Qualify for Subsidy, then Make Too Little in Non-Medicaid State?

[dgoldenz]

The idiots at HC.gov have no idea, so let's see if anyone here knows where I can find the answer to this in writing:

Let's say a self-employed client reports projected 2014 income of $13,000/year and qualifies for a subsidy in a state that did not pass the Medicaid expansion. Since they are near 100% of FPL, they get a huge subsidy and only pay $20/mo for coverage. Then they file their 2014 taxes and actually made $1,000. What happens to the subsidy they were given? Can the government claw it back when the person makes too little money to qualify for a subsidy since they are under 100% of FPL? Or does the person get to keep it?

 

[RayNY]

It's my understanding that they (client) would keep it(subsidy). They used their best estimate of income for 2014, and were given a subsidy based on those amounts. From what I've been told, those who drop into Medicaid eligibility are not subject to clawbacks.

It looks like come OEP 2014, the client *should* re-file using more accurate income estimates, that would pop them into Medicaid for 2015. Keep in mind, the '14 tax docs indicating they are ineligible won't be submitted until April '15.

Since the most recent data for 1/1/15 effective would be 2013 tax docs, the client could, theoretically, still claim the same income and apply for a real plan (although they shouldn't).

Regardless of the path they choose, come 2016, the taxes filed would indicate their Medicaid Eligibility, mis-estimation of income, and wrongful claim of subsidies. They would be forced into Medicaid for 2016, unless they could prove a change in their income status.

Worse case scenario, if I'm wrong, subsidy clawback for <200% FPL is capped at $600/family or $300/individual, a small part of the "huge" subsidy they received.

FYI, my exchange told me you're supposed to notify the gov't of any changes to income mid-stream so your subsidy can be changed appropriately. If they expected to make $13,000, and actually made $1,000, I'd presume they would realize their estimate is inaccurate pretty early on. No word on how to do this, but they told me you're supposed to.

 

[dgoldenz]

I'm talking about for a state that did not expand Medicaid, so if they drop below 100% of FPL, they are not entitled to any subsidy at all. They can't be forced onto Medicaid the following year since they are not eligible for it. Many of my clients have highly variable income since they are self-employed. This particular client doesn't know whether he's going to be make $10k or $150k, a lot of it depends on what equipment they depreciate and how much business their new location does. Similar concerns from other clients opening new businesses or worried about losing their job.

 

[Yagents]

My understanding is what Ray quoted:

Worse case scenario, if I'm wrong, subsidy clawback for <200% FPL is capped at $600/family or $300/individual, a small part of the "huge" subsidy they received.

 

[Ann H]

The subsidy will be clawed back. However, at an income of less than 200% of FPL, the maximum clawback per family is $600 ($300 for singles).

RayNY said, "It's my understanding that they (client) would keep it(subsidy). They used their best estimate of income for 2014, and were given a subsidy based on those amounts. From what I've been told, those who drop into Medicaid eligibility are not subject to clawbacks." I have not heard that. He might be thinking about those who were on Medicaid, then found out that their 2014 income was too high. It is my understanding that in those cases, they do not owe Medicaid any money back.

 

[FLM2]

This process is complete, total crap.

If anyone actually does get a subsidy, I can only imagine the cries of outrage in 2015 when people get a bill from the IRS for some or all of the subsidy (plus penalty and interest) because they estimated incorrectly.

If our SFB POTUS and HHS Secretary had any common sense the subsidies would have been based on 2012 income with no clawback allowed. This way it is what it is and move on...

 

[AllenChicago]

This process is complete, total crap.

If anyone actually does get a subsidy, I can only imagine the cries of outrage in 2015 when people get a bill from the IRS for some or all of the subsidy (plus penalty and interest) because they estimated incorrectly.

If our SFB POTUS and HHS Secretary had any common sense the subsidies would have been based on 2012 income with no clawback allowed. This way it is what it is and move on. .[/QUOTE]


I agree 110%. Self-Employed, or not Self-Employed, the income amount placed on the HealthCare.gov subsidy application will be different when the actual 2014 income. It's guaranteed. Will the IRS allow subsidy recipients a +/- percentage of income leeway, or grace, before subsidy re-payment is required, or additional subsidy is owed? If no one knows, I'll look it up in regs.
ac

 

[Ann H]

This process is complete, total crap.

If anyone actually does get a subsidy, I can only imagine the cries of outrage in 2015 when people get a bill from the IRS for some or all of the subsidy (plus penalty and interest) because they estimated incorrectly.

If our SFB POTUS and HHS Secretary had any common sense the subsidies would have been based on 2012 income with no clawback allowed. This way it is what it is and move on. .[/QUOTE]


I agree 110%. Self-Employed, or not Self-Employed, the income amount placed on the HealthCare.gov subsidy application will be different when the actual 2014 income. It's guaranteed. Will the IRS allow subsidy recipients a +/- percentage of income leeway, or grace, before subsidy re-payment is required, or additional subsidy is owed? If no one knows, I'll look it up in regs.
ac

No percentage of leeway.

 

[Pancur]

There should be no subsidy clawback according to http://kff.org/health-reform/faq/he...end-of-the-year-it-turns-out-my-annual-income.

"I estimate my 2014 income will be 140% of the federal poverty level, so I need a premium tax credit and I need to have it all paid in advance. If, by the end of the year, it turns out my annual income was even lower - 130% of the federal poverty level - so I could have enrolled in Medicaid, will I have to pay back the premium subsidy?

No, your final premium credit amount will be determined based on your income for the year as reported on your tax return. The fact that it ended up being 130% of the poverty line does not mean you have to pay back the premium tax credit you received. In fact, your final credit amount will likely be larger than the amount you received in advance."

 

[RayNY]

Dgoldenz, you say "they can't be forced into Medicaid because they're not eligible", but if they are making $1,000 per year, I'm pretty sure that's under the cutoff, making them eligible.

Pancur, that corroborates what I was told. You would NOT pay it back, but they may push you into medicaid based on your now medicaid-eligible income, unless you can prove otherwise.

We all agree on the <200%FPL clawback amount, but the real question is, can they claw back subsidies you received because your income DECREASED, and I believe that answer is no. I think the clawback only comes into play in a situation where you, for instance, went from 140%FPL to 195%FPL and were due less subsidy. Lower income is due more subsidy (or free care) and I can't see them penalizing you for being eligible for more.