Examples Of Elimination Of The Subsidy Cliff
Some examples help to illustrate what to expect with the elimination of the subsidy cliff in 2021 and 2022:
Avery is 24 and lives in Santa Fe, New Mexico. According to HealthCare.govs plan comparison tool, the unsubsidized price of Averys benchmark plan is about $273/month in 2021 or $3,276 for the year.
Without the ARP, premium subsidy eligibility ended at 400% of the poverty level, which is $51,040 for a single person in the continental United States in 2021 .
So lets say that Avery earns $52,000 in 2021. That means the benchmark plans cost is 6.3% of her annual income.
Under normal rules, Avery is not eligible for a premium subsidy. But even after we account for the American Rescue Plan, Avery still wont qualify for a premium subsidy due to the low cost of the benchmark plan relative to her income.
With an income of $52,000 , Avery is expected to pay no more than 8.5% of her income for the benchmark plan. But since weve already seen that its only 6.3% of her income, a subsidy is still not necessary for Avery.
Now lets consider Xavier. Hes 62 and lives in Cheyenne, Wyoming. To make the comparison easier, well say that hes also earning $52,000 in 2021. But in Xaviers case, the benchmark plan, according to HealthCare.gov, is $1,644/month, or $19,728 for the whole year.
Congress Is Trying To Remedy The Surprise Tax Bills That Millions Of Americans Are Getting Because Their Unemployment Income Means They Qualify For A Less
Preschool teacher Michele Ryan was nearly in tears when she filled out her 2020 taxes and learned that she owes the government more than $3,100 despite being unemployed for a significant portion of last year. She owes about $1,000 in taxes on unemployment income, but the bulk of her bill $2,100 is to repay some of the subsidy she received to buy health insurance last year.
According to the federal government, Ryan earned too much money on unemployment. It was more money than she would have made working as a preschool teacher, and it bumped her into a different income bracket that reduced her Affordable Care Act insurance subsidy. Shes desperate to keep health insurance in the middle of the pandemic and is trying to figure out how to pay the hefty bill.
Where do I come up with all of this money to pay them back during the pandemic? said Ryan, 50, who lives in Bergen County, N.J. What did they expect us to do? Drop Obamacare during the pandemic?
Ryan is among the millions of Americans encountering surprisingly large tax bills in the midst of a global health crisis. She was finally able to go back to work at a day-care center, but she says she doesnt have $3,100. She used what savings she had to move from Pennsylvania to New Jersey when a job opened up in her field.
Tips For Entering Income:
If you are applying or updating your income, you should enter your monthly income as it is right now, without the $600 in additional unemployment income. From there, enter your expected yearly income based on what you think youll make over the course of the year.
When entering your yearly income, consider how much you have earned so far this year, add any severance pay, plus unemployment , and include what might be earned if and when you return to work later this year.
We understand this is a guess. You will have the opportunity to change this if your income changes later. Its important to update your income information as it changes, so it is as correct as possible.
If you are eligible for a qualifying health plan with an Advanced Premium Tax Credit to lower the cost of coverage, you can adjust the amount you take by using the APTC slider after you choose a plan. It is a good idea to take the least amount of credit you can afford, because all tax credits received during the year will need to be reconciled when you file your tax return next year. Any unused credits can be claimed during tax filing.
- Finding the Right Plan with MHC
- Get to know the Maryland Health Connection Mobile App
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Enhanced Premium Tax Credits In 2021 And 2022
In addition to capping benchmark plan premiums at no more than 8.5% of household income, the American Rescue Plan also reduces, for enrollees at all income levels, the percentage of income people have to pay for the benchmark plan.
Ever since the marketplaces and premium subsidies debuted in 2014, a sliding scale was used to determine the percentage of income an enrollee has to pay for the benchmark plan. The persons subsidy will then pick up the remaining cost of the benchmark plan, or it can be applied to any other metal-level plan.
If the person picks a plan thats less expensive than the benchmark, their after-subsidy premiums will amount to a smaller percentage of their income. In contrast, if they pick a more expensive plan, their after-subsidy premiums will amount to a larger percentage of their income.
In 2014, the scale ranged from 2% of income to 9.5% of income for people who were subsidy-eligible .
The exact percentages are adjusted slightly each year, but before the American Rescue Plan, they ranged from 2.07% of income to 9.83% of income in 2021, depending on an applicants income.
Under Section 9661 of the American Rescue Plan, however, the percentage of income people have to pay for the benchmark plan has been adjusted. For 2021 and 2022, the range is now 0% of income to 8.5% of income.
