If I just ignored this letter 6/2013 do you think they will cancel Or what should I scan them a Hand written note on My Co. stationary since I’m a employ of my Co. for Liability purpose stating expected 2014 income do the trick.
    Wish they had a level 2 call center other than minimum wage script reading help line.

  • Reg Astor

    I am in the same situation as Todd. Got a letter stating I would lose my health insurance coverage unless I provided documents proving my estimated 2014 income estimate. I am self employed, get no w-2s and do not have any documents listed that would be able to establish that I will earn 100% of the federal poverty limit. I think that I will by the time the year is over, but who knows. I am an attorney who was laid off during the recession and I’ve been living off of savings, which is about to run out, since about 2011. The only legal work I’ve been able to get has been on contingent fee cases that may or may not generate sufficient income to “achieve” the federal poverty limit. AND, unfortunately I live in the not so great state of Texas. Rick Perry, our compassionate governor chose to keep his government paid for health plan, but chose to make sure down and out Texans, like me, don’t get health insurance by rejecting the federal money offered to Texas. From what I’ve read here and elsewhere, my only hope of avoiding this absurd catch-22 is by producing something called a self-employed Job ledger. Please direct me to some free site or information that will help me prepare such a meaningless piece of fiction. My life may very well depend on it. That may sound overly dramatic, but as I understand this whole mess, if the federal government finds out that I am really poorer than the poor (<100% FPL), they will not only impose monetary fines I have not chance of paying, but I will be disqualified from buying, WITH MY OWN SAVINGS, the only health insurance available to a 50+ year old man with prior health issues. Who needs debtor's prisons. With heartless hypocrites like Texas brilliant governor Rick Perry on one side, and the inept, unrealistic, pin headed geniuses who designed the the Affordable Care Act on the other, it will not take too long for the unfortunate poor (and I never thought I would have to include myself in that category) to inevitably and eventually just get sick and die without medical care. Problem solved.

    Anyway, I would appreciate some specific practical guidance on preparing a self-employed job ledger. Thank you.

  • Wiley Long

    Todd and Reg, I have recently become very aware of the letters you have received. It is imperative that you reply as soon as possible. I would not doubt the possibility that the government would cancel your health insurance and/or premium subsidy. Todd, I’m surprised they are requesting even more information based on what you have already sent, but yes, it’s an absolute must that you respond and certainly include your birth certificate. I understand you have the option to upload the information through healthcare.gov or mail it in. I guess that would be a matter of personal choice, but definitely keep copies of all documentation you receive and what you send. As far as the self-employment ledger, it is simply a document (Excel spreadsheet might be best) documenting income received in each given month (list each payment received, from whom it was received, and the date it was received-or as close as possible) and then total of gross receipts. You would document to the best of your ability your “business expenses” for that month. Subtract that from the gross income and your left with the balance. Do this for each month. You may need to look through bank statements to get this as close to accurate as possible. Here is a link to one example (although I would add your business expenses and subtract that from your gross receipts).

    https://www.state.sd.us/eforms/secure/eforms/E0990V1-SelfEmploymentLedger.pdf

    Reg-you are unfortunately in the catch-22. If you make too little money, not only do you not qualify for premium assistance but you also can’t get Medicaid since Texas did not expand. Therefore to avoid having to repay your subsidy, you would have to make above $11,490 to qualify for premium assistance. Remember-the maximum you should be required to pay back based on your income level is $300; however, keep in mind there may be a fine line between what the government considers unintentionally underestimating your income and “fraud” so be sure to report as accurately as possible.

    Keep in mind that I am not a lawyer or a CPA, and I am not providing legal or accounting advice, just general information based on commonly known information.

  • Joe B

    Hello, I have been trying to find out how to calculate the obamacare subsidy for a couple when one spouse goes on medicare half way through the year.

    The first 6 months we are a two person family with both getting insurance through the government exchange. The last six months we are a two person family with only one getting insurance through the government exchange.

    If we are at close to 400% on the income limit for two people we will be over the limit eligible for a subsidy when only one is getting insurance for the second half of the year. How do you calculate the subsidy for the year?

    Regards,
    Joe B

  • Rob

    Same boat as Todd and Reg… I am guessing that I get a bill from my insurance provider if i do not suppy a self employment ledger??? I am too busy to creat a ridiculous leger carefully crafted according to guidelines. I mean really, anybody can send in an xcel sheet…. and that is proof?

