First time ACA coverage with question

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
metalworking
Posts: 141
Joined: Sun Jan 03, 2016 9:20 pm

First time ACA coverage with question

Post by metalworking » Sat Aug 11, 2018 4:21 pm

I will be applying for ACA coverage during open enrollment for 2019 the first time and have a question or two. Our daughter will be graduating college at the end of may 2019. She has a job starting with health insurance in june. I am sure she wont be filed as a dependent on our taxes next year. How does this figure into keeping us in the subsidy threshold? I assume I have to stay over 138% and less than 400% poverty level for 2 people to avoid medicaid and keep in subsidy territory even though we will be paying for 3 people on our policy through May. She also has full ride scholarships (even room and board which is taxable) and I am unsure if this will count as income for ACA purposes? I have done a google search but can't seem to find the definitive answer for my situation. Thanks

marcopolo
Posts: 1209
Joined: Sat Dec 03, 2016 10:22 am

Re: First time ACA coverage with question

Post by marcopolo » Sat Aug 11, 2018 5:08 pm

It apparently gets a bit complicated when the family size changes. I asked similar question a while back, and got clarification.
The instructions that are referenced are not for the faint of heart.

viewtopic.php?f=2&t=245147&p=3845668&hilit=ACA#p3845668
Once in a while you get shown the light, in the strangest of places if you look at it right.

curmudgeon
Posts: 1629
Joined: Thu Jun 20, 2013 11:00 pm

Re: First time ACA coverage with question

Post by curmudgeon » Sat Aug 11, 2018 9:39 pm

If you had turbotax last year (or another similar program), I would try doing some dummy tax returns and seeing how it gets calculated. There is a somewhat messy form which handles that stuff, but hopefully TT would populate it for you. If you can figure out where the cliff would be based on using last year (with dummy figures), that should get you 95% of the way towards understanding this year. If anything doesn't seem right, go back and triple check the calculations (do that anyway).

47Percent
Posts: 345
Joined: Tue Oct 29, 2013 9:59 pm

Re: First time ACA coverage with question

Post by 47Percent » Sat Aug 11, 2018 11:56 pm

metalworking wrote:
Sat Aug 11, 2018 4:21 pm
I will be applying for ACA coverage during open enrollment for 2019 the first time and have a question or two. Our daughter will be graduating college at the end of may 2019. She has a job starting with health insurance in june. I am sure she wont be filed as a dependent on our taxes next year. How does this figure into keeping us in the subsidy threshold? I assume I have to stay over 138% and less than 400% poverty level for 2 people to avoid medicaid and keep in subsidy territory even though we will be paying for 3 people on our policy through May. She also has full ride scholarships (even room and board which is taxable) and I am unsure if this will count as income for ACA purposes? I have done a google search but can't seem to find the definitive answer for my situation. Thanks
Without getting into specifics, I can tell you this much:

1) Only things that actually show up in your tax return as AGI will count -- with very specific items added to it -- hence the name MAGI (Modified Aggregate Income). The following link is a good summary of it.
http://laborcenter.berkeley.edu/pdf/201 ... mary13.pdf

Scholarship is definitely not counted as income for MAGI. The portion for living expenses (room & Board) will be counted.

2) As long as she is a full time student, even she is not living with you she can be considered as part of your household. So you will be qualifying as a 3 people household with all 3 people income aggregated. Once she gets her job & insurance, technically you can cut loose and become a 2 person household and you will be qualifying with those 2 people's income.

You will still need to figure out how to handle this transition (3 person household to 2 person household) both in terms of getting the ACA insurance, and handling it at tax time. You should leave out any guesses about her income after she graduates and count that as zero. I do not believe her earning a higher amount from work should affect your qualification as at that time your household size will not include her. But, you will need help from someone else more knowledgeable in the specific area.

One other nugget you may be interested in. If you happen to choose HSA eligible insurance, not only can you contribute to HSA at the family level, your daughter too can contribute at the family level for the time she was on your insurance! (assuming she will be filing her own return and you won't be claiming her a dependent)

Spirit Rider
Posts: 8892
Joined: Fri Mar 02, 2007 2:39 pm

Re: First time ACA coverage with question

Post by Spirit Rider » Sun Aug 12, 2018 10:16 am

I would add to 47Percent's last point.

You should compare the cost/benefit difference between an ACA HSA qualifying HDHP (> 250% FPL) with/without your DD and the cost/benefit of her plan at her new employer.

