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California health insurance  -  Health Reform in California  -  Income qualification period

Updates to California health subsidy qualification period

Covered California has rolled out the agent certification system and we are feverishly going through it to best understand all aspects of the new system that many Californians (especially those that qualify for subsidies) will use to enroll in the new health plans starting October 1st (for a Jan 1st 2014 effective date).

We may have answered a critical question regarding the period of time that the system will look at in terms of income to qualify for a health subsidy, arguably the most important part of the entire health reform bill.

So let's discuss what've we've found.

Why income matters with the ACA health law

Sizable subsidies built into the law will be based on income.

People making under 400% of the Federal Poverty Level might be eligible for Advanced Tax Credits towards the purchase of qualified health plans. These subsidies can literally be $1000's of dollars per year.

Originally, we were given guidance that eligibility would be based on the most recent period that could be verified through taxes (the April 2013 tax filing reflecting 2012 income data).

We have already had questions about changes in income from that period of time till now. Let's look at an example.

Why the period difference matters so much

A woman called in to see if she can expect a tax subsidy.

Her income (just for herself) was $60K in 2012 but she lost her job in the summer of 2013 and now has a part time position earning $3K monthly.

Based on the 2012 period, she would not qualify for a tax credit towards the purchase of health insurance (400% of the FPL for one person is approximately $46K in 2012). Her expected income in 2014 however is $36K which would qualify for a subsidy.

That can mean the difference of approximately $2500 annually for her and it would drop her premium from $300 to $100 per month.

It's a big deal!

So what does the certification training lead us to believe?

2014 Estimates requested on the online application

We payed particular attention to the income submission area on the trial application. In this section, the system required the applicant to submit their estimated income.

For example, it asked how many hours a person worked at a given job and at how much per hour, month, or year. It then calculated the expected annual income from this entry and used it as a means to establish subsidy eligibility.

The system will supposedly bounce these figures off of various government agencies and if there is a discrepancy, further documentation may need to be submitted. We imagine this will be needed for big changes in income (loss of job, promotion, etc).

The Advance part of the Advanced Tax Credit

True to the name, it looks like California will ask the applicant to enter their expected gross income for 2014 and receive an advanced tax credit if eligible. It also warns that the applicant may have to pay back the credit if income turns out to be higher than submitted.

Our recommendation is to list your income accurately as you know and expect it for 2014.

Follow the prompts of the online or hard copy app and feel free to contact us as with questions you have on your situation or health insurance needs.

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If Your Income
Is In This Range

Current Years Estimate; All those that file together on one 1040:

Single Person: $16k - $47k
2 People $22k - $64k
3 People $27k - $80k
4 People $33k - $97k

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