What counts as "income" for PPACA subsidies?

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Re: What counts as "income" for PPACA subsidies?

Postby jeffyscott » Mon May 27, 2013 10:28 am

Well, that's not so bad, at least it's still a maximum of 9.5% of income, plus Medicare premiums. I was more worried that the qualifying income would be based on a family of 1 or something and there would be no subsidy and, thus, no way to know what the insurance cost might be for those years.
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Re: What counts as "income" for PPACA subsidies?

Postby gerrym51 » Mon May 27, 2013 10:39 am

since i have to tell you i'm in the same situation myself as wife is on medicare. medicare part b is 105.oo dollars a month. a good medicare advantage plan is 150 a month.

so total of about 250 just medicare premiums.
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Re: What counts as "income" for PPACA subsidies?

Postby FrugalInvestor » Mon May 27, 2013 10:44 am

gerrym51 wrote:
jeffyscott wrote:
magellan wrote:The 400% FPL cutoff is around $62k for a family of 2 (much higher in Alaska and Hawaii). Meanwhile, there's a marginal tax rate shift from 15% to 25% for couples at an AGI of around $73k.


The 25% rate is at taxable income of around $73K, not gross income. With standard deduction and personal exemptions that is about $93K gross.

BTW, does anyone know how this works when one member of the family of 2 is over 65 and the other is not?



unfortunetly the subsidy is based on total family income. the amount you pay for 1 or 2 is the same-but you will also be paying separate medicare premiums-


I don't understand your comment. Are you saying that the amount you will pay for medical insurance coverage for one (individual) or two (family) will be the same under the ACA?
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Re: What counts as "income" for PPACA subsidies?

Postby gerrym51 » Mon May 27, 2013 10:58 am

FrugalInvestor wrote:
gerrym51 wrote:
jeffyscott wrote:
magellan wrote:The 400% FPL cutoff is around $62k for a family of 2 (much higher in Alaska and Hawaii). Meanwhile, there's a marginal tax rate shift from 15% to 25% for couples at an AGI of around $73k.


The 25% rate is at taxable income of around $73K, not gross income. With standard deduction and personal exemptions that is about $93K gross.

BTW, does anyone know how this works when one member of the family of 2 is over 65 and the other is not?



unfortunetly the subsidy is based on total family income. the amount you pay for 1 or 2 is the same-but you will also be paying separate medicare premiums-


I don't understand your comment. Are you saying that the amount you will pay for medical insurance coverage for one (individual) or two (family) will be the same under the ACA?


yes-if you use any of the calculators available that will tell you. it always assumes 2 people will be getting the insurance if 2 are in the family. as far as i have been able to ascertain on several different websites and forums( to the chagrin of many of us) thats the situation
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Re: What counts as "income" for PPACA subsidies?

Postby jeffyscott » Mon May 27, 2013 11:02 am

If you are eligable for a subsidy, the subsidy is based on limiting your cost to a percentage of income. So if your family of two has an income of $60,000, your share of the cost is limited to 9.5% or $5700. That would appear to be your cost whether covering one person or two, assuming the insurance premiums exceed that amount.
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Re: What counts as "income" for PPACA subsidies?

Postby jeffyscott » Mon May 27, 2013 11:18 am

Playing with this calculator: http://kff.org/interactive/subsidy-calculator/

The out of pocket limit also varies with income, tops out at $12,500 for two but $6400 for one at 400% of poverty. I don't know which limit would apply for a family of two where only one gets coverage from the exchange?
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Re: What counts as "income" for PPACA subsidies?

Postby gerrym51 » Mon May 27, 2013 11:26 am

i'm trying to explain this but not doing a good job.

lets say your 62 and the wife is 60. the goverment says based on your family income you should pay 400 a month and they will subsidize the rest. sound good to me.

so any ways each year you pay 400 a month and the feds pay rest on plan that is worth somewhere about 12 thousand in value-just a guess.

then 3 years from now suddenly your 65. PPACA says you must get medicare if eligible for it(99.9 percent are).

so now your on medicare. the feds say your family is still 400 a month but now your wife is only getting a plan valued at about 7000 single-your family still has to pay 400 a month for it. worse you now have to pay medicare premiums. add medicare b and a good Medicare advantage plan and your now paying 250 in medicare premiums besides the 400 dollars. :moneybag
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Re: What counts as "income" for PPACA subsidies?

Postby zed » Mon May 27, 2013 11:49 am

gerrym51 wrote:i'm trying to explain this but not doing a good job.

lets say your 62 and the wife is 60. the goverment says based on your family income you should pay 400 a month and they will subsidize the rest. sound good to me.

so any ways each year you pay 400 a month and the feds pay rest on plan that is worth somewhere about 12 thousand in value-just a guess.

then 3 years from now suddenly your 65. PPACA says you must get medicare if eligible for it(99.9 percent are).

so now your on medicare. the feds say your family is still 400 a month but now your wife is only getting a plan valued at about 7000 single-your family still has to pay 400 a month for it. worse you now have to pay medicare premiums. add medicare b and a good Medicare advantage plan and your now paying 250 in medicare premiums besides the 400 dollars. :moneybag


We will be in a similar situation with me under 65 and spouse over 65. From what I have discerned I believe your example is correct.

