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Will you receive an Obamacare premium subsidy?

How the Affordable Care Act's subsidies are calculated, and who is eligible to receive them under the American Rescue Plan

More than a decade after the Affordable Care Act (aka Obamacare) was signed into law, it remains almost fully intact (the individual mandate penalty was eliminated as of 2019, and some of the law’s taxes have also been repealed, including the Cadillac tax). And the American Rescue Plan (ARP), which provides significant, albeit temporary, enhancements to the ACA, was signed into law by President Biden in March 2021.

The ARP includes several provisions that make health insurance and health care more accessible and affordable. For 2021 and 2022, it increases the size of premium tax credits and eliminates the upper income limit for subsidy eligibility. For 2021, it ensures that people receiving unemployment compensation are able to enroll in a silver plan with $0 premiums and robust cost-sharing reductions. And for the 2020 plan/tax year, it ensures that people who would otherwise have had to repay excess premium subsidies to the IRS do not have to do so.

The ACA’s health insurance premium subsidies – also known as premium tax credits – normally adjust each year to keep pace with premiums. (Here’s how that works.) But for 2021 and 2022, subsidies are much more robust than they usually are. There is no “subsidy cliff” for this two-year period. Instead, nobody purchasing coverage through the marketplace has to pay more than 8.5% of their household income (an ACA-specific calculation) for the benchmark plan. And people with lower incomes are expected to pay a smaller-than-normal percentage of their income for the benchmark plan – as low as $0 for people with income that doesn’t exceed 150% of the poverty level.

White House

An executive order signed by President Biden has authorized a COVID-related special enrollment period on HealthCare.gov. The SEP will run from February 15 to August 15.

In addition to the extra subsidies in 2021 and 2022, subsidy amounts were already considerably larger than they were prior to 2018. This has been the case since the Trump administration stopped funding cost-sharing reductions (CSR – a different type of ACA subsidy) in the fall of 2017.

To cover the cost, insurers in most states now add the cost of CSR to Silver plan premiums. That makes the Silver plans disproportionately expensive, and since premium subsidies are based on the cost of the benchmark Silver plan, it also makes the premium subsidies disproportionately large.

Premium subsidies can be used to offset the premiums for any metal-level plan in the exchange. Because the subsidies are so large, some enrollees can get $0 premium Bronze plans, or $0 premium Gold plans. According to an analysis by the Kaiser Family Foundation, 4.5 million uninsured Americans were eligible for free Bronze plans for 2021 – and that was before the American Rescue Plan substantially increased the size of the premium subsidies, resulting in even more people qualifying for premium-free plans.

During the open enrollment period for 2020 coverage, 11.4 million people enrolled in plans through the exchanges nationwide. Of those, 9.6 million – or 84 percent – received premium subsidies. For those enrollees, premium subsidies cover the bulk of their premiums: The average full-price plan across the 38 states that used HealthCare.gov  in 2020 was $595/month, but the average after-subsidy premium was just $145/month. Enrollment numbers were already higher in 2021 (at around 12 million people) before the American Rescue Plan was enacted. That legislation, combined with the COVID-related enrollment window that continues through May 15 in most states, is likely to result in a significant increase in enrollment as 2021 continues.

In short, the subsidies are a significant part of the “affordable” in Affordable Care Act. With each successive open enrollment period, awareness of the law’s premium tax credits (subsidies) has continued to grow. But many Americans may still be wondering, “Am I eligible to receive a premium subsidy – and if so, what should I expect?” This is particularly true in 2021, as the American Rescue Plan makes coverage much more affordable for millions of people.

Who is eligible for a subsidy?

Subsidy eligibility is normally based on income (ACA-specific MAGI), but subsidies are also available in 2021 for people who receive unemployment compensation.

For income-based subsidy eligibility, a household must have an income of at least 100% of the federal poverty level (139 percent of the federal poverty level in states that have expanded Medicaid). And although there is normally an income cap of 400% of the poverty level (discussed in more detail below), that does not apply in 2021 or 2022. Instead, subsidy eligibility is based on the cost of the benchmark plan relative to the person’s income. If it’s more than 8.5% of the person’s income (or a lower percentage, for people with lower incomes), a subsidy is generally available.

But there are other factors that determine eligibility for premium subsidies. Let’s take a look at what they are:

Access to affordable employer-sponsored coverage

If your employer offers coverage that’s considered affordable and provides minimum value, you’re not eligible to receive a subsidy in the exchange. Note that the affordability test only applies to coverage for the employee; the cost to add dependents to the plan is not taken into consideration. But if the employee’s coverage is considered affordable, the dependents are not eligible for premium subsidies in the exchange – and this situation is known as the family glitch.

If your employer offers affordable coverage that provides minimum value, you already are receiving a subsidy from your employer in the form of pre-tax health insurance benefits and an employer contribution to your premiums. The exchanges offer subsidized health insurance benefits to the self-employed, the unemployed, and employees who work for a company that does not offer affordable health benefits.

Note that some employers offer coverage that is either not affordable or does not provide minimum value (by doing this, they can avoid the potentially larger penalty they would pay if they didn’t offer coverage at all). These plans, while technically considered minimum essential coverage, can be quite skimpy – and to clarify, employers are subject to a penalty if they offer these plans and their employers opt for a subsidized plan in the exchange instead. If your employer offers a plan that doesn’t meet the affordability rules and/or the minimum value rules, you do have access to premium subsidies in the exchange if you’re otherwise eligible based on your income, immigration status, etc.

Access to Medicaid or CHIP

In addition, premium subsidies aren’t available to people who qualify for Medicaid or CHIP, since Medicaid and CHIP (the Children’s Health Insurance Program) generally provide even more financial assistance than premium subsidies.

It’s important to understand that CHIP eligibility extends to much higher incomes than Medicaid eligibility. Kids in households with MAGI at 2005 of the federal poverty level (FPL) are eligible for CHIP in nearly every state, and there are several states where CHIP eligibility extends to above 300% of the poverty level.

If your kids are eligible for CHIP, they aren’t eligible for premium subsidies. That means the subsidy amount you’ll see when you enroll is just for the adults in your household, as the kids will be on CHIP instead.

Age: Nothing but a number

There’s no upper age limit for subsidy eligibility. But most people become eligible for premium-free Medicare Part A when they turn 65. In that case, they lose their eligibility for premium subsidies.

But if you’re not eligible for premium-free Medicare Part A because you don’t have enough work history in the U.S., you can continue to buy coverage in the exchange, and you’ll continue to receive premium subsidies if your income makes you eligible. (See question A6 in this guide from CMS.)

The Medicaid coverage gap

Premium subsidies aren’t available to people with income below the poverty level (with the exception of recent immigrants, as described below), because when the ACA was written, it was expected that everyone living in poverty would be eligible for Medicaid. But two years after the law was enacted, the Supreme Court ruled that states couldn’t be forced to expand Medicaid, and some states still haven’t expanded coverage.

This results in a coverage gap for people with income below the poverty level in those states. In most cases, they’re not eligible for Medicaid because they’re in states with strict Medicaid eligibility guidelines. But they’re also not eligible for premium subsidies (note that for 2021 only, people receiving unemployment compensation for at least one week are considered subsidy-eligible – assuming they don’t have access to an employer-sponsored plan or Medicaid – even if their income is under the poverty level.)

Immigration status

Premium subsidies aren’t available to people who aren’t in the U.S. legally, although they are available to immigrants living legally in the U.S. In other words, you don’t have to be a U.S. citizen to get premium subsidies. In fact, premium subsidies are available for recent immigrants with income below the poverty level, even though they’re not available to the general population with income below the poverty level.

That’s because Medicaid is not available to recent immigrants until they’ve been in the U.S. for at least five years. When the ACA was written, the expectation was that Medicaid would be expanded in every state to cover people living in poverty.

But lawmakers knew that recent immigrants wouldn’t be eligible for Medicaid, even with the expanded eligibility guidelines. So they were careful to clarify that these individuals would be able to receive premium subsidies in the exchange. (Their goal was to make it so that all lawfully present U.S. residents would have access to affordable coverage, one way or the other.)

The income cap for subsidy eligibility does not apply in 2021 or 2022

Premium subsidies normally aren’t available to people with income (ACA-specific MAGI) above 400% of FPL, although as noted above, that’s not the case for 2021 and 2022.

When the ACA was written, the expectation was that coverage would be affordable without subsidies at that income level. But as premiums have grown, there are some areas of the country where coverage can easily exceed 25 percent of household income for a family just a little above 400% of the poverty level. (For 2021 coverage, before the American Rescue Plan removed the upper income limit for subsidy eligibility, it was $51,040 for a single person and $104,800 for a family of four.)

