Frequently Asked Questions
- Modified Adjusted Gross Income (MAGI)
- Tax Filing Status and Eligibility for Premium Tax Credits
- Dependents for Premium Tax Credits
- Determining Household Size for Medicaid
- Young Adult Coverage
- Coordination between Medicaid and Premium Tax Credits
- Changes in Income
- Immigrant Eligibility for Premium Tax Credits and Medicaid
- Employer Coverage
- Coordination with International Coverage
- Special Enrollment Periods
- Exemptions from the Individual Responsibility Requirement
- Plan Design
- Additional Resources
Modified Adjusted Gross Income (MAGI)
However, the impact of which poverty levels are being used is different in states that have expanded Medicaid and states that have not. An adult in an expansion state will be eligible for Medicaid if their income is below 138 percent of the poverty level using the guidelines in place for Medicaid eligibility. That means that the eligibility level for Medicaid will go up slightly when the current year poverty levels are used to determine Medicaid eligibility. In a non-expansion state, adults with income above the poverty line using the prior year guidelines will still be eligible for premium tax credits, even though the state will be using current year poverty levels to determine eligibility for its Medicaid program.
Tax Filing Status and Eligibility for Premium Tax Credits
- Single is someone who is not married or is legally separated from their spouse.
- Married filing jointly is a couple who are legally married and wish to file their taxes together.
- A qualifying widow/widower is a person with a dependent child whose spouse has died in the last two years.
- Head of household is someone who has a dependent child living with them, pays more than half the cost of keeping up the home, and is either not married or is married but lived apart from their spouse for the last 6 months of the tax year.
- Married filing separately is the tax status used for a legally married couple that chooses to file their taxes separately.
A person cannot claim a premium tax credit if he or she plans to use the filing status married filing separately in that year. This means that a married person will need to file jointly with his or her spouse or qualify as head of household in order to claim a premium tax credit.
Dependents for Premium Tax Credits
For example, let’s look at Bob, who is caring for his uninsured mother, Marie. Bob provides more than half of Marie’s support and Marie has no income. Marie qualifies as Bob’s dependent. He wants to enroll Marie in a marketplace plan, but Bob’s income is too high to qualify for marketplace subsidies. Even if Bob chooses not to claim Marie as a dependent on his tax return, Marie is not eligible to claim herself on a separate tax return. Because Marie qualifies as Bob’s dependent—whether or not he claims her on his tax return—she cannot qualify for PTC on her own. If Bob claims Marie as a dependent at tax time, any APTC Marie received during the year will be reconciled on Bob’s tax return based on his income and may need to be repaid if his income exceeds 400 percent of poverty.
Determining Household Size for Medicaid
See Figure 4 in the Health Assister’s Guide to Tax Rules for a chart that explains the households rules that apply to Medicaid.
For example, in the case of two married parents who file a joint return and claim their 9-year-old daughter as a dependent, the household of the daughter will include herself and both her parents. If the daughter was instead 30 years old (in which case she would be claimed as a qualifying relative instead of as a qualifying child) but everything else remained the same, her household would still include herself and her parents.
Age does affect which Medicaid household rule is applied to an individual claimed as a tax dependent by her parent if she lives with both parents but they do not file a joint tax return, or if she is a tax dependent claimed by a non-custodial parent. Under these circumstances, the tax dependent rules continue to apply if the individual is at least 19 years old (or at state option, a full-time student 21 years old). However, if the individual is under 19 years old, then the non-filer/non-dependent rules apply. (See Figure 4 in the Health Assister’s Guide to Tax Rules for a chart that explains the households rules that apply to Medicaid.
Young Adult Coverage
Anyone who wants coverage through the marketplace needs to enroll during an open or special enrollment period. If it is open enrollment, a student could drop her student health plan and enroll in a marketplace plan and receive premium tax credits if she is eligible for them. Outside of open enrollment, if she decides to drop her student health plan, this action would not qualify her for a special enrollment period. She would have to experience some other triggering event that qualifies her for a special enrollment period (such as losing her student coverage, for example because she leaves school) or wait until the next marketplace open enrollment period to enroll in a marketplace plan.
