Subsidy Clawback Abuse?

[Yagents]

I believe there is a refund available if you overstate your income. It is a APTC, Advanced Premium Tax Credit. Advanceable and/or refundable.

Most people are used to getting a tax refund. I will be recommending clients overstate their income. Clients will be much happier with a refund, and pissed if they owe money at year end.

Lynn Quincy: How you explain PPACA matters | LifeHealthPro
For the 2014 tax year, for example, they can wait until they file their 2014 income tax returns -- in early 2015 -- to get the tax credit money.
They also can lower their health insurance bills in 2014 by collecting the credit starting in early 2014, while the tax year is still under way, and before they know what their total 2014 income will be.
Under a description of the option for consumers to wait to take the tax credit until they file their taxes in 2015, a hypothetical consumer says, "I can afford the monthly premium. So, I'm taking the tax credit later. I like the idea of getting a bigger refund next April. I'll use it to get my kids a better computer."
Under a description of the option for consumers to take the tax credit immediately, while the tax years is still under way, another hypothetical consumer says, "I love my steady job at the print shop, but it's tough to make ends meet. So I'm taking the tax credit now. It's just nice to have less going out each month."

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Consumers understand that the credit lowers health insurance costs, that there's a trade-off between taking credit in advance and waiting to get the credit at tax time, and that they must contact the exchange if their income or family changes, Quincy said.

 

[Ann H]

Ann,
I received bad news today. Our hoped-for Legacy Major Medical will not be available to sell in 2014. If you know something good, by all means, please cheer me up!
-Allen

Hi Allen -

I hope that there are good alternatives, too. I am not surprised that today's major medical (Legacy) will be banned by HHS, just based on the final rules that we saw issued recently.

However, HHS left the door open to fixed indemnity, and it's now up to a quality carrier to create a fixed indemnity plan that is NOT LIMITED BENEFIT. Since limited benefit has recently been sold to people who need GI, and now those people can get the Obamacare Platinum plan, that opens the opportunity for the fixed indemnity style of reimbursement to be comprehensive in the services it covers and the amount of benefits it pays. United Healthcare's recent webinar said they are designing plans like that right now and seeing what complies with the law. Also, at a recent "colored company" seminar the high level execs said they expect to see a lot of this in the market.

Let's not forget catastrophic plans. They are allowed by Obamacare for those under age 30, AND THOSE WITH FINANCIAL HARDSHIP. Financial hardship includes people who find that the lowest cost bronze plan costs more than 8% of their AGI. That will fit many higher income clients! For instance, if the IRS is right and the lowest cost bronze plan costs $20,000 for a family, then those with AGI of $250,000 or less can claim financial hardship. If the lowest cost bronze plan costs $16,000, then hardship can be claimed by families with up to $187,500 AGI. For these cases (where the lowest cost bronze plan costs more than 8% of AGI), there is NO PENALTY for the individual mandate, and the person can purchase the catastrophic plan. Carriers can have a catastrophic plan inside and outside the exchange.

 

[stuy119]

Let's not forget catastrophic plans. They are allowed by Obamacare for those under age 30, AND THOSE WITH FINANCIAL HARDSHIP. Financial hardship includes people who find that the lowest cost bronze plan costs more than 8% of their AGI. That's your higher income clients! For cases where the lowest cost bronze plan costs more than 8% of AGI, there is NO PENALTY for the individual mandate, and the person can purchase the catastrophic plan. Carriers can have a catastrophic plan inside and outside the exchange.

Huge loophole, especially if there are still HSA deductions available.

 

[taterpeeler]

Hi Allen -

I hope that there are good alternatives, too. I am not surprised that today's major medical (Legacy) will be banned by HHS, just based on the final rules that we saw issued recently.

However, HHS left the door open to fixed indemnity, and it's now up to a quality carrier to create a fixed indemnity plan that is NOT LIMITED BENEFIT. Since limited benefit has recently been sold to people who need GI, and now those people can get the Obamacare Platinum plan, that opens the opportunity for the fixed indemnity style of reimbursement to be comprehensive in the services it covers and the amount of benefits it pays. United Healthcare's recent webinar said they are designing plans like that right now and seeing what complies with the law. Also, at a recent "colored company" seminar the high level execs said they expect to see a lot of this in the market.

Let's not forget catastrophic plans. They are allowed by Obamacare for those under age 30, AND THOSE WITH FINANCIAL HARDSHIP. Financial hardship includes people who find that the lowest cost bronze plan costs more than 8% of their AGI. That's your higher age clients, and many with incomes over 400% of FPL! For cases where the lowest cost bronze plan costs more than 8% of AGI, there is NO PENALTY for the individual mandate, and the person can purchase the catastrophic plan. Carriers can have a catastrophic plan inside and outside the exchange.

Ann... you are spending to much time on webinars... that make 2 for me today

 

[Yagents]

It also was confirmed that tax refunds are available if your income is lower than you expected, and you were not receiving the maximum amount of subsidies during the year.

As I believe, it's better for a client to get a refund, vs having to pay out at time of tax filing with a subsidy clawback.

 

[ctg]

It also was confirmed that tax refunds are available if your income is lower than you expected, and you were not receiving the maximum amount of subsidies during the year.

As I believe, it's better for a client to get a refund, vs having to pay out at time of tax filing with a subsidy clawback.

If you get let go or take a lower paying job, you can also adjust at any time during the year and take the average, correct?

As you have stated, most of us can't give tax advice. I see CPA's fielding a lot of phone calls. Can they charge by the 1/4 hour like lawyers?

 

[Yagents]

Yes on first question

We are not giving tax advice, we are giving subsidy advice based on what AGI they give us.

 

[AllenChicago]

No Earth-shattering news here, but this article reminded me that when state and federal government agencies start running out of money, they take desperate measures. For example, Illinois is going to be auditing every employee (state employees, university faculties, etc..) to ensure that a listed dependent is really a dependent.

If a consumer accepts a federal health insurance subsidy from the U.S. Treasury, they're opening a Pandora's box of potential audits, annoyances..or worse, for themselves.

Excerpt from: Benefit Choice continues; dependent audit announced | Inside Illinois | News Bureau | University of Illinois

"Dependent audit
In an effort to control costs and ensure enrollment files are accurate, the state of Illinois will conduct a dependent eligibility verification audit during fiscal year 2014. During the audit, members will be required to provide proof of eligibility for all dependents – such as birth certificates and marriage licenses.
If, during the audit, a member is found to be covering an ineligible dependent (such as an ex-spouse, for example), he or she may be subject to a financial penalty, including but not limited to, repayment of all premiums the state made on behalf of the employee and/or the dependent, as well as expenses incurred by the program.
Dependents can be dropped during the current Benefit Choice period without penalty. To check covered dependents, employees should review the CMS Personal Benefits Statement.
More information about the audit, as well as documents required, will be available online once the audit begins."

-ac

 

[HealthGuy]

Gawd, enforcement of this bad boy though the IRS sounds like a bowl of cherries. This is gonna be fun!

 

[Norwayguy]

Wonder how much it is going to cost to staff the auditing positions....Well there is a couple jobs created by Obamacare.