PS
Does that suggest that ACA is "gaming" the -65/+65 crowd? ;)

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Re: What counts as "income" for PPACA subsidies?

Postby Jack » Mon May 27, 2013 1:16 pm

gerrym51 wrote:so now your on medicare. the feds say your family is still 400 a month but now your wife is only getting a plan valued at about 7000 single-your family still has to pay 400 a month for it. worse you now have to pay medicare premiums. add medicare b and a good Medicare advantage plan and your now paying 250 in medicare premiums besides the 400 dollars. :moneybag

You will be getting a social security check to pay your medicare premiums.
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Re: What counts as "income" for PPACA subsidies?

Postby gerrym51 » Mon May 27, 2013 2:45 pm

Jack wrote:
gerrym51 wrote:so now your on medicare. the feds say your family is still 400 a month but now your wife is only getting a plan valued at about 7000 single-your family still has to pay 400 a month for it. worse you now have to pay medicare premiums. add medicare b and a good Medicare advantage plan and your now paying 250 in medicare premiums besides the 400 dollars. :moneybag

You will be getting a social security check to pay your medicare premiums.



you can get medicare without taking social security :mrgreen:
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Re: What counts as "income" for PPACA subsidies?

Postby FrugalInvestor » Mon May 27, 2013 2:54 pm

gerrym51 wrote:
Jack wrote:
gerrym51 wrote:so now your on medicare. the feds say your family is still 400 a month but now your wife is only getting a plan valued at about 7000 single-your family still has to pay 400 a month for it. worse you now have to pay medicare premiums. add medicare b and a good Medicare advantage plan and your now paying 250 in medicare premiums besides the 400 dollars. :moneybag

You will be getting a social security check to pay your medicare premiums.



you can get medicare without taking social security :mrgreen:


http://www.ssa.gov/retire2/justmedicare.htm
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Re: What counts as "income" for PPACA subsidies?

Postby linguini » Mon May 27, 2013 3:28 pm

zed wrote:We will be in a similar situation with me under 65 and spouse over 65. From what I have discerned I believe your example is correct.

PS
Does that suggest that ACA is "gaming" the -65/+65 crowd? ;)

zed


I know you're being tongue and cheek, but for informational purpose, there are edge cases for younger households as well. For example, there's a similar edge case involving employees who have individual insurance that the ACA defines as affordable through their jobs but use the exchange for their families. I suspect we'll see more edge cases pop up as implementation becomes reality.
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Re: What counts as "income" for PPACA subsidies?

Postby overanalyzer » Fri Jun 07, 2013 12:34 am

How about this for an edge case: I'm 63 and retiring in a month. I have good employer coverage for self, wife (62), and kid in college. Continuing this coverage will cost about $15K/year, which I have figured into retirement planning. However, I just discovered that I can save $5K by continuing coverage just for myself and buying high deductible coverage on the open market for spouse and kid for about $3K. Considering our health profiles, this seems reasonable, and I'd like to take the risk and get the savings. But how would our status be viewed in January 2014? Of our 2 adult family, I would have employer coverage, but my spouse would no longer be eligible to join that plan (offer of continued coverage expires 60 days after retirement). If I knew that the high deductible policy would continue, that would be fine, but no one seems to know what policies will be offered in 2014 and whether the policy available now will be guaranteed, or what the premium is likely to be. According to the KFF calculator, coverage (silver) for spouse and kid would be about $10K which would wipe out the $5K savings. It is unclear to me if the PPACA subsidy would apply since one of us has employer plan coverage, the other not.
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Re: What counts as "income" for PPACA subsidies?

Postby acaforall » Sat Jun 22, 2013 11:19 am

I'm also an early retiree who buys his own (very expensive) health insurance. My only taxable income is from CD interest, so it's currently quite low. To avoid being "eligible" only for Medicaid, I'm planning on bumping my taxable income up to roughly $17000 this year, by doing a Roth conversion. It appears that I can then buy private insurance on the Exchange, get a very substantial subsidy (e.g., close to 95% of the premiums) -- and lower my out-of-pocket from a $5000 deductible to about $2000. It could result in a total savings of over $10000 in my case. Sounds to good to be true! I'll be paying a little more in income taxes, but it appears to be worth it, assuming that the insurance plans offered are sound. Anyone else considering this strategy?
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Re: What counts as "income" for PPACA subsidies?

Postby truenorth418 » Sat Jun 22, 2013 6:03 pm

"Anyone else considering this strategy?"

