ACA subsidy trap for people who increase their income

[Texashiker]

Qualify for a subsidy under the ACA? Thinking about finding a better job?

You may want to think about this.

http://reason.com/blog/2014/04/22/why-people-are-choosing-to-remain-uninsu#comment

But it's actually worse than that. If Whitely's income rises enough this year, not only will her subsidy for next year go away, but she may have to repay part of this year's subsidy. People who underestimate their income and therefore end up getting a larger subsidy than their actual income allows can be dinged by the Internal Revenue Service (IRS) for repayment come tax time.

This is not a small issue. As many as 40 percent of the beficiaries who receive subsidies under the law may end up on the hook for repayment, according to a 2013 Health Affairs study.

If someone receives a subsidy under the ACA, and then finds a better paying job, the IRS is going to ask for their money back. 40% is not some small number. Nor are we talking about people who can afford to pay back thousands to the government.

This could leave a low income family with a large tax bill at the end of the year.

I wonder how many low income families will be driven into bankruptcy by the ACA and this subsidy debacle.

 

[Newell Steamer]

I wonder how many low income families will be driven into bankruptcy by the ACA and this subsidy debacle.

All of them.

 

[michal1980]

The aca is terrible. How the dem's managed to write in tax code that actually costs people money for earning more income is amazing. Its like they hate success and want to punish people.

 

[Texashiker]

Its like they hate success and want to punish people.

Who do you think the majority of democrat voters are? Wealthy liberals who have nothing better to do than push a social agenda and people on welfare.

The people wanted change, and all they are going to have now is spare change.

I am going to use a family I personally know as an example.

The husband works a full time job and makes ok money for around here.

The wife works at a local family owned restaurant.

Together they have two small children.

The wife is looking for a better paying job, but at this job she gets an ACA subsidy to help pay for her health insurance. I think she is paying something like $50 a month for health insurance?

What is a family who is barely getting by supposed to do if she finds a better paying job and has to pay back several thousand dollars? Their child tax credit would go to the government. No child tax credit means local businesses are not going to see that money around February and March of next year.

Having to pay back the subsidy is bad for low income families, but it is also going to have a negative impact on the local economy. Local businesses count on those income tax returns so people can buy a TV, pay down on a car, buy a new freezer or fridge,,,,. For a lot of low income families, earned income child tax credit is the one time of the year the family has extra cash.

Making the family pay ACA subsidy money back is going to have a very serious negative impact on the economy.

 

[Gonad the Barbarian]

If someone receives a subsidy under the ACA, and then finds a better paying job, the IRS is going to ask for their money back.

You know who this is not news to? Everyone who signed up on healthcare.gov.

 

[shira]

So, if someone accurately gauges their income for a family of four (= "Family A")and receives (say) a $500 a month subsidy, that's a good thing. But if someone underestimates their income for another family of four (= "Family B") for the coming year and receives an inflated subsidy of (say) $700 a month, when in fact their income is the same as for Family A, then when they are asked to repay the excess $2400 (so that their net subsidy is exactly the same as for Family A, as it should be), that's a BAD thing?

Honestly, you wingnuts get nuttier every day.

 

[Hayabusa Rider]

You know who this is not news to? Everyone who signed up on healthcare.gov.

Which means that everyone has to weigh whether it's worth getting a better job. As far as "everyone" knew I doubt it. Unions were behind the ACA then a lot of members found they were going to get screwed. It seems that "everyone" didn't realize the nice butt poke they were going to get. Oh no doubt it was in the print somewhere, but I doubt there was a "warning" attached.

Seems it would be better to have some sort of sliding scale based on income to deal with this sort of thing.

 

[LTC8K6]

If your status changes, you have to go update your account.

You would only have to pay back if you failed to update and continued getting a subsidy you shouldn't get.

Your status could easily go the other way in this economy. You might need to update so you start getting a subsidy.

 

[LTC8K6]

I will say that seeing the people around me with subsidies, and seeing them dealing with healthcare.gov and the IRS, I am quite happy that I do not get a subsidy.

I am glad that I never had to go to the government website and only had to deal directly with Blue Cross.

 

[Vic]

So, if someone accurately gauges their income for a family of four (= "Family A")and receives (say) a $500 a month subsidy, that's a good thing. But if someone underestimates their income for another family of four (= "Family B") for the coming year and receives an inflated subsidy of (say) $700 a month, when in fact their income is the same as for Family A, then when they are asked to repay the excess $2400 (so that their net subsidy is exactly the same as for Family A, as it should be), that's a BAD thing?

Honestly, you wingnuts get nuttier every day.

It's not nuttiness per se, they just want to be family B and get away with it.

 

[shira]

Hypothetical:

What would happen to a below-the-poverty-line family that technically qualifies under the ACA for the Medicaid extension, but who overstate their income because they live in a state that opted out of the Medicaid extension? If this family states an income of just over 100% of the poverty line, they'll receive the maximum-allowable ACA subsidy of 98% of the total premium for a family of four. At the end of the year, this family's true income will be under the poverty line; will the IRS ask them to pay back the entire subsidy? That WOULD be pretty outrageous.

