ACA Subsidy and Credit

[rae09]

We applied for healthcare from the marketplace since we lost the one provided from the job along with the W2 income. As of now, it looks like our 2021 income will be between 200-250% FPL and from what I understand, we should ask for maximum subsidy and credit and pay it back when we file our 2021 tax next year since the cap will save us some money. However, we got a message that they want us to upload files for income verification. Our 2020 tax return shows too much income and we won't qualify for any subsidy if they use that for qualification. What documents should we provide? I don't know how much information they get from the IRS but I'm reluctant to give the full schedules of our tax return (have Sch E).

[Paul der Krake]

You can send a letter explaining how your circumstances have changed and this reflects your best estimate of your 2021 income. Make sure to sound like you understand how credits work and you know what you're doing.

This is what I did last year and it satisfied them.

[rae09]

You can send a letter explaining how your circumstances have changed and this reflects your best estimate of your 2021 income. Make sure to sound like you understand how credits work and you know what you're doing.

This is what I did last year and it satisfied them.

Did you have to send them your previous year tax return?

Also, can you please elaborate on "Make sure to sound like you understand how credits work and you know what you're doing"? Is it okay to write that I prefer to take the whole credit up front and pay it back during reconciliation vs losing it in case we qualify because, to be really realistic, our client can terminate us any time despite what they tell us.

[Goldendog777]

We sent in a detailed letter breaking down where our income was coming from for our first year on the ACA since we quit the December prior and explained that we no longer had full  time employment.  I also sent in page one of our 1040s showing dividend and interest income (crossed out the w2 income), a 401k statement showing we would be doing a Roth conversion of $10k and we would be getting part time jobs making up about $10k.  I think it came to about $33k which gave us a fairly large subsidy towards a silver plan.  They accepted the documentation we sent without question. 

[Paul der Krake]

I did not send the previous year return, just a simple one paragraph letter explaining that my income was going to dramatically drop. I would post it here but I must have deleted it because I can't find it anymore.

I wouldn't even bother going into your reasons for reconciliation, just state that to the best of your knowledge, this is what your income will be in 2021, and that income will be coming from source X, Y, and Z. Simple, professional, concise.

I explained on an older thread my educated guess as to why the exchange requires "verification". Basically, they're trying to save consumers from themselves.

[Frankies Girl]

I just sent in a letter (word doc turned into pdf) explaining that last year's income would not be a good comparison as I was not working any more and income would be solely based on money from retirement accounts. And that my best, most accurate assessment for the taxable income for XX year would be $XX. I also stated I was aware and absolutely would inform them of any changes that would increase or decrease my income if the occurred. I confirmed at the end that all statements were true to the best of my knowledge.

I did not have to state anything about the percentage or amount of the subsidy as this isn't needed in the documentation. You do that during the enrollment/application process.

The very short 2 paragraph letter was acceptable for them, and no issues going forward. Only required it the first year after quitting my job as they saw that the income did keep to within an acceptable range.

I imagine you could do similar: a sentence or two stating that your estimated income for the year in question is different due to two income household reducing to a one income household due to Person A leaving job in 2020 that previously reported income of ~XX. Going forward as of 2021, income is estimated to be $XX, and in the event that there are any changes, you are aware that they will need to be updated with the ACA... you swear this is accurate, and will update if there are any changes.

You don't need to add any reasons, or explain that you plan to take % of subsidy or whatever. That's handled in the application/enrollment part and they aren't asking for that so it is unnecessary for the letter itself. And I have never had to give them any tax returns. They have permission in there somewhere you can give them anyway.

[rae09]

Thank you everyone. I submitted a short 3 paragraph letter based on your inputs. Hopefully they will take it.

[FIRE 20/20]

What state are you in?  In my state they don't accept a letter (I tried).  There was a form that it took me a while to find that they wanted instead.  After I completed the form with essentially the same information as the letter I wrote I had no problems.

[jpdx]

By the way, you're in a good spot with income at 200-250% FPL because you can get a Silver plan with Cost Sharing Reductions. You'd do even better if your estimated income was less than 200% FPL -- after all, you don't need to pay back CSR payments if it turns out your estimate was incorrect.

Are you sure you don't think your income will be below 200% FPL?