It may make sense to keep her on your plan until age 26 to allow taking advantage of 47Percent's last point. Note: While she/you on her behalf can make HSA contributions to her own HSA account up to the full HSA family plan contribution limit after she is no longer a dependent. You can only reimburse her expenses for dates of service while is/was a dependent.

donall
Posts: 800
Joined: Tue Mar 13, 2012 6:45 am

Re: First time ACA coverage with question

Post by donall » Sun Aug 12, 2018 10:59 am

Taxes will be predictable as student will not be a dependent. With a decrease in family size, the subsidy will decrease. As for ACA insurance cost and premium tax credit, cost and credit will be prorated through forms 1095-A and 8962. You can look up the difference in monthly premiums/subsidy with a household of 2 and 3 and multiply by the number of months used for each to determine your budget for insurance. You can also see where your family will be concerning the subsidy threshold. Remember that a yearly income is used to determine the subsidy and can be decreased with a traditional IRA or 401 contribution.

marcopolo
Posts: 1209
Joined: Sat Dec 03, 2016 10:22 am

Re: First time ACA coverage with question

Post by marcopolo » Sun Aug 12, 2018 11:45 am

donall wrote:
Sun Aug 12, 2018 10:59 am
Remember that a yearly income is used to determine the subsidy and can be decreased with a traditional IRA or 401 contribution.
Do you know how the family yearly income is computed?

My understanding is that it includes everyone that was covered (family income). So what happens when someone graduates college, gets a job and leaves the ACA insurance plan?

So, for first 6 months, there are 3 people insured. For last six months, 2 people are insured. and you allocated premiums accordingly on a monthly basis.

But, as you mentioned, i think income is considered on a yearly basis. So, if the person leaving insurance gets a high paying job for the last 6 months of the year, does their income count towards computing subsidy even though they had no income during the 6 months they were on the CA coverage?
Once in a while you get shown the light, in the strangest of places if you look at it right.

donall
Posts: 800
Joined: Tue Mar 13, 2012 6:45 am

Re: First time ACA coverage with question

Post by donall » Sun Aug 12, 2018 11:51 am

When the student gets their own insurance from a job, you will notify the Marketpkace about the change and get a new premium. The student is not on your taxes as dependent and so their income will not be part of the family income. ACA follows tax status.
I’m adding that student can be part of household but may or may not be considered a dependent. But the age, being a full time college student for 5 months, having a job with health insurance, all point towards not considered a dependent. Please check dependent rules
https://www.irs.gov/help/ita/whom-may-i ... -dependent

marcopolo
Posts: 1209
Joined: Sat Dec 03, 2016 10:22 am

Re: First time ACA coverage with question

Post by marcopolo » Sun Aug 12, 2018 12:14 pm

donall wrote:
Sun Aug 12, 2018 11:51 am
When the student gets their own insurance from a job, you will notify the Marketpkace about the change and get a new premium. The student is not on your taxes as dependent and so their income will not be part of the family income. ACA follows tax status.
I’m adding that student can be part of household but may or may not be considered a dependent. Please check dependent rules
https://www.irs.gov/help/ita/whom-may-i ... -dependent
Are you certain about this? Take the case where the student/leaving insurance is not an issue.
If you have an adult child with a job who is NOT a dependent but is on your ACA policy, I am pretty sure their income would count for calculation of subsidy (i.e., included in "family income"). Your bolded statement above would seem to indicate that is not the case?

Take a look at the 3rd row in the table at the link below. I read that as, if they are included in the coverage, then their income is also included,even if they are not dependents:
https://www.healthcare.gov/income-and-h ... hold-size/


What i am less sure of is what happens in the case where they are only on the insurance for part of the year, does their income for the whole year get included, or only the income for the portion of the year that they were on the insurance?
Once in a while you get shown the light, in the strangest of places if you look at it right.

Smitty700
Posts: 3
Joined: Tue Jun 28, 2016 10:22 am

Re: First time ACA coverage with question

Post by Smitty700 » Sun Aug 12, 2018 12:48 pm

metalworking wrote:
Sat Aug 11, 2018 4:21 pm
I assume I have to stay over 138% and less than 400% poverty level for 2 people to avoid medicaid and keep in subsidy territory...
If you live in a state that did not expand Medicare, such as Texas where I live, the range is 100% to 400% of the Federal Poverty Level for subsidies.

metalworking
Posts: 141
Joined: Sun Jan 03, 2016 9:20 pm

Re: First time ACA coverage with question

Post by metalworking » Mon Aug 13, 2018 9:46 am

thanks to everyone. just got back in town and will try and process all the new info.

User avatar
HueyLD
Posts: 6226
Joined: Mon Jan 14, 2008 10:30 am

Re: First time ACA coverage with question

Post by HueyLD » Mon Aug 13, 2018 9:50 am

Smitty700 wrote:
Sun Aug 12, 2018 12:48 pm
metalworking wrote:
Sat Aug 11, 2018 4:21 pm
I assume I have to stay over 138% and less than 400% poverty level for 2 people to avoid medicaid and keep in subsidy territory...
If you live in a state that did not expand Medicare, such as Texas where I live, the range is 100% to 400% of the Federal Poverty Level for subsidies.
Medicare has nothing to do with the ACA.

