As we are nearing the implementation of the Affordable Care Act, it seems the general rule will be change. This is the biggest piece of legislation in history, so it is natural that there will be changes. The latest change is regarding income verification.
When consumers sign up for health insurance in these Health Insurance Exchanges (HIX) (or should I say if they sign up due to the high costs), they will be asked what their income level is. This will define their level of subsidy. Originally, the HIX’s were supposed to verify income levels via the IRS. Just last week, this requirement was waived. Now, the state exchanges won’t have to verify any income while if a state chose to partner with the federal government for their exchange, then income will be verified/audited on a random basis. What happens to those that are caught intentionally underestimating their income? They could be fined as high as $25,000.
What does this mean for you? If you estimate your income low, you will receive a larger subsidy but if your income comes out higher than what you entered and it changes the level of your subsidy, then you will be required to pay back the subsidy. If you are below 250% FPL and you are also receiving better coverage via the cost sharing subsidy, will you have an additional penalty? I am not sure. If the exchanges show the increased cost of these better coverage plans, then I expect that you will. On the other hand, will the government give you an additional tax credit if you overestimate your income and should have received a larger subsidy? I am not sure. If you are self employed and you are required to pay quarterly with-holdings and you underestimate your income, will the additional subsidy you are receiving be calculated in the penalty calculation when filing your taxes? Not sure. I would always assume worst case at this point.
All will become much clearer as we get closer to October 1. More to come…