Yes I think a lot of people who can control their income, such as early retirees or professional investors, who are on the edge of the "cliff" will manage their income in order to come in under the limit and benefit from the subsidies.
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Re: What counts as "income" for PPACA subsidies?

Postby snowman » Sat Jun 22, 2013 7:21 pm

"Anyone else considering this strategy?"

When the discussion about the law was going on, some politicians were citing just the scenario you are describing as the reason the bill should not be approved. Ultimately it went through, and as it stands now, your assets are not considered under PPACA. There is nothing illegal about it - your assumptions are correct, and you will save significant amount of money.

However, in the big picture, there aren't that many people like yourself (already retired, below 65, without former employer's health benefits). The bigger worry was that working people will quit their jobs, retire early, and take healthcare subsidies by playing with MAGI. The counterargument I heard most was that the impact would be limited because: 1., that job would ultimately be taken by a younger, unemployed worker - a positive for the economy; and 2., people work for many different reasons, and very few would quit their job altogether just to save on healthcare premiums. So the answer to your question is yes - it is expected that there will be other people doing exactly what you are planning to do.
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Re: What counts as "income" for PPACA subsidies?

Postby Flobes » Sat Jun 22, 2013 8:01 pm

Re the OP
My question is: what counts as "income" for calculating eligibility for these subsidies?


My state now has a special department in charge of the health care exchange as well as educating us about how it will work. Here's the answer I received to my question of how MAGI will be computed to determine subsidies:

Dear ,
Here is some additional information on how to calculate Modified Adjusted Gross Income (MAGI) which is what will be used to calculate premium tax credits:

Based on the 1040 tax form
• Income—add lines 7-22
o Wages, salaries, tips, alimony received, capital gains, pensions, rental real estate, farm income, social security benefits, unemployment benefits. . .

• Adjusted gross income—subtract deductions in lines 23-36
o Tuition and fees, student loan interest, self employment deductions, health savings account deductions, moving expenses, alimony paid. . .

• Modified adjusted gross income—add back in:
o Any foreign earned income excluded from taxes
o Tax-exempt interest
o Tax-exempt social security income

Hope this helps.

[a real person]
Health Plan Coordinator


Edit: I too am an early retiree who pays for individual HSA-eligible health insurance. I can easily control the amount of my income by increasing or decreasing or eliminating Roth conversions. So I've been monitoring the process, with a goal of threading the needle to garner some subsidy without being forced onto Medicaid. Health care insurance is my largest expense.
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Re: What counts as "income" for PPACA subsidies?

Postby FrugalInvestor » Sat Jun 22, 2013 11:15 pm

I have read that the income used to qualify for subsidy will be based on your 2012 tax return. But I've also seen somewhere that there will be an option to delay your subsidy and base it off your 2013 return. Has anyone seen anything definitive on this?
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Re: What counts as "income" for PPACA subsidies?

Postby gerrym51 » Sat Jun 22, 2013 11:19 pm

FrugalInvestor wrote:I have read that the income used to qualify for subsidy will be based on your 2012 tax return. But I've also seen somewhere that there will be an option to delay your subsidy and base it off your 2013 return. Has anyone seen anything definitive on this?



this is not true. the basis for your subsidy is what you tell them your earnings will be in 2014. that is what they use. HOWEVER if it is greatly different from prior tax years they have on file-which would be 2012-they will question you for more info. :mrgreen:
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Re: What counts as "income" for PPACA subsidies?

Postby FrugalInvestor » Sat Jun 22, 2013 11:59 pm

gerrym51 wrote:
FrugalInvestor wrote:I have read that the income used to qualify for subsidy will be based on your 2012 tax return. But I've also seen somewhere that there will be an option to delay your subsidy and base it off your 2013 return. Has anyone seen anything definitive on this?



this is not true. the basis for your subsidy is what you tell them your earnings will be in 2014. that is what they use. HOWEVER if it is greatly different from prior tax years they have on file-which would be 2012-they will question you for more info. :mrgreen:


Thanks. I've also read that if you under-report your expected income and receive a subsidy larger than you may be due that you will be required to repay a portion of the difference, but perhaps not the entire difference. Any insights?
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Re: What counts as "income" for PPACA subsidies?

Postby gerrym51 » Sun Jun 23, 2013 9:12 am

FrugalInvestor wrote:
gerrym51 wrote:
FrugalInvestor wrote:I have read that the income used to qualify for subsidy will be based on your 2012 tax return. But I've also seen somewhere that there will be an option to delay your subsidy and base it off your 2013 return. Has anyone seen anything definitive on this?



this is not true. the basis for your subsidy is what you tell them your earnings will be in 2014. that is what they use. HOWEVER if it is greatly different from prior tax years they have on file-which would be 2012-they will question you for more info. :mrgreen:


Thanks. I've also read that if you under-report your expected income and receive a subsidy larger than you may be due that you will be required to repay a portion of the difference, but perhaps not the entire difference. Any insights?


there are limits based on numbers in family and total bill but i don't remember where i read it.
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Re: What counts as "income" for PPACA subsidies?

