The 100% Subsidy Cliff

Yagents

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Arizona
I skipped legal ease class in kindergarten. Can someone please interpret the bolded item below. Does this mean that a person who claimed projected 110% FPL income, and actually comes in at 90% FPL, will they have to pay back the subsidies or not? This is for non medicaid expansion states only. The article has links to other references.

The Subsidy Cliff: Incentives For Increasing Projected Income To Qualify For Exchange Subsidies – Health Affairs Blog

During the first round of open enrollment under the ACA, millions of Americans learned whether they qualify for subsidized health insurance coverage through the law’s exchanges. At that time, one significant feature of the law became especially apparent: the dramatic cutoff of premium assistance for individuals who do not qualify for Medicaid in their state, but also earn too little to qualify for subsidies through the exchanges.

For example, if, during enrollment, a sixty year-old Miami man projected that he would earn $11,500 in 2014, he could purchase a bronze plan using a full subsidy so there would be no cost to him in premiums. But if the same man projected earning just $500 less, $11,000, he would no longer qualify for any subsidy at all and the same coverage would require him to pay the full $6,573 premium.

Here is how the coverage gap works: Under the ACA, people earning below the key threshold of 100 percent of the federal poverty level (FPL) do not qualify for any premium subsidies through the exchanges; the law was written to provide them with Medicaid coverage instead. In reality, however, Florida and 23 other states chose not to expand Medicaid under the ACA, creating a gap into which roughly five million people with annual incomes less than 100 percent FPL ($11,490 for an individual or $23,550 for a family of four) will likely fall.

Discussions of the coverage gap typically overlook the strong incentives that these uninsured individuals may have to modify their incomes in order to qualify for subsidies. Such behavior is a particularly important possibility because the US treasury will not force exchange enrollees to pay back subsidies if their projected income at enrollment exceeds the Federal poverty level but their year-end taxable income falls below it.
 
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I skipped legal ease class in kindergarten. Can someone please interpret the bolded item below. Does this mean that a person who claimed projected 110% FPL income, and actually comes in at 90% FPL, will they have to pay back the subsidies or not? This is for non medicaid expansion states only.

The Subsidy Cliff: Incentives For Increasing Projected Income To Qualify For Exchange Subsidies – Health Affairs Blog

During the first round of open enrollment under the ACA, millions of Americans learned whether they qualify for subsidized health insurance coverage through the law’s exchanges. At that time, one significant feature of the law became especially apparent: the dramatic cutoff of premium assistance for individuals who do not qualify for Medicaid in their state, but also earn too little to qualify for subsidies through the exchanges.

For example, if, during enrollment, a sixty year-old Miami man projected that he would earn $11,500 in 2014, he could purchase a bronze plan using a full subsidy so there would be no cost to him in premiums. But if the same man projected earning just $500 less, $11,000, he would no longer qualify for any subsidy at all and the same coverage would require him to pay the full $6,573 premium.

Here is how the coverage gap works: Under the ACA, people earning below the key threshold of 100 percent of the federal poverty level (FPL) do not qualify for any premium subsidies through the exchanges; the law was written to provide them with Medicaid coverage instead. In reality, however, Florida and 23 other states chose not to expand Medicaid under the ACA, creating a gap into which roughly five million people with annual incomes less than 100 percent FPL ($11,490 for an individual or $23,550 for a family of four) will likely fall.

Discussions of the coverage gap typically overlook the strong incentives that these uninsured individuals may have to modify their incomes in order to qualify for subsidies. Such behavior is a particularly important possibility because the US treasury will not force exchange enrollees to pay back subsidies if their projected income at enrollment exceeds the Federal poverty level but their year-end taxable income falls below it.

Your interpretation is correct. What I do not know is if in fact no one will be required to pay back the subsidy. My gut tells me that the govt will not come after these people because their goal is not to save dollars, but to get people covered.
 
Lee, I don't have an interpretation, that's what I'm looking for from posters. The bolded sentence is conflicting in how it is written.
 
Lee, I don't have an interpretation, that's what I'm looking for from posters. The bolded sentence is conflicting in how it is written.

Sorry, it appears as though you did in the first paragraph, but I read it again.

In this example this Miami resident enrolled assuming an income of $11,500, which made him eligible for the subsidy of $6,573. For whatever reason(s) the actual income was $11,000 per year, which would have made him not eligible for any subsidy. Now he is in a situation where he received a subsidy of $6,573 which he should have never received.

Technically, the subsidy should be paid back, but treas has already announced that they will not go after these overpayments. For people that understand this, it is a strong incentive for them game the system by reporting an income that maximizes their subsidy because there is a very strong possibility that the treasury will not come after them for the overpayment.
 
The way I read that sentence is that the people would NOT have a clawback. However, I don't know where the author got that information. The last I heard, there was a clawback, although it is limited at the lower income levels.
 
This is a good question and one I've had myself. I've been told to think it most likely would not happen. But, it still is a possibility in my mind. I'm inclined, however, to think it's just one of those things that will be "overlooked". Similar to how United Health used to overlook business checks paying for individual coverage. And similar to the extension of signing up in the marketplace and not really having a way to check (and not bothering to check) if the person actually started the process or not before Apr1. (a requirement to sign up between April 1-15).

I was also under the impression that people who qualified for a subsidy had to go on a Silver plan. Not sure, but geez, all the rules and regs. I put everyone on a Silver anyway just to be safe. And, well, they are better than a bronze anyway...even if slightly.

I am trying to avoid any of the ACA enrollment, doing it only when referrals or clients need help. Although, in most cases I gave them a CI supp.

This is not much help, but my two cents. I had the question a few times, bc of a dozen or so hairstylists in a very rural area, really have no idea what they are going to make, also so many flub on their taxes to begin with...ugh

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I'm sure by April of next year, we will know that definitive answer. lol...being a lil sarcastic here
 
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https://www.fas.org/sgp/crs/misc/R41137.pdf
Check out Table 5 (Reconciliation of Premium Credits) on page 16 of the pdf however, it's page 13 on the report itself. I think this is what you are talking about.

I spoke with a carrier rep and he was familiar with it. He said he thought some agents may use it as an angle to sign up more people who would not receive a subsidy in the first place. His comment was that it is not right to do, but he felt some would use it as a way to enroll those who did not make enough income.

I think it would led to some issues down the road when someone does not get the refund they thought they should have. No need to bring more trouble down on yourself. I stayed away from mentioning the reduced claw back.
 
Just another thing real quick. I also made very clear to those who signed up what would be needed on their modified gross adjust income to continue getting that subsidy.

By doing that I put the responsibility on them to perhaps be careful when figuring tax deductions and such. I did this because it could come down to just that, a few deductions here or there that would disqualify them.

Just an fyi.
 
Even if the subsidy clawback was enforced, wouldn't the limit for him, a person earning under 200% FPL, be $600 rather than the full premium as stated in the article?
 
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