The number of people with off-exchange coverage – and unsubsidized coverage in general, including people who buy full-price plans in the exchange – has declined precipitously in recent years in many areas. This is not surprising given the sharp premium increases in 2017 and 2018, which caused coverage to become unaffordable for some people who earn a little too much to qualify for subsidies (although rates have stabilized in 2019 and 2020, they’re still too high to be affordable in many areas when a household’s income is just a little above the subsidy eligibility cap).

It’s important to understand that contributions to a health savings account (HSA) and/or pre-tax retirement plans will reduce your income for subsidy-eligibility purposes. This is still true in 2021 and 2022 – even though there is no subsidy cliff for those years, it’s still possible to reduce your ACA-specific MAGI (and thus qualify for a more significant subsidy) by making pre-tax retirement plan contributions or HSA contributions.

Even with the American Rescue Plan in place, there won’t be subsidies for people earning millions of dollars, as health insurance premiums won’t even come close to eating up 8.5% of their income. But people with income well above 400% of the poverty level will qualify for subsidies in some areas.

California has created its own state-funded subsidies for people earning up to 600% of the poverty level; this is separate from the American Rescue Plan.

Subsidies are based on the cost of Silver plans

Now that we know who is eligible, let’s take a look at how the subsidies actually work. The subsidies are tax credits that are available to help middle-income and low-income people afford health insurance when they don’t have access to affordable employer-sponsored coverage or government-sponsored coverage (Medicaid or Medicare). Most eligible enrollees take those tax credits in advance, paid directly to their health insurance carrier each month to offset the amount that has to be paid in premiums.

But you can also pay full-price throughout the year for a plan through the exchange, and then claim your subsidy as a lump sum when you file your taxes. Subsidy reconciliation is completed when you file taxes, using form 8962. If the subsidy you receive during the year is too high, you’ll pay back some or all of it when you file taxes (note that for 2020 only, you do not have to repay excess premium subsidies; this is a provision in the American Rescue Plan). If it was too low – or if you didn’t receive an advance subsidy at all during the year – you’ll get the balance of the tax credit when your return is processed.

As discussed above, premium subsidies are available to exchange enrollees based on their ACA-specific MAGI. (People enrolled in off-exchange plans are not eligible for subsidies, regardless of income; anyone enrolled in an off-exchange plan in 2021 should take a careful look at the available on-exchange options, as the new premium subsidies under the American Rescue Plan will tend to make coverage much more affordable than it was in prior years.)

In states that have expanded Medicaid under the ACA, Medicaid is available to enrollees with incomes up to 138% of the poverty level, and subsidies are not available below that threshold.

Although there is no upper income limit for subsidy availability in 2021 and 2022, it’s important to understand that in other years, the upper income limit for subsidy eligibility is higher in Alaska and Hawaii than it is in the rest of the country. That’s because Alaska and Hawaii have higher poverty levels, meaning that 400% of the poverty level is a higher dollar amount in those states.

Note that some people with MAGI under 400 percent of the poverty level don’t receive subsidies simply because the unsubsidized cost of coverage in their area is under the threshold established by the ACA. This is still true in some cases even with the American Rescue Plan in place, but it’s even less common now than it was before that law temporarily increased premium subsidies for 2021 and 2022.

Subsidies are tied to the cost of the second-least expensive Silver plan in your area (ie, the benchmark plan). The architects of the Affordable Care Act (ACA) wanted to make sure that people who must buy their own insurance can afford that benchmark Silver plan, even in regions where health care is extremely expensive. So knowing the price of the benchmark plan in your region is key to calculating the size of your subsidy.

The benchmark can be a different plan from one year to the next, as insurers adjust their prices – but it’s always the second-lowest-cost Silver plan in a given area. And as the cost of the benchmark plan changes, the size of the premium subsidy changes too, to keep pace with the benchmark plan cost. If the benchmark rate goes up, subsidies increase. But if the benchmark rate goes down, premium subsidies will decline. This has happened quite often recently, especially in areas where new insurers join the exchange.

The enrollment software will automatically calculate your subsidy, but many enrollees are curious about how the subsidy amount is determined, so here are the details:

What exactly is a Silver plan?

In the exchanges, insurers offer Bronze, Silver, Gold and–in a few areas–Platinum plans. (Catastrophic plans are also available to young adults and people with hardship exemptions, although subsidies are not available on catastrophic plans). All must cover the ACA’s essential health benefits, and cannot refuse to cover you or charge you more because you suffer from a pre-existing condition.

The difference between the four tiers is their actuarial value. Bronze and Silver plans tend to have lower premiums, with higher co-pays and deductibles–up to a maximum of $8,550 in out-of-pocket costs in 2021 (many plans have out-of-pocket caps that are below this level.) After an enrollee hits the out-of-pocket limit, the insurer pays for all essential benefits, as long as the patient stays in-network.

Gold and Platinum plans’ premiums are higher, but deductibles, copays, and total out-of-pocket exposure on those plans are often lower. Silver plans pay roughly 70% of enrollees’ expected healthcare costs, and generally have premiums that are higher than Bronze plans, but lower than Gold plans. (Note that the concept of “expected healthcare costs” is in relation to the average costs for the entire population covered by the plan, including those with very high health care costs; it does not apply to each individual insured.)

It’s important to understand, however, that because the cost of cost-sharing reductions has been added to Silver plan rates in many states, you may find that there are Gold plans in your area that are less expensive than silver plans. Shop carefully!

How to calculate your subsidy in four easy steps

The size of your subsidy is based on how your household’s income (ACA-specific MAGI) compares with the prior year’s poverty level, and the price of the benchmark Silver plan in your region.

To calculate the size of your subsidy:

1) Use this table to find out where your income falls in relation to the federal poverty level. You’ll be looking at your 2021 income, but you’ll be comparing it to the 2020 federal poverty level, which is what the numbers in this table represent. (Since open enrollment for 2021 took plans in 2020, these numbers will be used for all plans with 2021 effective dates.) As noted above, the numbers are higher in Alaska and Hawaii.

Normally, an income above 400% of the poverty level would make a household ineligible for premium subsidies. But in 2021 and 2022, premium subsidies are available above that level if they’re necessary in order to keep the cost of the benchmark plan at no more than 8.5% of the household’s ACA-specific MAGI.

In most states, if your income doesn’t exceed 138% of the poverty level, you’ll be eligible for Medicaid. The other delineations are for determining the percentage of income that you’d be expected to pay for the benchmark plan in the exchange, as described in the next step.

Percent of Federal Poverty Level (FPL)
Household Size 100% 138% 150% 200% 300% 400%
1 $12,760 $17,609 $19,140 $25,520 $38,280 $51,040
2 $17,240 $23,791 $25,860 $34,480 $51,720 $68,960
3 $21,720 $29,974 $32,580 $43,440 $65,160 $86,880
4 $26,200 $36,156 $39,300 $52,400 $78,600 $104,800
5 $30,680 $42,338 $46,020 $61,360 $92,040 $122,720
6 $35,160 $48,521 $52,740 $70,320 $105,480 $140,640
For each additional person, add $4,480 $6,182 $6,720 $8,960 $13,440 $17,920

2) Find out how much the Affordable Care Act expects you to contribute to the cost of your insurance by consulting Table 2. The expected contribution is adjusted slightly each year. The percentages listed below are for 2021 and 2022, and are specific to Section 9661 of the American Rescue Plan (the IRS had previously issued a normal contribution percentage table for 2021, but it’s no longer relevant; all of the expected contributions have been adjusted down as a result of the ARP).

If you earn Your expected contribution is
Up to 150% of FPL            0% of your income (ie, the benchmark plan will have no premium)
150%-200% of FPL            0%-2% of your income
200%-250% of FPL            2%-4% of your income
250%-300% of FPL            4%-6% of your income
300%-350% of FPL            6%-8.5% of your income
400% of FPL or higher            8.5% of your income

The subsidy will make up the difference between the amount an individual is expected to contribute (based on income) and the actual cost of the area’s second-lowest-cost Silver plan.

3) Determine out how much a benchmark Silver plan costs in the area where you live. You can scroll through the available quotes in your state’s exchange and see what the second-lowest-cost Silver plan’s premium would be for you and your family, or you can call the exchange.

It’s important to note that the benchmark plan changes from one year to another: Carrier A might have the second-lowest-cost Silver plan one year, but due to premium fluctuations, Carrier B might take over that spot the following year.