[seattlecyclone]

The 200-250% cost sharing reductions aren't really worth worrying too much about. Get below 200% and they're much more lucrative.

Example plan details from Washington:
Silver plan with no CSR: $2,000 individual deductible, $7,800 out-of-pocket max, $25 primary care copay, $800 (after deductible) per ER visit, outpatient surgery, or day in the hospital
Same silver plan for 200-250% range: $2,000 individual deductible, $6,500 out-of-pocket max, $20 primary care copay, $750 (after deductible) for ER visits etc.
Same silver plan for 150-200% range: $750 individual deductible, $2,250 out-of-pocket max, $10 primary care copay, $445 (after deductible) for ER visits etc.
Same silver plan for 138-150% range: $150 individual deductible, $800 out-of-pocket max, $3 primary care copay, $125 (after deductible) for ER visits etc.

As you can see there just isn't that much discount off the full-price plan in the highest CSR tier. In fact due to the practice of silver loading* you may find gold or bronze plans to be a better deal than silver plans even in this top CSR tier.

* A few years ago the Trump administration decided to stop reimbursing insurance companies for the cost sharing subsidies. The insurance companies have to make this money up from somewhere, namely premiums. Many places have settled on baking this cost into the premium for silver plans, and silver plans only. This has been called "silver loading." The result is that if you're getting a non-CSR silver plan your premiums are subsidizing the people who are getting a CSR silver plan, while if you get a bronze or gold plan this will not be the case. The unintended result of this practice is that by increasing the silver premiums, you also increase the premium subsidies for people buying any level of insurance coverage through the marketplace. This has correlated with more people getting insurance overall. We'll see what happens with this in the new administration.

[secondcor521]

* A few years ago the Trump administration decided to stop reimbursing insurance companies for the cost sharing subsidies. The insurance companies have to make this money up from somewhere, namely premiums. Many places have settled on baking this cost into the premium for silver plans, and silver plans only. This has been called "silver loading." The result is that if you're getting a non-CSR silver plan your premiums are subsidizing the people who are getting a CSR silver plan, while if you get a bronze or gold plan this will not be the case. The unintended result of this practice is that by increasing the silver premiums, you also increase the premium subsidies for people buying any level of insurance coverage through the marketplace. This has correlated with more people getting insurance overall. We'll see what happens with this in the new administration.

When this became a thing I thought I read that the various states managed this issue differently.  Some loaded the cost onto Silver plans only, some spread it across the entire ACA marketplace.  The point in me mentioning this is that the dynamic you mentioned might be in play or might not be based on state-level decisions.  I do not know what proportion of states handled it the way you describe, although I'm fairly certain that mine did.

[seattlecyclone]

* A few years ago the Trump administration decided to stop reimbursing insurance companies for the cost sharing subsidies. The insurance companies have to make this money up from somewhere, namely premiums. Many places have settled on baking this cost into the premium for silver plans, and silver plans only. This has been called "silver loading." The result is that if you're getting a non-CSR silver plan your premiums are subsidizing the people who are getting a CSR silver plan, while if you get a bronze or gold plan this will not be the case. The unintended result of this practice is that by increasing the silver premiums, you also increase the premium subsidies for people buying any level of insurance coverage through the marketplace. This has correlated with more people getting insurance overall. We'll see what happens with this in the new administration.

When this became a thing I thought I read that the various states managed this issue differently.  Some loaded the cost onto Silver plans only, some spread it across the entire ACA marketplace.  The point in me mentioning this is that the dynamic you mentioned might be in play or might not be based on state-level decisions.  I do not know what proportion of states handled it the way you describe, although I'm fairly certain that mine did.

Right, it is a state-by-state thing. Here's an interesting article about the effect that this practice has on the marketplace. It says that "nearly all states" use silver loading at present. It also cites studies showing that stopping the CSR reimbursements has cost the government a ton of money though higher premium tax credits, which has thereby led to an increase in the number of people buying insurance. Stopping silver loading by resuming these reimbursements would hurt more people than it helped. Textbook unintended consequences there.

[rae09]

By the way, you're in a good spot with income at 200-250% FPL because you can get a Silver plan with Cost Sharing Reductions. You'd do even better if your estimated income was less than 200% FPL -- after all, you don't need to pay back CSR payments if it turns out your estimate was incorrect.