Spirit Rider
Posts: 8892
Joined: Fri Mar 02, 2007 2:39 pm

Re: First time ACA coverage with question

Post by Spirit Rider » Mon Aug 13, 2018 10:12 am

HueyLD wrote:
Mon Aug 13, 2018 9:50 am
Smitty700 wrote:
Sun Aug 12, 2018 12:48 pm
metalworking wrote:
Sat Aug 11, 2018 4:21 pm
I assume I have to stay over 138% and less than 400% poverty level for 2 people to avoid medicaid and keep in subsidy territory...
If you live in a state that did not expand Medicare, such as Texas where I live, the range is 100% to 400% of the Federal Poverty Level for subsidies.
Medicare has nothing to do with the ACA.
I'm sure Smitty meant Medicaid. Since there was only Medicaid expansion in the ACA. It is very clear by context what was meant. Sometimes you need to cut someone a little slack.

donall
Posts: 800
Joined: Tue Mar 13, 2012 6:45 am

Re: First time ACA coverage with question

Post by donall » Mon Aug 13, 2018 12:58 pm

marcopolo wrote:
Sun Aug 12, 2018 12:14 pm
donall wrote:
Sun Aug 12, 2018 11:51 am
When the student gets their own insurance from a job, you will notify the Marketpkace about the change and get a new premium. The student is not on your taxes as dependent and so their income will not be part of the family income. ACA follows tax status.
I’m adding that student can be part of household but may or may not be considered a dependent. Please check dependent rules
https://www.irs.gov/help/ita/whom-may-i ... -dependent
Are you certain about this? Take the case where the student/leaving insurance is not an issue.
If you have an adult child with a job who is NOT a dependent but is on your ACA policy, I am pretty sure their income would count for calculation of subsidy (i.e., included in "family income"). Your bolded statement above would seem to indicate that is not the case?

Take a look at the 3rd row in the table at the link below. I read that as, if they are included in the coverage, then their income is also included,even if they are not dependents:
https://www.healthcare.gov/income-and-h ... hold-size/


What i am less sure of is what happens in the case where they are only on the insurance for part of the year, does their income for the whole year get included, or only the income for the portion of the year that they were on the insurance?
If student will get own insurance from work then obtaining insurance from parents ACA plan is not an issue as is the case for OP. This link has a good example explaining situation for a not yet 26 year old non dependent who gets insurance from parents ACA plan. https://www.healthinsurance.org/faqs/we ... like-ours/

marcopolo
Posts: 1209
Joined: Sat Dec 03, 2016 10:22 am

Re: First time ACA coverage with question

Post by marcopolo » Mon Aug 13, 2018 1:04 pm

donall wrote:
Mon Aug 13, 2018 12:58 pm
marcopolo wrote:
Sun Aug 12, 2018 12:14 pm
donall wrote:
Sun Aug 12, 2018 11:51 am
When the student gets their own insurance from a job, you will notify the Marketpkace about the change and get a new premium. The student is not on your taxes as dependent and so their income will not be part of the family income. ACA follows tax status.
I’m adding that student can be part of household but may or may not be considered a dependent. Please check dependent rules
https://www.irs.gov/help/ita/whom-may-i ... -dependent
Are you certain about this? Take the case where the student/leaving insurance is not an issue.
If you have an adult child with a job who is NOT a dependent but is on your ACA policy, I am pretty sure their income would count for calculation of subsidy (i.e., included in "family income"). Your bolded statement above would seem to indicate that is not the case?

Take a look at the 3rd row in the table at the link below. I read that as, if they are included in the coverage, then their income is also included,even if they are not dependents:
https://www.healthcare.gov/income-and-h ... hold-size/


What i am less sure of is what happens in the case where they are only on the insurance for part of the year, does their income for the whole year get included, or only the income for the portion of the year that they were on the insurance?
If student will get own insurance from work then obtaining insurance from parents ACA plan is not an issue as is the case for OP. This link has a good example explaining situation for a not yet 26 year old non dependent who gets insurance from parents ACA plan. https://www.healthinsurance.org/faqs/we ... like-ours/
I think you might be missing the point of the question both the OP and I are asking.

What happens when there is a mid-year transition? Student in on parent's ACA plan Jan - June. Then gets their own insurance from job after graduation (july-dec). Student had no income Jan-June. but had substantial income July-Dec. Does the July-Dec income count against "family income" for ACA subsidy calculation for Jan-June?
Once in a while you get shown the light, in the strangest of places if you look at it right.