4) See Table 2. Subtract the amount that you are expected to contribute (based on your income) from the cost of your benchmark Silver plan. For instance, let’s say your Silver plan costs $3,000 a year, and you are expected to contribute $1,000. You will receive a subsidy of $2,000.

Sample calculations for 2021 under the American Rescue Plan’s adjustments to the ACA’s subsidy amounts

This spreadsheet shows several scenarios – different ages, income levels, and locations – with after-subsidy benchmark and lowest-cost plan prices under the American Rescue Plan. And you can see the corresponding amounts without the ARP, to see how much more affordable the ARP made coverage as of 2021.

Let’s work through a specific example, so that you can see exactly how it works (we’re rounding numbers here to make it easy to follow; the exact dollar amounts would be slightly different):

Rick is 27 and lives in Birmingham, Alabama (zip code 35213). According to HealthCare.gov, the benchmark plan for Rick has a full-price premium of $498 per month in 2021.

If Rick earns $25,520 (that’s 200% of FPL, based on the 2020 FPL numbers) he would be expected to kick in 2% of his income, or $510 in 2021, towards the cost of the benchmark plan (0.02 x $25,520 = roughly $510), with a subsidy covering the rest of the premium. That amounts to about $42.50 per month in premiums that Rick would have to pay himself if he buys the benchmark plan.

It’s important to understand that without the American Rescue Plan, Rick would have been expected to pay 6.52% of his income for the benchmark plan. This would have amounted to $1,664 in 2021 that Rick would have had to pay for the benchmark plan. So the American Rescue Plan is increasing Rick’s subsidy amount by $1,154 in 2021, or about $96/month (the subsidy has to grow by about $1,154 for the year in order to bring Rick’s expected contribution down from 6.52% of his income to just 2% of his income).

To calculate his subsidy, he just needs to subtract $510 (the amount he kicks in over the course of 2021) from $5,976 (the total cost of the benchmark plan over the course of 2021). His subsidy will be about $5,466 for the year. That means the exchange will send about $455/month to his insurer, and Rick will have to pay the other $43/month. Of course, that’s assuming he picks the benchmark plan; if he buys a less-expensive plan, he’ll pay less, and if he buys a more expensive plan, he’ll pay more. The $455/month subsidy will stay the same regardless of what plan he buys – unless he enrolls in one of the three plans available to him that have full-price premiums of less than $455/month. In that case, the subsidy will cover the full price and his monthly premium will be $0, but he won’t be able to claim the excess subsidy.

(Note that you can also calculate your expected contribution percentage if your income is somewhere in the middle of one of the ranges shown in Table 2. Here’s how it works.)

Rick’s 27-year-old cousin Alice, earns the same amount as Rick, but lives in Little Rock, Arkansas (zip code 72201), where the pre-subsidy cost of the benchmark plan is quite a bit lower. After her subsidy, she’ll pay the same amount as Rick for the benchmark plan (because they earn the same income), but her subsidy won’t need to be as large. The benchmark plan for Alice has a full-price premium of $323 per month in 2021, according to HealthCare.gov’s plan comparison tool.

If Alice also earned $25,520 (200% of the FPL) the government would expect her to spend 2% of her income on the benchmark plan, just like her cousin in Alabama. (Remember, the expected contribution is tied to income (MAGI), not the underlying cost of the plan.) So she, too, would have to pay $510 of her own money (about $43/month) to buy the benchmark plan in her area. But because the full price of the benchmark plan for Alice would only be $3,876 over the course of 2021, her subsidy will only need to be $3,366 (or about $281/month).

Since Rick and Alice earn the same amount, they pay the same in after-subsidy costs for the benchmark plan: About $510 for the year. This is based on their MAGI – not their age, health status, or location. But Rick’s subsidy has to be larger than Alice’s, because the unsubsidized cost of his plan is so much more, due to his location.

If Rick and Alice were younger, the Silver plan would be less expensive and their subsidies would be smaller. If they were older, the Silver plan would be more expensive, and their subsidies would be higher.

The idea behind the subsidies is to level the playing field and bring average premiums to a middle ground for everyone who has the same general level of income (MAGI). So at the same income level, an older person will receive a higher subsidy than a younger person, but they’ll both ultimately pay the same price for the benchmark plan.


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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Brian
Brian
1 year ago

the examples use a single person, if a married couple income was 60,000 then 9.78% of income is about $6,100/year. is that to cover both or just one person?

Louise Norris
Louise Norris
1 year ago
Reply to  Brian

It’s to cover both people together, as long as they’re both enrolling in a plan through the exchange. The numbers above that detail the percentage of income that a household has to pay for the benchmark premium are for the combined total premium for all members of the household that are enrolling through the exchange.
But if one family member is on Medicare or covered through an employer’s plan, for example, that person’s insurance expenses aren’t counted towards the roughly $6,100 (in your example) that the household is expected to pay for their coverage.
That’s why a family might find that their after-subsidy premium in the exchange doesn’t change much at all when they go from having one person on the plan to having two, or vice versa (assuming they’re a tax household of two the whole time).

Mike
Mike
10 months ago
Reply to  Louise Norris

Thanks, Louise. Just my wife and myself. Assume $75K income, both of us in our 50s without employer offered coverage. The online calculators will spit out approx $7300 for premium max (9.78%). This $7300 would cover premiums for BOTH of us, correct? Can you give me an idea of total out of pocket maximum expenses we should each plan for each year (over and above the $7300)? Thanks!

Jo Ann
Jo Ann
6 months ago
Reply to  Mike

Although this is an old post, I see that you have not received a reply. It is my understanding that if your income is above the 400% FPL ($67,640 for a family of two in 2020), then there is no subsidy available.
This loophole is one is one of the most criticized issues in the ACA. For families and for those middle aged or older, crossing over that threshold can mean a difference of thousands of dollars a year in premiums. If there were a political climate to do so, a fix would not be difficult, by just passing a law that subsidies could continue above the 400% FPL if the premium of the second cheapest Silver plan exceeded 10% of income.

Louise Norris
Louise Norris
6 months ago
Reply to  Jo Ann

Yes, the “subsidy cliff” is particularly challenging for older people and people who live in areas where health insurance is more expensive than average. Here’s more about that: https://www.healthinsurance.org/obamacare/beware-obamacares-subsidy-cliff/
The Biden/Harris health plan includes a solution to the subsidy cliff problem, but Congress would have to agree to the fix in order to make it happen.

Louise Norris
Louise Norris
6 months ago
Reply to  Mike

Sorry for the delayed reply, Mike. At an income of $75k for two people, you won’t be eligible for premium tax credits — assuming you can’t reduce your income further by contributing to a health savings account or retirement accounts? Here’s more about that: https://www.healthinsurance.org/faqs/with-my-income-im-barely-over-the-eligibility-limit-for-a-premium-subsidy-is-there-anything-i-can-do-to-lower-my-income-so-i-become-eligible/
But assuming you’re not eligible for a premium tax credit, there’s no cap on how high your premiums can be. They’re whatever the approved rates in your area are, for the plan you select. The 9.78% cap was for 2020, but it only applied to people who earn up to 400% of the poverty level. Unfortunately, if you earn more than that, your premiums could well be more than that percentage of your income, depending on where you live. But you should have access to a variety of plans with varying premiums.
For 2021, the maximum out-of-pocket costs (in addition to premiums) are $8,550 for a single person and $17,100 for a family. That’s the maximum allowed, but many plans have lower out-of-pocket exposure, so it will depend on the plan you select.

Mo Albadri
Mo Albadri
1 year ago

What if the new immigrants has no income and they live in their son’s house, do they still qualify to get health plan through exchange?

Louise Norris
Louise Norris
1 year ago
Reply to  Mo Albadri

Premium subsidies are a tax credit, so they have to be reconciled on the person’s tax return. If they’re actually counted as their son’s tax dependent, the son’s income would also be considered and the subsidy would be reconciled on the son’s tax return. But if they’re not considered a tax dependent on their son’s return, they’d qualify for subsidies based on their own income and would then file a tax return (including Form 8962) to reconcile the tax credit after the end of the year. They would have to file a return in that case, even with zero income.

Martin
Martin
1 year ago
Reply to  Louise Norris

Based on the article, an individual has to earn at least 100 percent of the federal poverty level (139 percent of the poverty level in states that have expanded Medicaid), but not more than 400 percent of the poverty level.
Is it correct to conclude, that an individual not eligible for Medicaid or Medicare, earning less than federal poverty level would not be eligible for a subsidy? If so, can you explain the logic? I understand a maximum income threshold, but why a minimum? Wouldn’t that person be in more need of financial support?

