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Old 10-08-2013, 08:01 AM
 
1,475 posts, read 631,813 times
Reputation: 2822
Default ACA does anyone really know how the subsidies will work?

I still can't get onto healthcare.gov. I did read some things on the site but they were less than clear.

I KNOW that due to my tiny income I qualify for subsidies. What I don't know is just how those reductions get applied. According to healthcare.gov, it will be in the form of tax credits, BUT we get this credit up front so we will have less taken out of our paychecks in the first place.

How will they know? how will our employer know to withold less tax? Or how does the fed govt. know how much money I will make in 2014 before I've even earned it? What if I switch from part time to full time and no longer qualify? How does the insurance company know?

I really don't want a debate about the process or the program here. I am curious if anyone has gotten far enough in the process to understand the logistics.
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Old 10-08-2013, 08:21 AM
 
Location: Southlake. Don't judge me.
1,641 posts, read 1,109,705 times
Reputation: 1823
Quote:
Originally Posted by Stagemomma View Post
I still can't get onto healthcare.gov. I did read some things on the site but they were less than clear.

I KNOW that due to my tiny income I qualify for subsidies. What I don't know is just how those reductions get applied. According to healthcare.gov, it will be in the form of tax credits, BUT we get this credit up front so we will have less taken out of our paychecks in the first place.

How will they know? how will our employer know to withold less tax? Or how does the fed govt. know how much money I will make in 2014 before I've even earned it? What if I switch from part time to full time and no longer qualify? How does the insurance company know?

I really don't want a debate about the process or the program here. I am curious if anyone has gotten far enough in the process to understand the logistics.
From Subsidy Calculator | The Henry J. Kaiser Family Foundation

"People purchasing coverage on their own will be eligible for government subsidies (through a tax credit) towards their health insurance premiums based on income. "

For more information here: http://kaiserfamilyfoundation.files....01/7962-02.pdf
================================================== ========================
[SIZE=3][SIZE=3]How will premium subsidies be provided?
[/SIZE][/SIZE][SIZE=2][SIZE=2][SIZE=2]Premium tax credits would be refundable and advanceable. A refundable tax credit is one that is available to a person even if he or she has no tax liability. An advanceable tax credit allows a person to receive assistance at the time that they purchase insurance rather than paying their premium out of pocket and waiting to be reimbursed when filing their annual income tax return.
PPACA requires exchanges to provide information to prospective enrollees about their eligibility for premium tax credits. The process through which people apply for premium tax credits will likely be established by the Secretary of Treasury through regulation.
[/SIZE]
[/SIZE]
[/SIZE]

================================================== ========================

In most situations, it appears the tax credit will be administered in a manner similar to the Earned Income Credit (EIC) - it would get applied at the time you file your return. However, you should be able to modify your witholding allowances to effectively receive the credit during the year, just as people currently can with the EIC.

Standard Circular 230 Disclaimer - I am not acting as your tax attorney or advisor, everything I say could be completely wrong so don't rely on me and the IRS won't care what someone on the intermawbz told you if you mess up.
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Old 10-08-2013, 08:24 AM
 
Location: The Triad (nc)
16,596 posts, read 20,360,822 times
Reputation: 13583
Quote:
Originally Posted by Stagemomma View Post
I

I KNOW that due to my tiny income I qualify for subsidies.
What I don't know is just how those reductions get applied.

According to healthcare.gov, it will be in the form of tax credits,
BUT we get this credit up front so we will have less taken out of our paychecks in the first place.

How will they know? how will our employer know to withold less tax?
Or how does the fed govt. know how much money I will make in 2014 before I've even earned it?
What if I switch from part time to full time and no longer qualify?
How does the insurance company know?

I really don't want a debate about the process or the program here.
I am curious if anyone has gotten far enough in the process to understand the logistics.
The subsidy is paid to the (in exchange) insurance provider.
I don't think the nitty gritty is sorted out.

Quote:
(Sept 2013) The ACA provides for information reporting (under Internal Revenue Code section 6055) by insurers, self-insuring employers, and other parties that provide health coverage. It also provides for information reporting (under Code section 6056) by employers that are large enough to be subject to the employer shared responsibility provisions regarding the health coverage they offer their full-time employees. These proposed regulations...

The proposed rules issued today describe a variety of options to potentially reduce or streamline information reporting, such as:...
IRS reporting requirements for managing ACA subsidies and penalties - PNHP's Official Blog
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Old 10-08-2013, 08:36 AM
Status: "Keep your hand out of my pocket" (set 18 days ago)
 
23,364 posts, read 18,571,169 times
Reputation: 5593
Quote:
Originally Posted by MrRational View Post
The subsidy is paid to the (in exchange) insurance provider.
I don't think the nitty gritty is sorted out.



