Obamacare: What does it cost? More help at healthcare.gov (Part 3)

[Update 12/12/13: Link rot has apparently set in on the paper application. The other noteworthy change is that I’ve been getting reports that the administration had ditched asking for 2012 MAGI at all! That’s just wrong—the regs were written to base the advanced premium credit on 2012 modified adjusted gross income. If you have both 2012 and an estimate of 2014 handy, you should be able to figure out the possibility of clawback. It’s seems stupid that they would actually deny the advance credit based off someone’s guess about income in a year that hasn’t even happened yet.]

If you haven’t heard the news, the Administration put out draft forms of what the health exchange applications will be, for Affordable Care Act coverage.

You can find the blog post and the link to the relevant draft application (long form – single or family), here.

If you’ve been following my posts on this, what was noteworthy is that the income information the proposed applications look for is different than what is in the regulations. The regulations seek the most current “adjusted gross income”, which for practically everybody will be 2012’s this October. The draft application asks what are you currently making, and what do you plan to make in 2014?

This is a nice end run around the problem I’ve called the Obamacare Clawback. If your 2014 income is substantially higher than what you had for AGI in 2012, you would be required to pay back some (or all!) of the government’s health care credit. (Quick review: your cost of insurance on the Exchange is a net of what is left AFTER you are advanced a federal credit. That credit is tentatively based on 2012 AGI, or now, apparently, your guess about 2013 or 2014 income.)

I’m glad the Administration did it this way. The draft applications are short and sweet. If any individual would have a problem concerning escalating income (not a bad problem to have), better to get it out in the open at the start.

Myself, I plan to use 2012 AGI, like the original regs say. If there is a clawback, I will deal with it in April 2015.

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9 comments

  1. Jim Thornton · May 8, 2013

    Hi, Hoofin! I just discovered your great blog after Googling “is there an asset test to qualify for Obamacare subsidies?” Buried in the comments section of one of your earlier entries I finally found the answer to this, which is no! You would think that such information would be easy to find, but it isn’t. I am 60, my wife is 56, we are both in good health, but we are also self-employed and at the mercy of the individual health insurance market. We purchased a BC/BS policy in MN when we were younger, then moved out of state, were told (erroneously) that we could not switch to the PA BC/BS plan without undergoing medical underwriting, and thus we kept the MN policy. A few years later, MN changed their regulations, making it impossible for out-of-state policy holders to change any of the terms (i.e., go to a high deductible, HSA type plan, for instance.) Because we both have “pre-existing conditions” (statin drugs and antidepressants), we were uninsurable. Long story short: we were stuck with an absurd policy that has become more and more expensive every year to the point where in 2012, we paid over $30,000 in premiums and out of pocket Rx costs for just the two of us (we got our sons their own policies for $115 each.) Our only option: take it or leave it. We have been going bankrupt on the installment plan ever since, which is why I absolutely love the ACA and can’t wait till October, when this absurdly cruel system we have now is jettisoned.

    Because, in part, of the high costs we’ve been paying for health insurance, our AGI was well under the 400 percent poverty line in 2012, this despite a reasonably decent net worth (mainly real estate properties and a little IRA money.) If we do qualify for a subsidy, I can see saving significantly over what we have been paying (premiums alone $2115.50 a month for the two of us, with a $500 deductible.)

    But once the huge weight of these payments is lifted from our respective necks, our income would understandably see a commensurate rebound! Any advice on avoiding too much “clawback” in 2015? I make my living as a magazine writer, and my income–though steady in recent years–is never guaranteed. I’d love to take your approach–i.e., use 2012’s AGI (which was actually a negative number! We have to use home equity loans to help pay insurance premiums). But I don’t want to be clobbered by a clawback when better days (one can only hope) follow in the wake of Obamacare’s official implementation.

    Thanks for your take on this!

    • hoofin · May 9, 2013

      If you are in Pennsylvania, what you need to know is that the legislature has not agreed to Medicaid Expansion, due to the Tea Party element. As a result, if you do not have MAGI that is at least 100% of federal poverty level (FPL), you won’t be able to claim the health exchange credit.

      There is a silver lining. The way the regs are currently written, if you expect your 2013 or 2014 income to be over the 100% of poverty line, then you can substitute that estimate.

      As for any clawback in 2015: you have to be very careful about what your 2014 income is. The clawback is capped if you are below 400% of FPL. If you are above that, you could lose the whole health exchange credit.

      Also, you should be aware that while Obamacare does not have an asset test, Medicaid may have an asset clawback, if you are over age 55. So the preference for near-seniors is Exchange policy over Medicaid.

      • Gene · May 9, 2013

        1.Could it be that if you’re from a non-expansion state & believe your 2014 MAGI will be at the FPL, but it winds up being below it, they will clawback the entire subsidy? At the FPL as I understand it, the subsidy for an individual would cover all but around $234, while if below.there is no subsidy, which sets up the perverse case where if an individual’s income is $11,700 your premium is about $19.50/mo.but at $11,699 it’s closer to $640/mo. Can that be right?

        2. If this perverse situation can actually occur than does this mean we can accurately call all legislators who voted against Medicaid expansion perverts?

        3. Is there a good website other than your own or an official website where one can get pertinent info that seems so hard to get by ‘googling around’ or by contacting health care advocacy groups (I’ve tried Patient Advocacy Foundation and Florida Chain) or government agencies? Like, for example, where did you find the info on asset clawback. Back when I thought FL would have Medicaid expansion and I’d qualify, I thought I found info on the web that gave said unequivocally “No” to an asset test. Your info surprised me.