Postby acaforall » Sun Jun 23, 2013 5:20 pm

When you enroll (as early as this October 1, if things go as planned) you'll be told how much your subsidy/tax credit will be, based upon the income you estimate for 2014. I imagine that most people will opt to have the subsidy sent directed to the Marketplace insurance company they chose, thus reducing their monthly premiums immediately come January 2014. When you file your 2014 taxes in 2015 and report your actual MAGI, and your adjusted subsidy is determined, it appears that you'll simply pay the difference or qualify for a refund, depending upon whether you over- or under- estimated your income. But it shouldn't be burdensome unless your estimate was wildly off.

If that is a concern, you have the option of waiting and receiving the total subsidy as a refund (or at least as a credit) in 2015. But you'll have to pay the full, unsubsidized premium to the insurance company each month before then. For me, that's predicted to be about $650 a month versus $50 a month. I could do that -- I do it now, after all -- but I don't see any advantage. I've never been a fan of big refunds, after all -- I'd rather simply owe less up front.

One potential problem I do see is letting my TAXABLE income inadvertently fall below the Federal Poverty Level -- tax-wise, a nice problem to have... until now. My state has not and may not expand its definition of Medicaid at all. So I'm playing it safe and targeting 134%-150% of the FPL, with my eye on the lower end. That seems to be the level at which, whatever state you live in, you'll qualify for a generous tax credit. I'm still unclear about what happens if you're in the 100 to 133% of FPL zone. Again, it may depend upon what state you live in.
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Re: What counts as "income" for PPACA subsidies?

Postby jeffyscott » Sun Jun 23, 2013 5:48 pm

acaforall wrote:I'm still unclear about what happens if you're in the 100 to 133% of FPL zone. Again, it may depend upon what state you live in.


Yes it does. States have the option of expanding Medicaid to cover that group, if they do the Feds pay for 100% of the cost for the next 2 or 3 years and then, after that, 90% or something like that.

But even below 100% of poverty, isn't the expansion of Medicaid to cover all who are in that group optional?
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Re: What counts as "income" for PPACA subsidies?

Postby gerrym51 » Sun Jun 23, 2013 6:02 pm

jeffyscott wrote:
acaforall wrote:I'm still unclear about what happens if you're in the 100 to 133% of FPL zone. Again, it may depend upon what state you live in.


Yes it does. States have the option of expanding Medicaid to cover that group, if they do the Feds pay for 100% of the cost for the next 2 or 3 years and then, after that, 90% or something like that.

But even below 100% of poverty, isn't the expansion of Medicaid to cover all who are in that group optional?



it's not optional. if your income qualifies for medicaid thats it under the PPACA.
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Re: What counts as "income" for PPACA subsidies?

Postby jeffyscott » Sun Jun 23, 2013 6:30 pm

gerrym51 wrote:it's not optional. if your income qualifies for medicaid thats it under the PPACA.


I guess I was not clear, it is not your option, it is the state's option.

In my state Medicaid will cover people up to 100% of poverty, above that will be the exchanges. Other states are reportedly not expanding Medicaid at all. Other states will use the full Medicaid expansion, covering people up to 133% of poverty.
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Re: What counts as "income" for PPACA subsidies?

Postby Jack » Sun Jun 23, 2013 7:56 pm

Medicaid is a joint state and federal program. Currently, the federal government provides most of the funds, but each state decides how to spend it. Each state decides how many or how few people are covered and also the amount of benefits for each person. There is currently a wide variation in the level of Medicaid coverage among different states.

The ACA attempted to expand and standardize Medicaid coverage in all the states. The requirement is to expand Medicaid to everyone up to 133% of the federal poverty level. It also raises the payment level for physicians to the same level as Medicare. The feds pay 100% of the cost of this expansion for the first three years which gradually tapers to 90% in 2020 and thereafter.

However, the U.S. Supreme Court ruled 7-2 that the ACA cannot mandate that each state implement the ACA Medicaid expansion. Each state has the choice of either refusing the extra funding for expansion or else accepting the extra funding and adopting the new Medicaid standards.

So far 26 states have agreed to do the Medicaid expansion program, 13 states have announced refusal and 11 are still undecided. So future Medicaid will depend on which state you live in.
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Re: What counts as "income" for PPACA subsidies?

Postby Saving$ » Sun Jun 23, 2013 8:09 pm

gerrym51 wrote:..now suddenly your 65. PPACA says you must get medicare if eligible for it(99.9 percent are).

so now your on medicare.


I'm trying to understand this. What if you are, for example, now 67. You continued working when you turned 65, registered for Medicare Part A, but no other parts because you have an employer plan that would continue to cover you even after 65. What if you planned to work until 72, and planned to stay on the employer plan. Will PPACA require that you drop the employer plan and go on Medicare Part B and supplemental/advantage plan?