    Is there a documented penalty or fee for not suppying a ledger? Seems like the proof will be in the pudding come April 2015.

  • roger rigby

    I am in the same boat of uncertainty. 2 hours on the phone with 800-obamacare (including wait times) and hours of internet research has revealed nothing reliable regarding how to safely guesstimate with a self-employment ledger, avoid troubles later or blatant cancellations of subsidy by unfeeling computer algorithms and agents who have no power of appeal or assistance that is reliable or helpful.

    So, it is the lousy ObamaCare which provides healthcare I consider sloppy and insufficient and painful forced upon me now with a system in place to manage it lacking fairness, logic, or anything except scary threat letters. Shame shame shame!!!!!!!!!!!!1

    • Wiley Long

      Roger,

      I agree this is a tremendous hassle for many individuals! I wrote about this and included additional information about the self-employment ledger in a recent HSA for America newsletter – I’ve added the link below. The ACA has unfortunately put higher demands on the self-employed to document their income – and of course the ball is in their court. If you fail to provide the documents requested by healthcare.gov, not only do you lose your subsidy- you lose your plan! See if this helps: http://www.hsaforamerica.com/newsletter-issue-98-post.htm.

      I also have another blog coming up next week notifying our readers that the deadline to submit this information is September 5th. Healthcare.gov has stated if the information is not received by the deadline, insurance coverage will end September 30th.

  • Wiley Long

    Rob, unfortunately it’s not as simple as them just sending you a bill. If you do not respond to the request for additional information, your policy can be cancelled altogether. Unfortunately if you are self-employed, the time has come where proper business records must be kept or you risk not only losing your subsidy, but also losing your policy.

  • Tom harney

    My current income is too much for Medicaid but low enough for subsidies. In early 2015 I may be unemployed for a few months but rest of year will have income that again will that will be too much for Medicaid but low enough for subsidies. My question is –will being unemployed in January and February 2015 cause the healthcare exchange connected IRS computer system to put me on Medicaid automatically? My state has a Medicaid estate recovery program and I don’t want to be on Medicaid.

    • Wiley Long

      Tom,

      You will not be automatically switched to Medicaid. Subsidy determination is based on your annual income. Yes – you do have the option to sign up for Medicaid if you choose once you don’t have any income, but you don’t have to. If you know your annual income will meet subsidy requirements, you should be able to keep your plan and will not be switched.

  • Renee B

    I signed up for health insurance on the marketplace when my husband was unemployed the first 6 months of the year and received a subsidy. I notified the Marketplace in June when he went back to work, that I would no longer require the subsidy. I found out a month later that not only was I now responsible for the full premium,(which I knew) but me health plan was actually changed to a new plan with higher deductibles and copayments. I went from a $250 individual deductible to a $2,000 individual deductible no one informed me of this, I found out when a received a benefit statement for a Dr’s visit. My health plan NSLIJ care connect also made this new policy retroactive to March and is telling me I am responsible for the $2000 deductible even though I had the “subsidized” plan from March to July. I am appealing this. My understanding is the bills should be covered at the Subsidized plan rates from March to July and July and August should be paid out at the Normal policy rate. Knowing what I know now I would have not informed them of any changes and just repaid the subsidy at tax time, instead i try to do the right thing and my health insurance plan is changed and backdated. Be aware that you are not only receiving a premium Subsidy but also a subsidy in copayments, deductibles etc…No one ever made me aware of this at the time of purchase or when I notified them of my change in income, Again, I only was made aware of the when I received a benefits statement from a Dr’s visit indicating I now had a $2,000 deductible instead of $250. Is there any law that states the insurance co has to process my claims for March through July at the “subsidized ” plan rates and can’t backdate my new “regular” plan to March and change my coverage? My husbands co based insurance starts in September so this will all be behind me. However, I don’t think I should be responsible to pay claims that were process during the subsidized period (March-July) at the regular rate, they should not be allowed to go back and reprocess claims that where paid at lower rate.

    • Wiley Long

      Hi Renee,

      From what I have researched, it is understandable for your carrier to switch you to a plan without cost-sharing, and obviously your subsidy would be decreased (or even null if you make over 400% of the FPL); However, you should not have to repay any previous payments that were made based on cost-sharing during that time. If you’re unable to get any satisfaction through your insurance carrier, I recommend calling healthcare.gov or your state exchange (wherever your plan was purchased from) and see if they are able to assist you.

