Form 8962 (ACA Subsidy) Can someone help me understand this?

[iwannaretire]

This year, I came in over 400 percent of the poverty level.   My understanding is that for 2022, I still do not have to pay more than 8.5 percent of MAGI in insurance premiums.  Is that correct?

When Turbo Tax fills out the form, it calculates my monthly contribution amount as $808, which is 8.5 percent of MAGI.  I actually paid $694 a month, which means i underpaid by $114 a month or $1368 total.   

Nevertheless, the reconciliation on form 8962 is telling me that I owe $5793 in excess advance premiums.   How can this be the case.  That would make me pay more than 8.5 percent of MAGI.  I'm really confused. 

[MDM]

That could happen if you opted for a plan more expensive than the Second Lowest Cost Silver Plan (SLCSP) available to you.

For example, if you had
AGI = $114,070
Enrollment Premium (Form 1095-A box 33A) = $14,121
SLCSP (Form 1095-A box 33B) = $9,600
Advance payment of PTC (Form 1095-A box 33C) = $5,793

You would have paid $14121 - $5793 = $8,328/12 = $694/mo, but still owe the full advanced PTC payment amount.

Is that at all close to your situation?

[iwannaretire]

No, I opted for a bronze plan.

Box 33A is $26,897
Box 33B is $22,430
Box 33C is $9700

[MDM]

No, I opted for a bronze plan.

Box 33A is $26,897
Box 33B is $22,430
Box 33C is $9700

Seems unusual that the premiums for the bronze plan you chose (33A) would be higher than the premiums for the SLCSP (33B).

What are all the numbers, boxes checked, etc., on your form 8962?

[iwannaretire]

I think it may be because I have a Bronze PPO and the second lowest silver plan is probably an HMO.  Would that explain the difference?  If so, that's a trap for the unwary and quite disturbing to be honest.

Here's the info on the form:

1.   Tax family size:  4
2a  Modified AGI   $114,115
3.   Household income:  $114,115
4.   Federal poverty line: $26,500
5.   Household income as a percentage of federal poverty line:  401%
7.   Applicable figure:  .085
8a  Annual contribution amount: $9700
8b.  Monthly contribution amount: $808
9.   Box checked no
10.  Box checked yes.  Continue to line 11

11.  A  26,897
11.  B.  22,430
11.  C.  9700
11   D.  12,730
11   E.  12,730
11   F.   18,523

24   Total Premium Credit: $12,730
25.  Advance Payment of PTC: $18,523

27.  Excess Advance Payment of PTC: $5793
29   Excess advance premium tax credit repayment:  $5793a

Thanks so much for helping me.   I would have never thought about the bronze being more expensive than silver, and I guess I really don't fully understand how the ACA works.

[MDM]

Don't know the ins and outs of ACA premium pricing, so I don't know why a bronze plan would be more expensive than a silver plan.

But back to form 8962: why is box 11f not equal to Form 1095-A box 33C?  See the instructions for Line 11 Column (f).

[iwannaretire]

Line 11f is the same as 1095- box 33c.   Sorry I think my original numbers I gave you were boxes 11c, not 33c.

1095 box A -- 26,907.16
1095 box B -- 22,429.68
1095 box C -- 18,523.32

We're in California, so everything is upside down.

[MDM]

Line 11f is the same as 1095- box 33c.   Sorry I think my original numbers I gave you were boxes 11c, not 33c.

1095 box A -- 26,907.16
1095 box B -- 22,429.68
1095 box C -- 18,523.32

We're in California, so everything is upside down.

OK, that helps!

With an expected contribution of 8.5% * $114,115 = $9,700, and an SLCSP cost of $22,430, you are eligible for a Premium Tax Credit of $22,430 - $9,700 = $12,730.

Because you received advance premium tax credits (APTC) of $18,523 (that corresponds to an MAGI for ACA purposes of ~$74,550), you are indeed subject to repaying $18,523 - $12,730 = $5,793.

Don't shoot the messenger...but do the calculations (aside from how the law works) make sense?

[iwannaretire]

The calculations make sense, but the fact that i'm paying more than 8.5 percent of MAGI is what does not make sense.