Louise Norris
1 year ago
Reply to  Martin

Yes, people with income below the poverty level are more in need of financial support, which is why the ACA called for covering them with Medicaid instead (total out-of-pocket costs are much lower than they would be with a subsidized private plan). But states are responsible for covering 10% of the cost of expanding Medicaid, and the Supreme Court ruled in 2012 that states couldn’t be forced to expand Medicaid in order to keep their existing federal Medicaid funding.
There are still 15 states (mostly in the south) that haven’t accepted the extra federal funding to expand Medicaid (Nebraska will expand coverage later this year, and it will drop to 14 at that point). In 14 of those states, many adults with income below the poverty level don’t qualify for Medicaid, because the state hasn’t changed its rules. But they don’t qualify for subsidies under the ACA because they were *supposed* to qualify for Medicaid.
So the short story is that the ACA called for financial assistance for everyone up to 400% of the poverty level, with extra assistance (in the form of free Medicaid) for people with the lowest incomes. In most states, that’s working as intended. But in the states that haven’t expanded Medicaid, there’s a coverage gap.

Dan Duley
Dan Duley
1 year ago

If I am laid off can I get a subsidy to pay for COBRA coverage?
If I am laid off and my income for 3 months is very low and I qualify for a subsidy based on the low income, but I then get a new job that pays well and I go on the employer’s plan will I have to pay back the subsidy at the end of the year if my total yearly income pushes me out of the income range to receive a subsidy?

Steve Anderson
Steve Anderson
1 year ago
Reply to  Dan Duley

Unfortunately, Dan, there are not subsidies for COBRA coverage: Here’s an article about that. https://www.healthinsurance.org/obamacare/do-you-still-need-cobra-health-coverage/

Ellen
Ellen
1 year ago

If a person has employer offered insurance, the open enrollment period is over, and the employer lowers how much of the cost of insurance they are going to pay which puts the premiums into the unaffordable range, can this person seek insurance elsewhere if they have the opportunity to cancel their coverage because of the change in premiums? And would their only subsidy be the amount over the 9.78% of their income?

Louise Norris
Louise Norris
1 year ago
Reply to  Ellen

Yes. If a change in income, work hours, or coverage details results in the employer’s plan becoming unaffordable (ie, the employee’s portion of the cost of employee-only coverage under the lowest-cost plan the employer offers is more than 9.78% of the employee’s household income), that would trigger a special enrollment period for individual market coverage: https://www.healthinsurance.org/special-enrollment-guide/an-sep-if-your-employer-plan-doesnt-measure-up/ During the special enrollment period, the employee can switch to a plan in the exchange, and can qualify for premium subsidies as long as they’re otherwise eligible.

Raine
Raine
1 year ago

I lost my full-time job in 2018 and went on COBRA. My COBRA ends at the end of March and I’m not yet eligible for Medicare, so I’ll need insurance. I am married right now, but my husband left and we’re anticipating the divorce will be final at the beginning of March. Although I don’t have a ‘real job’, I do get side jobs. In 2019 I made about $23,000. My husband and I will file jointly for our 2019 taxes, since he made $70,000 as a couple we’ll be over the threshold. Will that affect my ability to get affordable healthcare in March 2020 when I’ll be single again? Or does the exchange look at the present and go forward?
Thank you

Louise Norris
1 year ago
Reply to  Raine

They will be looking at your 2020 income when determining whether you’re eligible for a subsidy for 2020, so it will only be based on your own income if you’re going to be single and filing your own tax return for 2020 (the premium subsidy is a tax credit that has to be reconciled when you file your 2020 tax return).
The exchange will ask you to project your income for the year, and to provide whatever documentation you have in order to back up the projection you give them. If your income changes later in the year, you can notify the exchange and they can adjust your subsidy in real-time. Then when the year is over, you’ll reconcile everything with the IRS, once you know for sure how much you earned during the year.

Raine
Raine
1 year ago
Reply to  Louise Norris

Thank you!~

Charles Schulz
Charles Schulz
1 year ago

I will turn 65 in June and lose my current healthcare coverage. As I will go on Medicare that’s not an issue, but I will have to buy insurance for my wife and teenage son. While only the two of them will be covered, is the income level based on the “family of 3” since there are three of us in the family? Most of our income is from my pension and social security.

Josh Schultz
Josh Schultz
1 year ago
Reply to  Charles Schulz

It sounds like you’ll be looking for ACA coverage for your wife and son. Your income level for calculating your subsidy will be based on the tax household, and isn’t impacted by the fact that you yourself are going on Medicare.

M Pinder
M Pinder
1 year ago
Reply to  Josh Schultz

Assuming the same facts but that he had also qualified for $2000 in monthly premium credits. What happens to all of those credits once the husband goes on Medicare? As an example, assume June 1st he gets Medicare coverage. So obviously through May 31st, they still get the $2000 in premium credits. What happens after June 1st? Do they lose all of $2,000 of the monthly credits. Or just 1/3 since the wife and son are still on Obamacare? (this also assumes they will meet the income level). this question is all about the credits for June- December.

Louise Norris
Louise Norris
1 year ago
Reply to  M Pinder

The family’s household income relative to the poverty level will still be based on a household of three, since that’s the tax household. (ie, in 2020, premium subsidies would be available for this household with an ACA-specific MAGI of up to $85,320, since that’s 400% of the 2019 poverty level for a household of three).
The premiums the family pays for Medicare will not be taken into consideration when subsidies are calculated for the wife and son. Only the cost of the second-lowest-cost silver plan for the two of them will be used, and it will be compared with the percentage of total household income that the family is expected to pay for a plan in the exchange, based on their income (here’s the math on how that works: https://www.healthinsurance.org/faqs/is-the-irs-saying-ill-have-to-pay-more-for-my-health-insurance-next-year/ ).
This can sometimes result in some counter-intuitive changes to premium subsidy amounts. Here’s a summary: https://www.verywellhealth.com/obamacare-subsidies-change-with-family-size-4065153

Charlie Siedle
Charlie Siedle
7 months ago
Reply to  Charles Schulz

yes! It will include all 3 of your income, but only 2 of you need to be insured

Eddie
Eddie
1 year ago

I am a married teacher in Florida. They offer us an option to continue our insurance after I retire. It would cost 13000 a year for both of us or 6000 a year for just me. I would make 40000 a year in retirement benefits. Would I or my wife qualify for obamacare?

Louise Norris
Louise Norris
1 year ago
Reply to  Eddie

If your total household income, including any income your wife has, is $40,000, you and your wife are likely both eligible for premium subsidies in the exchange once you retire. If your former employer offers retiree health benefits, you can decline that coverage and select a plan in the exchange instead, and qualify for subsidies based on your income (so retiree benefits are different from benefits offered to active employees, in that they only prevent you from getting subsidies if you’re enrolled, not just if you’re eligible). Here’s more about how this works: https://www.healthinsurance.org/faqs/im-60-and-retired-with-no-income-i-can-get-insurance-from-my-former-employer-but-its-very-expensive-do-i-qualify-for-insurance-under-the-exchanges/

Suzanne M
Suzanne M
1 year ago

My husband retired at the end of 2018, and we were on COBRA through the 4th quarter of 2019. If our household income (2 of us) is $42,000 and we paid for ACA insurance for the 4th quarter. (Total paid was about $6,000). It looks like my expected contribution is about $3,500 (8.29% of income) but the silver plan monthly is $460/month. Do I determine a pro-rated amount to what my credit will be on my return?

Louise Norris
Louise Norris
1 year ago
Reply to  Suzanne M

With specific tax questions like this, we always recommend that you speak with a tax professional. But in terms of general background info, yes, you’ll be able to prorate your subsidy amount for the months you had coverage. Form 8962 is the tax form that you’ll use to reconcile your subsidy: https://www.irs.gov/pub/irs-pdf/f8962.pdf
In Part II of that form, you’ll see where there’s an option to use annual totals (for people who had exchange coverage all year) or monthly totals, for people who had partial year coverage. If you’re using the monthly section, it will have you divide your annual expected contribution by 12 and fill that in for each box under column c. Then you’ll be able to calculate your premium tax credit for each month that you had coverage in the exchange.

Martha
Martha
1 year ago

My husband will be signing up for Medicare (turns 65 in September) and when he does that, I will lose the employer healthcare plan that I have had for years here in VA, and I am only 60, so will need to find insurance for a little over 4 years. When I am checking the charts, do I use my income of $23,000, or the total of mine and my husband’s income, which is $78,160 for the two of us? I just a little confused, and when I called the exchange, they said it was too soon to provide me any information, but I want to be prepared.

Alice Shook
Alice Shook
1 year ago

Do you have report a change of income if you receive a corona virus stimulus check?

