A good overview of the interaction between premiums, age, and income on the exchange– and some of the factors that typically are left out in most news reporting:
The dirty secrets behind Boehner’s ‘spiking’ Obamacare premiums
By Michael Hiltzik – Los Angeles Times – November 25, 2013
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.
Does navigating your government-created health exchange web site give you a headache?
Here’s a quick online tool to find the health care offerings in your area, including a tool to quickly estimate subsidies:
This is a free tool created using public databases. No login required — all information can be quickly entered on the home page, with results appearing as the the data is entered.
(Created as a public service by three young and capable San Francisco-based computer technicians – see http://www.thehealthsherpa.com/about to learn more about them)
There has been a lot of media attention focused on various technical difficulties related to signing up for insurance under the ACA. There is also a lot of attention being paid to the fact that individuals who had insurance on non-grandfathered plans are now receiving termination notices — though this is hardly “news”. (A “grandfathered” plan is one that was in existence before passage of the ACA in March 2010; a “non-grandfathered” plan is a plan that an individual or employer group purchased or set up after that time. In order to be “grandfathered”, plans had to also be upgraded to meet certain specified requirements as to coverage).
I’ve recently discovered a document that was created by an insurance company (Anthem Blue Cross) to assist its agents in understanding the standards for coverage and setting rates. This 64-page Booklet, called The California Agent Guide: Policies and Procedures Sales and Underwriting for Authorized Agentss, is quite recent, published in May, 2013. But it’s worth reading as a very detailed reminder of the hurdles that everyone had to pass in order to purchase insurance.
The list of disqualifying conditions or medications is staggering. Kid taking medication for ADHD? that’s a 25%-75% increase in premium. Taking prescription meds for acne? Decline. In fact there’s a whole page listing dozens of prescription medications that would preclude a person from getting insurance.
I have wrestled somewhat with the ACA’s definition of MAGI (modified adjusted gross income) for purposes of determining eligibility for the premium tax credit. In fact, that is what led me to create this blog. The information I found on the internet was contradictory and confusing, and even the tax professionals and insurance agents I consulted seemed confused.
Part of the confusion stems from the fact that the tax code uses the phrase “modified adjusted gross income” to mean different things for different purposes. The term is defined for purposes of the Affordable Care Act in 26 USC 36B. Various other definitions can be found in these sections:
To add to the confusion, there are two other sections of the Affordable Care Act which also provide their own, different definitions of MAGI:
- 26 USC 1411 (Medicare Tax on High Level Investment Income)
- 26 USC 5000A (Requirement to Maintain Minimum Essential Coverage)
The starting point of determining your household income for purpose of the ACA tax credit is your adjusted gross income AGI). As explained in my previous post (Part One), your household income is the combination of the AGI of the primary taxpayer and any other family members with incomes large enough to trigger tax liability, together with any tax-exempt income from interest, social security, or foreign earnings.
AGI is defined in Internal Revenue Code section 62. It is the amount remaining after subtracting various specified deductions from your gross income (or the total of all taxable forms of income). Because these various deductions can potentially reduce your income by thousand of dollars, it means that you or your family may be eligible for the premium assistance tax credit even if you have total income well above the 400% federal poverty level.
Here are some of the most common deductions enumerated in Section 62 which may effectively reduce income. Many individuals or families whose household incomes fall above the 400% FPL subsidy limits may find that they can effectively reduce their AGI and qualify for significant credits toward their insurance by simply taking advantage of deductions they may not have fully utilized in the past.
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