Are you sure you don't think your income will be below 200% FPL?

Since we can't know for sure if we will have income couple months from now so I did estimate it less than 200% to maximize the CSR and got the maximum CSR as a result. I think I saw this strategy from the other ACA thread that I can't find anymore now so I can't credit the poster. I think it was probably @seattlecyclone.

[rae09]

The letter was accepted! Thank you so much for the inputs @Paul der Krake , @Goldendog777 , @Frankies Girl .

What state are you in?  In my state they don't accept a letter (I tried).  There was a form that it took me a while to find that they wanted instead.  After I completed the form with essentially the same information as the letter I wrote I had no problems.

I'm in Nevada.

[Need2Save]

Hoping someone can point me to an answer to this question or another thread if already discussed elsewhere.

For FPL purposes, where can one find the definition of "family"?  I have two adult children who will be 24 and 23 next year. Their full-time student status is questionable. I may have one that counts as a dependent and one that does not but this is not clear right now. But I may wish to have both of them on our family ACA plan since they are under age 26 and probably won't have full-time jobs yet (that could also change if one of them graduates in May). 

I'm trying to figure out if we are a family of 2, 3, or 4 for ACA purposes, as we may both be retiring this year and looking for ACA coverage for 2022. 

Anyone with experience with adult children on their ACA plan who are not also dependents for tax purposes?
Thanks!

[Need2Save]

Shoot, nevermind. Just found this page:

https://www.healthcare.gov/income-and-household-information/household-size/


It says for non-dependent children, to 'sometimes' count them. Count them if you DO plan to include them in coverage.  So we'll have to decide if we are covering both on the plan first and then count them both even if one is a dependent and one is not.  I hope I have that correct!

[Malum Prohibitum]

That link does not answer your question, which is, do adults who are not my tax dependents count for determining my family size when I look at the federal poverty level?

The answer is no.

http://www.healthreformbeyondthebasics.org/wp-content/uploads/2016/02/KeyFacts_Determining-Households-for-PTCs.pdf

[Malum Prohibitum]

https://www.irs.gov/pub/irs-pdf/i8962.pdf

[Malum Prohibitum]

Suppose that Maria and Simon also have an older daughter, Cora, who is 22 and living at home with her parents. Cora just graduated from college and is working full-time. She cannot be claimed as a tax dependent by her parents and files her own taxes. Even though Cora lives with her family, she is a household of one for premium tax credit purposes because she cannot be claimed by her parents.

http://www.healthreformbeyondthebasics.org/key-facts-determining-household-size-for-premium-tax-credits/

[Malum Prohibitum]

It looks like (maybe) your answer is 3.

https://apps.irs.gov/app/understandingTaxes/hows/tax_tutorials/mod04/tt_mod04_03.jsp

[secondcor521]

Hoping someone can point me to an answer to this question or another thread if already discussed elsewhere.

For FPL purposes, where can one find the definition of "family"?  I have two adult children who will be 24 and 23 next year. Their full-time student status is questionable. I may have one that counts as a dependent and one that does not but this is not clear right now. But I may wish to have both of them on our family ACA plan since they are under age 26 and probably won't have full-time jobs yet (that could also change if one of them graduates in May). 

I'm trying to figure out if we are a family of 2, 3, or 4 for ACA purposes, as we may both be retiring this year and looking for ACA coverage for 2022. 

Anyone with experience with adult children on their ACA plan who are not also dependents for tax purposes?
Thanks!

Your tax family for any given tax year is you, plus your spouse, plus any qualifying children or other dependents.

To determine if your adult children are your qualifying children or other dependents, see the flowcharts in Form 1040 instructions, starting on page 17.  Many things are taken into consideration, including relationship, age, student status, disability status, residency, income, and support.

You need to reevaluate your dependents each tax year, since the facts and circumstances change over time.  You can use the flowcharts to try to understand ahead of time, for planning purposes, who might be your dependent in 2022.

The odd thing, of course, is that you generally have to try to know ahead of time (during open enrollment and then during they year) whether to include them on your ACA policy or not.  It is easiest if you determine correctly ahead of time and make it so that you include on your ACA policy everyone who is your dependent, and exclude everyone who is not your dependent.

