Health Insurance in Texas can be quite expensive for some. It is a good thing that it is no longer a federal mandate to carry. However, while it is not required to carry Obamacare insurance, it is a necessity for many families to have health coverage. Children get sick, and adults have accidents. Then, in the age of COVID, you never know when you will need to see a doctor. Insurance becomes essential, but how can one afford it? Obamacare offers subsidies to those who have difficulty affording health insurance. Subsidies are based on your income situation. But one must be cautious about how they use them when claimed.
What are Obamacare Subsidies?
When you’re shopping for health insurance, you have many options. You can apply through an insurance company directly, through an insurance agent, or you can apply through the Marketplace. Each has its benefits. However, if you cannot afford health coverage, you can use Obamacare subsidies which would assist you in lowering the cost of your health care coverage.
Obamacare subsidies are tax credits that help lower your insurance premiums. This benefit was recently expanded for 2021-2022 with passage of the American Recovery Plan Act and extended through passage of the Inflation Reduction Act from 2023 through 2025.
How Do I Qualify for Affordable Care Act Subsidies?
We all would like to save money on our health insurance in Texas, and for those that qualify for subsidies, it can make the difference between having the health care you need and going without. To benefit from the tax savings Obamacare provides, one must:
- Be an American citizen or non-citizen who doesn’t have healthcare access
- Meet standards about family size and projected income (earn between 100 and 400 percent of the federal poverty level)
- Sign up for a Silver Plan
- Not have access to affordable health care through another option that does not cost more than 9.12% of an employee’s income.
You will not qualify if any of these apply:
- Those who are married but filing separately.
- You do not file income taxes.
- If you are incarcerated
- You have access to employer insurance, but you want to purchase an Obamacare family plan because you can’t afford the employer cost-share on family coverage
How Do I Claim Obamacare Subsidies?
This is the easy part. When you apply for insurance through the Marketplace, you are automatically in the process of applying for Obamacare subsidies. The answers to your questions on your application will determine your qualification for advance premium tax credits. Simply apply online or through an insurance agent. As long as you are applying for an Affordable Care Act insurance policy, you are able to qualify.
Once you submit your application, you will see which health insurance options you can sign up for and if you qualify for the subsidy. Then you will be given the option of how you want to apply your credit. These are known as advance credit payments. You can use all or some of these credits toward your premium. Then, when you receive your tax information and file your taxes, you will reconcile how much was paid versus what you were entitled to. If the amounts reflect that you paid more in taxes than what you owed, you will receive a refund. However, if the amount shows that you were given more than what you were entitled to, you will be required to pay the amount back.
How Did I End Up Owing Obamacare Subsidies?
There are several reasons why you would end up owning taxes based on a tax subsidy that was supposed to be there to assist you.
Your income changed. This is one of the biggest reasons you may have to pay back your Obamacare subsidy. Changes you fail to report will impact your tax situation at the end of the year. If you get a raise or promotion at your job, you must report this. Your subsidy status is based partly upon your income. Remember, your subsidy is based on calculating this year’s earnings, not last year’s tax filing. So, at the end of the year, when your income is not where it should be, you may end up owing.
Your home situation changed. Whether you live in Dallas or Austin, your health insurance rates can be impacted. This can affect your subsidy status as well. When you relocate, your insurance rates tend to increase or decrease. If you move into a higher-rated area, then this can potentially affect your subsidy.
Your family dynamic changed. Having a family member move in or out can tremendously impact your insurance rate. Not reporting this can affect the subsidy and leave you owing at the end of the year.
You must be careful to report all changes as soon as they occur. You could be looking at more than higher rates and paying back Obamacare subsidies. This can sometimes be considered insurance fraud, even if done unintentionally.
Is There a Deadline to Pay Back Obamacare Subsidies?
Once you realize you owe for your health insurance in Texas subsidies, you need to pay it back regardless of how much you owe. However, you do have a saving grace. There are dollar caps on the repayment amount if your income falls below 400% of the poverty level.
Income between 200% and 400% of the poverty line
Individual Annual income – $25,760 – 51,520 – Repayment Limit – $325 – 1400
Family Annual income – $53,000 – 106,000 – Repayment Limit – $650 – 2800
Above 400%: $53,200 for an individual or 106,000 for a family; no repayment limit exists.
This means that if you earn above the 400% of the federal poverty line, receive subsidies, and miscalculate your income, you could be left owing federal taxes into the thousands of dollars. Passing this top level is called falling off the ‘subsidy cliff.’ When you reach this level and essentially fall off it, you will owe if you fail to report it to the IRS. This is why it is important always to report every change as it happens. You don’t want to be left holding the bag at the end of the year.
Paying Back an Obamacare Subsidy
The good news is that the federal government is willing to work with those who have made the unfortunate mistake of miscalculation. Communication with the IRS is the best bet. They can help with payment plans and waiver of interest. However, if they are not paid back by the following year’s tax season, the amount owed will be deducted from the following year’s tax return, should there be one. Also, note that owing an Obamacare subsidy will not disqualify receiving the tax credit for the following year.
Keeping up with your insurance plan is important. Every change that you have, it is best to review your insurance policy to see how it affects your coverage and your rates. When it all seems confusing, you have the insurance experts in your corner. We at Cover Mile can review what you have and assist you in ensuring you have the best coverage, including having the correct subsidy information on your Affordable Care Act policy. Contact us today.