I know some people over 65 who are still working cannot currently be covered by their employer plan because some smaller employer policies don't allow that. But large employers do, currently. Will PPACA change that?
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Re: What counts as "income" for PPACA subsidies?

Postby gerrym51 » Sun Jun 23, 2013 8:59 pm

Saving$ wrote:
gerrym51 wrote:..now suddenly your 65. PPACA says you must get medicare if eligible for it(99.9 percent are).

so now your on medicare.


I'm trying to understand this. What if you are, for example, now 67. You continued working when you turned 65, registered for Medicare Part A, but no other parts because you have an employer plan that would continue to cover you even after 65. What if you planned to work until 72, and planned to stay on the employer plan. Will PPACA require that you drop the employer plan and go on Medicare Part B and supplemental/advantage plan?

I know some people over 65 who are still working cannot currently be covered by their employer plan because some smaller employer policies don't allow that. But large employers do, currently. Will PPACA change that?


you cannot buy a ppaca policy once you turn 65 and are eligible for medicare. if you are on an employers plan thats private insurance-has nothing to do with buying plan on an exchange.
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Re: What counts as "income" for PPACA subsidies?

Postby acaforall » Mon Jun 24, 2013 8:07 am

Yes, the Act is quite clear when it comes to those over 65 and eligible for Medicare. They are not eligible to enroll in the Exchange/Marketplace/PPACA plans. Ironically, perhaps, this may mean that you'll need to budget for HIGHER monthly premiums once you leave the Exchange, at least if you have enjoyed a substantially subsidized plan. When you turn 65 you'll instead be paying for Medicare Part B, and to be prudent, a supplemental policy, and Part D.

I'm not saying that that is "right or wrong," just that if you are like me and want to try to forecast your income and expenses as best you can, to plan your investments accordingly and not outlive your money, it's something to stay aware of as the PPACA, and Medicare, evolve. As others on this thread have noted, health insurance is often a huge expense for some of us, greater than any other line item in our budget. So I appreciate all the thoughtful insights and links to info provided here on this topic.

One last point about Medicaid. Yes, it will now become available to some new folks (e.g., childless adults with no disabilities) in some states that have expanded the definition accordingly. And you may be able to meet the income requirement despite having substantial non-taxable income and assets. Again, this is not the forum to discuss the policy implications of that. It just wouldn't be appropriate for me, for many reasons. From a personal financial perspective it might look tempting, but if the delivery system isn't changed from what it is today (I'm a retired provider, so I know)... it just wouldn't be feasible, regardless of the cost.
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Re: What counts as "income" for PPACA subsidies?

Postby Saving$ » Mon Jun 24, 2013 7:15 pm

gerrym51 wrote:
Saving$ wrote:
gerrym51 wrote:..now suddenly your 65. PPACA says you must get medicare if eligible for it(99.9 percent are).

so now your on medicare.


I'm trying to understand this. What if you are, for example, now 67. You continued working when you turned 65, registered for Medicare Part A, but no other parts because you have an employer plan that would continue to cover you even after 65. What if you planned to work until 72, and planned to stay on the employer plan. Will PPACA require that you drop the employer plan and go on Medicare Part B and supplemental/advantage plan?

I know some people over 65 who are still working cannot currently be covered by their employer plan because some smaller employer policies don't allow that. But large employers do, currently. Will PPACA change that?


you cannot buy a ppaca policy once you turn 65 and are eligible for medicare. if you are on an employers plan thats private insurance-has nothing to do with buying plan on an exchange.


I did not word my question clearly enough.
However, gerry wrote: "PPACA says you must get medicare if eligible for it(99.9 percent are)."
Does PPACA really say this? I do understand that if 65 and eligible for Medicare you can no longer buy a ppaca policy/plan on the exchange. But that is very different from ppaca requiring you must get your coverage through medicare if medicare eligible. ie - does PPACA state that at 65 and eligible for Medicare you can no longer participate in an employer private insurance plan and must get on Medicare?
I'm not trying to be difficult - I'm really just trying to understand. Appreciate any clarifications.
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Re: What counts as "income" for PPACA subsidies?

Postby gerrym51 » Mon Jun 24, 2013 7:18 pm

Saving$ wrote:
gerrym51 wrote:
Saving$ wrote:
gerrym51 wrote:..now suddenly your 65. PPACA says you must get medicare if eligible for it(99.9 percent are).

so now your on medicare.


I'm trying to understand this. What if you are, for example, now 67. You continued working when you turned 65, registered for Medicare Part A, but no other parts because you have an employer plan that would continue to cover you even after 65. What if you planned to work until 72, and planned to stay on the employer plan. Will PPACA require that you drop the employer plan and go on Medicare Part B and supplemental/advantage plan?