Louise Norris
Louise Norris
1 year ago
Reply to  Alice Shook

No. It’s not considered income, so it won’t change anything about your subsidy eligibility. The new $600/week federal unemployment benefit is counted for premium subsidy eligibility, but not for Medicaid eligibility. But the stimulus checks that are being sent out (based on 2018 or 2019 income) are not counted for either one.

Sue LaBute
1 year ago

At what point in time are earnings considered for subsidy eligibility? Is it based on prior year AGI. Or if someone worked from January – March, then was laid off, is it based on 2020 earnings to date, or earnings as of the layoff? Obviously much lower after lay off.

Louise Norris
Louise Norris
1 year ago
Reply to  Sue LaBute

Premium subsidies are a tax credit, so they’re based on your income for the year during which you’re getting the subsidy. But unlike other tax credits, they can be taken in advance — paid directly to your insurance company — instead of having to wait until you file your tax return next spring (that’s also an option, but most people take them in advance, throughout the year).
So when you’re enrolling in a plan through the marketplace, you want to project the annual income you expect to have, to the extent that you’re able to do so — admittedly tricky in situations like this. Then you can update the exchange with more accurate estimates later in the year, depending on how your income changes.
When you file your 2020 tax return next spring, you’ll have to reconcile the amount of premium tax credit that was paid on your behalf during the year. At that point, the IRS will look at your actual total earning for 2020 and compare it with the tax credit you received. If the tax credit was too much, you may have to repay some or all of it. If it was too little, they’ll give you the difference (subtracted from the taxes you owe, or added to your refund). Here’s how that works: https://www.healthinsurance.org/faqs/what-happens-if-my-income-changes-and-my-premium-subsidy-is-too-big-will-i-have-to-repay-it/
All of that said, one other thing to keep in mind that if you’re in a state that has expanded Medicaid, you might want to start with the state Medicaid office, to see if you’re eligible for coverage. Premium subsidy eligibility is based on total annual income, regardless of whether it’s earned steadily throughout the year, or all in one chunk. But Medicaid eligibility can be calculated based on current monthly income, even if your income earlier in the year was too high for Medicaid eligibility. In states that have expanded Medicaid, a person with monthly income from $0 up to about $1,467 would be eligible for Medicaid. When your income picks back up again, you’d be able to switch to either a plan in the exchange or a new employer’s plan, depending on your circumstances. (The majority of the states have expanded Medicaid, although there are still 15 that have not).

CINDY BAUCOM
CINDY BAUCOM
1 year ago

Can a person drawing social security who is under age 65 receive subsidies?

Louise Norris
Louise Norris
1 year ago
Reply to  CINDY BAUCOM

Eligibility for premium subsidies is based on an ACA-specific calculation of modified adjusted gross income, which is described in more detail here: https://www.healthinsurance.org/glossary/modified-adjusted-gross-income-magi/
SSDI is counted as income under this formula, but SSI is not. A person who is receiving SSDI could still get premium subsidies if their total household income is in the subsidy-eligible range.

Celina
Celina
1 year ago

Can an employer buy the Obamacare? What impact for profit or loss on their S-Corp?

Steve Anderson
Steve Anderson
1 year ago
Reply to  Celina

Celina, here’s an article about how businesses can offer small-group ACA-compliant coverage to their employees. https://www.healthinsurance.org/small-group-health-insurance/

Caregiver
Caregiver
1 year ago

I quit my job to take care of my elderly parent full time. Can I say I am self employed and use room and board equivalent to qualify my income at the poverty level? My state doesn’t have expanded Medicaid.

Louise Norris
Louise Norris
1 year ago
Reply to  Caregiver

Unfortunately, that is well beyond the scope of our expertise. We’d recommend you consult with a tax adviser or attorney, especially since that could affect your parent’s income tax return too. But this thread might be useful: https://www.agingcare.com/questions/room-board-for-a-live-in-calculated-179051.htm

Shishir Valunjkar
Shishir Valunjkar
1 year ago

Me and my wife want to go for Medicare
We are 63 and 59 age
We have filed our tax for 2019 (1040)
Our adjusted gross income annually is less than USD 4000
Are we eligible for Obamacare and subsidy?
We both are having PR status
Please guide how to proceed

Louise Norris
1 year ago

Shishir,
Your income puts you under the poverty level, but the ACA (Obamacare) has a special provision allowing recent immigrants to get premium subsidies even if their income is under the poverty level. That’s because Medicaid — which is available in most states to people with income below the poverty level — is not available to recent immigrants who have been in the US for less than five years. So if you’ve been in the US for under five years, you should be able to qualify for a substantial premium subsidy in the exchange, as explained here: https://www.healthinsurance.org/obamacare/how-immigrants-are-getting-health-coverage/#recentimmigrant
Keep in mind, however, that you’ll need a qualifying event in order to enroll now, unless you’re in a state that has relaxed its enrollment rules due to the COVID-19 pandemic. Open enrollment in every state begins again in November, for coverage effective in January 2021. Here are a couple of pages that might be helpful in terms of understanding how you can get coverage before 2021:
https://www.healthinsurance.org/obamacare/state-and-federal-efforts-to-improve-access-to-covid-19-testing-treatment/#sep
https://www.healthinsurance.org/special-enrollment-guide/why-you-need-this-book/
(and to clarify, you mentioned Medicare, but that’s not available until you’re 65 and have been in the US for at least five years).

Erin
Erin
1 year ago

I currently have employer-sponsored health insurance, but in August, I plan to go down to part-time work while I take courses toward a career change. This will make me ineligible for my employer’s plan. Will this decrease in income from the switch to part-time work count as a qualifying event? And will I be able to use my new, part-time salary to qualify for a tax subsidy? If so, there will be a lag in obtaining pay stubs to document the decrease in income, so I may have a coverage gap…I assume that the very expensive option to COBRA during this transition period may be my best bet for remaining covered? THANK YOU for this incredibly helpful resource/

Louise Norris
Louise Norris
1 year ago
Reply to  Erin

Losing your employer-sponsored coverage is a qualifying event that will trigger a special enrollment period for a plan in the exchange: https://www.healthinsurance.org/special-enrollment-guide/involuntary-loss-of-coverage-is-a-qualifying-event/
If you know the date your employer-sponsored coverage will end, you’ll have 60 days before that date when you can enroll in a health plan through the exchange. Assuming your employer-sponsored plan will end on the last day of the month, you’ll be able to have seamless coverage that way (if you wait and enroll after your employer-sponsored plan ends, you’ll have a gap in coverage, since the exchange plan won’t provide retroactive coverage).
Your eligibility for a premium tax credit will be based on your total income for the whole year, since it will have to be reconciled on your 2020 tax return. So assuming you’re losing your employer-sponsored plan at the end of July, they will look at the income you earned for the first seven months of the year, plus what you expect to earn for the final five months of the year. If that total income is within the subsidy-eligible range (and you meet the rest of the subsidy eligibility requirements, which is likely), you’ll qualify for premium subsidies to offset the cost of your coverage in the exchange.
But if your income during the first seven months of the year puts you over the subsidy eligibility threshold, you would not qualify for premium subsidies during the latter part of the year, regardless of how low your income is. (It’s worth noting, however, that Medicaid eligibility is determined based on monthly income, and does not get reconciled on your tax return; some people who experience a sharp drop in income end up being eligible for Medicaid even if they earned a significant amount of money earlier in the year).

Erin
Erin
1 year ago
Reply to  Louise Norris

Thank you, Louise! This is extremely helpful and makes me feel better prepared to navigate my transition.

walt
walt
1 year ago

We just learned from our tax preparer that we have to pay back 17,000 more to Obamacare. My wife is the only person with a policy. I am on Medicare. She payed $226 a month premium thru the year. We made a little over $69,000 gross income for the year. That puts her premium for the year at 19,712. That is 29% of our income for one person.Thanks for the screwing Obama. Can this be right?

Louise Norris
Louise Norris
1 year ago
Reply to  walt

Walt,
Unfortunately, an ACA-specific MAGI above $65,840 in 2019 would put your household above 400% of the poverty level, which reduces premium subsidies to zero. And there’s no cap on repayment of excess subsidies to the IRS if your household income makes you entirely ineligible for subsidies, so your tax preparer is right in saying that you have to pay it all back.
I assume you’ve already looked into this, since you’re working with a tax adviser, but did your wife contribute the maximum allowable amount to a traditional IRA for 2019, assuming she had earned income for the year? That’s one means of reducing your ACA-specific MAGI: https://www.healthinsurance.org/faqs/with-my-income-im-barely-over-the-eligibility-limit-for-a-premium-subsidy-is-there-anything-i-can-do-to-lower-my-income-so-i-become-eligible/

walt
walt
1 year ago
Reply to  Louise Norris

Before Obama care my wife and I bought our health insurance from Blue Cross/Blue Shield as employees of our small construction company. Premiums for the two of us were approximately $700 per month for a plan that was better than she has now. We were forced off our insurance and into the Obama care marketplace like many others we know. Remember “you can keep your insurance” This was a lie. Now premiums for one person are almost $2000 a month. How is this helping the working family? We are now retired and living on Social Security and savings. My wife is not yet eligible for medicare. Why are premiums so much more expensive for lousy insurance?

