Income is a key driver of health subsidy eligibility under the new Health Reform laws. There will be citizenship, residency, and group health insurance (if offered) rules but income is really the main qualifier for whether you will receive a subsidy and for how much. California has a very dynamic economy and people are constantly moving in and out of the workforce (not to mention increases and reductions in hours or pay).
Very few households have fixed incomes that remain the same from year to year. How does the new California health exchange address changes in income as it pertains to health subsidies? This a good and quite common question so let's jump in.
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The health subsidy is basically available to people (households really) that make between 138% and 400% of the Federal Poverty Level (Covered Ca Income Table) and it is applied on a sliding scale. If you fall within this range, you may be eligible for a health subsidy. This brings up the question, what period of income do they look at? They basically ask for a best estimate of this year's income. When you complete the online or paper enrollment, they ask you to enter your various income sources on a current basis. These amounts may be very different from last year or even last month (loss of income, promotion and raise, etc). What should you do if your income changes significantly (plus/minus 10%) from your original data entry in the Covered California?
When you first enroll in the Health Exchange in California, you essentially create an ongoing account tied to you. At any time during the year, you can log in and update information and income levels are definitely part of this updating process.
In fact, it's required that you update any changes in income data immediately within the system. This change in data will immediately affect the subsidy available to you either on a monthly basis or annually at tax time the following year. Let's look at the slider function for determining how and when you will take any subsidy.
When enrolling or updating information online, you are given flexibility in how you can choose to receive any available subsidy. You can choose to take the full amount as a monthly deduction (divided by 12) to reduce your immediate out of pocket premium. You can also choose to take none of the subsidy up front and collected subsidies available to you at tax time during the following year. You can even use their slider function to find some middle ground. Why wouldn't a person take the full subsidy right away? Changes in income or the potential for changes in income are a key factor.
What if you enroll in a California exchange plan in January based on expect income of $25K which would qualify you for a subsidy if you meet the other requirements. In April, you change jobs which results in your income going up to $35K. This amount is still under the 400% of the Federal Poverty Level so a subsidy is still possible the amounts will definitely change (go down based on higher income). In April, after receiving the change in income, you would want to login to your account and update the income to reflect this.
You may not want to take the full subsidy up front because your current income is lower than usual (you might be paid seasonally or by commission). In this case, you can use the slider to reduce the monthly or "advanced" tax credit. You will pay more in premium but you will also not potentially have to pay back part (or all) of the subsidy at tax time.
You can access the online application here:
If you experience a sizeable drop in income (10% or greater), update your income level. You may qualify for a more subsidy or even qualify for any subsidy if you were right on the income 400% level. It's best to keep this information as current and accurate as possible to protect yourself.
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