Do I qualify for an ACA affordability exemption?

[FIKris]

Hi all,  wondering if anyone has experience getting an ACA affordability exemption.  My spouse and I are self-employed, mustachian-style.  We expect to have about $10,000 in regular income next year and earn $60,000-$70,000 from the sale of an investment property we've held for the last 5 years.   Where we live, the rock bottom cheapest ACA bronze high-deductible plan costs $700/month for the two of us - $8,400 per year.   That's over 10% of what we expect to make next year. I have been looking into the "8% household income affordability exemption," but I can't seem to find a straight forward explanation.   We are planning to travel for about 8 months next year out of the country, so I'd rather not get an expensive Colorado-only HMO plan that won't cover us abroad if I can avoid it.

Not looking for opinions on the pros or cons of the Affordable Care Act, just insights on how much a self-employed couple can make and qualify for the affordability exemption. If there's another thread on this somewhere please point me to it!

[undercover]

Adjusted gross income.

[FIKris]

Yeah - but long term capital gains ARE included in AGI for the purposes of the affordable care act right?  So if our AGA is $80,000, but the cheapest plan is more than 10% of that, would we qualify for the affordability exemption?  There was some confusing language on the ACA and IRS site about calculating the affordability exemption - one made it seem like if the cost for ALL household members was over 8% you qualify, but another source made it seem like you only get the exemption if the cost was more than 8% of AGI per person (which would be 16% total for 2 family members?)

[mskyle]

Yeah - but long term capital gains ARE included in AGI for the purposes of the affordable care act right?  So if our AGA is $80,000, but the cheapest plan is more than 10% of that, would we qualify for the affordability exemption?  There was some confusing language on the ACA and IRS site about calculating the affordability exemption - one made it seem like if the cost for ALL household members was over 8% you qualify, but another source made it seem like you only get the exemption if the cost was more than 8% of AGI per person (which would be 16% total for 2 family members?)

Is that $60,000-70,000 all gains?

[Trudie]

Go to IRS.gov, print off a 1040, plug in your numbers, then see how you come out.  Line 37 (AGI) is what you focus on to find out if you're eligible for subsidies. 

[seattlecyclone]

Per healthcare.gov, the premium must be more than 8.13% of MAGI after any premium tax credits are applied. Long-term capital gains count toward your AGI for the year.

[FIKris]

Thanks all for weighing in.  I went ahead and ran some scenarios on Turbotax and it looks like as long as we make under $77,000 in 2017 an affordability exemption would apply. 

[seattlecyclone]

Thanks all for weighing in.  I went ahead and ran some scenarios on Turbotax and it looks like as long as we make under $77,000 in 2017 an affordability exemption would apply. 

What happens if your MAGI goes below 400% of the poverty line for your family size? The premium tax credits were designed to ensure that the second-cheapest silver plan is no more than 9.5% of MAGI after subsidies for families between 300-400% of the poverty line. If the difference in price between that plan and the cheapest bronze plan is at least 1.37% of your MAGI, there would be at least one plan that costs less than the 8.13% threshold after applicable subsidies.

[FIKris]

Thanks for the heads up seattlecyclone.   I plugged in the numbers and it looks like 400% of the poverty line for a family of my size in CO is about $64,000 - we'll have to be careful.   That's the trouble with forecasting income - you don't know how much a property will sell for until you sell it.  :)

If in the end we pay the penalty I won't mind so much - our earned income bracket will likely exempt us from paying most capital gains taxes when we do sell the house anyway so I guess it balances out.  The ACA penalty it isn't cheap but it would still save us $4,000-$5,000 to just pay the penalty and buy a short-term non-qualifying plan for the months we're in the US.

[Axecleaver]

Penalty this year is 2.5% of your household's MAGI or $695 per adult, whichever is more.

There was some confusing language on the ACA and IRS site about calculating the affordability exemption - one made it seem like if the cost for ALL household members was over 8% you qualify, but another source made it seem like you only get the exemption if the cost was more than 8% of AGI per person (which would be 16% total for 2 family members?)

Problem with the affordability exemption is that it was poorly drafted, and the IRS interprets it very narrowly. You take the worst part of both sides of the calc - so you compare the individual cost for insurance, to the total household's MAGI. Which is silly, but that's where they ended up.

