Choosing a ACA silver plan but exceeding the MAGI to qualify during the year

[REAL WORLD EXPAT]

My income is very unpredictable and can be low enough to qualify for an ACA silver plan. If I chose a silver plan but exceeded the MAGI during the year does anyone know what will happen?

I assume it'd correct the premiums at tax time but what about the deductible and out of pocket, do they go back and increase those to non-silver levels and recover that from the policy holder?

[seattlecyclone]

The premium subsidies will be reconciled at tax time.

Are you talking about the regular silver plan or the <250% FPL silver plans with lower deductibles and such? If the latter, my understanding is that there's no clawback for those out-of-pocket costs if your income comes in higher than you estimated to the exchange.

[REAL WORLD EXPAT]

Are you talking about the regular silver plan or the <250% FPL silver plans with lower deductibles and such? If the latter, my understanding is that there's no clawback for those out-of-pocket costs if your income comes in higher than you estimated to the exchange.

Yes, the <250% FPL silver plans with lower deductible and lower maximum out of pocket.

[jim555]

Are you talking about the regular silver plan or the <250% FPL silver plans with lower deductibles and such? If the latter, my understanding is that there's no clawback for those out-of-pocket costs if your income comes in higher than you estimated to the exchange.

Yes, the <250% FPL silver plans with lower deductible and lower maximum out of pocket.

The CSRs (cost sharing reductions) are not reconciled.

[rantk81]

Are there any consequences to under-estimating MAGI in order to reap the benefits of the lower cost sharing amounts?  Assuming you do make estimated tax payments to "make up for" the eventual reconciliation of the premiums...

[seattlecyclone]

Are there any consequences to under-estimating MAGI in order to reap the benefits of the lower cost sharing amounts?  Assuming you do make estimated tax payments to "make up for" the eventual reconciliation of the premiums...

Not really. It's up to the exchange to determine whether your estimate is credible or not, and if they think it is then you're all set. If you habitually underestimate your income it's possible they could eventually put you under some more scrutiny and ask you to prove that you're really not going to go way over again this year before they sign off on it. Beyond that I'm not aware of any likely consequence to underestimating.

[RedmondStash]

My income is very unpredictable and can be low enough to qualify for an ACA silver plan. If I chose a silver plan but exceeded the MAGI during the year does anyone know what will happen?

I assume it'd correct the premiums at tax time but what about the deductible and out of pocket, do they go back and increase those to non-silver levels and recover that from the policy holder?

I had a silver plan at >250% FPL for a couple of years.

Your eligibility for a silver plan itself (or bronze or gold) doesn't depend on income. Only your eligibility for tax credits/subsidies and other cost reductions depends on income. It's just super expensive without subsidies.

Your deductible & out-of-pocket maximum are set by the plan, not by income level (unless you're talking about modifying them with cost reductions based on income). It's not like if your income is too high, they'll kick you out of a silver plan and into something else with a higher deductible. You should be able to see the deductible & out-of-pocket max for specific plans on the ACA site where you shop for plans.

[secondcor521]

Are there any consequences to under-estimating MAGI in order to reap the benefits of the lower cost sharing amounts?  Assuming you do make estimated tax payments to "make up for" the eventual reconciliation of the premiums...

Not really. It's up to the exchange to determine whether your estimate is credible or not, and if they think it is then you're all set. If you habitually underestimate your income it's possible they could eventually put you under some more scrutiny and ask you to prove that you're really not going to go way over again this year before they sign off on it. Beyond that I'm not aware of any likely consequence to underestimating.

I think seattlecyclone is correct (as usual).  There is a clause about "intentional or reckless disregard for the facts" in the instructions for Form 8962 (https://www.irs.gov/pub/irs-dft/i8962--dft.pdf page 8 top of right column), but that appears to only apply if one overestimates AGI to qualify for ACA subsides in situations where one's AGI would otherwise be to low.

In my state, the ACA marketplace has no mechanism to see my federal tax return from the prior year, so there is no feedback loop to catch this kind of situation.  The lack of CSR reconciliation on Silver plans with estimated AGI under 250% (or 200% or 150%) is just a bit of a not-very-well-known loophole.

Some people might object to this underestimation strategy on ethical grounds.

[nalor511]

If you exceed the threshold once, the next time they will want proof uploaded