Kevin Knauss: Health, History, Travel, Insurance
Posts on the development and implementation of the California health insurance market place, application, account, enrollment, termination.
The American Rescue Plan is federal legislation that applies to federal Premium Tax Credits. It does not apply to any repayment suspension or forgiveness of the California subsidy. One odd twist is that some consumers may have a higher MAGI, over 400 percent of FPL, and not have to repay the federal subsidy and also pick up the California Premium Assistance subsidy on their California income tax return.
For example, if the annual cost of the SLCSP is $6,200 and 8.5 percent of your household income is $5,000, then the subsidy is $1,200. When divided by twelve months, that would be $100 per month to lower the cost of any health plan offered to you through Covered California. If 8.5 percent of your household income $7,000, and the SLCSP is $6,200, there is no subsidy.
Individuals and families may be eligible for a temporary increase in premium tax credits for this year, with no one paying more than 8.5% of their household income towards the cost of the benchmark plan or a less expensive plan. Meaning, many consumers will be eligible for higher tax credit amounts to help cover their Marketplace health plan premiums.
Without the consent for verification, Covered California cannot forward any monthly Advance Premium Tax Credit subsidy to the health insurance carrier selected by the consumer. Many households, who may have forgotten to update their consent for verification during the Open Enrollment Period are shocked when they must pay the full premium amount of their health insurance. Updating the Consent for Verification restores the monthly subsidy.
The new law requires Covered California to automatically enroll individuals who have been terminated from Medi-Cal into the lowest cost Silver plan in the person’s region. The automatic enrollment is meant to prevent a gap from when an individual or family is terminated from Medi-Cal to when they enroll in a new health plan.
Drivers will need to supply proof of health insurance. The health insurance can be a health plan purchased through Covered California or off-exchange directly from the carrier according to Covered California. Important to note is that Medicare, Medi-Cal, employer sponsored group plans, and Minimum Coverage plans (for individuals under 30 years old) are not qualifying health insurance for the purposes of the stipend. Drivers should always consult the app-based network for health plans eligible for the stipend.
The 56-year-old San Mateo County resident purchased health insurance through Covered California in 2020 and 2021. The estimated income was $45,000. In 2020, after the Covered California subsidy, the individual paid $109.98 per month for the Kaiser Silver 70 plan. In 2021, the Kaiser Silver plan jumped to $285.71, a 160 percent increase over the prior year.
In scenario III, the income situation is reversed. The couple estimated a MAGI of $25,000, but ended up with a final MAGI of $55,000. However, they don’t have to repay all of the $4,375 excess federal Premium Tax Credit they received from the federal government because there is a repayment limitation. In their case, they only have to repay $2,700. The higher income puts the couple into the California subsidy income zone and they get to claim a $376 tax credit on their California income tax return.
The starting point for the subsidy calculation is also the end point for reconciling the subsidy on the California 540 income tax return. First, your Modified Adjusted Gross Income (MAGI) is converted into a percentage of the federal poverty level (FPL), which varies by household size. That FPL percentage is then matched to the Applicable Figure. The Applicable Figure is itself a percentage, the percentage of the household’s fair share or consumer responsibility for health insurance. It is a sliding scale with income closer to the FPL being responsible for less of the health insurance premium.
Unfortunately, many of us don’t fully factor in the costs of doing business when we think of our monthly income stream. Consequently, many small self-employed individuals may have applied and received unemployment benefits greater than the actual net taxable income received during normal business operations.