I know some people over 65 who are still working cannot currently be covered by their employer plan because some smaller employer policies don't allow that. But large employers do, currently. Will PPACA change that?


you cannot buy a ppaca policy once you turn 65 and are eligible for medicare. if you are on an employers plan thats private insurance-has nothing to do with buying plan on an exchange.


I did not word my question clearly enough.
However, gerry wrote: "PPACA says you must get medicare if eligible for it(99.9 percent are)."
Does PPACA really say this? I do understand that if 65 and eligible for Medicare you can no longer buy a ppaca policy/plan on the exchange. But that is very different from ppaca requiring you must get your coverage through medicare if medicare eligible. ie - does PPACA state that at 65 and eligible for Medicare you can no longer participate in an employer private insurance plan and must get on Medicare?
I'm not trying to be difficult - I'm really just trying to understand. Appreciate any clarifications.


you are correct the ppaca just will not let you buy from an exchange if you are over 65. other than that it does not care what insurance you have
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Re: What counts as "income" for PPACA subsidies?

Postby Flobes » Sun Jun 30, 2013 2:26 pm

Here's my latest email conversation with my state's special department in charge of the health care exchange and educating us about how it will work. (You can read her explanation of MAGI determination for ACA subsidies in my previous post in this thread.)

Q Is this subsidy based on a guesstimate I'll make in late 2013 for 2014 income?
Yes, the Advance Premium Tax Credit is a guesstimate for 2014 income.


Q Is there a potential problem if my 2014 income is very different from 2012 (which is what you'll have on file at the time) or 2013 (which I'll be filing in 2014)?
No, if it is a lot different, it will probably be flagged, but you will be able to provide an explanation such as – I got a new job, etc.


Q What happens if my best and good-faith guess is incorrect? Income guess could certainly be too low (and I received too much subsidy) or too high (and I'd have been eligible for more subsidy). It's not likely the guesstimate will be exactly correct, given the external variables, like dividends for example.
Yes, if income is different, there are two ways to reconcile this. One, you come back into our system and modify your income and get a new APTC. Or, you can reconcile on your 2014 tax return, but it is possible that you would owe money back at the end of the year.


Q What is the state's procedure for verifying my income?
We verify it against the latest data from the IRS – 2012 – and then you would self-attest to why it is different. Again, reconciliation happens on the 2014 tax return when you will have to prove it.
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Re: What counts as "income" for PPACA subsidies?

Postby yukon50 » Sun Jun 30, 2013 10:46 pm

My 2012 income was around 35k.

My 2013 income will be around 17k (with a 17.5k 401k contribution).

Was thinking about doing a Roth conversion this year, but if I need to lower income for subsidy, then I can later do a recharacterization until Oct 2014.

What happens if one is unemployed on 1/1/2014? Do they estimate based on expected unemployment to be received in 2014?

My income could range from 20k - 50k in 2014, which would be a lot different than my 35k income in 2012 and 17k in 2013.
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Re: What counts as "income" for PPACA subsidies?

Postby nonnie » Mon Jul 01, 2013 4:01 am

frugaltype wrote:This is making my head hurt. I'm glad I'm on Medicare,...


And Medicare pays for that also-- either you can get an MRI of your brain or mental health psychotherapy through a psychologist. :D
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Re: What counts as "income" for PPACA subsidies?

Postby Epsilon Delta » Mon Jul 01, 2013 8:47 am

As I understand it the actual subsidy for a year (say 2015) is based on your actual income for that year, as determined by your tax return which is filed the next year (April 15 2016). All of the estimates based on previous year, current income, etc. are just interim calculations. Compare this to income taxes where the W-4, withholding and quarterly payments are estimates and everything is evened up when you file your 1040.

The estimates affect cash flow but not wealth. They are vital for people living paycheck to paycheck but less important to people with liquidity and a decent emergency fund.
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Re: What counts as "income" for PPACA subsidies?

Postby 555 » Mon Jul 01, 2013 9:09 pm

For early reitrees who can control their income, to a low multiple of FPL (Federal poverty level) are some of you saying you should make your income at least 133% of FPL so as to get PPACA subsidies, and avoid Medicaid?

Does something bad happen if you income is at 130% of FPL rather than 135% of FPL?
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Re: What counts as "income" for PPACA subsidies?

Postby Phineas J. Whoopee » Tue Jul 02, 2013 2:26 pm

555 wrote:For early reitrees who can control their income, to a low multiple of FPL (Federal poverty level) are some of you saying you should make your income at least 133% of FPL so as to get PPACA subsidies, and avoid Medicaid?

Does something bad happen if you income is at 130% of FPL rather than 135% of FPL?

I believe that depends very much on one's state of residence.

First, how good (or otherwise) will your state's Medicaid program be next year?

Second, has your state adopted the new ACA standard for Medicaid? Per the Supreme Court each state can choose for itself without sanction. If it has not, the threshold will be whatever your state says it is.