[forummm]

Problem with the affordability exemption is that it was poorly drafted, and the IRS interprets it very narrowly. You take the worst part of both sides of the calc - so you compare the individual cost for insurance, to the total household's MAGI. Which is silly, but that's where they ended up.

Pretty sure that's only in the case where someone is employed and has family coverage available through work. If this is the case for a family without employment-based coverage available, I would definitely like to know that.

[Altons Bobs]

https://www.irs.gov/pub/irs-pdf/i8965.pdf page 3, 2nd item from the top.  But do you count the 8.05% on the amount AFTER subsidy is applied or before if you qualify for subsidy?

[forummm]

https://www.irs.gov/pub/irs-pdf/i8965.pdf page 3, 2nd item from the top.  But do you count the 8.05% on the amount AFTER subsidy is applied or before if you qualify for subsidy?

Was this a response to my question above? If so, I don't believe that section answers it. However, if you read further into the form, I believe it agrees with my assertion (if no employer-based coverage is available, you compare the total cost of premiums for all members of the household to the 8.05% threshold). For example, see page 9:

Determining an individual's required contribution—Individuals not eligible for coverage under an employer plan.
If you or another member of your tax household can't purchase coverage under an employer plan, the individual's required contribution is based on the premium for the lowest cost bronze plan available through the Marketplace minus the maximum premium tax credit that you could have claimed if the individuals had enrolled in this plan.

For this purpose, use the lowest cost bronze plan available through the Marketplace that covers everyone in your tax household:
for whom a personal exemption deduction is claimed on your tax return,
who isn't eligible for employer coverage,
and who doesn't qualify for another coverage exemption.

For information on the lowest cost bronze plan you could have purchased for your tax household, visit www.HealthCare.gov/tax-tool or contact the Marketplace serving your area. Subtract from the premium the maximum premium tax credit that you could have claimed if these individuals had enrolled in that plan. You can claim the exemption for unaffordable coverage for the individual if the result is more than 8.05% of your household income.

If the Marketplace serving the area where the individual resides doesn't offer a single bronze plan that would cover everyone in your tax household who may be eligible for the exemption for unaffordable coverage, add the premiums for the lowest cost bronze plans that are offered through the Marketplace where one or more of the members of your tax household who may be eligible for this exemption reside that would together cover all of these individuals.

Use the Marketplace Coverage Affordability Worksheet to determine whether you or another member of your tax household is eligible for this coverage exemption.

This tool also may be helpful:

https://www.irs.gov/uac/affordable-care-act-1

[FIKris]

Thank you foruMMM! That's exactly the kind of clarity I was looking for - neither of us has employer based coverage so I hope that they interpret it as 8.05%  for the two of us.    I'll provide an update after tax day and let you all know how it turns out!

[forummm]

Thank you foruMMM! That's exactly the kind of clarity I was looking for - neither of us has employer based coverage so I hope that they interpret it as 8.05%  for the two of us.    I'll provide an update after tax day and let you all know how it turns out!

<tip of the top hat>

[ohsnap]

... We are planning to travel for about 8 months next year out of the country, so I'd rather not get an expensive Colorado-only HMO plan that won't cover us abroad if I can avoid it....

Do any of the ACA exchange plans cover overseas care?  I googled it, and most of the links I found say care outside the US is not covered on exchange plans.  BUT most of the links were selling travel insurance. :)  I didn't find anything authoritative.

[forummm]

... We are planning to travel for about 8 months next year out of the country, so I'd rather not get an expensive Colorado-only HMO plan that won't cover us abroad if I can avoid it....

Do any of the ACA exchange plans cover overseas care?  I googled it, and most of the links I found say care outside the US is not covered on exchange plans.  BUT most of the links were selling travel insurance. :)  I didn't find anything authoritative.

I don't know. There's nothing prohibiting them from covering care outside the US. However, it would make the plan more expensive, so a lot of the plans probably don't include it because they want to be price competitive. I have seen employer-sponsored plans that do include care outside the US (e.g. from BCBS). So they do exist.

[Axecleaver]

Having worked in this space, international providers are not really on the radar to cut deals with. So it's pretty rare, most payors have enough problems to deal with domestically.