Financial Friday: Cost Sharing Subsidies

Many people have heard about the premium subsidies being provided by the government if your Modified Adjusted Gross Income (MAGI) is 400% of the poverty rate or below.  Not many people have heard about or understand what the Cost Sharing Subsidies are all about.

Income Level Actuarial Value
100-150% FPL 94%
150-200% FPL 87%
200-250% FPL 73%

The table above shows the Actuarial Value (to be defined on Monday) available to people who choose to sign up for the silver plan (Actuarial Value of 70% for everyone else) but make less than 250 percent of the Poverty Level.  In other words, if your income level is within the levels above, you will be eligible for a better health plan that will have lower out of pocket costs (lower deductible, co-pays, and/or co-insurance).  So, you will receive a higher premium subsidy and be eligible for better coverage.

When you sign up during the enrollment period, you will be entering in your income.  This is an estimate.  I am curious how the government will treat those that register below the 250% level and gain better coverage, but then when they file their taxes and they made more than the bracket they were in, how will the government estimate and recover the cost sharing subsidy?  The premium subsidy is pretty clear because you know exactly the amount you are receiving from the government, but will the exchanges show the higher cost and the increase in subsidy to gain the better coverage so someone knows their total risk if they make too much?

Still many questions to be answered as the government is still figuring this out.  More to come…


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