Subsidy Clawback Abuse?

[Ann H]

Silly HHS. It's like their subsidy application process is attracting abuse. Page 18 of this famous 21 page app says:

Renewal of Coverage
I understand that if I’m eligible for help paying for health insurance, I may also be able to renew the coverage. During the renewal process, the Health Insurance Marketplace will use income data including information from tax returns of household members. This will determine yearly eligibility for help paying for health insurance for the next 5 years. The Marketplace will send me a notice and let me make changes. If I don’t respond, the Marketplace will continue my eligibility at the level indicated by the data. I understand this renewal process will occur each year for the number of years that I check off below, but I may change my choice at any time by contacting the Marketplace.

()5 years ()4 years ()3 years ()2 years ()1 year
()Don’t renew my eligibility for help paying for health insurance."​

But just above it, they did give the "fraud" warning, albeit in such wimpy language it's amazing:

I have provided true answers to all the questions on this form to the best of my knowledge. I know that there may be a penalty if I’m not truthful.​

 

[stuy119]

What about the opposite of this situation?

You know that your income level as a self-employed person is 300-600% of FPL, so you estimate it at 300% for the first year. When you get to the end of the year, it comes out to be 200%.

Are you able to file and get your subsidy similarly to how you would get an annual refund? Or by overstating your income did you "forfeit" your subsidy?

 

[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.

 

[Ann H]

What about the opposite of this situation?

You know that your income level as a self-employed person is 300-600% of FPL, so you estimate it at 300% for the first year. When you get to the end of the year, it comes out to be 200%.

Are you able to file and get your subsidy similarly to how you would get an annual refund? Or by overstating your income did you "forfeit" your subsidy?

That's a very good question, Stuy119. I don't know the answer, but I'll bet YAgents does. (EDIT: I just hit "submit" and then saw that YAgents answered the question. See, I knew he would have the answer!)

Please let me say that I understand that people's income genuinely fluctuates, especially business owners and those in sales. The IRS would be looking for clear abusers who have a consistent history of higher income, yet falsify the subsidy application in order to obtain funds for which they did not qualify.

This is ripe for abuse. The mortgage tax credit a few years ago was the largest abuse the IRS ever had. It gave $8,000 to new homeowners, but felons found ways to funnel that money to them, including those who were in prisons at the time.

Most of that is done through fraudulent tax returns where the person gets a refund. Even though Stuy119's question was not about fraud, let's take his example of someone who OVERstated their income and is due a refund equal to the subsidy. An identity thief steals the SSN, files a tax return, and has the refund electronically sent to his temporary debit card.

Read this article for a great explanation of how that happens. It happens a lot. People on public assistance commit majority of tax refund fraud, police say | Tampa Bay Times

 

[Yagents]

They changed the calculator field entries:
National Health Care Calculator

Haven't played too much with it, but no "family rate", add children........see price go up up up

Cool, they are allowing for 2 person couple, but only 1 person buying on exchange.
​

 

[jerry176]

I put 150K in for income 2 people working w child

silver plan zero subsidy and "cheap" silver plan

A whopping 54K year in premium...

but if I make 50k its 4116 premium per year...

Who is paying the 51K difference???

Or where is the money comming from???

Am I missing something???

 

[Yagents]

You only have to worry about it if you pay taxes.

Hint: It's coming from the taxpayer. Or China, or your kids future taxes, or Ben's money printing machine

 

[jerry176]

I know it was taxpayers.....

We are screwed screwed screwed

 

[bluemarlin08]

What if one overstates their income to avoid being placed in Medicaid? Assume they will be ok?

 

[Yagents]

Good question......a real good question, because I have a lot of retirees and/or clients that show very little on paper, but won't want Medicaid.

HHS is discussing with some states about allowing them to privatize medicaid, and allow them to instead get subsidized health plan from private insurer on the exchange to entice them to expand in those states that are fighting the medicaid expansion. But, they are saying it would cost more than regular ol' medicaid.

So, I don't know if there would be any backlash with a payment due for the difference, and it may only last 1 year until they file their taxes.

But, if a person goes on medicaid, an agent gets $0. But, if they make 139% of federal poverty level, they get highly subsidized private insurance and an agent gets paid.