Third, I believe nobody with an income below 100% of the poverty level will be eligible for the subsidy; but that there are states where some of the people below that threshold will not eligible for Medicaid either.

Fourth, I believe in the new-standard-adopting states the cutoff really is 138%, even though the press usually says 133%.

IMHO, if below 400% of the Federal Poverty Level and reasonably able to do so, and intending to use the new exchanges and apply for a subsidy or go on Medicaid, one should maintain enough financial flexibility to adapt to possible unexpected consequences.

PJW
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Re: What counts as "income" for PPACA subsidies?

Postby 555 » Tue Jul 02, 2013 6:28 pm

Phineas J. Whoopee wrote:
555 wrote:For early reitrees who can control their income, to a low multiple of FPL (Federal poverty level) are some of you saying you should make your income at least 133% of FPL so as to get PPACA subsidies, and avoid Medicaid?

Does something bad happen if you income is at 130% of FPL rather than 135% of FPL?

I believe that depends very much on one's state of residence.

First, how good (or otherwise) will your state's Medicaid program be next year?

Second, has your state adopted the new ACA standard for Medicaid? Per the Supreme Court each state can choose for itself without sanction. If it has not, the threshold will be whatever your state says it is.

Third, I believe nobody with an income below 100% of the poverty level will be eligible for the subsidy; but that there are states where some of the people below that threshold will not eligible for Medicaid either.

Fourth, I believe in the new-standard-adopting states the cutoff really is 138%, even though the press usually says 133%.

IMHO, if below 400% of the Federal Poverty Level and reasonably able to do so, and intending to use the new exchanges and apply for a subsidy or go on Medicaid, one should maintain enough financial flexibility to adapt to possible unexpected consequences.

PJW


Obviously things could change in the years before I am in this situation. But I can see having the choice between having income above or below the 138% of FPL (or whatever the cutoff is in the future, and I suppose what I am wondering is, how bad is it being on Medicaid? Is it something one would so much want to avoid that they'd generate more income (via Trad 401k/IRA withdrawals or Roth conversions) to avoid the dreaded fate of Medicaid, despite there potentially being other disadvantages to having more income.
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Re: What counts as "income" for PPACA subsidies?

Postby nonnie » Tue Jul 02, 2013 11:01 pm

555 wrote:Obviously things could change in the years before I am in this situation. But I can see having the choice between having income above or below the 138% of FPL (or whatever the cutoff is in the future, and I suppose what I am wondering is, how bad is it being on Medicaid? Is it something one would so much want to avoid that they'd generate more income (via Trad 401k/IRA withdrawals or Roth conversions) to avoid the dreaded fate of Medicaid, despite there potentially being other disadvantages to having more income.


It's not a question of "how bad is it being on Medicaid"- it's a question of finding a doctor with the qualifications you'd like who will take Medicaid. Here in my Northern CA town of 175,000, 50 miles north of San Francisco, you'd be hard pressed to find ANY doctor that accepts Medicaid, let alone for someone over 50 years of age. Medicaid recepients are forced to go to City/County clinics for care. The docs I see are starting to grumble about low reimbursement rates for Medicare and I've had two of the specialists I see predict that in five years the number of docs accepting Medicare will be the same as those accepting Medicaid today. I'm sure demographics--our population is slightly older than average-- and cost of living in CA for new docs on top of med school debt is contributing.

Ask the docs you see now or find a few specialists in your area with good qualifications/ratings on Healthgrades and call an ask if they accept Medicaid.

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Re: What counts as "income" for PPACA subsidies?

Postby Jack » Tue Jul 02, 2013 11:15 pm

nonnie wrote:It's not a question of "how bad is it being on Medicaid"- it's a question of finding a doctor with the qualifications you'd like who will take Medicaid.

The Medicaid expansion portion of the ACA increases physician payments for Medicaid to the same level as Medicare. Only 26 states have agreed to implement the ACA Medicaid expansion, so your Medicaid experience will depend on which state you live in.
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Re: What counts as "income" for PPACA subsidies?

Postby nonnie » Wed Jul 03, 2013 6:08 pm

Jack wrote:
nonnie wrote:It's not a question of "how bad is it being on Medicaid"- it's a question of finding a doctor with the qualifications you'd like who will take Medicaid.

The Medicaid expansion portion of the ACA increases physician payments for Medicaid to the same level as Medicare. Only 26 states have agreed to implement the ACA Medicaid expansion, so your Medicaid experience will depend on which state you live in.


Very interesting, I didn't know about the doc payment reimbursement levels. Of course ACA also includes some cut backs and other changes to Medicare physician reimbursements. To date cuts prescribed by the 1997 reimbursement formula-- in 2013 it was scheduled to be 26.5%- have been deferred.
http://www.kaiserhealthnews.org/stories ... c-fix.aspx

http://www.kaiserhealthnews.org/Daily-R ... S-act.aspx
"2013-The deal averts for one year a 26.5 percent cut in payments to doctors who treat Medicare patients."