The fact she has student health coverage does not prevent her from signing up for additional coverage through the Marketplace, but she would not be able to receive premium tax credits through the marketplace while also covered under the student plan. This is because the student coverage is considered “minimum essential coverage” once she has enrolled in it.
Coordination between Medicaid and Premium Tax Credits
To illustrate this, assume John is a student in a state that had not expanded Medicaid in November 2017. When he applied for premium tax credits for 2018 coverage during open enrollment in November, his projected income from his part-time job was $13,000 for the year, which was over the $12,060 poverty line for a single individual in 2017. John does not work as many hours as he thought he would and his actual income ends being about $11,000. When the IRS reconciles his premium tax credits, it will use his actual income even though it is slightly below the poverty line.
Changes in Income
When a person reports a change in income, federal rules require the marketplace to determine the person eligible for the level of cost-sharing reductions that corresponds to the person’s expected annual household income for that year. Based on the newly calculated income, the person could become eligible for cost-sharing reductions for the first time, lose cost-sharing reductions they already have, or be determined eligible for a different level of cost-sharing reductions.
If a change in cost-sharing reductions occurs, federal rules also provide enrollees in a marketplace plan the option to change plans using a special enrollment period (for example, to get into a plan in the silver level, which is required to receive cost-sharing reductions). If a person with a change in eligibility for cost-sharing reductions already has a silver plan and does not change plans during the special enrollment period, then the insurer providing the person’s plan is required to move him to the appropriate version of the silver plan, which is either a new cost-sharing reduction variation of the plan or to a silver plan without any cost-sharing reductions.
Yes, federal rules ensure she would get credit for any cost-sharing charges that she paid before moving to Medicaid – but only if she re-enrolls in the same marketplace plan from the same insurer when she returns to the marketplace. The rule on this is at 45 CFR 156.425(b), and the preamble to the final rule provides examples showing how insurers will account for past cost-sharing.
The requirement for continuity of cost-sharing charges is not just limited to movement between the marketplace and Medicaid. It applies any time someone re-enrolls in the same marketplace plan they had during the same year.
Many people who move between the marketplace and Medicaid are likely to be eligible, while in the marketplace plan, for a federal subsidy called a cost-sharing reduction that lowers their out-of-pocket costs in the plan. To receive the cost-sharing reduction, an eligible person must enroll in a plan at the silver level. If she is eligible for a larger or smaller cost-sharing reduction when she returns to the marketplace from Medicaid in the same year, she gets credit for past cost-sharing charges under the plan as long as she enrolls in the same silver plan she had before.
Immigrant Eligibility for Premium Tax Credits and Medicaid
Because he is treated as if his income is at the federal poverty level, he would qualify for a cost-sharing reduction which would raise the actuarial value of his plan to 94 percent. This means he would be able to lower his deductibles, copayments and other out-of-pocket charges. He would need to purchase a silver plan in order to receive the cost-sharing reduction.
Coordination with International Coverage
Special Enrollment Periods
If the person selects a plan on or before the date that he loses MEC, the effective date of coverage for the newly selected plan would be the first day of the month following the loss of coverage. For example, someone who reports he is losing coverage on June 30 and selects a marketplace plan on or before June 30 will be able to start his new coverage on July 1, thereby avoiding a gap in coverage.
If the plan selection is made after the date that MEC is lost, the coverage effective date would be the first day of the month following plan selection. Thus, someone who loses coverage on June 30 and selects a Marketplace plan anytime in July will have a coverage effective date of August 1 for the new plan.
In states that run their own marketplace, there is the option to apply the regular rules for coverage effective dates if plan selection is made after the date that an individual loses MEC. (This means that if plan selection occurs between the first and the fifteenth day of any month, the coverage effective date would be the first day of the month following plan selection. If plan selection occurs between the sixteenth and the last day of the month, the coverage effective date is the first day of the second following month.) Individuals living in states with SBMs should check to determine which rules are in effect in their state.