[jim555]

The calculations make sense, but the fact that i'm paying more than 8.5 percent of MAGI is what does not make sense.

The 8.5% is true for the SLCSP Silver benchmark plan only.

[iwannaretire]

I guess that is the case.  Sorta sad though that I have to pay about $4000 more because i'm on a bronze PPO plan.   Not exactly a Cadillac plan.   Seems like California at least wants to force us onto HMOs.

[seattlecyclone]

I guess that is the case.  Sorta sad though that I have to pay about $4000 more because i'm on a bronze PPO plan.   Not exactly a Cadillac plan.   Seems like California at least wants to force us onto HMOs.

We asked for market-based health care instead of the evil socialism they use in other countries, and this is what we get. The HMOs in your state are able to meet the minimum standards for adequate health insurance at a lower cost than your PPO, so their premiums are less too. The ACA guarantees that there will be at least two plans that cost 8.5% of your income or less. If you want to choose something more expensive the difference is on you.

[iwannaretire]

Yep, so glad I'm still getting my choice of doctor, as promised by Obama.   Oh wait. .  .

Sorry but I've been on HMOs and the medical care is substandard.  It's fine when you're in your 20s or even 30s, but not so much when you're older.

[jim555]

I don't know what the complaining is about, you are getting some subsidy with excellent income.  Some would say you can afford it all on your own.  You are supposed to change your income estimate through the year so at tax time you don't get shocked. 

[iwannaretire]

I'm complaining because (1) the 8.5 percent advertised by our politicians is misleading.   I'm not paying 8.5 percent.  I'm paying 12.2 percent, (2) it seems inherently unfair to penalize me by $4k for buying a bare bones bronze PPO policy with a $6500 deductible and a $12,500k out of pocket limit; this is not a Cadillac plan, all i want is the ability to choose my own doctor and have competent medical care (3) my income  puts me squarely in the middle class in Southern California, so it is not an excellent income.  It's not even enough to pay the bills with 2 kids in college.   Cost of living matters.   The poverty level in California is probably $10k higher than the rest of the country, but I still get taxed the same as someone who lives in a LCOL area, but of course, their policy premiums are lower.  (4) I ran the numbers even if I had a lower income, and I would still have to pay a penalty. 

[seattlecyclone]

Yep, so glad I'm still getting my choice of doctor, as promised by Obama.   Oh wait. .  .

Sorry but I've been on HMOs and the medical care is substandard.  It's fine when you're in your 20s or even 30s, but not so much when you're older.

You have your choice of doctor. You chose a more expensive doctor and that choice has financial consequences to you. Obama never promised every doctor would cost the same.

If you believe the HMO plans should not be considered adequate coverage for the purpose of using as a benchmark for subsidies, that would be a fine topic to contact your Congressperson about.

Meanwhile the 8.5% number is absolutely not misleading. Nobody ever said that's what it would cost to buy any plan out there, just that there will be some options at that price. You clearly don't like those options and that's your prerogative, but those options do exist.

[jim555]

I'm complaining because (1) the 8.5 percent advertised by our politicians is misleading.   I'm not paying 8.5 percent.  I'm paying 12.2 percent, (2) it seems inherently unfair to penalize me by $4k for buying a bare bones bronze PPO policy with a $6500 deductible and a $12,500k out of pocket limit; this is not a Cadillac plan, all i want is the ability to choose my own doctor and have competent medical care (3) my income  puts me squarely in the middle class in Southern California, so it is not an excellent income.  It's not even enough to pay the bills with 2 kids in college.   Cost of living matters.   The poverty level in California is probably $10k higher than the rest of the country, but I still get taxed the same as someone who lives in a LCOL area, but of course, their policy premiums are lower.  (4) I ran the numbers even if I had a lower income, and I would still have to pay a penalty.

The law is the law, if you didn't read it or understand it that is on you.  In 2026 the cliff comes back and you get $0 subsidies.

[Omy]

What a timely thread! We just found out about a little windfall coming our way that's going to throw us over 400% FPL in 2023. Because of the windfall, there will be added taxes AND $4k less in ACA subsidy.

Knowing ahead of time will allow us to reduce subsidies now and work on strategies to lower MAGI as much as possible.

Thanks for the post...and to the excellent explanations!