There are a lot of questions when it comes to who is and isn't eligible for health insurance subsidies and how these subsidies work. What happens if I make more money than I originally thought or get married and join my spouses plan? What happens if I lose my job during the year or get a big promotion? And what happens if I have a child turn 26 half way through the year and have to take them off my plan?
The Affordable Care Act (Obamacare) has rules and regulations regarding each and every one of these questions. I have broken them down into this easy to read outline that will hopefully give you more understanding of your rights (and responsibilities) when it comes to your health insurance coverage.
How Subsidy Tiers Work
Subsidy tiers are based off of the federal poverty level and are dependent on your household size. Obamacare limits the amount of money an individual or family earning a certain amount will have to spend each month by setting a cap on the amount they will have to pay. The federal poverty level for a family of four is currently $24,250 per year. The amount of money your family earns above that level is calculated into a percentile and your subsidy (or lack thereof) will be based off of that.
For example-- a family of four earning $50,000 a year makes roughly 200% above the federal poverty level, so their monthly premiums for a silver plan would be capped at 6.3% of their annual income, or $3,150/year ($262.50/month).
You can see where you fall within the subsidy tiers by visiting Healthcare.gov and typing in some basic information about your income, family size, and the state you reside in.
What happens to my subsidy if I make more money than I originally projected?
Health insurance subsidies are based off of your projected income. If you make more money than you projected and received a subsidy worth more than you were ultimately eligible for then you will be responsible for repaying some or all of the tax credits you received throughout the year. How much you have to pay back will be dependent on your final yearly income.
If you wind up earning more than 400% of the FPL then you will be responsible for paying back your entire subsidy. If you earn less than 400% of the FPL then you will be responsible for repaying a set amount. Below is a chart of the amount you or your family will be responsible for repaying if your financial status changes during the year.
|Income Range||Repayment Cap|
|300% to 400% FPL||$2,500 ($1,250 individual)|
|200% to 300% FPL||$1,500 ($750 individual)|
|Less than 200% FPL||$600 ($300 individual)|
What if I lose my job and health insurance?
If you lose your job and health insurance then you will automatically qualify for an open enrollment exception. This means that you will be able to apply for coverage outside of the traditional enrollment periods and your coverage will be based off of your new projected income. It doesn't matter if you and your spouse file your taxes jointly. If you lose your health insurance and can not join your spouses plan then you will be able to apply for coverage using the special enrollment exception.
If you get a new job that offers health insurance then you will be able to cancel your monthly subsidy and enroll in your new plan, BUT you may be responsible to pay back your subsidy if you wind up earning enough money in the year. Obamacare subsidies are based off your annual income and if you make too much money then you will have to repay the amount you were allotted while you were unemployed.
Children & Dependents
Obamacare mandates that parents can opt to keep their children or dependent on their health insurance until they turn 26. They are not required to do so, but they do have the option to. Once your child turns 26 then they are responsible for their own coverage and you will need to use your open enrollment exception to reflect that.
If you as a single person or as a couple have or adopt a child at any time during the year then you will qualify for an open enrollment exception. (See above paragraph for further details.) The same is true if you put your child up for adoption or place your child in foster care.
If your dependent child needs to go off of your plan for any reason (job, marriage, etc.) then you will qualify for a special enrollment period and can take them off of your coverage. This may effect your subsidy if you were currently receiving one, so it is imperative you use the open enrollment exception to make sure you aren't hit with any surprises at tax season.
Marriage, Divorce, Civil Unions, and Cohabitants
If you get married or divorced at any time during the year then you qualify for an open enrollment exception and can change your coverage accordingly. If you get married and join your partners plan then you may have to repay part or all of any subsidy you received depending on your total income when you file your federal taxes.
Gay marriage is now legal in all fifty states, so if you marry a partner of the same sex your partner will be able to either join your current health insurance (if your employer offers coverage to spouses) or you both will be able to apply for coverage after you marry using the open enrollment exception.
Civil unions, cohabitation, and common law marriages are not regulated at the federal level and varies from state to state. You will need to contact your local or state government to inquire whether they will allow you to add an individual to your health insurance if you fall into any of these three categories.