IRS reporting requirements for managing ACA subsidies and penalties - PNHP's Official Blog
There are also the state by state differences and Medicaid subsidies etc. One of the not fully known realities is that the poor in many states That did not expand Medicaid will not be able to pay the co- pays and balance above their plans benefits.
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Old 10-08-2013, 08:39 AM
 
Location: Southlake. Don't judge me.
1,641 posts, read 1,109,705 times
Reputation: 1823
I believe the link you posted is regarding reporting requirements for employers and insurers rather than the issues of how the subsidies are paid out.

My very brief search indicated that there may be instances in which the subsidies could be paid directly to the insurer, but that was a bit in passing.

ETA- Tuborg is correct that there are also some issues that vary by state.
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Old 10-08-2013, 09:06 AM
 
Location: The Triad (nc)
16,596 posts, read 20,360,822 times
Reputation: 13583
Quote:
Originally Posted by synchronicity View Post
there may be instances in which the subsidies could be paid directly to the insurer,
but that was a bit in passing.
The distinction (as I understand it) is in whether you get the insurance on your own...
or through the exchange.

On your own? subsidy = wait for tax filing time for a credit.
Through exchange (as the OP asks about) subsidy = it's done internally through payroll.

What happens when a job is lost or changed and how that accounting gets managed?
Not the first clue.
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Old 10-08-2013, 09:10 AM
 
1,475 posts, read 631,813 times
Reputation: 2822
Someone sent me this link. Made me feel that at least the IRS knows what is going on


Questions and Answers on the Premium Tax Credit
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Old 10-08-2013, 03:07 PM
 
Location: Carmichael, CA
806 posts, read 625,473 times
Reputation: 963
I'm also hearing through my state exchange that the subsidies will be paid directly to the insurance company.

From keeping up with all the bulletins at the IRS site and at the HHR site I'm seeing the following:

1. The subsidy level will be set when you sign up.
2. There's no way for the Feds to know if you have a job change or income change.
3. It all gets worked out the next April when you file your taxes. If the Feds paid too much, you'll return the money at that time.

The #3 is going to be the big problem. What if you have major job changes and then next April get a "oh, you now owe $7000 in back subsidies"? Plus your income being verified was written into the bill, but that was one of the things the President did a waiver on, so you can go to the exchange making $100,000 a year, tell them you make $20,000 and you'll get subsidies all year.

LOTS of things to still work out. I kind of think this first whole year is going to be a testing period.
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Old 10-08-2013, 03:31 PM
Status: "Keep your hand out of my pocket" (set 18 days ago)
 
23,364 posts, read 18,571,169 times
Reputation: 5593
Quote:
Originally Posted by MrRational View Post
The distinction (as I understand it) is in whether you get the insurance on your own...
or through the exchange.

On your own? subsidy = wait for tax filing time for a credit.
Through exchange (as the OP asks about) subsidy = it's done internally through payroll.

What happens when a job is lost or changed and how that accounting gets managed?
Not the first clue.
From what I understand there will be a burden on the individual to notify the government. What I have read multiple times is the concern that if someone gets a raise/bonus and it takes them over the cliff and they fail to notify the IRS in a timely fashion they will have to repay at tax time any excess subsidy they gave gotten. I assume folks know what is meant by the ACA cliff.
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Old 10-08-2013, 03:34 PM
Status: "Keep your hand out of my pocket" (set 18 days ago)
 
23,364 posts, read 18,571,169 times
Reputation: 5593
Quote:
Originally Posted by cb73 View Post
I'm also hearing through my state exchange that the subsidies will be paid directly to the insurance company.

From keeping up with all the bulletins at the IRS site and at the HHR site I'm seeing the following:

1. The subsidy level will be set when you sign up.
2. There's no way for the Feds to know if you have a job change or income change.
3. It all gets worked out the next April when you file your taxes. If the Feds paid too much, you'll return the money at that time.

The #3 is going to be the big problem. What if you have major job changes and then next April get a "oh, you now owe $7000 in back subsidies"? Plus your income being verified was written into the bill, but that was one of the things the President did a waiver on, so you can go to the exchange making $100,000 a year, tell them you make $20,000 and you'll get subsidies all year.

LOTS of things to still work out. I kind of think this first whole year is going to be a testing period.
Yup
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