Scenarios for October

[timsip]

Throughout many of the threads in this forum, I have noticed that we have brought up a lot of 'what ifs' and thankfully there are many of us that can answer each other's questions. I wanted to create a thread where we can all discuss upcoming cases that we either expect to encounter or have encountered in the past that will have to be dealt with differently with Obamacare.

My first one: I think I have concluded from another discussion, but here is one I have in the pipeline. I have a prospect that works for a small business without health benefits, so is looking for coverage. He is 45 and his wife is 50. Wife is on disability with Medicare, prospect is not. She is not a problem, MAPD. He is subject to the mandate but my question is related to subsidy. Is his subsidy based on household income or individual since he will be enrolling as an individual? In another thread our resident PPACA resource Ann shared that a spouse of an employee that is covered will be subjected to mandate, but the subsidy would be based on household income; is the same true for one spouse on Medicare, one in the individual market?

What other scenarios are you seeing or expecting?

 

[Ann H]

That's a very good question, Tim. YAgents (Bill) asked the same question at a local BCBSAZ meeting where a well-known PPACA expert spoke. Bill asked the question about his VA client whose wife will need insurance. The husband will stay on VA, and if the wife's subsidy is based on household income then she wouldn't qualify, but if it was based on her income alone (since her husband is not applying for a subsidy or applying for Obama health insurance) then her AGI would be less than 400% of FPL. The answer was (unfortunately) that the subsidy income test is based on the MAGI of the family, not just the person applying for coverage.

I can see other ways this would cause a problem. Let's say the Husband has "affordable" coverage at work based on the self-only rule. So, the spouse can go to the exchange to get a subsidy, but she has to include her husband's income again.

I seem to remember that on one of those videos that healthcare.gov produced about a month ago as a draft of their new "streamlined" application, they used an example of a family, and they added in the income of the children too.
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Okay, Tim, here's another one for you, and it is like your example above, with a twist. Let's say the parents don't have affordable coverage, but their 5 kids get on Medicaid. The parents apply for a subsidy. If I understand correctly, they use the FPL for a family size of 7 people even though only 2 are applying for subsidized health insurance.
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And another one... This is an anomaly that I noticed while playing on the subsidy calculator at National Health Care Calculator

This calculator uses premiums that I don't think are high enough, but beside that point, it allows you to play around with family sizes and ages.

If you put in a family of 4 with an income of 85,000, and an age of 25, the family's premium is $673, because it is 9.5% of the family's MAGI. Change the age to 35, or 45, or 55, or even 64, and the family's premium is the same - because it is capped at 9.5% of AGI. Only at ages less than 25 is the family premium less than that (because the actual premium is less than the 9.5% cap). Fast forward to today, where we expect premiums to actually be higher than this calculator assumes. The 9.5% of income cap stays the same, and the family's premium share is still $673. So...... this changes the way we sell health insurance. No longer do we tell subsidized people their premium is lower for a younger age or male gender or preferred health. It's lower if they make less income since the premium is capped at 9.5% of family MAGI. Or it's lower if they take the subsidy money and use it to buy a bronze plan.

 

[getlife]

Great scenarios.

Folks will be quite shocked when the spouse gets no help. Either that or there will be a bunch of divorces. Then the spouse would be able to buy through the exchange based on their own salary. If gay marriages gets upheld and some are marrying for health benefits, they may want to take this snafu into consideration.

 

[Norwayguy]

And to think some many on here gave Pelosi a hard time about needing to pass the law to know what was in it....She really was right as so much of the left interpretation HHS seceratary.

 

[Yagents]

Forecasting 2014 income should be a hoot. Just take agents like ourselves as an example, do we have any idea what our income will be in 2014?

Obamacare Won't Affect Most 2012 Taxes, Despite Firm's Claim : Shots - Health News : NPR

 

[timsip]

...if I am a consumer that owns my own business that is set up as an LLC or S Corp and paid myself on a W-4 instead of just absorbing profits, couldn't I just pay myself less than 200% of FPL somehow and get huge subsidies? This might be more of a tax question, but it certainly is one issue that will come up. I am not the smartest guy alive, so if I have thought of it, certainly others have...except maybe those that built this monstrosity!

 

[Yagents]

Your profits above and beyond your salary still spill down to your 1040 AGI

 

[RayNY]

Because of the "claw-back" amounts, everyone has an incentive to estimate $0 income for 2014. Worse case scenario, they claw back the whole subsidy, that you wouldn't have gotten anyway (they have not mentioned "plus interest" on anything yet, and present value is always more than future value...).

Best case scenario, you're just under 400%FPL, and they claw back 25-30%, leaving you thousands of dollars ahead of the game.

Because they can't "claw-back" more than you were entitled to, you'll never be worse off than if you estimated correctly.

Why do it right when doing it wrong can only help you and can never hurt you?

 

[Yagents]

Because I don't know any average person that will set that money aside to pay back the clawback. Owing the IRS is non forgiveable, accrues inerest, and can not be eliminated in a BK. I'd rather go uninsured and pay the penalty.

 

[Ann H]

Also, it's fraud to knowingly misstate income to the IRS.