 

[Strk]

So, if someone accurately gauges their income for a family of four (= "Family A")and receives (say) a $500 a month subsidy, that's a good thing. But if someone underestimates their income for another family of four (= "Family B") for the coming year and receives an inflated subsidy of (say) $700 a month, when in fact their income is the same as for Family A, then when they are asked to repay the excess $2400 (so that their net subsidy is exactly the same as for Family A, as it should be), that's a BAD thing?

Honestly, you wingnuts get nuttier every day.

Don't spell it out for him, he may realize how obvious it is

 

[gus6464]

So basically you're mad because you can't cheat the system... Hmm...

 

[Texashiker]

then when they are asked to repay the excess $2400 (so that their net subsidy is exactly the same as for Family A, as it should be), that's a BAD thing?

What is going to happen, that family will lose their earned income child tax credit.

Which means less money for that family to spend.

Which in turn hurts the local economy.

A lot of local small businesses see a spike in sales around February and March. This is from people spending their tax returns.

Income tax return is the one time of the year low income families can afford to buy new furniture, new TV, new cell phones,,,, whatever it may be. With less money to spend the local economy and small businesses are going to be hurt.

The town I live in has a population of around 8,000 people. If just 10 families have to pay back 2,000 out of their income tax, 20,000 pulled from the local economy is a lot of money. That is $20k that could have bough new beds, new cell phones, paid down on a car,,, something besides going back to the IRS.

 

[Gonad the Barbarian]

Hypothetical:

What would happen to a below-the-poverty-line family that technically qualifies under the ACA for the Medicaid extension, but who overstate their income because they live in a state that opted out of the Medicaid extension? If this family states an income of just over 100% of the poverty line, they'll receive the maximum-allowable ACA subsidy of 98% of the total premium for a family of four. At the end of the year, this family's true income will be under the poverty line; will the IRS ask them to pay back the entire subsidy? That WOULD be pretty outrageous.

That's the "subsidy trap" not found in the OP.

 

[chucky2]

This is going to be a real problem for people. People are generally absorbed with everyday life, they aren't thinking of their present earnings as to how it affects their subsidy level...they're thinking about getting home from the store after work so they can pick up the kids and the sitters and get started on the laundry while watching American Idol.

Telling people who made not much (since they're getting a subsidy) that they now owe money (or aren't getting near back the refund they expected) is going to be a pretty rude awakening...

 

[Texashiker]

That's the "subsidy trap" not found in the OP.

I am willing to bet lot of people in low paying jobs get a subsidy, change jobs, do not know they have to go back and redo their health plan and will end up with a big bill come tax time.

Telling people who made not much (since they're getting a subsidy) that they now owe money (or aren't getting near back the refund they expected) is going to be a pretty rude awakening...

Exactly right.

There are going to be a lot of low income families who think they are getting back a certain amount. They already have that money planned for a used car, new beds for the kids,,,, something they need.

Then they find out they are not going to get back near what they planned for. Guess what, no car, no new TV, no new furniture,,,.

 

[Gonad the Barbarian]

That's not a trap, that's a subsidy working as intended (and as explicitly stated). When did you become such champion of government handouts?

 

[Texashiker]

That's not a trap,

If people do not fully understand how it works, it is a trap.

All people see is obama held true to his promise, cheap health insurance.

 

[Gonad the Barbarian]

This is going to be a real problem for people. People are generally absorbed with everyday life, they aren't thinking of their present earnings as to how it affects their subsidy level...they're thinking about getting home from the store after work so they can pick up the kids and the sitters and get started on the laundry while watching American Idol.

Telling people who made not much (since they're getting a subsidy) that they now owe money (or aren't getting near back the refund they expected) is going to be a pretty rude awakening...

If you ever had your own individual health insurance policy everyday life already consisted of thinking about it.

 

[Matt1970]

Well ya, duh, it's based on your income. It's no different than if you were getting a welfare check and your income changed.

 

[Exophase]

I am willing to bet lot of people in low paying jobs get a subsidy, change jobs, do not know they have to go back and redo their health plan and will end up with a big bill come tax time.

Yeah and maybe they change to self employed, don't realize that they're now responsible for paying taxes directly since it's not withheld, and come tax time won't have the money set aside because they spent it on other things.

Should I feel sorry for that person too?

 

[Gonad the Barbarian]

If people do not fully understand how it works, it is a trap.

All people see is obama held true to his promise, cheap health insurance.

If people don't understand how it works they can't read or chose not to.

 

[Jaskalas]

If your status changes, you have to go update your account.

You would only have to pay back if you failed to update and continued getting a subsidy you shouldn't get.

Your status could easily go the other way in this economy. You might need to update so you start getting a subsidy.

Oh... well that's far more sensible than the OP makes it sound.

 

[Phanuel]

That's not a trap, that's a subsidy working as intended (and as explicitly stated). When did you become such champion of government handouts?

When his daughter couldn't get elective birth control surgery and sloot about instead of having her main wear a condom or use pill or iud based birth control.