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I am on Medicare and Social Security. My wife is self employed and needs insurance from the state exchange. How do we figure our household income?

The exchange will determine what percentage of your total household income is necessary to cover the full-price cost of the ACA benchmark plan for your spouse. | Image: StockImageFactory / stock.adobe.com

Q. I am on Medicare and Social Security, my wife recently became self-employed and needs health insurance from the state exchange, as she’s not yet old enough to qualify for Medicare. How do we figure our household income? Does my social security count toward household income, even though I will not be buying insurance?

A. For the purpose of determining subsidy eligibility, the IRS and the health insurance exchanges use an ACA-specific version of modified adjusted gross income (MAGI). MAGI is based on household income, even if only one spouse is applying for a policy in the exchange.

Keep in mind that subsidy eligibility is a function of income related to the poverty level. Although your total household income is obviously higher than your wife’s income alone, the poverty level for a household of two is also higher than the poverty level for a household of one. So while your income is counted when determining whether she’ll qualify for a subsidy, you’re also counted as part of the household when determining how the household’s income compares with the poverty level.

Are there income limits for ACA subsidy eligibility?

Normally, subsidy eligibility only extends to households with income up to 400% of the poverty level, with no subsidies available for households with income above that point. But for 2021 and 2022, the American Rescue Plan has eliminated that income threshold. Subsidies are available for households with income above 400% of the poverty level if the cost of the benchmark plan (second-lowest-cost silver plan) would otherwise be more than 8.5% of the household’s income.

So technically there is still an income limit for subsidy eligibility, but it varies depending on the applicant’s age and location, since those determine the cost of the benchmark plan. In an area where premiums are higher than average, and if the person is on the higher end of the age range, subsidy eligibility will extend far above 400% of the poverty level. But for a younger person in an area where premiums are fairly inexpensive, subsidy eligibility will stop at much lower income levels.

Will we qualify for a subsidy?

The exchange will look to see what percentage of your total household income is necessary to cover the full-price cost of the benchmark plan for your wife. If it’s more than the percentage of income that people are expected to pay for their coverage, she’ll qualify for a premium subsidy. But the amount that you pay for your Medicare coverage will not be counted; they will only look at how much your wife’s policy costs in relation to your total household income. Here are some examples of how differing family sizes affect total subsidy amounts, as it can sometimes be a bit counter-intuitive.

In order to qualify for a subsidy, married applicants must file joint tax returns. If your wife experienced a qualifying event (for example, losing her employer-sponsored plan when she became self-employed), she can enroll in the exchange during the special enrollment period triggered by her qualifying event. If not, she’ll have access to individual market plans when open enrollment begins again on November 1.

Your wife can use your most recently filed tax return to provide income information to the exchange. But if your household income has changed significantly as a result of her recent self-employment, she can instead provide the exchange with an estimated projection of your household income, and then provide updates to the exchange later on if her income changes again.

For any year that she receives advance premium tax credits (subsidies) during the year (or if she pays full price through the exchange but ends up with a household income that makes her subsidy-eligible), she’ll need to use Form 8962 to reconcile her subsidy on your joint tax return.


Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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Jacqueline Kelly
Jacqueline Kelly
1 year ago

Regarding the above situation, it is similar to my own, this is the first time I am seeking a credit on I believe to be overpayment of premiums, but when my husband is filing his taxes showing our earnings which are within the threshold for a couple it shows no refund, I am not sure why. Although I’ve checked on the marketplace it says different when I fill out the information as a reference. Is this because my husband is on Medicare so I am being seen as only one and not entitled to a lower premium or refund after all.

Louise Norris
Louise Norris
1 year ago

When you’re a household of two, the premium for just yourself is compared with your total household income to determine if you qualify for a subsidy (and they also use the poverty level for a household of two, so potential subsidy eligibility does extend to a higher income in that situation). It’s based on keeping your premium in the exchange (in this case, for just yourself) at the percentage of your household income that’s considered affordable. (you can see more about those percentages here: https://www.healthinsurance.org/faqs/is-the-irs-saying-ill-have-to-pay-more-for-my-health-insurance-next-year/ )
So yes, the subsidy is much smaller if only one spouse is enrolling through the exchange, because the pre-subsidy premium for just one person is less than it would be for two people. Have you completed Form 8962 yet? It will show you the price of the benchmark plan in your area, the price of the plan you purchased, and the amount of premium subsidy — if any — that you should receive.