This means that people on the lower end of the income scale can enroll in the benchmark plan with no premium at all.
What Should I Include In Calculating My Household Income
One thing to note is that Medicaid eligibility is based on your monthly income. But when it comes to shopping the Marketplace, your eligibility for tax credits is based on your annual income. So if, for example, lets say you had a higher-paying job for the first few months of the year. If your hours were reduced in April, you may qualify for Medicaid because your monthly income is low. And this is true even though your annual income is higher.
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Whats The Maximum Income I Can Have And Be Eligible For Government Assistance Through Covered California
The Covered California income guidelines take into consideration your household income and size. In 2021, if you are a single person earning less than $47,000 per year, you qualify for government assistance. A family of four with an annual household income less than $97,200 qualifies for government assistance. The lower the net income, the greater the government subsidy.
To qualify for federal tax credits, California state subsidy, or both, you must make between 0-600% of the FPL. The chart below, created by Covered California, can help you determine whether your household income is within range of the FPL to qualify for federal tax credits or subsidies when buying health insurance on the Covered California marketplace.
Keep in mind that tax deductions can lower your income level and may help you qualify for government assistance.
How To Report Income
The income questions in Washington Healthplanfinder help calculate what coverage youre eligible for, including the type and amount of financial assistance you can get.
How to report income is one of the most frequently asked questions about applying for coverage Weve broken it down to the basics:
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What Do I Do If I Get Another Job This Year
If you get another job this year and get an offer of health insurance as part of your benefits, youll most likely not be eligible for cost savings on your Marketplace health plan. Please keep in mind that these cost savings will be voided even if you dont enroll in this job-based health insurance. You will most likely want to cancel your Marketplace health insurance plan for yourself and anyone else in your household who is now eligible for health insurance through your new employer.
Get a new job that doesnt offer health insurance? Then you can keep your Marketplace plan. But youll need to report the income change so that your cost savings can be adjusted accurately. If you enrolled in Marketplace coverage through HealthSherpa, you can report changes by logging into your account. If you enrolled in Marketplace insurance elsewhere, you can report changes in your income here.
Makes Coverage More Affordable For Many Americans
On March 11, 2021, President Joe Biden signed H.R.1319, the American Rescue Plan Act, into law. This sweeping piece of legislation is designed to provide widespread relief to address the ongoing COVID-19 pandemic. It includes a vast range of provisions.
Among the most widely known are the third round of stimulus checks, enhanced child tax credits, and the extension of additional federal unemployment compensation.
But the legislation also includes several important provisions that make health insurance more affordable for millions of Americans. Lets take a look at how the provisions work and what consumers can expect:
- Subsidy cliff temporarily eliminated for marketplace enrollees
- Enhanced premium tax credits in 2021 and 2022 for people who are already subsidy-eligible
- Full premium tax credits and cost-sharing reductions for people receiving unemployment compensation in 2021
- Six months of COBRA subsidies
- Excess premium subsidies from 2020 do not have to be repaid to the IRS
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Should You Include The Federal Stimulus Payments As Part Of Your Household Income For Covered California
No. While using the Shop and Compare Tool, you dont need to add stimulus payments as part of your household income. The stimulus payments arent included in your taxable gross income and Modified Adjusted Gross Income to determine whether youre eligible for any financial help available through Covered California. The same goes for determining your eligibility for Medi-Cal and CHIP.
On Unemployment What To Include As Income On Your Application
Whether you are applying for the first time or you already are covered through Maryland Health Connection, you may have new types of income to enter, including
- Unemployment Income
- Federal Pandemic Unemployment Compensation $600 unemployment bump
- One-time federal recovery rebate or stimulus payment
Use this chart to help you figure out what to include on your application.
|Type of Income||Include in Current Income?||Include in Projected Annual Income?|
|Unemployment extension up to 39 weeks of benefits||Yes, regular unemployment should be reported in the month it is received.||Yes, make your best guess about your yearly income, including how long you expect to receive unemployment benefits.|
|$600 FPUC bump||No, do not include this amount in your current monthly income.||Yes, add the $600 per week when estimating annual income. Someone who receives unemployment benefits from early April through July 31 will receive about $10,000 from this.|
|One-time recovery payment||No, do not include this amount in current monthly income.||No, do not include this amount in current yearly income.|
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Coverage Options For People Who Lose Their Jobs Or Are Uninsured
If you have insurance through the job you lost: Maintaining your coverage through COBRA is a possibility but you might find a cheaper option through the Affordable Care Acts marketplaces. As always, even though open enrollment is closed, anyone who loses a job with health insurance is automatically eligible for a special enrollment period through the marketplaces. The first thing to do after losing job-based coverage is visit HealthCare.gov to check out options. If you qualify for a premium subsidy or Medicaid, there may be options much cheaper than COBRA.