Access to new qualified health plans (QHPs), not distance, is what determines whether an individual who is making a permanent move can qualify for a special enrollment period. An individual who moves to a neighboring county just a few miles away may qualify for a special enrollment period if he gains access to new QHPs that he did not have access to where he previously lived. Conversely, the same individual can move to another part of the state that is a hundred miles away and not qualify for a special enrollment period if the QHPs that are available in the new area where he moved to are the same as the QHPs that were available where he previously lived.
In addition, to trigger a SEP based on a permanent move, a person needs to have had at least one day of minimum essential coverage in the 60 days before the move, or be moving from another country or a U.S. territory.
The effective date of coverage for newly selected plans is either the first day of the month following the loss of coverage if the plan selection is made before or on the day of the loss of coverage, or the first day of the month following plan selection.
Exemptions from the Individual Responsibility Requirement
An individual can obtain a hardship exemption based on affordability through the marketplace or can claim an exemption from the penalty when she files taxes. If she chooses to apply through the marketplace, she would have to do so during open enrollment or a special enrollment period, and affordability will be based on the cost of coverage relative to her projected household income. Once the exemption is granted, it will be valid for the calendar year regardless of changes in circumstances. To get an exemption for the entire calendar year, the individual must apply before the year starts.
Alternatively, a person can wait until tax filing and claim an exemption based on the cost of coverage relative to her actual income for the year. The exemption largely mirrors the affordability exemption the marketplace can grant during open enrollment, but the IRS exemption granted at tax filing is based on actual income whereas the marketplace exemption is based on projected income.
For an example, let’s say a person with an offer of employer-sponsored coverage has projected income of $36,000 in 2018 and the premium for her coverage at work is $3,000. The insurance costs more than 8.05% of her income (8.3%), which qualifies her for an exemption. Instead of applying in advance, she decides to wait until tax filing to claim the exemption. In December, she gets a $2,000 bonus. Her insurance now costs slightly less than 8.05% of income (7.9%), and she no longer qualifies for the exemption. She discovers this after the tax year is closed, so unless she qualifies for a different exemption, she will owe a penalty for being uninsured for the entire year. In this case, applying for an exemption early based on projected income would have saved her from paying the penalty.
There are two ways for a person who falls into the Medicaid coverage gap to qualify for an exemption from the penalty for failing to maintain minimum essential coverage. If a person applies for coverage through the Marketplace and is in the coverage gap, she will receive an exemption certificate number on her eligibility determination notice that she can use at tax time to claim an exemption for the entire year, regardless of future changes income insurance coverage status. If she applies for Medicaid directly from a state Medicaid agency, she can use the denial letter from the Medicaid agency to apply at the marketplace for an exemption, which will exempt her from the penalty for the entire year.
People who, at tax time, have annual household income that is under 138% of the poverty line, resided at any time during the tax year in a state that did not expand Medicaid and would have been eligible for Medicaid had the state expanded will be eligible for a Code G exemption that can be claimed directly on the tax return.
It is strongly encouraged for people to return to the marketplace to update their eligibility information and actively shop for plans, because plans and pricing change each year. In states using Healthcare.gov, enrollees generally don’t have to return to Healthcare.gov to renew their premium tax credit eligibility.
People who don’t provide Healthcare.gov with updated information will have their APTC and CSR eligibility re-determined based on the most recent income information available to the marketplace, as well as updated benchmark plan premiums and poverty level thresholds. However, not everyone currently enrolled in coverage will be able to have their eligibility re-determined automatically. Those individuals must return to the marketplace to update their information, or else they will be renewed without ATPC or CSR. For more information, see Key Facts: Auto-Renewal of APTC for 2018 in Healthcare.gov.
The renewal process may be different in states that established their own marketplaces. People enrolled in coverage through State-Based Marketplaces should check with their state about the process for renewing coverage and re-determining premium tax credit eligibility.
- Reference Guide: Yearly Guidelines and Thresholds
- Reference Guide: Documents Used to Verify Immigration Status
- Reference Chart: Minimum Essential Coverage
- Reference Chart: Special Enrollment Periods
- Guide: Health Assister’s Guide to Tax Rules