Daniel Vollmer
Daniel Vollmer
1 year ago

I went part time as of Jan 1st 2020. I could not get insurance thru my company b/c I would be working less than 32 hrs. because of this I applied for the AFCA insurance. I had already paid for the first month for this insurance the last week of December. Now, before the end of the year I got hurt and this applied as a workmans comp injury. Not knowing when i returned to work after the Christmas Holidays, workmans comp said I would need to get paid at the rate when i got injured, which at that time i didn’t think it would be a big deal; figuring it would all be taken care of soon. Then the Covid 19 hit and all my appointments etc got delayed, but I’m still working and making my wage from 2019. So with this in mind, this will put me over my limits of $65,000 as I’m still working and want to continue working. I am still waiting for doctor appointments so it is still on delay. Because of these circumstances is there some leniency that can be applied for this. I anticipated only making half this wage working the part time, but again b/c of this injury and Wisconsin workmans comp rules they have to pay me my existing wage until this is resolved.

Louise Norris
Louise Norris
1 year ago
Reply to  Daniel Vollmer

Daniel,
We recommend that you talk with a tax advisor or an attorney who specializes in workers’ comp, to see if there’s anything that can be done to address the situation you’re describing. But as a general background, the rules are pretty cut and dried when it comes to ACA premium tax credits. They’re reconciled on your tax return, based on the income you actually earned during the year (as opposed to the income you projected when you enrolled prior to the start of the year), and the guidelines for calculating ACA-specific MAGI re fairly straightforward: https://www.healthinsurance.org/glossary/modified-adjusted-gross-income-magi/
That said, keep in mind that contributions to a traditional IRA are a way of reducing your ACA-specific MAGI, as they do not get added back to your AGI for the subsidy-eligibility determination: https://www.healthinsurance.org/faqs/with-my-income-im-barely-over-the-eligibility-limit-for-a-premium-subsidy-is-there-anything-i-can-do-to-lower-my-income-so-i-become-eligible/ (HSA contributions are also a way to reduce your ACA-specific MAGI, but you can only contribute to an HSA if you have an HSA-qualified health plan).

Daniel Vollmer
Daniel Vollmer
1 year ago

I may need to get an operation from a work injury. I am on Affordable care insurance. Does disability pay get applied to income?

Louise Norris
Louise Norris
1 year ago
Reply to  Daniel Vollmer

It depends. We recommend that you touch base with a tax advisor to clarify the specifics for your situation, but here’s some general background:
Social Security Disability Income does count as income when your ACA-specific modified adjusted gross income is determined (it’s one of the things that has to be added back to your AGI to calculate your ACA-specific MAGI: https://www.healthinsurance.org/glossary/modified-adjusted-gross-income-magi/ )
If you have private disability insurance, the benefits will generally be counted as taxable income (and thus included in your ACA-specific MAGI) if your premiums were paid with pre-tax dollars, but not counted as taxable income if your premiums were paid with after-tax dollars. Premiums for most employer-sponsored disability policies are paid with pre-tax dollars, which means the benefits are taxable (and included in your income for subsidy-eligibility determination). But if you buy your own personal private disability plan, your premiums were paid with after-tax dollars and your benefits are not counted as taxable income.

Bob Jones
Bob Jones
1 year ago

I am thinking about retiring in the middle of next year at the age of 57. I work for a city. I would need coverage for me and my wife who no longer works. If I retire I estimate that our combined income for the year would be only a little over the federal poverty level. Would this qualify us for a full subsidy in the exchange.

Louise Norris
Louise Norris
1 year ago
Reply to  Bob Jones

Bob, it depends on what you mean by “only a little over the federal poverty level,” and on where you live. If you’re in a state that has expanded Medicaid, you and your wife would qualify for Medicaid if your ACA-specific MAGI is up to 138% of the poverty level (above that, you’d qualify for a premium subsidy in the exchange). If you’re in a state that has not expanded Medicaid, you’d qualify for a subsidy if your income is at least 100% of the poverty level.
Here’s how MAGI is calculated: https://www.healthinsurance.org/glossary/modified-adjusted-gross-income-magi/
And here’s a summary of which states have expanded Medicaid and which have not: https://www.healthinsurance.org/medicaid/

Jake
Jake
1 year ago

What happens if a person is receiving a subsidy during the year they turn 65. Once 65, can their reportable income increase since they are no longer receiving the subsidy, or do they have to maintain the lower income for the full year?

Louise Norris
Louise Norris
1 year ago
Reply to  Jake

They would need to maintain a subsidy-eligible income (ie, no more than 400% of the prior year’s poverty level) for the entire year. Premium subsidies are reconciled on tax returns, using Form 8962 (here’s more about how that works: https://www.healthinsurance.org/faqs/what-happens-if-my-income-changes-and-my-premium-subsidy-is-too-big-will-i-have-to-repay-it/ ). If a person’s total annual income goes above 400% of the poverty level, they’ll need to pay back the entire subsidy that was paid on their behalf. That’s true even if they only had a subsidy for a few months, and even if their income during that time was lower.

Karen
Karen
1 year ago

I haven’t seen anyone talking about how the add’l $600/week unemployment from the CARE Act could impact our ACA subsidies for 2020. If this is considered income, I will likely lose my subsidy and owe ACA over $6,000 when this is all over. Not sure why no one is warning the public, but I’d like to find guidelines on this topic and is there a way to minimize the damage (i.e. will investing in an IRA reduce my ACA income?). Thanks if you can help.

Ken
Ken
11 months ago

I am a divorced father who splits custody of my son 50/50. One year I am able to claim his as a dependent and get head of household status, the next year I don’t and his mom does. His health insurance coverage is under his mom, but I pay the premiums. For the year he is my dependent, does my income limit for the subsidy move up to the $67640 level for that year, even if I don’t get ACA coverage for him – it would just be for me? Or is the income limit only applicable to who will be covered by Obamacare? Thanks –

Louise Norris
Louise Norris
11 months ago
Reply to  Ken

The income limit for subsidy eligibility is based on the size of your tax household. So yes, in years that you claim your son as a tax dependent, you’re considered a household of two and you’d be eligible for a premium subsidy with an income of up to 400% of the poverty level for a household of two (for 2021 coverage, that will be $68,960).
But your eligibility for a subsidy also depends on how the total premium (in your case, just for yourself) for the second-lowest-cost silver plan in the exchange compares with your household income. If it’s already at a level that’s considered affordable without a subsidy, there would be no available subsidy even if your income is in the subsidy-eligible range (in other words, having income in the subsidy-eligible range does not guarantee that a subsidy will be available). Unfortunately, the amount you pay for other non-exchange health insurance (in this case, for your son’s plan) is not taken into consideration when the exchange looks at the amount you have to pay for your health coverage as a percentage of your income.

KATHRYN
KATHRYN
10 months ago

I receive an ACA subsidy for myself and three dependents. We are all on a Marketplace Health Insurance Plan. Two of the dependents are in their young twenties and working. When estimating my annual income for subsidy prediction, I included the presumed income of one child whom I suspected would earn more than $12,400 (standard deduction). If she earns $13,400, and she files her own taxes (and I file mine with her as a dependent) do I add $13,400 to my household income for subsidy calculations? Or $1,000 (the amount over the standard deduction)? The second daughter, due to unemployment with the $600/week bump, has an income WAY higher than I had predicted and if the whole amount of her earnings (and her sisters) are added to mine, I am dangerously close to losing my predicted subsidy and will need to “return” premium tax credits in the amount of close to $12,000. I also have been receiving unemployment/PUA benefits – which do not get recorded on Schedule C. And because I am paying rent and other costs on an empty office (I am still shut down due to COVID) I will likely be operating that business at a LOSS this year. Will this loss – due to ongoing overhead/expenses – still be able to be used to offset income from other sources, ie alimony, UI/PUA benefits, etc?