Bob Kelley
Bob Kelley
8 months ago

my wife and I went on the ACA in the Nov of 2020 when I retired. In June of 2022 she will turn 65 and go on Medicare. I will only be 57 at that time and on the ACA by myself. When she switches over to Medicare does that trigger a qualifying event for me so I can go on a different plan or do I have to wait until open enrollment to switch plans? Once she goes on Medicare, does the money we are paying for Medicare part B, Medigap and a part D plan still count as part of our MAGI or do we subtract that amount when calculating our income for the ACA for me? How does the fact that she will be on the ACA for six months and medicare for six months affect us? Ideally, once she goes on the ACA I would like to go onto a high deductible plan. Right now we are on a very low deductible plan because she has had numerous health problems for years. Me, on the other hand, I generally go to my doctor once per year for my annual wellness physical and I do not have any health issues.

Louise Norris
Editor
8 months ago
Reply to  Bob Kelley

There is not a special enrollment period for that specific circumstance, but if your eligibility for a premium subsidy changes at the same time, that would trigger a special enrollment period: https://www.healthinsurance.org/special-enrollment-guide/a-change-in-subsidy-eligibility-changes-your-options/
Unfortunately, the money you’ll be paying for Medicare coverage would not be taken into account when your subsidy eligibility for your own plan is calculated. Here’s more about how that works: https://www.verywellhealth.com/obamacare-subsidies-change-with-family-size-4065153 (it can be quite counterintuitive)
In terms of the mid-year plan change, if you’re receiving a premium subsidy, the subsidy for your wife would end when she switched to Medicare, and this will be reflected on the 1095-A that you receive from the marketplace. Although you’re unlikely to be able to switch plans for yourself at that point (and would have to wait until open enrollment that fall), keep in mind that it’s possible to put yourselves on two different plans as of the start of 2022, if that’s your preference. You can still receive a premium subsidy for your household, even if there are multiple marketplace plans for the same household.

Fran Grabowski
Fran Grabowski
6 months ago

We have a family of three. If all three enroll, the premium after the subsidy is less than if one or even two of us join. That’s right. The household income is the same, but premium is double if two join instead of three.

So next year when he goes on Medicare, the two remaining family members will pay double for ACA, and he’ll pay for Part B plus a premium for his health plan. In total our costs will go up 500%.

We expect to pay added costs for him, but we should expect to pay less for the remaining two.

Our income hasn’t gone up, so why should two family members pay more than three?

Louise Norris
Editor
6 months ago
Reply to  Fran Grabowski

Premium subsidies in the marketplace only account for how the marketplace premium (for whichever household members are enrolling) compares with the total household income. The cost to obtain non-marketplace coverage for one household member (for example, someone who transitions to Medicare) is not taken into consideration.

If the household is enrolled in the benchmark plan (the second-lowest-cost silver plan, upon which subsidy amounts are based), their after-subsidy premium should remain no more than it was when all three family members were on the marketplace plan, since that’s capped as a percentage of total household income. The subsidy will be considerably smaller, however, since the pre-subsidy total premium for two members is lower than it would have been for three members.

But if the household is applying the subsidy to a lower-cost plan, they may very well see a considerable increase in the after-subsidy premium when one family member transitions to Medicare and the marketplace subsidy decreases.

As an example, consider a couple, age 63 and 64, living in Chicago and earning $60,000 in 2021. They qualify for a $1,245/month subsidy, and the benchmark plan costs $360/month after that subsidy is applied. But they can get the cheapest available plan for about $8/month after the subsidy.

If we now assume it’s a year later and they are 64 and 65 with the older spouse eligible for Medicare, most of the numbers are different — except the after-subsidy cost for the benchmark plan for the 64-year-old spouse will still be the same $360/month. But the subsidy is much smaller ($449/month), and it doesn’t go as far toward bringing down the cost of the lowest-priced plan, which will be $180/month (versus just $8/month when both spouses were enrolled together).

You can use our subsidy calculator to see more examples of how this works: https://www.healthinsurance.org/obamacare/subsidy-calculator/

But the general idea is that the cost of the benchmark plan in the marketplace will be capped at the same amount for a household both before and after a family member transitions to Medicare. But the cost of the Medicare premiums isn’t taken into consideration when accounting for how much the household is spending on premiums, and the cost of a non-benchmark plan could vary quite a bit when the subsidy decreases following the removal of one family member from the marketplace plan.

Maria h.
Maria h.
5 months ago

Thanks for this informative website/resource. You have presented great information.
I know understand that medicare premiums can not be factored in, however does this apply for Medigap premiums too? My spouse is 65+ and I am not. I am self employed and purchase my insurance through the NYS marketplace. Since Im purchasing insurance for just myself, I have never qualified for any subsidy. However the amount we pay in premiums exceeds 8.5% (we currently pay around 11%). I was hopeful when I read about the 2021 Rescue Plan, however in talking with NYS health today, they said that the premiums we pay for Medigap can not factor into reaching the 8.5% ceiling. Does this sound correct? Or (im hoping) that this is not the case. thank you.

