Last week, Butch asked a great question:
How are income and subsidy calculated if you’ve been laid off?
The short answer is that it depends.
Now let’s get to the longer answer.
For Medicaid and CHIP eligibility (Expansion and non-expansion) income is calculated on a monthly basis. If you got laid off in March and were paid through the 15th, you would use your last paycheck plus any unemployment insurance you can collect for the month of March. If you apply in April, you’ll just use any unemployment insurance that you collect.
Now if you are going onto the Exchange for ACA subsidized insurance, income is determined on an annual basis for “modified adjusted gross income (MAGI)”. MAGI does not include Supplemental Security Income (SSI) from Social Security. MAGI is calculated on an annual basis. Subsidies are allocated based on estimated MAGI at the start of the year. At the end of the year, the IRS will reconcile actual income versus projected income. If you overestimate your income and made too little, the IRS will give you a bigger tax refund in the spring of the following year. If you estimate too low and make more than you thought, the IRS will clawback some or all of the excess subsidies.
No one expected million person lay-off weeks at the start of the year.
So if you are applying for a Special Enrollment Period for an ACA plan, add up your January through lay-off income. Then estimate what you think you’ll get from unemployment for the rest of the year until you think you can go back to work at whatever wage is available. I have no idea how to estimate when people will be going back to work and at what wage levels. It is a fraught calculation. As soon as your situation changes (hopefully for the better), update your income on either your state based marketplace or Healthcare.gov account so that your subsidy will reflect your reality as best you can guess.
If you have questions, let’s talk in the comments.
WV Blondie
Of course I have a question: Do the (so-far fictional) payments Congress is considering count toward our incomes? If so, how do we estimate those, since right now we don’t know either the amount or the longevity of the payments?
xpostfactoid
Dave, I just wrote up a different aspect of this: yearly income could qualify you for ACA subsidy, while monthly going forward could qualify you for Medicaid. If the latter is the case, and preferable, you need to avoid ACA exchanges if earnings to date + expected would put you over the line. https://www.balloon-juice.com/2020/03/24/calculating-income-for-coverage/
David Anderson
@WVBlondie — most of the Congressional proposals are structured as fully refundable tax credits so I think (am not an accountant nor a lawyer) that the money would not count for means testing purposes.
Need to know more soon
Kenneth Krasity
I’m not sure this is phrased quite right: ” Subsidies are allocated based on estimated MAGI at the start of the year.”
Isn’t it the case that subsidies are allocated or reallocated on an interim basis based on annual income estimated at the time of enrollment, whether the enrollment occurs at the start of the year or the start of the special enrollment period or at the time of a change in income is reported??
“When a person reports a change in income, federal rules require the marketplace to determine the person eligible for the level of cost-sharing reductions that corresponds to the person’s expected annual household income for that year. Based on the newly calculated income, the person could become eligible for cost-sharing reductions for the first time, lose cost-sharing reductions they already have, or be determined eligible for a different level of cost-sharing reductions.
If a change in cost-sharing reductions occurs, federal rules also provide enrollees in a marketplace plan the option to change plans using a special enrollment period (for example, to get into a plan in the silver level, which is required to receive cost-sharing reductions).”
http://www.healthreformbeyondthebasics.org/question-of-the-day/#Changes_in_Income
See also, suggesting the same reasoning applies to income changes that affect APTC:
“Notifying the Marketplace about changes in circumstances as soon as they occur will allow the Marketplace to update the information used to determine your expected amount of the premium tax credit and adjust your advance payment amount. This adjustment will decrease the likelihood of a significant difference between your advance credit payments and your actual premium tax credit. Changes in circumstances that can affect the amount of your actual premium tax credit include:
https://www.irs.gov/affordable-care-act/individuals-and-families/questions-and-answers-on-the-premium-tax-credit
and
“If your income estimate goes down or you gain a household member:
https://www.healthcare.gov/reporting-changes/
Gary Ratner
How are deductibles treated for those losing employer coverage and entering ACA plans?
Travis
I am retired, my wife was on ACA. She recently lost her job. In calculating income for her ACA we include my SS, plus withdrawals from my IRA. Is this correct?
David Anderson
@Travis: touch base with a navigator to make sure!
David Anderson
@Gary Ratner: Deductibles paid reset to $0 and you have to pay out again.
Brachiator
@Travis:
I don’t think that SS is included in household income, but as noted, you should double-check with the appropriate agency.
Brachiator
@David Anderson:
This is very interesting material. Does it also come into play for people in California, now that the state has introduced its version of the individual mandate?