User avatar
HueyLD
Posts: 6226
Joined: Mon Jan 14, 2008 10:30 am

Re: First time ACA coverage with question

Post by HueyLD » Mon Aug 13, 2018 1:24 pm

Marcopolo,

Did you read the page 17 of form 8962? The example about Gary and his 25 year old nondependent son?

https://www.irs.gov/pub/irs-pdf/i8962.pdf

marcopolo
Posts: 1209
Joined: Sat Dec 03, 2016 10:22 am

Re: First time ACA coverage with question

Post by marcopolo » Mon Aug 13, 2018 2:28 pm

HueyLD wrote:
Mon Aug 13, 2018 1:24 pm
Marcopolo,

Did you read the page 17 of form 8962? The example about Gary and his 25 year old nondependent son?

https://www.irs.gov/pub/irs-pdf/i8962.pdf
Yes. It is more likely we will be in scenario 4 (other allocation methods). If i understand it correctly. A portion of the premium paid, and the SLSPC gets allocated to each tax family. Then the income for the entire year is taken into consideration for each tax family (even though the SLSCP is for part year?) to figure any PTC that may be available.
Once in a while you get shown the light, in the strangest of places if you look at it right.

User avatar
HueyLD
Posts: 6226
Joined: Mon Jan 14, 2008 10:30 am

Re: First time ACA coverage with question

Post by HueyLD » Mon Aug 13, 2018 2:35 pm

Yes. You are a good student.

metalworking
Posts: 141
Joined: Sun Jan 03, 2016 9:20 pm

Re: First time ACA coverage with question

Post by metalworking » Mon Aug 13, 2018 5:01 pm

marcopolo wrote:
Mon Aug 13, 2018 2:28 pm
HueyLD wrote:
Mon Aug 13, 2018 1:24 pm
Marcopolo,

Did you read the page 17 of form 8962? The example about Gary and his 25 year old nondependent son?

https://www.irs.gov/pub/irs-pdf/i8962.pdf
Yes. It is more likely we will be in scenario 4 (other allocation methods). If i understand it correctly. A portion of the premium paid, and the SLSPC gets allocated to each tax family. Then the income for the entire year is taken into consideration for each tax family (even though the SLSCP is for part year?) to figure any PTC that may be available.


Marcopolo you are a better student than i am. This is all confusing to me. What you interpret makes me wonder if it would be better just to purchase my daughter health insurance through her university student policy (which is ACA compliant)starting this fall semester even though i will be working through december and could have her covered on my policy. This way in spring 2019 when she does her last semester she will be on student insurance and not part of our "family". Unfortunately if i don't sign her up for fall 2018 coverage then spring 2019 coverage doesn't start till 2/1/19. I believe her 7 months of work (starting june 2019)would put us out of subsidy range if the factor in the whole year of income.

User avatar
HueyLD
Posts: 6226
Joined: Mon Jan 14, 2008 10:30 am

Re: First time ACA coverage with question

Post by HueyLD » Tue Aug 14, 2018 4:10 pm

Metalworking,

If the student insurance is a better value (cheaper and good coverage), by all means do so for your child.

But if you prefer to carry her on your current policy, you can definitely do so. You did not mention COBRA coverage from your employer, are you sure you won't be eligible for COBRA to cover her until her independence?

As to the ACA coverage for her, you will not have to consider her income on your tax return if she will not be your dependent for 2019. That's what that Example in IRS form 8962 is about.

Best of luck to you.

metalworking
Posts: 141
Joined: Sun Jan 03, 2016 9:20 pm

Re: First time ACA coverage with question

Post by metalworking » Tue Aug 14, 2018 5:57 pm

Thanks Huey
Yes i did consider cobra but it would be >$2000/month. I did call the university today and they said even if we did not sign up for fall insurance that we could get spring coverage started 1/1/19 so i think that is what we would do. I think we will put her on student insurance even if it is a little more expensive than ACA so that she doesn't have to deal with ACA issues on her tax forms. I will keep doing some reading as i have a little bit of time before the final decsion must be made. thanks again for your help

Spirit Rider
Posts: 8892
Joined: Fri Mar 02, 2007 2:39 pm

Re: First time ACA coverage with question

Post by Spirit Rider » Tue Aug 14, 2018 6:26 pm

metalworking wrote:
Tue Aug 14, 2018 5:57 pm
Thanks Huey
Yes i did consider cobra but it would be >$2000/month. I did call the university today and they said even if we did not sign up for fall insurance that we could get spring coverage started 1/1/19 so i think that is what we would do. I think we will put her on student insurance even if it is a little more expensive than ACA so that she doesn't have to deal with ACA issues on her tax forms. I will keep doing some reading as i have a little bit of time before the final decsion must be made. thanks again for your help
If any covered individual has a Qualifying Life Event (QLE), the COBRA premium could be separate just for them, not the entire family. Check into what that premium would be.

Post Reply