Louise Norris
Editor
5 months ago
Reply to  Maria h.

The information you got from NYSOH is correct. The 8.5% cap on premiums only applies to the premiums you pay for marketplace coverage (specifically, what it would cost you to purchase the second-lowest-cost silver plan in the marketplace). Any outside premiums you pay are not taken into consideration, regardless of whether it’s an individual plan purchased outside the marketplace, an employer-sponsored plan, or anything related to Medicare.
Unfortunately, that means that households with one member on Medicare might be paying well over 8.5% of household income on TOTAL premiums, since only the marketplace premiums are counted towards that 8.5% cap.

Paul LeBlanc
Paul LeBlanc
2 months ago

Can anyone answer if I should use the amount of my social security before or after medicare premium is withheld

Louise Norris
Editor
2 months ago
Reply to  Paul LeBlanc

You’ll include the full amount, before any deductions are subtracted: https://www.healthcare.gov/income-and-household-information/income/

Mike B.
Mike B.
2 months ago

I am currently employed and have health insurance for myself and my spouse thru my employer. When I turn 65 I would like to drop my employers insurance and switch to Medicare. Will this count as a qualifying event for my spouse to enroll in the ACA, and will she be able to get the tax credit subsidy based on my income as she does not work and is not eligible for Medicare yet?

Louise Norris
Editor
2 months ago
Reply to  Mike B.

This is a potentially tricky situation, but it’s likely that your spouse will be able to get a special enrollment period. Technically, you’re voluntarily ending your coverage (assuming you’re continuing to work, since your employer has to allow you to keep your coverage in conjunction with Medicare if you continue to otherwise be eligible for the plan). But the certificate of coverage provided by the health plan will show the date of termination, but likely won’t show the reason for the termination. Your spouse would then be able to show that to the marketplace as evidence of loss of other coverage, triggering a special enrollment period.

Once your spouse is no longer eligible for your employer’s health plan, she’ll potentially be able to qualify for a premium tax credit in the marketplace based on your total household income. Be aware, however, that people in this situation don’t always end up getting a subsidy, since the marketplace will just be looking at the cost for her coverage, versus your household income and the federal poverty level for a household of two. Any available subsidy would only be to keep the cost of the marketplace plan (for one person) at no more than the percentage of income they expect a household to pay. The cost of your Medicare coverage won’t be factored into it. You can use our subsidy calculator to see how this works: https://www.healthinsurance.org/obamacare/subsidy-calculator/ (enter your wife’s age, select household of two, and the total household income)

Eddy
Eddy
1 month ago
Reply to  Louise Norris

My wife and I have market place health insurance with a substantial PTC in 2021, I will be 65 in November 2022. I presume that we will have the same plan in 2022. I understand that I have 7 months to enroll Medicare. Should I enroll within 3 month before my birthday month or in my birthday month or the 3 months after my birthday month? Does mkt place insurance keep paying my PTC until I enroll in Medicare? Should I enroll in December 2022 so that Medicare starts January 2022? Does enroll in December cause any problem with part A, Part B , Part D and medigap? Any penalty on part B or part D?

Louise Norris
Editor
1 month ago
Reply to  Eddy

These are great questions. We’ve discussed a lot of those details in an article about transitioning from marketplace coverage to Medicare: https://www.medicareresources.org/medicare-eligibility-and-enrollment/moving-from-obamacare-to-medicare/
We advise that you work with a local broker who can help you sort out all of the details to optimize your coverage situation.

One other point to note: Medicare effective date rules will change in 2023, which you might be hearing about as you reach your own Medicare eligibility next fall: https://www.elderlawanswers.com/congress-fixes-some-but-not-all-medicare-enrollment-problems-18106

Eddy Chu
Eddy Chu
1 month ago
Reply to  Louise Norris

If I enroll in medicare in the month of my birthday, I understand the PTC will pay for my premium up to that month (November). My Part B will start December, and Part A will be backdated to November. My question is : Do I have to pay a higher Part B premium or penalty because I enroll in the month of my birthday and not within the three months prior to my birthday? The second question is: Can I still get the standard rate for Medigap without requiring medical underwriting?

Louise Norris
Editor
1 month ago
Reply to  Eddy Chu

Neither of those will be a problem. The Part B penalty only applies if you delay your Part B enrollment by at least 12 months: https://www.medicare.gov/your-medicare-costs/part-b-costs/part-b-late-enrollment-penalty
And Medigap is guaranteed-issue (with standard premiums) during a six-month window that starts when you’re at least 65 and enrolled in both Part A and Part B. https://www.medicareresources.org/faqs/is-there-a-best-time-to-enroll-in-a-medicare-supplement-plan/

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