  • Elwood Suggins

    I have been receiving Obamacare subsidies since May based upon my good estimate that my income would be in excess of the Federal Poverty limit. I do free lance contact legal work, and although I had as a matter of choice not been working the first half of the year, I believed I would easily make enough to exceed the limit in the remaining months of the year. However, due to some family emergencies, and the fact that some potential work fell through, I now doubt that I will exceed the Federal Poverty limit. As I am in a state that does not provide Medicaid for those making less than the Federal Poverty limit, do I have to repay the entire amount of the subsidies paid to my insurer? Or, as my income falls below the Federal Poverty limit of $11,490, will my repayment amount be subject to the cap of $300.

    • Wiley Long

      Hi Elwood,

      Your situation may affect many Americans and I appreciate your question. In your particular case, your responsibility would be capped at $300.

    • Me

      The ACA is clear on this point: no repayment is required if your income is below the FPL. In your case, the FPL simply serves as upper limit on the size of your tax credit.

  • Cathy

    My son signed up for Obama care in March 2014 after falling off of my current plan because he moved out of state. At that time his income was $20k and he qualified for $174/month tax credit. We took the amount of the credit and used that each month which left him paying $53/month for his health plan. He then got married in June 2014 and we entered the change of life into healthcare.gov. His income stayed the same because his new wife had no income. He had to re-enroll in the same plan and received a $201 tax credit which we used and paid 0.12 per month starting in July. Now, his wife has gotten a job and her income for the rest of the year (starting in September) will be $12,500. I reported this new income to healthcare.gov which now left him with $55/month tax credit. He will start paying $145/month in November. What is going to happen at the end of the year. Will we now owe back tax credit money that was given to him the previous months at tax time? There was no way to estimate that he was going to have this added income. We’re not quite sure what to do about this or what will happen.

    • Wiley Long

      Cathy,

      This is one of the unfortunate pitfalls of “Obamacare” – you never know what is going to happen in any given year. The final determination of your son’s premium tax credits will be based upon his 2014 tax return including his modified adjusted gross income and household size. If the IRS determines that he received too much in the form of an advanced premium tax credit, he will owe the IRS and would have to repay all or part of his advanced premium tax credit. The amount required to be repaid varies and is capped based on income and can be withheld from any tax refund due.

  • smlowry

    I wonder if there’s any chance something will happen to help those of us who live in states that did not accept federal funds to expand Medicaid. I live in Maine and lost my Medicaid coverage in Dec. 2013. I’m 62 – not a great age to have no health insurance. I moved to this state from Vermont 18 years ago to care for my disabled sister (who is 7 years younger than me) after our father suffered a stroke and had to move to a nursing home. My sister’s disablity is from a severe brain injury suffered 31 years ago. She cannot live alone. I am beside myself with worry over my/our future. We co-own our home so we just can’t pick up and move back to Vermont. I want to sell it but the market here hasn’t recovered enough such that we’d be able to afford the costs of a move after selling, paying off the mortgage and the realtor fee. So I’m stuck here. If I were to have an accident or get seriously ill, we’d lose the house anyway so a part of me thinks we should stop making mortgage payments, save the $ and then let the bank take the house so we can move. But right now we have good credit and I don’t want to ruin that. If our governor’s race puts the democrat in office, no problem. But it’s a tight race due to a 3rd party candidate so LePage could very well receive the highest percentage of votes (though it would not be a majority – the same thing happened 4 years ago). Is there any hope for me or do I just have to pray I don’t get sick until I turn 65?

    • Wiley Long

      Hi smlowry,

      You and so many other Americans have fallen into this coverage gap. Unfortunately, there is no way to tell what the future will bring and which states may overturn their decision and move forward with expanding Medicaid. If your income falls below the level to qualify for premium assistance, it seems that you will continue in this coverage gap but may want to consider something as simple as an accident policy (as most health-related problems are accident related). If you are able to bring your income to the minimum required to qualify for premium assistance, ($11,670 for 2014), you could then sign up for a health plan, and this would provide coverage until you’re 65.

  • lynn

    hi wiley, so glad to have found this article.

    a family member is in a similar position as many here. lives in a state that didn’t expand medicare. estimated income at what he thought was conservative–$20,000. qualified for a big subsidy and got a good policy. then got sick, 2 hospitalizations, and hasn’t been able to work at all so far this year. will likely not earn more than $11490/FPL.

    i understand from reading the article and comments that he will likely have to repay only $300, right? if so, can you direct me to the ‘law’ that says this? so far, i’ve found this 2013 article that seems to confirm…but i haven’t been able to find the law itself. i know it would ease his mind to have it.

    thank you so much!