        4. Apropos of #3 above, yesterday I tried to verify something with the IRS, but after calling and waiting an hour (after being passed to the FOURTH agent, I hung up so perhaps you are able to verify: a) is it MAGI or AGI and b) would taking an IRA distribution be included – Roth conversion or direct withdrawl from a Traditional IRA?

        Thanks again for all the valuable info. Being in the know helps relieve a lot of stress which I believe for me makes you the single greatest health care contributor since I lost my health insurance two years ago.

        • hoofin · May 9, 2013

          1. Yes, potentially. They could claw back, because there is nothing in the statute (Internal Revenue Code Section 36B) that permits a credit to someone below 100% of MAGI. The presumption is that all these folks would be under Medicaid in their respective states.

          2. They get called worse. The cruelest thing is that most of the affected general public doesn’t even know that this could be a problem for them come January.

          3. Most everything I have comes from reading as the various regulations are posted in the Federal Register. I also like the Kaiser Family Foundation site, the Robert Wood Johnson site (since I am from New Jersey originally!), and the one from the Urban League. I know of no site that compiles all the topics together, because the law is, in fact, pretty complicated in what you have to watch out for, the pitfalls. I believe it was written that way to sabotage its successful rollout.

          4. I don’t expect the phone help at the IRS would be up on the credit yet, since they are understaffed and probably still trying to get late returns processed for the 2012 season. When Congress screws with the Service’s budget, this is another practice that harms the everyday citizenry of this country who just want answers. I can tell you that MAGI is defined in an amendment to the original ACA statute. I know I blogged that topic once, and I just have to remember where I put it.

          Thanks for you compliments, as well!

          • hoofin · May 10, 2013

            The current MAGI for Obamacare is in Section 36B, at (d)(2)(B):

            (B) Modified adjusted gross income
            The term “modified adjusted gross income” means adjusted gross income increased by—
            (i) any amount excluded from gross income under section 911,
            (ii) any amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax, and
            (iii) an amount equal to the portion of the taxpayer’s social security benefits (as defined in section 86 (d)) which is not included in gross income under section 86 for the taxable year.

            (i) goes to the foreign earned income exclusion;

            (ii) is tax-exempt interest; and

            (iii) is the portion of social security benefits that aren’t included on the taxpayer(s)’ tax return(s).

  2. Jim Thornton · May 9, 2013

    Thanks so much for the reply. I hate Corbett with a passion, I must say, and I just don’t understand the Pennsyltuckian ignorami Tea Partiers that voted him into office. But enough bile! So, correct me if I am wrong, because our 2012 MAGI (interesting acronym that, no gift of the MAGI for me, it seems!) is less than 100 percent of the federal poverty level, we can’t receive any subsidies for health insurance that we buy on the exchange? And because we do have significant assets, we can’t qualify for Medicaid either?

    The whole question of MAGI is interesting because last year, as I mentioned above, we spent a little over $30,000 in insurance premiums and out of pocket costs, and the accountant deducted whatever the proper share of this was from our total income. This deduction alone was one of the main reasons that we ended up with a negative MAGI in 2012. If the ACA provisions dramatically reduce our healthcare costs, our income will, almost by definition, go up by the amount we save.

    I will be 61 and my wife will be 56 in October, 2013. Part of the ACA, as I understand it, is that no one has to pay more than 3x anyone else for insurance offered on the exchange (unless you are smoker, which we are not.) Do you have any idea what policies will cost for people our age? Is there a place where I can find an estimate for this information? It would be nice to get a subsidy, but even without it, I have to imagine we will be saving some money next year.

    Again, thanks so much for your expertise. I realize our situation is a bit unusual–Alan Katz, the erstwhile blogger of the wonderful Alan Katz Healthcare Reform Blog–thought I was practically a poster child for people being screwed by the individual market. But I find myself really hoping that starting in 2014, my wife and I will be paying no more than $1000 a month for health insurance, as oppposed to our current $2115.50! This would lead to a net increase of $13,338 per year in our income, bringing us into the realm of positive cash flow! Who knows, maybe even above 100 percent of FPL for a couple?

    Is this just wishful thinking?

    If it’s true that nobody has to pay more than three times anybody else, I am thinking that

    • hoofin · May 9, 2013

      As it stands, you will have to be at 100% or more of MAGI in 2014. Originally, we thought this would be 2012 for 2014, but regulations issued earlier this year allow 2013, or even an estimated 2014, to be allowed. The best verification of this are the model applications available at healthcare.gov — the official Obamacare website. (See their April 30, 2013 post).

  3. Jim Thornton · May 9, 2013

    Sorry for bombarding you! I feel like a guy dying of information thirst who have discovered an oasis in the desert!

    I just looked up FPL and found that, for a household of 2 (my wife and me, for instance; our sons are no longer officially dependents!), the following figures apply:

    100% $15,510
    133% $20,628
    150% $23,265
    200% $31,020
    300% $46,530
    400% $62,040

    Barring some sort of lottery win, I can’t foresee our MAGI going over $62,040 anytime soon.

    But depending on what subsidy we could qualify for on the exchange, we could easily get above the $15,510 mark. In fact, if my wife and I paid $823 a month in premiums as opposed to our current $2115.50, we would save $15,510 from this alone!

    Do you know of anybody in the Pittsburgh area who is knowledgeable about all this and could help us negotiate the intricacies when the October sign up begins?

    • hoofin · May 9, 2013

      Send me your contact info to my blog e-mail.

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