Louise Norris
Louise Norris
10 months ago
Reply to  KATHRYN

Kathryn,
You’re definitely going to need to talk with a certified tax advisor for the specifics of your situation. But here’s some general background info: Your children who are in their early twenties and working are almost certainly going to have to file their own tax returns, and cannot be counted as a dependent on your tax return. That’s basic IRS rules, independent of health insurance: https://www.irs.gov/faqs/filing-requirements-status-dependents/dependents/dependents-2
The rule that allows you to include your young adult kids on your health insurance plan is applicable even if they’re no longer your tax dependents (as is likely the case for your family). I assume the third child is still your tax dependent? If so, you’ll file a tax return for yourself and that child, and each of your older two children will file their own tax returns.
Since you’re all on one marketplace plan, you’ll need to allocate the premium subsidy across the three tax returns. The IRS explains how you can do that in the instructions for Form 8962, with the “allocation situation” instructions: https://www.irs.gov/pub/irs-pdf/i8962.pdf (specifically, see the example that starts near the bottom of page 17; it’s very similar to the situation you’re describing).
Basically, you’re going to be a tax household of two, with only your income and your youngest child’s income. Each of your older two children will file as a tax household of one, with their own incomes counted. Then you’ll allocate the applicable premium subsidy across all three tax returns. But again, this is a complicated situation, and we highly recommend that you seek professional tax advice.

KATHRYN
KATHRYN
10 months ago
Reply to  Louise Norris

Thank you for this reply. I appreciate it and I will read the linked articles. In years’ past, all children have filed their own tax returns – as they each had earned income – and I claimed them as my dependents. They filed their taxes based on their earnings, but indicated that they were being claimed on someone else’s tax return as a dependent – which they are – both in college (the youngest is in high school). Can they not file their own returns (all three of them) while still being claimed as dependents on mine?

Alicia Briceno
Alicia Briceno
9 months ago

i am very confused about all insurance. I am unemployed due COVID and My husband’s job still close so we may run out of medical insurance on September, he found a job meanwhile, (they do not ofder insurance)we have a daughter and we have a son with autism and we were thinking to buy an insurance just for him,so he could still recieve ABA therapy. I don’t know how to do it or the cost of a family insurance . So many plans, restrictions, i don’t know were to start. Any where i can call?

Lisa
Lisa
8 months ago

I am in a family of 2 our income has exceeded our cap.We because of the covid unemployment and stimulus have gotten by the end of the year to 87,000

Lisa
Lisa
8 months ago
Reply to  Lisa

What will we have to pay back.We we’re paying 70 a month

Louise Norris
Louise Norris
8 months ago
Reply to  Lisa

The amount you’ll have to pay back will depend on whether your MAGI (as described in the comment above) goes over 400% of the 2019 poverty level for your household size. If it does, you’ll have to pay back all of the subsidy that was paid on your behalf. If not, there are caps on how much you’d have to repay, with the highest repayment amount capped at $2,650 for last year’s taxes: https://www.irs.gov/instructions/i8962#idm140224345750000 (could be a little higher for 2020 taxes). But again, that cap only applies if your MAGI doesn’t go over 400% of the poverty level. If it does, you’ll have to repay the full subsidy amount, unless you’re able to make retirement plan and/or HSA contributions that bring your MAGI down into the subsidy-eligible range. We recommend that you talk with a financial advisor to see if that’s possible for your situation.

Louise Norris
Louise Norris
8 months ago
Reply to  Lisa

The one-time stimulus checks that were sent out last fall are not included in taxable income. But the extra $600/week in unemployment benefits provided by the federal government does count as income in terms of calculating premium subsidy eligibility. Here’s a general overview of how MAGI is calculated for determining subsidy eligibility: https://www.healthinsurance.org/glossary/modified-adjusted-gross-income-magi/
If you’re able to contribute to a pre-tax retirement account, that will lower your MAGI. And if you have an HSA-qualified health plan, contributions to an HSA will also lower your MAGI.
But if your MAGI for 2020 ends up being above 400% of the 2019 poverty level (based on the size of your household), you’ll have to repay all of the premium subsidy that was paid on your behalf in 2020. If your MAGI ends up higher than you initially projected but not more than 400% of the poverty level, there are caps on how much you have to repay, as explained here: https://www.healthinsurance.org/faqs/what-happens-if-my-income-changes-and-my-premium-subsidy-is-too-big-will-i-have-to-repay-it/

john
john
8 months ago

Please advise. I will lose my job Oct 30 and can get COBRA for one month paid by my employer. Once that is up, I’m not sure what route to take. My spouse and I also own a small business and we have one other employee but currently offer no healthcare benefits. We are a family of 5. I should get unemployment after I am let go from my job- but have no idea if they will pass another stimulus unemployment bonus which adds extra 400-600 a week. Our business income is 55,000. Do I buy insurance in the marketplace for our family or try to get the small business insurance for us. I’m confident the one employee would decline it because he is already ensured through his wife’s employer. The quote I got for small business insurance was 1000/mo for family of 5 with a bronze type plan. WOuld getting a subsidy in marketplace be the better way to go? Who do I call to talk these scenarios through with? And if an additional unemployment benefit is passed in the next few months, will that screw my income requirements for qualifying for a subsidy??

Louise Norris
Louise Norris
7 months ago
Reply to  john

You’ve got a lot of really good questions, not all of which have clear answers! Yes, another stimulus bill that adds extra unemployment benefits would have an effect on subsidy eligibility and repayment of subsidies on 2020 tax returns (unless lawmakers opt to build in a clause to make that income not counted for subsidy eligibility, the way they did the first time for Medicaid eligibility). Here’s more about that: https://www.healthinsurance.org/faqs/how-could-covid-19-financial-relief-affect-my-income-taxes-for-2020/
But with a current income of $55,000, you would likely qualify for premium subsidies as a family of five even if you end up getting additional unemployment benefits later this year if they were to become available. If you’re in a state that uses HealthCare.gov (most states do), you can use this tool to see prices for 2020: https://www.healthcare.gov/see-plans/#/?year=2020 And this tool to see prices for 2021: https://www.healthcare.gov/see-plans/#/ (if you’re in a state that uses its own exchange, those pages will direct you to your state’s platform).
Premium subsidies are available for a family of five in 2020 with a total annual income up to nearly $121,000, and with an income of nearly $123,000 in 2021. So you should still be well within the subsidy-eligible range, even if you end up getting extra unemployment benefits. You might find, however, that your kids are eligible for Medicaid or CHIP, which would mean that subsidies would only apply to adults in the household. Here’s a chart with Medicaid/CHIP eligibility by state: https://www.medicaid.gov/medicaid/national-medicaid-chip-program-information/medicaid-childrens-health-insurance-program-basic-health-program-eligibility-levels/index.html

Diana Gundry
Diana Gundry
7 months ago

My daughter made approximately $2,000 above the 400% limit in 2019. Now she is told she has to return the entire subsidy. She did not qualify for 2020 so now for silver she pays over $700 a month with a $8,000 plus out of pocket. She had to go to the ER and now has over $2,500 in expenses.
How is this considered affordable? With all these medical expenses she is going through some very hard economic times.

Louise Norris
Louise Norris
7 months ago
Reply to  Diana Gundry

I’m really sorry your daughter is struggling. The “subsidy cliff” at 400% of the poverty level is a very real problem, and one that Democratic lawmakers are trying to address. Eliminating it is part of the Democratic Party platform and the Biden/Harris health care reform proposal: https://joebiden.com/healthcare/#
For this year, if your daughter is enrolled in a plan through the exchange, has she checked to see if it’s possible to get her income into the subsidy-eligible range by making contributions to a pre-tax retirement plan (or an HSA, if the Silver plan she has is HSA-qualified)? https://www.healthinsurance.org/faqs/with-my-income-im-barely-over-the-eligibility-limit-for-a-premium-subsidy-is-there-anything-i-can-do-to-lower-my-income-so-i-become-eligible/ Since her income was so close to the limit last year, it’s possible that might be an option for this year. If so, and if she’s able to make the contributions, she could then claim the premium tax credit on her tax return next spring. I’d advise her to speak with a financial advisor to see if this is an option for her, as they can provide advice about how it would impact her overall financial situation.

Charlie Siedle
Charlie Siedle
7 months ago

if we make 66,000 total for 2021, and live in illinois, and choose the lowest bronze plan, what will our cost be?

Jo Ann
Jo Ann
6 months ago
Reply to  Charlie Siedle

Options will vary from county to county. The best way to get an answer to this question is to go on healthcare.gov and start an application. After you submit information about your location, family size and income, you will be able to see how much of a subsidy you would be eligible for, the plans available to you, the original cost and the cost with the subsidy for which you qualify.

