If you’re applying for health insurance through the Marketplace, you will be required to fill out a detailed application. This application includes pertinent information that relates to your general health, as well as your income and is used to determine which types of plans you are eligible for. Your employment status and the amount of money you make will affect the cost of the plans that you are eligible for. The lower your income is, the more subsidies you will be able to receive.
What is a Subsidy?
Under the Affordable Care Act, everyone is requires to carry health insurance coverage. Those who are not insured under an employer-sponsored policy or who are ineligible for Medicare or Medicaid must purchase their own health insurance; if they fail to obtain coverage, they will be required to pay a penalty. While there are several levels of insurance, for many people, even the lowest level policies may be unaffordable. In an effort to assist those who are suffering from financial hardship, the federal government provides subsidies, or financial assistance that is used to help cover the cost of health insurance.
There are two types of subsidies available for low-income individuals. The Advanced Premium Tax Credit, which reduces the monthly cost of health insurance premiums, and Cost Sharing Reduction, which minimizes the out-of-pocket expense for the health care services that an individual receives throughout a policy’s period, including deductibles, copays, and coinsurance.
There are several factors that are taken into consideration to determine whether or not an individual is eligible for a health insurance subsidy. These factors include how an applicant’s annual income compares to the Federal Poverty Level, the family size of the applicant, and the cost of health insurance in the applicant’s area. While all three factors will determine whether or not someone qualifies for a subsidy, income is the primary factor that determines eligibility. Those who make as much as four times the amount of the Federal Poverty Level can qualify for a subsidy; that’s a salary of around $47,000 for a single person and approximately $97,000 for a family of four people. Individuals who make under $29,000 per year or families of four that make approximately $60,000 annually combined may be able to qualify for both the Advanced Premium Tax Credit and the Cost Sharing Reduction subsidies.
What if You Under Report Your Income?
Since your income plays such an integral part in determining whether or not you will be eligible for subsidies that will assist with paying for your health insurance, it’s important to provide the most accurate information as possible. But what happens if you under report your income level?
If you have under reported your income, try not to panic. For a lot of people, it’s difficult to determine when a new career opportunity will come around and what type of income will be associated with the position. The government does understand this, which is why they are lenient about under-reporting income. However, it is important to note that while the government understands that errors in income reporting do happen, if you have under reported your income and have received a subsidy, you will have to pay it back. The amount that you will be required to pay back depends on how large the error was. If the error was minor, you may only have to pay back a small percentage of the subsidy you received; but, if it was a large error, you may have to pay back all of the money that you received.
Under no circumstances should you ever purposely low ball your income in an attempt to receive a subsidy. The federal government can and will check the information related to your income that you reported on your application. The estimated income you have claimed will be compared with your actual income when your federal income taxes are filed. If it s found that you earned more than what you estimated and you received a subsidy, you may be required to repay some or all of the amount you received.
The amount you will have to repay is directly related to your actual income level. If you earned between 100 percent and 199 percent of the federal poverty level and you received a subsidy on your health insurance, you will have to pay back a maximum of $300 for yourself and a maximum of $600 for a family of four. When you applied for your health insurance and reported an income of $20,000 and received a subsidy, but you acquired an increase in pay during the coverage period, you will likely be required to repay the money that you received to assist you with paying for your health insurance policy.