Nonnie

Edited to remove speculation and heresay
Last edited by nonnie on Wed Jul 03, 2013 7:40 pm, edited 1 time in total.
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Re: What counts as "income" for PPACA subsidies?

Postby freebeer » Wed Jul 03, 2013 7:24 pm

nonnie wrote:... my pulmonologist said lots of docs will soon stop accepting Medicare. Of course ACA also includes some cut backs and other changes to Medicare physician reimbursements. Lawmakers invariably defer the cuts prescribed by the 1997 reimbursement formula...


With respect, I think this is getting far afield from the initial post topic and verging on political opinions and speculation that are off limits on this forum. This thread seems to have found some value for folks trying to understand the specifics around income thresholds so perhaps folks can stick to that topic lest it get locked. Thanks!
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Re: What counts as "income" for PPACA subsidies?

Postby nonnie » Wed Jul 03, 2013 7:46 pm

freebeer wrote:With respect, I think this is getting far afield from the initial post topic and verging on political opinions and speculation that are off limits on this forum. This thread seems to have found some value for folks trying to understand the specifics around income thresholds so perhaps folks can stick to that topic lest it get locked. Thanks!


Point taken, I hope I've edited my post satisfactorily. I posted the info about the 1997 reimbursement formula because it is information and I had no idea why every year there is a last minute bill to defer mandated cuts. I didn't intend to speculate on whether the law will be amended nor whether deferrals will continue.

"1997 deficit reduction law that called for setting Medicare physician payment rates through a formula based on economic growth and known as the "sustainable growth rate" (SGR). "

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Re: What counts as "income" for PPACA subsidies?

Postby JMc » Sat Jul 06, 2013 7:11 pm

Could someone please clarify exactly where in the law and why contributions to a traditional IRA do not reduce MAGI for determining the amount of an exchange subsidy?

The way I read things is as follows:

MAGI (modified adjusted gross income) is adjusted gross income plus (1) untaxed Social Security, (2) tax-exempt interest and (3) certain foreign income.

Adjusted gross income ALLOWS a deduction for a traditional IRA.

What am I not seeing? Why would a contribution to a traditional IRA be added back to make a higher MAGI?

Thanks.
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Re: What counts as "income" for PPACA subsidies?

Postby Phineas J. Whoopee » Sun Jul 07, 2013 9:51 am

Welcome to the forum, JMc!

Remainder of post removed.

PJW
Last edited by Phineas J. Whoopee on Sun Jul 07, 2013 11:31 am, edited 3 times in total.
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Re: What counts as "income" for PPACA subsidies?

Postby gerrym51 » Sun Jul 07, 2013 10:31 am

MAGI- includes just about all income not covered by AGI. the government is not going to let you get away with anything. :mrgreen:
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Re: What counts as "income" for PPACA subsidies?

Postby Jack » Sun Jul 07, 2013 11:17 am

The confusion about MAGI comes about because the IRS uses multiple versions of MAGI for different purposes. For example the MAGI used to determine eligibility for a deductible IRA obviously does not include an IRA deduction before you determine if you are eligible to take that deduction. That MAGI also excludes taxable social security, student loan deduction and one-half of self-employment tax.

The PPACA specifically defined a new MAGI for health insurance purposes only. It is much simpler. It includes the adjusted gross income on line 37 plus tax-exempt interest and some foreign income. A subsequent law in 2011 also added in the non-taxable portion of social security.
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Re: What counts as "income" for PPACA subsidies?

Postby JMc » Sun Jul 07, 2013 1:14 pm

Thanks, Jack.

So you agree with me that a good planning technique is making a contribution to a traditional IRA that will decrease MAGI and increase eligibility for a premium subsidy?

Earlier posts in this thread said a traditional IRA contribution is added back to come up with MAGI so it does NOT increase eligibility for a premium subsidy.
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Re: What counts as "income" for PPACA subsidies?

Postby JMc » Fri Jul 12, 2013 2:45 pm

An earlier post said the "definition of MAGI is pretty stable - you take your AGI, and than you add back certain items like foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs. For most people, it's IRAs and educational cost deductions they will be adding back."

Is this right for calculating MAGI for subsidies? Do you add back IRA contributions? I don't think so.
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Re: What counts as "income" for PPACA subsidies?

Postby Flobes » Fri Jul 12, 2013 2:59 pm

FWIW Here's the draft federal application. According to the representative in my state's office, those filing for exchange insurance with subsidy assistance will use a 21-page form much like this:

https://docs.google.com/viewer?url=http://www.washingtonpost.com/blogs/wonkblog/files/2013/03/508_CMS-10440_Appendix_C_FA_Paper_Application.pdf&chrome=true
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