Should Most +400% FPL QHP Purchasers Register With The Marketplace?

[AllenChicago]

Since millions of people lose their jobs, or experience other unfortunate circumstances that reduce their income, is it prudent for (almost) everyone who is +400% of the Federal Poverty Level set up a Marketplace account and be issued the Subsidy/APTC Determination letter?

Would this be all that's needed to claim the Advance Premium Tax Credit at tax filing time, if one's income falls below 400% of FPL after purchasing an Off-Exchange Qualified Health Plan?

Some have said (here in the forum) that the QHPlan MUST be purchased at healthcare.gov to qualify for claiming the APTC at a future date. But when you're on healthcare.gov and you click on the "Return to Issuer Website" to purchase a plan, you're not buying your QHP inside the Marketplace.

Therefore it seems to me that what makes you qualified for potentially claiming the Advance Premium Tax Credit on your tax return is the fact that you registered with the Marketplace and clicked through to the point of generating the eligibility letter. Is this a correct assumption?

-Allen

 

[Yagents]

Great question Alan. I'll add one more......is a determination letter even required. Can they buy on .gov , not get determination, and get a tax refund if below 400%????

 

[AllenChicago]

Great question Alan. I'll add one more......is a determination letter even required. Can they buy on .gov , not get determination, and get a tax refund if below 400%????

I suppose we'll have to wait until the tax-year 2014 IRS forms are drafted in April of 2014? The rules on this might even be formulated already. I'll have to dig into the bowls of the govt repositories to see.


What I'd like to avoid is getting this phone call in early 2015 (or sooner).
"Mr. AC, due to the double-dip Obama recession we're in, our business and business income has suffered. My accountant tells me that you were wrong to advise me to purchase our family health plan directly from the insurance company. He says that if we had purchased through healthcare.gov, or at least registered with healthcare.gov, I could be looking at a $7,000 refund instead of owing the government $2,000! My attorney will be in touch..."
ac

 

[Post Quartermaster]

What I'd like to avoid is getting this phone call in early 2015 (or sooner).
"Mr. AC, due to the double-dip Obama recession we're in, our business and business income has suffered. My accountant tells me that you were wrong to advise me to purchase our family health plan directly from the insurance company. He says that if we had purchased through healthcare.gov, or at least registered with healthcare.gov, I could be looking at a $7,000 refund instead of owing the government $2,000! My attorney will be in touch..."
ac

Its an interesting scenario.....

My response below....

"Mr. Client, as a licensed insurance agent, I cannot legally give you tax advice. Why didn't your CPA advise of this during open enrollment, as s/he has an obvious working relationship with you, and a thorough understanding of the tax law? "

Followed by (choose one or more as applicable):

A. "Remember that your current policy was going to expire on 1/1/2014 and hc.gov was not working when we met in Oct/Nov/Dec?

B. "Remember how you said that you did not want to risk putting your personal data on an insecure website? "

C. "Remember how you were burning that picture of Obama when I walked into your office during open enrollment and you said you would never do anything associated with Ocare?"

D. "Remember that we saved you almost 12k per year by cancelling your group plan and putting you and your wife on an individual plan with no pre-ex's?"

E. "Your CPA is wrong and obviously loves Obama, the democrat party, and is probably the president of the local chapter of Communists of America. I am pretty sure I saw him driving a Prius with a rainbow colored hammer and sickle sticker the other day. That damn Prius is so quiet he almost ran me over in the Whole Foods parking lot. I don't think we should trust someone who drives a car that can sneak up on you like a panther. Let's let your attorney know. Maybe we could have your accountant deported.. "

F. "Remember how I mentioned you should ask your accountant about your MAGI estimate for 2014 before we completed your enrollment?(I did tell every self employed client to do this, fwiw) This would have been a perfect opportunity for him to advise you of your tax credit eligibility under PPACA. I feel he misled us both, let's let your attorney know."

 

[Ann H]

Post Quartermaster, that's the funniest post I've read in a long time, but direct to the point also. We can only advise clients, not make decisions for them, and there are more factors going into the decision of using hc.gov or not using it than just the subsidy factor alone.

As to the other question --- It is my understanding that the plan must be a QHP purchased through the exchange. If you use the carrier pathway, are transferred to hc.gov, and then transferred back to the carrier to pick a plan you are still enrolling through the exchange. Carriers have exchange plans and off-exchange plans, and even though they might appear similar, they are separate plans.

The question YAgents posed about whether a determination letter is even required is a question I have posed a couple of times on this forum. I have a sneaking suspicion that you cannot get your subsidy through a tax refund if you have not allowed the exchange to issue a subsidy determination (i.e. you applied through the exchange without doing the financial part).

It would be really nice to just skip the financial disclosure part of the exchange app, pick a plan and enroll, and then at tax filing time have your accountant decide if you financially qualify for a subsidy, paid to you via your tax refund. However, I have seen nothing in reliable documents that say you can do it that way. I have seen documents saying you must apply through the exchange. But the absence of any mention about skipping the financial disclosure, or not getting a subsidy determination, is thundering silence.

In another thread, one poster linked an IRS site that says the exchange will issue a document at year end for you to use when you file your taxes. But that does not say it's okay to skip the financial part of the exchange app and still get a subsidy. Also, NAHU put out a bulletin one time (during the hc.gov crisis) saying they were asking the government to allow people to do this very thing. Why would NAHU be asking the government to allow people to skip the financial part until tax-filing time if that was already an option? Those are the reason why I'm suspecting that you must do the entire hc.gov experience before you qualify for a subsidy, whether you get it as an "advance" or you get it as part of your tax refund.

Now, it might be possible to just go to the exchange late in the game (i.e. at tax filing time in 2015), and retroactively apply for the subsidy. I dunno. That would be nice. That way, you could enroll through the exchange without having to do the financial disclosure part at the time of enrollment. But this is just hope & conjecture on my part, not fact.

And.... for the question that AC posed which started this thread, I don't see why you should concern yourself about enrolling every 400%+ person through the exchange. Clearly, if you (or they) think it's possible they could qualify for a subsidy, then they should take that route. But, in the case of an unexpected loss, a job loss, or other change in income which would make them newly eligible for a subsidy, it opens an SEP. Granted, this won't help for the months that they paid full price, but that should be the client's decision not ours, as we just advise them of the 2 choices of on-exchange or off-exchange, and factors that play into their decision of which to use.

 

[AllenChicago]

Thanks for the input Ann and PQ! Since the final IRS rulings have yet to arrive, the bottom line is to play it safe and give our +400% FPL clients the option of going the full hc.gov route for subsidy determination and plan application, in case their incomes drop below 400% of the Federal Poverty Level.

As for those who have already purchased off-exchange, without ever visiting healthcare.gov, it's does no harm for them to go ahead and register with HC.gov and obtain the "you're not eligible for..." at this time, letter.

Thanks again!
-ac