The Affordable Care Act (Obamacare) can really be boiled down into one, all-powerful effect.
The Tax Credit!
Also called the Subsidy, it really is the heart of the law.
The rest is just window dressing, albeit important. What really matters to most Californians is simple.
The tax credit is the remedy to that long running ailment of our health care system.
Put simply, the Tax Credit means $1000/year in savings.
Based on the 1000's of successfully enrolled Covered Ca members, a quick snapshot:
These are big numbers!
It's not unusual for us to see a net premium of between $10-60 month...
regardless of age!
We'll explain the age piece later but first, let's look at everything you need to know about the tax credit!
This last piece is crucial.
The process of determining tax credits is tricky to someone who doesn't do it everyday.
We do the calculations EVERY DAY! Many times a day in fact so let us help you.
On to the tax credit and how to avoid the biggest mistakes!
The primary driver of the 2016 tax credit is income. There are other inputs, but income drives everything.
Basically, we want to estimate our year's gross income.
Officially, it's the MAGI (Modified Adjusted Gross Income).
That's accounting speak for your adjusted gross income plus a few less common sources of income such as foreign income, non-taxed interest, Social Security.
A few important causes of mistakes on the income piece:
These are just few items to look at on the income front. Most of the mix-ups we see with self-enrollees has to do with income.
Call us at 800-320-6269 and we can quickly size up your income estimate in 5 minutes
A common mistake deals with the timeframe people use for their estimate.
We want to estimate income for the year in which we'll be insured and eligible for a tax credit.
Let's look at an example.
If we're in October of a year and considering coverage for the following year, we'll actually want to estimate for that following year!
This can be tough. Especially for self-employed people.
We have to go with our best estimate and adjust in the system (we can easily do this for our members with a quick email) when we have better information.
Why is this important?
Let's say we're in October 2015 or close to Open Enrollment and we enter in our line 37 from prior year (2014). That number was $25K. Great, we'll get a tax credit for next year (2016).
What if over the course of 2016, we make $35K or higher. Come tax time the following year (April 2017), we'll probably have to pay back part of the tax credit.
All at one time.
Keep in mind that it goes the other way too.
If we estimate $35K and received a tax credit but our actual income came back at $25K, we'll recoup the extra tax credit at tax filing time.
What if your income situation is changing mid-year or more complicated, call us at 800-320-6269
We speak with many people that accidentally use the wrong number of people.
The tax credit calculation basically looks at two pieces:
Household is another place where people make mistakes!
Here are some common mistakes on the household number front:
#6 brings up two issues.
We need all family members on one 1040 in the account, even if not enrolling.
The first is in our interest (bigger household) but the second can be an issue.
The calculation is complicated but basically, if a spouse/parent is offered "affordable" group health insurance for just the employee, the dependents may not be able to get a tax credit at Covered Ca.
This piece is tricky and we need to ask a few questions to really see if there's a way around the rule.
Call us at 800-320-6269 regarding any questions on Household size and who to include. Our service is free to you!
Officially, it's called an Advanced Payment Tax Credit.
This is government speak to say that you don't have to wait for April to take the credit.
You'll get an invoice from the carrier for the net premium (after tax credit is taken out)
This is great news!
It's not uncommon for us to see a premium come down from $500 to $75 with the tax credit applied.
We even see monthly premiums of $1/monthly (the minimum required by law).
The tax credit and monthly premium will stay the same for the full calendar year (Jan 1st-Dec 31st).
Keep in mind that most people with tax credits will not see rate increases since the law keeps their premium to a percentage of income.
If we make income estimate changes during the year, the tax credit will adjust accordingly during the following month.
One note. Covered Ca manages the tax credit, not the carrier.
Questions on income and tax credit are addressed with Covered Ca for this reason.
We do see situations where the tax credit is removed on a member's invoice.
This is usually because the member has not submitted request back-up info to support income estimate, residency, or citizenship.
We can help with this process at 800-320-6269.
This gets tricky as we mentioned above.
You may not be eligible for a tax credit if you meet these:
Companies have to submit a form which shows the employees that they enroll on group health plans.
The IRS will compare this with the Exchange tax credit list.
If you're names on both, that could be trouble.
Call us at 800-320-6269 and we'll see if we can still get the tax credit
These are the common issues we see with the tax credit.
Both are bad!
Call us at 800-320-6269. 5 minutes and we'll help you get the best tax credit.
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20 years of experience in the California health insurance market has taught us one thing...Competent and experienced guidance is Invaluable
We can quickly (very important) size up your health insurance needs and clearly explain the options available to you. Our focus is finding the most coverage at the best cost to you.
We are licensed Covered Ca agents with in-depth knowledge of their plans, process, and tax credits.
Call us...you will be Pleasantly Surprised. 800-320-6269
We'll quickly see if you have the best priced plan available and if you qualify for a tax credit800-320-6269
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