  • Jane Doeder

    How is annual salary calculated in a mid-year divorce situation? I was told by healthcare.gov that even though I had separate finances and was already receiving alimony, I wouldn’t qualify for a subsidy until my divorce was final because my soon-to-be-ex made too much money. So, he let me stay on his insurance until the divorce was final in June. In June when I applied at Healthcare.gov, I estimated my annual income based on just my salary for the year. Now I’m wondering 1. Are they going to count my ex’s income from January to June as part of my annual income even though I had private insurance during those months and we are filing our taxes separately? 2. If it’s based just on my income alone and I fall below the amount to qualify for a subsidy for 12 months of insurance coverage, how does that work since I only used the subsidy for 6 months of the year?

    • Wiley Long

      Hi Jane

      One determining factor here will be how you file your taxes. If you file as “married filing separately” you absolutely will not qualify for the tax credit. This is not allowed under the ACA. If you still file as married, as you said, you would not qualify due to your soon to be ex-husband’s income. If you are divorced by the end of this year and file as single, then it will only go by your income as filed on your tax return.

  • ZV

    Hello. My parents are currently covered under Medicaid, but that coverage is ending at the end of the month 10/31/14. On the Marketplace application, it asks if they are covered under Medicaid or any other insurance. I answered yes because they are still covered as of the date I am doing the application. It then asks whether they will be losing coverage in next 60 days and to specify the date. These were “optional” questions. Based on my answer of “yes” to them being covered under Medicaid, I was not asked if they had affordable employer-sponsored health insurance. The eligibility notification indicated they will get a subsidy.

    My dad does have “affordable” employer-sponsored health insurance. However, based on how I answered the questions, the question was not asked of me. Are they still entitled to the subsidy?

    • Wiley Long

      Hi ZV,

      If your father has access to “affordable” employer-sponsored health coverage, no – they do not qualify for a subsidy. If you are under 26, you can also be added to your parents’ insurance policy. I am not sure of your age or living situation, but if you make adequate income to qualify and your parents choose not to add you to their policy, you may apply individually under your own account on healthcare.gov for insurance and/or a subsidy. Open enrollment begins November 15 unless you qualify for a special enrollment period, then you could sign up now.

      • ZV

        Since the question of whether he has access to affordable coverage never showed up for me, the eligibility notification does say they have a tax credit. If they apply the max credit (over $600/mo), will they responsible for paying the full amount back or will it be capped at the $600 for the household salary level (150-200% FPL)?

        • Wiley Long

          ZV,

          Yes it’s true there is a recap on the amount of how much they would have to repay; however, if the government were to determine that fraud was committed when applying for coverage (as he is aware affordable coverage is available through his employer and technically would not qualify for a subsidy), there is a chance that the cap might not apply. During the application process, there is a document required to be provided from the employer stating affordable coverage IS NOT available, so that may be where he hits the snag.

  • Amy

    I have a question. If i overestimate my income, AND purchase it on the exchange, then I will receive extra in the form of a tax refund for the additional subsidy amount I would have qualified for.
    Does this also apply to cost-sharing measures? For example, if I estimate my income to be a certain (lower) amount, I would receive a greater subsidy AND a lower deductible and out of pocket maximum. But if I estimate my income to be a little higher just to be safe, I get a little less in subsidy AND a higher deductible than the first way.
    So let’s say I do overestimate my income. When it comes to tax time and I receive the
    extra, say $30/month in subsidies that i qualified for, will I also receive a refund of, say, the extra $1000 in “out of pocket” money since I would have had an out of pocket max that was much lower due to ‘cost saving’? (Assuming that I met my out of pocket max for the year.)

    I hope my question makes sense! There are so many different individual situations that it is not always easy to understand how this will work.

  • Sound Therapy

    I will be turning 65 in July and will only be getting health insurance for 6 months, then cancel and switch to Medicare. Can I report half a years income?

    • Wiley Long

      Hi,

      Great question. Subsidies are determined based on your household modified adjusted gross income which is determined when you file your taxes, so no, you cannot only claim income for half a year. Be sure not to cancel your marketplace health coverage until you are positive your Medicare is effective.