Question from a Client & I'd Like Some Feedback

[cadylou]

I had a client ask me today if she is entitled to a $542/mo subsidy, can she buy a less expensive plan (like a bronze one we saw with a sticker price of $389 pre-subsidy), will she get the difference back as a tax refund? I told her "no" - that this was designed as a way to purchase insurance and not to establish a free stream of income from the government.

Has anyone encountered this? People are seeing this as a potential way to make money from the government by not utilizing the whole subsidy and saying they should have the $$ back?

 

[Duaine]

Premium Tax Credits

Insurance premiums are monthly, quarterly or yearly payments to insurance companies for providing insurance. Premium tax credits will help people reduce the amount of money they pay for insurance premiums. To qualify, a person must earn between 100% and 400% of the federal poverty level and buy coverage through a health insurance marketplace, also called an exchange. In 2013, that would mean an income between $11,490 and $45,960 for individuals or between $23,550 and $94,200 for a family of four.

People won't have to wait until they file their taxes to receive a tax credit. The tax credits go straight to the insurance company to lower the premiums by the amount of the tax credit.


You can apply for a tax credit when you enroll through an insurance marketplace. You will need to supply income and employment information to see if you qualify. The marketplace will estimate your tax credit based on the information you provide. The exact amount of your tax credit will depend on your federal income tax return for the year. If your estimate was less than your actual credit, you will receive the balance as a refund. However, if your estimate exceeded your actual credit, you must repay the amount as tax due.

https://www.healthcare.gov/glossary/advanced-premium-tax-credit/

 

[G.Gordon]

In a word, NO, she will not get the money. If she is getting that much, guide her to a silver plan where she most likely gets help paying for the deductible and copays as well.

People come out of the wood work for the free crap.

 

[AllenChicago]

In a word, NO, she will not get the money. If she is getting that much, guide her to a silver plan where she most likely gets help paying for the deductible and copays as well.

People come out of the wood work for the free crap.

What if she chose not to use any of the $$$ as an APTC paid to the insurance carrier. Would she then be able to receive $542 x #months of coverage when she files her 2014 return?
ac

 

[cadylou]

Well AllenChicago, that was her question - could she choose a cheaper plan & receive the excess as a refund. I told her that the objective here was not to EARN income from this - that the tax credit is to pay for insurance premiums only. If she chooses a less expensive plan - then so be it - she will not receive the excess. But - I guess people are thinking they can actually MAKE money off of this (which pisses me off . . . .). The whole objective was to help people get help paying for insurance. If you followed her line of thinking, then I guess you could take the tax credit & what? not buy insurance & get a refund??? even if you paid the penalty - she'd be ahead by around $400/mo. Doesn't seem to make sense but I can find no written verbiage addressing it specifically. . . .

 

[AllenChicago]

Here's a starting point...

•Premium Tax Credit: If you get insurance through the Marketplace, you may be eligible to claim the premium tax credit. You can elect to have advance payments of the tax credit sent directly to your insurer during 2014, or wait to claim the credit when you file your tax return in 2015. If you choose to have advance payments sent to your insurer, you will have to reconcile the payments on your 2014 tax return, which will be filed in 2015. If you're already receiving advance payments of the credit, you need do nothing at this time unless you have a change in circumstance.

Ref: Affordable Care Act Tax Provisions for Individuals and Families


What's needed is more/better IRS guidance. The above wording states that you can only receive an APTC (Subsidy), or claim the Subsidy later, if you Pick A Plan AT THE MARKETPLACE. But clearly, insurers are/will be receiving APTCredits from Uncle Sam on behalf of insureds, even though the insureds purchased their plans at the CARRIER'S website.

If people ask me questions regarding subjects where there is no clear guidance, I just tell them that no firm decision has been made yet by the government...or something to that effect.
ac

 

[taterpeeler]

Had a guy call me stating his baby's mamma was due 20 more dollars and wanted to know when I was sending the check.... She bought a plan for 380 and subsidy was400 .....heathen proceeded to inform me he would come to my office to collect it... After I informed him to bring it and I was armed so be ready.. He never showed up by the 357 was and still is in my top drawer... We rednecks do t play.... Keep that In mind next time

 

[Ann H]

The Advance Premium Tax Credit is used to offset premium. Whether you get it as an advance or at tax time is irrelevant. It's a PREMIUM Tax Credit used to offset premium, "not a free stream of income from the government", as Cadylou so succinctly wrote. Did you notice that you cannot use the excess for smoker surcharge? Or for a stand-alone dental plan? Why? Because the excess available subsidy that is not used for qualifying premium is not refundable to you in any form.

 

[AllenChicago]

As I've said many times on this forum..I'm dying to see the 2014 IRS Form 1040 and associated ACA-related worksheets. If they don't word all this APTC and Penalty instructions at a 7th grader level, who knows what crazy claims and answers people will put on their returns... Some out of malice and some out of ignorance, but there will be BILLIONS of dollars siphoned incorrectly that will never get detected, much less recaptured. Just like Medicaid.

If HHS has any say-so, the IRS-1040 will say:

1. Enter the amount of Subsidy $$$ that you qualified for from the form the Marketplace sent you._________

2. If you did not have that money sent to your insurer, check this box ____ and we'll add this amount to your refund.

Senator Harry Reid says that the American people don't understand how to use the internet, and are therefore not too bright overall. Perhaps 7th grade is setting the bar too high?

 

[Ann H]

As I've said many times on this forum..I'm dying to see the 2014 IRS Form 1040 and associated ACA-related worksheets. If they don't word all this APTC and Penalty instructions at a 7th grader level, who knows what crazy claims and answers people will put on their returns... Some out of malice and some out of ignorance, but there will be BILLIONS of dollars siphoned incorrectly that will never get detected, much less recaptured. Just like Medicaid.

If HHS has any say-so, the IRS-1040 will say:

1. Enter the amount of Subsidy $$$ that you qualified for from the form the Marketplace sent you._________

2. If you did not have that money sent to your insurer, check this box ____ and we'll add this amount to your refund.

Senator Harry Reid says that the American people don't understand how to use the internet, and are therefore not too bright overall. Perhaps 7th grade is setting the bar too high?

So far they've indicated that there will be a reporting form from the marketplace (similar to a W2 or 1099) that reports the amount of the premium, the amount of the subsidy advanced so far, etc. You use this at tax-filing time to report the correct amounts on your tax return. So, clearly, the premium will be stated, and trust me, aint no way the IRS is going to allow people to get more subsidy than the cost of their premium.