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)
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
These tax rules are important for the premium tax credit. 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 her own personal exemption 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 Marie applies for health coverage on her own, and at tax time she attempts to file a separate tax return, she will be found ineligible for PTCs and any advance payments of the PTC she received during the year will need to be repaid, up to the cap. If instead, Bob claims Marie as a dependent at tax time, any APTC Marie received during the year will need to be reconciled on Bob’s tax return based on his income.
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 January 2014. When he applied for premium tax credits, his projected income from his part-time job was $13,000 for the year, which was over the $11,490 poverty line for a single individual in 2014. 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
John is 50 years old and is eligible for silver plan in the marketplace that costs $4,528 a year. He is found eligible for a premium tax credit in the amount of $2,799 for the year based on an estimated annual income of $25,000. In June, John reports that he will start a new job in July and his income will go up to $35,000 a year. Assuming he took the entire amount of the credit in advance monthly payments, $233 a month was paid to his insurer from January through June. When he reported his salary increase, his new annual income was calculated at $30,000. Based on that, he would be entitled to a premium tax credit of $2,016 for the year. John received $1,400 in advance premium tax credits from January through June (6 times $233, rounded). This amount is subtracted from the newly calculated premium tax credit of $2,016, which leaves John $616 available for the rest of the year. Assuming he wanted to take the entire amount in advance, his new tax credit would be $616 divided by 6, or $103 (rounded).
However, suppose the same family initially projected a household of three (parents and son) and claimed a premium tax credit for all three based on an income at 179% of the federal poverty line. The premium tax credit for the couple (both 40 years old) and their 21-year-old son is $7,145 per year (or $595 per month). But as of July 1, the son gets a job and his income is such that he is no longer a dependent for the tax year. The parents report this change right away and their premium tax credit is now recalculated based on a household of two. At the same income, their maximum annual premium tax credit for 2014 is $3,961. They have already received $3,570 for January through June. For the remainder of the year, they will receive $391 ($65/month).
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.
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
SEPs not subject to plan selection restrictions for current Marketplace enrollees are the SEPs triggered by exceptional circumstances, error or misrepresentation by the Marketplace or other enrollment assistance entity, being a victim of domestic violence or spousal abandonment, or being an American Indian or Alaska Native (AI/AN). For more information, see our Special Enrollment Period Reference Chart.
For more information, see the Special Enrollment Period Reference Chart.
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.
In the Federally-Facilitated Marketplace, 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, if plan selection is made after the date that an individual loses MEC, the State-Based Marketplace has two options:
- The SBM could make coverage effective on the first day of the month following plan selection.
- The SBM could apply the regular rules for coverage effective dates. 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.
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
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 2014 and the premium for her coverage at work is $3,000. The insurance costs more than 8% 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% 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.
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.
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