Health Insurance Subsidies And Tax Credits – Home » Covered California » IRS ACA Tax Credits » Tax Credit or Repayment? Health insurance subsidies for 2022
A new health insurance subsidy curve went into effect in 2021, providing larger subsidies for both low- and high-income individuals. In 2022, the subsidy curve is still in effect without the complications and benefits of unemployment benefits from the Covid pandemic. The net result should be slightly easier navigation of the Affordable Care Act reconciliation of health insurance premium tax credits on the 2022 tax return.
Health Insurance Subsidies And Tax Credits
The bailout flattened the subsidy curve and extended it to households with incomes above 400 percent of the federal poverty level.
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American Rescue Plan’s health insurance subsidy curve based on the federal poverty level and the second cost silver plan for 2022.
For households with incomes below 150 percent of the Federal Poverty Level (FPL), the consumer liability for the Second Lowest Cost Silver Plan (SLCSP) is 0%. In other words, the subsidy offered to the consumer will be equal to the cost of the SLCSP. The consumer responsibility for health insurance gradually increases as a percentage of household income until income is 400 percent of FPL. Household incomes above 400 percent of the FPL will result in the consumer being responsible for no more than 8.5 percent of the SLCSP. This means that a household with an income of 700 percent of the FPL can receive a subsidy so that the SLCSP is no more than 8.5 percent of their annual modified adjusted gross income.
The household’s modified adjusted gross income (MAGI), as reported on Form 8962, is the AGI from line 11 of the 1040 plus tax-exempt interest plus foreign earnings plus Social Security benefits. This includes income from the primary tax filer, their spouse, and income from tax dependents who must file a federal income tax return because they owe income tax.
A family of 3, with an income of $77,213, is 353% of FPL, which equates to a 7.33% consumer responsibility for the second lowest cost silver plan.
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To illustrate how matching subsidies works, consider a family of 3 adults. The final MAGI, calculated in dollar amounts from the 1040 tax return, is $77,412.84. This corresponds to 353 percent of the FPL ($77,413 divided by $21,960).
Federal poverty level income, based on household size, is used to determine health insurance premium tax credits on Form 8962 for tax year 2022.
A 353% MAGI intersects the subsidy curve at 7.33% consumer responsibility. When a family applied for health insurance subsidies through Covered California, a monthly subsidy was determined that would make the annual cost of SLCSP no more than 7.33 percent of the family’s estimated household income.
The monthly subsidy included in the health plan to reduce the family’s health insurance is reported on tax form 1095A. This family had the same health plan all year and did not change their income during the year. Therefore, all dollar amounts are the same throughout the 12 months of enrollment.
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Part I of Form 8962 calculates the applicable (percentage) MAGI, FPL, consumer liability figure for 2022. Part II collects the information from the 1095A.
Household MAGI, along with 1095A data, is transferred to Form 8962 Forms 1 and II. Part I of Form 8962 shows how the family’s income intersects the subsidy curve to derive the 7.33 percent consumer responsibility and specifies that the family must have spent no more than $5,674 on health insurance (line 8a) during the year for the SLCSP. .
Part II of Form 8962 summarizes the annual health insurance and subsidy amount from Form 1095A. Note that column 11e limits the amount of the household subsidy. If the family enrolled in a bronze plan that was substantially cheaper than the SLCSP, and less than the maximum qualifying subsidy, the primary taxpayer could claim a subsidy equal to the lower bronze health insurance premium.
If the primary taxpayer is given an additional premium tax credit for health insurance, this is shown on line 26.
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Lines 24 through 26 of Part II of Form 8962 determine whether the household is entitled to the additional premium tax credit. In this situation, the final household MAGI was slightly lower than the estimated income on the Covered California application. The result is that the family is entitled to an additional $23 in premium tax credits. They could have received an annual subsidy of $16,832, but received only $16,809.
If the primary taxpayer received excess health insurance premium tax, this amount is shown on line 27.
However, there could have been a situation where the household had a higher MAGI than they estimated. In this hypothetical scenario, the family was only entitled to a $10,000 premium tax credit, but received $16,809. The family received a $6,809 premium tax credit to reduce their health insurance.
If the family’s income is less than 400% of FPL, any excess advance premium tax credit coverage is limited.
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Fortunately for this family, their final MAGI is less than 400 percent of FPL. This means they will have to pay only $2,800 of the excess subsidy. If the income was more than 400 percent of the FPL, they would have to pay all the excess subsidies.
The instructions for Form 8962 also answer some frequently asked questions about employer-sponsored COBRA health insurance, subsidy eligibility, when an individual may have been Medicaid (Medi-Cal) eligible, and if final MAGI is below 100% FPL and is not eligible. For any premium tax credit.
If you fail to receive benefits under an employer-sponsored plan before the waiting period expires, you will not be considered eligible for that coverage during the waiting period. Also, if you leave a job and are offered post-employment coverage, such as COBRA or retiree coverage, you will not be considered eligible for that post-employment coverage unless you actually enroll in the coverage. See coverage after termination of employment under employer-sponsored plans in Pub. 974 for more information.
You are usually considered eligible for coverage under a government-sponsored program for a month if you meet the eligibility criteria for that month, even if you don’t sign up. However, if the Marketplace determined that you or a family member was not eligible for Medicaid or CHIP and was eligible for APTC when the individual enrolled in a qualified health plan, the individual would be treated as ineligible for Medicaid or CHIP for purposes. PTC for the duration of the coverage period under a qualified health plan (generally the rest of the plan year), even if your actual 2022 income suggests that the individual would have been eligible for Medicaid or CHIP.
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Estimated family income is at least 100% of the federal poverty line. You may qualify for PTC if your household income is less than 100% of the federal poverty line and you meet all of the requirements below.
Market estimated at enrollment that your family income will be at least 100% of the federal poverty line for your family size by 2022.
Kevin is an independent health insurance agent in California and a certified insurance agent for Covered California. CA LIC. 0H12644. Focus on families, individuals, the self-employed and small businesses. Represents several insurance carriers plus Medicare Advantage and Part D plans. I blog about several topics to provide consumer information for people who have questions about health insurance and the Affordable Care Act. Author: “The Hidden History Beneath Folsom Lake,” “Benjamin Norton Bagbay, Sacramento’s Champagne King,” and “Amos Catlin, the Whig Who Put Sacramento on the Map.” , Gary Claxton, Daniel McDermott, and Anthony DeMico
The Affordable Care Act (ACA) provides subsidized health insurance on HealthCare.gov and state Marketplaces.Since 2014, approximately 9 million people have purchased coverage with federal premium assistance. However, millions remain uninsured even though they are able to purchase it in the marketplace. Some insured people were priced out of the market because their income did not support their subsidy; Other uninsured people were eligible for subsidized or even free Marketplace coverage, but were either unaware of the financial assistance available to them or still found coverage unaffordable or unattractive because of high deductibles. Additionally, people who already buy Marketplace or over-the-counter coverage may still face affordability challenges.
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The March 2021 COVID-19 relief legislation, the American Rescue Plan Act (ARPA), extends eligibility for ACA health insurance subsidies to people who buy their own health coverage on the Marketplace with incomes above 400% of the poverty level. The law also increases the amount of financial assistance for low-income people who were already eligible under the ACA. Both provisions are temporary, lasting two years, retroactive to January 1, 2021. A more detailed explanation of these enhanced and expanded subsidies and ARPA’s other coverage provisions can be found here, along with an earlier analysis and interactive comparison of ARPA and the ACA. Subsidies can be found here.
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