If you include one of your children on your ACA policy and then they end up not being your dependent, then you will have to allocate the relevant premium tax credits, subsidy amounts, and SLCSP amounts between your tax return and their tax return.  See "Allocation Situation 4" starting on page 18 of the instructions for Form 8962.

If you do not include one of your children on your ACA policy and then they end up being your dependent, then you can include them in your tax family, which will help you with your PTC when you go to file your taxes, but will not help in terms of APTC, CSRs, and most importantly, they would not have been covered under your policy.

You can make your best guess at open enrollment time.  If you determine partway through the year that the person will be or will not be your dependent, then you can perhaps contact your state department of health and welfare to add or remove them.  They may or may not do so, because usually you have to have a qualifying life event in order to make changes.  If they do allow the change, then it will likely result in a reevaluation of your situation, an adjustment to your APTC, and possibly create multiple 1095A forms for you at tax time.  It could also affect your insurance OOP, deductibles, and of course insurance coverage for the individual you're adding or removing.

Another option is to treat the questionable individual as their own tax family and have them get an ACA policy on their own.  If they end up being their own tax family, then they file their own taxes and do their own 8962, and you and the rest of your tax family file your own taxes and do your own 8962.  If they end up being your dependent, then you can just combine their 1095A information with yours on your 8962.

[Paul der Krake]

Yeah, trying to include working adult children complicates everything to the nth degree. At a time when changes are the most likely to happen as they find their wings and leave the nest.

[iris lily]

Wait until you get to the place where the person who owns*the ACA account drops off ACA coverage and the remaining person with no income has to negotiate with the eejits who cannot grok zero income when the subsidies were predicated on household income.

It happened to us. I qualified for Medicare several months before DH qualified for Medicare.

He has zero income. They wanted him to go on Medicaid. No, we file IRS jointly, he has income thru me.

Knowing that he would be able to sign up for Medicare soon, we just kept humoring them along by sending them whatever documents they asked for. They are careful to not cancel coverage and so we just kept stringing them along until he could get on Medicare.

What a dumb shit show.Then the icing on the cake was that DH’s  father died and left at a nice estate for all of is kids, so we had too much windfall income to have earned those subsidies anyway and we had to pay it all back. And really, that’s fine, I don’t mind it, I just wanted health insurance.


*In my experience anyway with ACA, I was the primary user and DH the secondary. I don’t remember why it was set up that way or if we had a choice.

[Paul der Krake]

Unless there is a clerical error somewhere along the way between application and policy issuance, whoever fills out the application is the primary. I'm the one dealing with important paperwork 99.99% of the time, so I try to be a consistent patriarchal dictator and put myself first on everything.

Making a mental note to put DW as primary 35 years from now when I qualify for Medicare before her...

[lhamo]

For those wondering whether or not to keep kids as household members for ACA purposes it really pays to run some estimates with different configurations.  Our DS split off on his own health insurance account when he turned 19 because it made sense for a variety of reasons.  He graduated, moved back home, and started a high-paying internship a few months later.  Even though he is back at our residence, he is no longer a tax dependent so we didn't have to put him back on our health insurance our count his income toward our household income. As a young person, his cost for a totally unsubsidized ACA silver plan with reasonable deductible/co-pays/OOP costs is just over $300/month.  For DH (age 62) the same plan at the same income level would be more like $1k/month and for me (age 52) around $800/month. Pays to be young and healthy!

[Need2Save]

Sorry I didn't post back sooner.  Thank you to those who responded to my question. The devil is in the details and I found some notes when I started looking in to this a couple years ago and forgot a few things I had already sorted out.

Since DS#1 is turning 24 next year, I can't include him either way.  Hopefully he graduates in May and finds a job with insurance. if not, we will look for an ACA policy for just him and maybe get insurance through the school while he is still enrolled (have to price compare).

So that leaves possibilities between 2 (just my DH and myself) and 3 of us (plus DS#2).  DS#2 is in college, but it's uncertain if he'll be full-time or not so we have to see how that pans out.  He has been hovering just under a FT class load but may be transferring back to the state university to complete his 4 year degree.  Agree that parents have to truly look at their situation year by year and see if they are dependents or not.