Kaiser Health News has some good news for people who live in states whose elites are functional sociopaths that refuse to take free Federal money to expand Medicaid. The exchanges won’t claw back money from people who stated that they thought they would be Exchange subsidy eligible (more than 100% of Federal Poverty Line) but are not because they made too little money:
Right about now, some low-income people who just barely qualified for subsidies on the health insurance marketplace are starting to worry: What if my income for the year ends up below the poverty level? Will I have to pay back the premium tax credits I received…
Their concern stems from an unfortunate wrinkle in the health law. Premium tax credits that make coverage on the health insurance exchanges more affordable are available only to people with incomes between 100 and 400 percent of the federal poverty level ($11,490 to $45,960 for an individual this year). People whose income is below the poverty line don’t qualify….
No repayment will be required. According to a Treasury Department rule, if the insurance marketplace estimates that someone’s income will be between 100 and 400 percent of poverty and it turns out that his income for the year is below the poverty threshold, the individual won’t be on the hook for any premium tax credits he received.
Income estimates for subsidies are just that, estimates. 2014 subsidy levels were based on the combination of 2013 reported income on federal tax returns as a default and 2014 estimates if people thought the tax return did not reflect their situation or there would be a material change in expected income. The IRS will be reconciling estimated 2014 income as used by the Exchanges to issue subsidies and reported 2014 income on the tax returns that are due by April 15, 2015. If estimated income is over actual reported income, the filer may get an additional tax refund to help pay for the 2014 insurance premiums. If the estimated income is less than actual income, and premium subsidies were received, some of those premium subsidies will be clawbacked by the IRS.
The Exchanges are set up for good faith estimates. There is an expectation that if circumstances change (lay-off, promotion/pay raise at work, new job, kid being born etc) people will log back into the Exchange and update their information which will update their subsidy going forward. The goal is to minimize the reconciliation. The IRS also recognizes that peoples’ incomes change, so the expecation is good faith estimates are made. If you’ve been making between $36,000 and $41,000 for the past three years straight, and then you estimate that you would have only made $22,000 in 2014 but report $39,000 for taxes, that probable is not good faith. If in that scenario, you estimate you’ll make $37,500 but actually make $41,000, that is a reasonable miss.
The loophole here is that if you estimate that you’ll make 100.1% of Federal Poverty Line for 2015 which is just enough to qualify you for Cost Sharing Assistance Silver Plus plans at 2% of your income and a large subsidy, but your actual reconciled income is 95% of FPL, you’re home free. This is for two reasons. The first is purely pragamatic in that if you are making under poverty line, the ability of the IRS to actually collect anything is fairly low and not worth the effort. Secondly, it is a soft and incomplete work around to the optionality of Medicaid expansion. I would expect an amazingly high number of people in Texas to have 100.1 to 102% of FPL as their estimated income compared to the same demographic adjusted population group in California. It is an expensive work around as Medicaid is cheaper than commercial insurance, but it helps some people hurt by the assholes on the court.
Good faith is still the key. If you project you’ll make 100.1% of FPL and then made 12% of FPL, that invites a fraud investigation. If you make 97% of FPL, that is an honest mistake.
Belafon
New Republican Talking Point: Obama penalizes people who try to get help on the exachange.
Zifnab25
Waiting for the inevitable lawsuit, claiming that this action by the Treasury is unconstitutional.
Freemark
Does anybody know with certainty if a student stipend for a summer research experience is is federally taxable. The institution won’t commit to whether it is or isn’t and I can’t find info on the IRS website. I need to take money from my 401k to get close to the subsidy level. The amount I take out depends on the answer.
VFX Lurker
My job wraps at the end of this year. I plan to retrain at the beginning of 2015 and look for work later in the year. I do expect to find work, but…Murphy’s law.
Would the “safe” approach be to sign up for insurance on CoveredCA, pay the full unsubsidized price for insurance premiums, and settle up with the federal government on my 2015 tax return?
Richard Mayhew
@VFX Lurker: If you can afford to front the money for premiums, and then get a big tax refund in February of 2016, that would be a reasonable course of action.
Another Holocene Human
Surprised everyone’s talking about Ron Fournier today and not mentioning Stephen Colbert’s trolling last night. After Bernie Sanders starting talking about education and healthcare policy in Denmark, Colbert encouraged his twitter followers to retweet “Suck it, Denmark” more times than Denmark has residents. Wondering how Danes have responded.
rikyrah
now that’s the way to open up a post.
VFX Lurker
@Richard Mayhew:
That did seem like the best way to go. Thank you for confirming that.
I’ve settled on Kaiser Permanente, because I greatly appreciate their integrated system. My next big decision will be between Bronze and Silver. The max out-of-pocket is the same for both tiers, so the worst-case scenario could theoretically be the same for both tiers. However, any savings I make by going with Bronze could be eaten up by the higher deductible if something bad did happen next year.
Glad I have a few weeks to think about this. :-)
burnspbesq
@Zifnab25:
No constitutional issue. The claim will be the same as the ridiculous claim at issue in Halbig and King, i.e., that the regulation is invalid because it’s inconsistent with a clear and unambiguous statutory provision.
Mnemosyne
@burnspbesq:
And yet if there’s a 5-4 decision in Halbig, then it will absolutely throw this action into question, because every inconsistent statute is going to be brought into question.
I know that Omnes thinks that Roberts won’t want to make that much work for himself and the courts since it would pretty much grind the entire system to a halt, but given that the Prime Directive of Republicans is to break the government and make it unworkable, I don’t have his confidence.
MomSense
@Mnemosyne:
I share your lack of confidence in the integrity of 4 and sometimes 5 members of the Roberts court.
Remember when Republicans used to talk about how insecurity about taxes and regulations made it tough for businesses to plan? What about all of us who are getting our insurance through the exchange with subsidies? How am I supposed to plan and budget and make decisions when I have to constantly wonder if I will lose my insurance or have another $700 a month in health insurance expenses. The latter would necessitate the former.
If we ever needed proof of how incredibly cruel and out of touch the Republican party has become, it is this unbelievable obsession they have with preventing people from accessing health care.
burnspbesq
@Mnemosyne:
There’s actually an even bigger concern than millions of people losing their subsidies.
I worry that if there is a mojority to strike down the subsidies, Scalia will end up writing the majority opinion, and he will write in a way that fatally undercuts the entire Chevron doctrine of judicial deference to administrative rule-making. That would pretty much render EPA, OSHA, SEC, CFPB, et al powerless. Which would be a five-run home run for the bad guys.
@MomSense:
You could always move to a state with its own exchange (kidding).
Another Holocene Human
@rikyrah: I’m really happy this is the kind of blog where nobody’s going to jump up and say “Herp derp ableism!” when sociopathy is mentioned.
No. Anti-social personality disorders are NOT mental illness. Your point is invalid. HAND.
jl
Thanks for another very useful and informative report.
MomSense
@burnspbesq:
I’m considering it. Maine’s economy is going nowhere and LePage will get to continue his abysmal economic record.