If you are a subscriber to a health plan through Covered California, then you know that reporting your income is a key factor in determining your eligibility for a subsidy.
As a Covered CA subscriber, you also know that you must report your income and file your taxes every April 15 to continue to receive premium assistance. In this issue, the top questions deal with this required reporting of income:
Q. What happens to someone who has overestimated his income and received the wrong subsidy amount for a marketplace plan? Does he get a tax refund when he files? What if he underestimated his income and was paid too much? Does the system catch it when he reapplies for coverage in 2015? Will he be prevented from renewing automatically?
A. If you received too small a subsidy because you overestimated your income, that amount will be added to your tax refund — if you’re receiving one — or it will reduce the amount of tax that you owe.
Similarly, if your subsidy was too large because you underestimated your income, you may have to pay some or all of it back. If your income is more than 400 percent of the federal poverty level ($94,200 for a family of 4 that enrolled for 2014), you’ll owe the full amount of any subsidy overpayment. At lower incomes, the amount that must be repaid is capped.
Unless you contact Covered California to update your income and other details, your subsidy amount will remain the same next year. That’s probably not in your best interest, since changing marketplace policy details and changes in your own financial situation could mean you either may not receive the total amount you’re due or you’ll be on the hook to repay a too-generous subsidy. The system, however, won’t prevent someone from renewing next year, automatically or otherwise, because his subsidy amount was incorrect.
The best thing to do is to get in touch with us. We will make sure Covered California has the most up-to-date information on your account.
Q. If I don’t have to file taxes and don’t have insurance, how do I pay any penalty for not being insured?
A. You don’t have to pay the penalty. If your income is below the income tax filing threshold — $10,150 for an individual and $20,300 for a married couple filing jointly in 2014 – you won’t be penalized for not having insurance. Based on your income, the IRS will be able to determine that it shouldn’t apply the penalty. You don’t have to do anything.