If you have coverage through the ACA marketplaces: If you lost your job, your income is likely dropping, which means you may qualify for a subsidy, or a larger subsidy if you already receive one. Unemployment benefits and the additional $600 temporary supplement count toward your income, but stimulus payments you receive from the government do not. Go to HealthCare.gov and update your income information.
If you have coverage through Medicaid: Keep your coverage and make sure your enrollment status is up to date, so you dont lose your coverage if you forget to reenroll.
If you are uninsured, you have two options:
What Deductions Do I Report
Washington Healthplanfinder will subtract any allowable deductions you might have.
Allowable deductions include:
- Tuition and fees
- Educational expenses, which are tuition and fees paid for out-of-pocket. Do not include living expenses, activity fees, personal expenses, or tuition paid by scholarships, grants, or other financial aid. You can deduct a yearly maximum of $4000.
- For 2021, the IRS is not allowing Educational expenses as a deduction.
- See IRS.gov for more information.
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New Agi Exclusions For Unemployment Benefits
As a result of the ARPA, up to $10,200 of unemployment benefits are now excluded from income for single taxpayers. For married taxpayers, up to $20,400 of unemployment benefits can be excluded if both received unemployment benefits and filed a joint income tax return.These changes can affect the FAFSA treatment of unemployment benefits on the 2022-23 FAFSA as it’s based on 2020 income. Applicants began filing the 2022-2023 FAFSA on October 1, 2021.Since ARPA was signed into law on March 11, 2021, some taxpayers may have already filed their federal income tax returns beforehand and reported the unemployment benefits as part of their adjusted gross income . The IRS is sending these taxpayers a refund.But taxpayers who filed their returns after this date won’t have the unemployment benefits reported as income on their tax returns. So their returns will report a lower AGI than taxpayers who filed their federal income tax returns before the change.
Subsidies And Lawful Immigrants Ineligble For Medicaid
According to the IRS, Certain aliens with household income below 100% of the federal poverty line are not eligible for Medicaid because of their immigration status. You may qualify for the PTC if your household income is less than 100% of the federal poverty line if you meet all of the following requirements:
- You or an individual in your tax family enrolled in a qualified health plan through a Marketplace.
- The enrolled individual is lawfully present in the United States and is not eligible for Medicaid because of immigration status.
- You otherwise qualify as an applicable taxpayer .
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Government Programs For Children
In order to qualify for Medi-Cal adults must have ahousehold income of less than 138% of the FPL. However, Children qualify forMedi-Cal when their family has a household income of 266% or less. In order toqualify, children must be under 19 years old.
If your household income is > 266% to 322% of theFPL, the County Childrens Health Initiative Program offers health carecoverage.
No Payback Of Excess Marketplace Subsidies
Who benefits: People who earned more money last year than they estimated when they signed up for marketplace coverage.
Under the ACA, people estimate their income for the upcoming year, and the marketplace estimates how much in premium tax credits can be advanced to them every month. At tax time, people reconcile their actual income with their projected income, and if they received too much in tax credits, they generally must pay it back to the government.
The new Covid-19 relief bill eliminates that requirement for 2020. The provision could help people who received unforeseen income last year such as hazard pay or perhaps were laid off and hired back as a contractor at higher pay but without benefits, experts said.
Unfortunately, because of the timing of the new law, income tax forms and tax filing software dont reflect these changes, said Sabrina Corlette, a research professor at Georgetown Universitys Center on Health Insurance Reforms.
A lot of people are going to think they owe money but theyre not going to, she said.
Steps to take now:
When: April through September 2021
Who benefits: People who lost their employer-sponsored coverage and want to stay on that plan.
For people undergoing treatment for a medical condition, it can be important to keep their coverage and existing providers. And switching plans midyear can leave people on the hook for a brand-new deductible.
Steps to take now:
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How Do I Report Income That Changes Month To Month
Washington Healthplanfinder asks you to provide income from the current month. If your income changes from month to month, you can either:
- Enter your actual monthly income, and report the new amount any time your income changes or
- Average your monthly income over a period of time.
Keep Your Income Current
If your income changes by more than $150 a month, update your account. Reporting income changes as soon as possible will help you avoid paying more at tax time. If you receive more tax credits then you are eligible for based on your year-end income, you may have to pay money back when you file your taxes.