Under ACA, eligibility for Medicaid and premium-reduction subsidies for exchange policies is governed by the poverty guidelines for the policy year. The 2014 guidelines are now available and can be viewed at: http://familiesusa.org/product/federal-poverty-guidelines
In the Medicaid expansion states, individuals and families who fall under 133% of the poverty line will receive coverage through Medicaid. Those whose incomes are between 133% and 400% are eligible for subsidies and/or a tax credit when purchasing insurance through an exchange.
In states that have not expanded Medicaid, individuals and families are eligible to purchase subsidized insurance from an exchange so long as their anticipated income is at or above the 100% poverty level.
If a taxpayer is approved to receive a subsidy by an exchange, but their total income for the year as reported on their 2014 return falls below the 100% level, their tax credit will be computed as the value that would apply if their income was exactly 100% of the FPL. Continue reading
Here are some simple “fixes” that would reduce confusion over ACA provisions, help further the individual goals of the statute, and possibly improve the efficiency of signing up ACA customers, and the reason why they are needed.
1) Eliminate the Medicaid gap for non-expansion states: The ACA provides that taxpayer units (individual or joint followers) are eligible for premium assistance tax credits when household income is between 100-400% of the federal poverty line. At the time of drafting, it was assumed that all any person with income under 100% of the FPL would be enrolled in Medicaid, as the terms of the original statute essentially mandated expansion in all states. (States which did not agree to expansion would have faced loss of federal funds).
However, after the US Supreme Court struck down the Medicaid provisions, half of US states opted out, meaning that individuals who earn less than the FPL who live in those states are not eligible for subsidies on the exchanges. This leaves many of the neediest individuals out in the cold, and undermines the central goal of ACA: to provide insurance for all.
Because tax credits or subsidies to offset insurance premiums are eliminated for taxpayers with household incomes over 400% of the federal poverty line, crossing that income threshold creates a potentially large tax penalty, especially for older adults who will be face higher premiums. This means that a slight gain in the year’s income for a taxpayer on the edge of eligibility could end up costing more than the amount gained.
This can obvious impact decisions as to whether to accept a moderate increase in pay, as well as impact decisions that could result in other taxable income, such as managing investments.
On the other hand, it’s generally better for a person to get more money than less, so it would be foolish for someone to forego an income opportunity that would result in gains that substantially outweigh the loss of a tax credit. Continue reading
The really cool part about Obamacare, especially for we older folks, are the subsidies.
The really terrible part about Obamacare, especially for we older folks, is what happens if our incomes too high to qualify for subsidies, but just barely.
The part that makes the care “affordable” is that everyone who earns income between 100% to 400% of the federal poverty line gets a tax credit for any amount that we pay that is above a certain percentage of our income. That percentage varies, but is no more than 9.5%. Because we need to pay our insurance premiums right away, the law has another perk: we can choose to claim that tax credit in advance, and the government will pay it out in monthly installments directly to the insurance company. Continue reading