The Department of Health Care Services (DHCS), the agency that manages the county based Medi-Cal system, has worked, and struggled, to efficiently determine MAGI Medi-Cal eligibility from the income section of the Covered California application. In a February 19, 2021, All County Welfare Directors letter, No. 21-04, DHCS outlined some of the changes to Modified Adjusted Gross Income (MAGI) calculations for MAGI Medi-Cal eligibility determinations.
Modified Adjusted Gross Income
Posts related to the Modified Adjusted Gross Income (MAGI) for eligibility for the Premium Tax Credit Subsidy through Covered California.
The income ranges in the revised table did not change because they were based on the already released 2021 federal poverty levels for income. What has changed is that the California Premium Assistance Subsidy is no longer listed. This is because the new federal Premium Tax Credit subsidies are larger than anything California was offering. Also note that the Federal Premium Tax Credit extends beyond 600 percent of the federal poverty level.
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.
Covered California doesn’t administer or enroll you into a MAGI Medi-Cal health plan. Through the Covered California income section where you enter you monthly income, the Covered California application system determines if you or your dependents are eligible for MAGI Medi-Cal. If your income indicates you are eligible for MAGI Medi-Cal in the Covered California system, that information is pushed over to the Department of Health Care Services and your county social services office.
Let me emphasize that you are ESTIMATING your income for the year. Your past income and tax return can be used as a guide, but may not be an accurate predictor of your future MAGI. For example, if your spouse is set to collect Social Security retirement benefits in 2020, that income needs to be added to the MAGI.
What is interesting is that these 2020 FPL income levels are higher than what Covered California posted in their program eligibility income chart at the start of the 2020 open enrollment period. Covered California listed the single adult Medi-Cal annual income level, 138% of FPL, at $17,237 and for a two-adult household at $23,226. The DHCS 2020 FPL income chart lists a higher amount of $17,609 for a single adult and $23,792 for two adults.
As many people enrolled in Covered California have found out, the folks at Covered California will not talk about taxes. Most consumers have also learned the dirty little secret about the federal and state subsidies for health insurance; it’s all about your tax return. The Internal Revenue Service (IRS) and the California Franchises Tax Board (FTB) don’t care how you estimated your income to Covered California to become eligible for the monthly subsidies. They only care about the final income number (MAGI) that entitles you to a subsidy.
For the California Premium Subsidy, you will reconcile that subsidy amount with the Franchise Tax Board when you file your state income tax return. And this is where it gets complicated and a potential headache for tax prepares. If your income is between 200% and 400% of the FPL you potentially could be receiving 2 subsidies, one from the feds and one from the state. If you earn over 400% of the FPL you will only get a subsidy from California.
Basically, the redesigned 2018 form 1040 has made it more difficult to quickly locate all the necessary information for estimating a household’s MAGI. Virtually all of the dollar amounts were listed on the first page of the old form 1040. Now Covered California participants will have to review page 2 of the 1040 and Schedule 1 income and deductions to get most of the information for their estimated MAGI.
If you own a small business or receive income for a service you provide, and most likely file a schedule C with your tax return, you should consider having your estimated taxable income reviewed by your tax planner. The IRS has noted that as they develop guidance for all of the changes to the tax regulations for 2018 they will be posting them on their website.