Tim
Tim
6 months ago

In the state of New Hampshire, Married person with 3 dependants when enrolling why are my 3 kids placed in a CHIP program when My income is just below the $119,000 per year?

Steve Anderson
Steve Anderson
6 months ago
Reply to  Tim

Tim,
You can use this calculator to see your eligibility for a subsidy: https://www.healthinsurance.org/obamacare/subsidy-calculator/

Louise Norris
Louise Norris
6 months ago
Reply to  Tim

Tim,
I’m not sure what might be going on there. The cutoff for Medicaid/CHIP for kids in New Hampshire is 318% of the poverty level: https://www.medicaid.gov/medicaid/national-medicaid-chip-program-information/medicaid-childrens-health-insurance-program-basic-health-program-eligibility-levels/index.html The poverty level for a household of five is currently $30,680, so 318% of that is $97,562 in annual income. You’re well above that level, so I’m not sure why it’s showing that your kids would be in Medicaid/CHIP.
I tried using HealthCare.gov’s plan finder tool for a rough estimate (just guessing on ages and zip code) and it shows the entire family eligible for premium subsidies at that income level. What tool were you using that shows the kids eligible for Medicaid/CHIP? And have you reached out to a local broker or Navigator for assistance yet?

John
John
4 months ago

Did I do something wrong? We’re paying about 12.5% of our gross income (about 18.9% of our net income, both wife and I are self employed) for the cheapest Bronze plan we could find through the Marketplace ($688 premiums with 209.21 subsidies). But everything says that we shouldn’t be paying more than 9.78% for a silver plan. We make $55,000 gross yearly (or just under $44,000 net yearly). Does this sound right?

Louise Norris
Editor
4 months ago
Reply to  John

John,
If you can provide a bit more detail, we can look into this further for you. How old are you and your wife, and what’s your zip code? Also, do either of you use tobacco? And as far as your income goes, are you calculating the ACA-specific version of MAGI? Here’s more about how that works: https://www.healthinsurance.org/glossary/modified-adjusted-gross-income-magi/

John
John
4 months ago
Reply to  Louise Norris

36 and 48 years respectively. Zip is 81230. Neither use Tobacco nor Marijuana nor alcohol nor any other drug. I calculate my estimated MAGI for this year to be $52,609. It was even less for last year.
Thanks!

Last edited 4 months ago by John
Louise Norris
Editor
3 months ago
Reply to  John

John, I think you’re just reading the subsidy estimate backward. According to Connect for Health Colorado’s subsidy calculator, you qualify for a subsidy of $688/month, and the lowest-priced plan is $211/month after the subsidy is applied. The benchmark plan (second-lowest-cost silver plan) is about $430/month, which amounts to 9.8 percent of your income.

Marie
Marie
2 months ago

I am getting divorced finalized in April and have been out of the work force for 15 years. I expect to make about $13,000 this year. Will my alimony or roll over back door IRA to Roth conversion (which is considered income on my taxes) be considered in the income level for a subsidy?

Louise Norris
Editor
2 months ago
Reply to  Marie

Here is a general overview of how income is counted under the ACA: https://www.healthinsurance.org/glossary/modified-adjusted-gross-income-magi/
Alimony is not counted as income if the divorce is finalized after the start of 2019: https://www.healthcare.gov/income-and-household-information/income/
But taxable withdrawals from IRAs are considered income, and a back door IRA to Roth conversion would fall into that category. We advise that you consult with a tax advisor for the specifics of your situation, but in general, you should expect to count your IRA conversion amount but not your alimony amount.
Also, keep in mind that premium subsidies have become much larger for 2021 and 2022, under the American Rescue Plan: https://www.healthinsurance.org/blog/2021/03/05/how-the-american-rescue-plan-act-would-boost-marketplace-premium-subsidies/

Roberto Lecue
Roberto Lecue
1 month ago

Hi, My question only is about the first year using the ACA. My wife and I are 61. We earn a combined $160,000 per year. If we both retire in May of 2021 while contributing to 401Ks, HSAs and IRAs such that our MAGI after those tax deferred contributions comes in at $28,000 for 2021, do we qualify for the ACA subsidy that corresponds to that $28,000 MAGI (Illinois) for the remaining 7 months of 2021?

Louise Norris
Editor
1 month ago
Reply to  Roberto Lecue

You won’t earn any additional income after May, and your MAGI for the year will be $28,000? If so, then yes, your monthly premium subsidy for the remaining seven months of the year would be based on that total income. You’ll project your income for the full year when you enroll, and then reconcile it with the IRS after the year is over. For a household of two, MAGI of $28k would put you at about 162% of the poverty level, which means you’d be eligible for substantial subsidies as well as cost-sharing reductions.

Roberto Lecue
Roberto Lecue
1 month ago
Reply to  Louise Norris

Louise,
Thank you for sharing your expertise and for your prompt reply!
Roberto

Leah
Leah
1 month ago

I am in my 40s and disabled. I was approved for SSI with Medicare A and B two years ago. However, I am over the asset limit (retirement account) so can not get SSI and I have no other income. I do not qualify for any programs that would help me pay for part B (due to the asset limit), and I can not afford $150 a month for health insurance. Currently, I have no insurance other then Medicare part A (which I get free). I have found several conflicting sites that state I can get ACA to pay for my part B premium since I can not afford it, and other sites that state the complete opposite. There are also sites that state I can get a marketplace plan (based on income not assets) but some say I can not because I have Medicare. Can you clear this up for me?

Louise Norris
Editor
1 month ago
Reply to  Leah

If you’re enrolled in Medicare Part A with no premiums, you cannot enroll in an individual market plan. CMS clarifies this here: https://www.cms.gov/Medicare/Eligibility-and-Enrollment/Medicare-and-the-Marketplace/Downloads/Medicare-Marketplace_Master_FAQ_8-28-14_v2.pdf (see questions A1 and A13, for example) and here: https://marketplace.cms.gov/outreach-and-education/medicare-and-the-health-insurance-marketplace.pdf
I’m sorry that you’re struggling to afford the premiums for health coverage. Have you reached out to the Medicare State Health Insurance Assistance Program (SHIP) in your state? They may be able to point you to resources that could help. Here’s a page when you can find the SHIP in your state: https://www.shiptacenter.org/

Leah
Leah
1 month ago
Reply to  Louise Norris

I did check into SHIP (for NH), and all the programs use the asset test. My retirement account puts me over the limit so I do not qualify for any of the programs. Thank you for your quick response and taking the time to explain this to me.

Barkha
Barkha
1 month ago

Hello and thank you so much for this helpful overview. I was wondering if you might be able to opine on our specific situation. My parents (household of 2, file taxes jointly) are recent immigrants to the US (Green Card date of Oct 2018). They currently reside in NJ and we were looking at health insurance marketplace plans for them via getcoveredNJ.gov since they don’t qualify for medicare yet.Their annual income (combined) is $30-$35k per year and they are currently 61/62 years old. I see several plans on the marketplace that offer both APTC, CSR as well as additional NJ savings that can potentially come out to very low premiums per month (anything from a few $ to $20 per month), but those plans still have high deductibles and out of pocket maximums (for e.g. $800 deductible and $5600 max out of pocket for a family plan). Depending on the specific plan, their coinsurance for x-rays, diagnostic blood work, hospital/ER visits can range anywhere from 20 to 50% of coinsurance after deductible is met – if they have even the simplest of medical procedures, that could run anywhere upto multiple tens of thousands of dollars, but their out of pocket max would be limited to $5600 for covered services. Given their age, I can easily still see them having enough hospital/doctor visits that would get them to $5600 out of pocket max easily in a year (which would be about 18% of their annual income). Does this seem high to anyone else? It’s nice that these premiums are low with all the new subsidies but the features of this plan can still run someone a lot of money ($800 at the very least in deductibles). Am I missing something? thanks so much!

Louise Norris
Editor
1 month ago
Reply to  Barkha

Barkha,
Here’s more information about how CSRs work: https://www.healthinsurance.org/glossary/cost-sharing-reduction/ As long as your parents’ combined income doesn’t exceed $34,480 this year, which is 200% of last year’s poverty level for a household of two, they’ll qualify for a silver plan with an actuarial value of 87% (almost as good as a platinum plan) and a maximum out-of-pocket that won’t be more than $2,850 per person ($5,700 combined, if they both need medical care that reaches the out-of-pocket limit).
It’s worth noting that these out-of-pocket limits are 67% lower than the regular out-of-pocket limit that applies to other plans that don’t have built-in CSR benefits. The CSR is really helpful, even if the numbers still seem high.

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