Question: Why is my eligibility for a subsidy for Obamacare based on 2012 income instead of 2013 and what if my income is lower in 2014? Also does an early IRA distribution count as income affecting my 2014 health care subsidy?
Answer: I’ve had many questions having to do with just how Covered California will use the adjusted gross income (AGI) from an applicant’s tax return. I think that, primarily, people want to know how much flexibility will be shown beyond the AGI number. Actually, the exchange has always referred to eligibility based on MAGI for Modified Adjusted Gross Income, but we didn’t know how the AGI would be modified.
We got a good indication of that last week when the feds released a demo version of the marketplace online application. Because the application is connected to a hub including IRS data, the applicant’s AGI from his last federal income tax return in is already displayed in the application, but it only serves as a reference point to help determine his or her estimated income for the year in which he wants insurance coverage. In some cases the MAGI could be very different from the AGI, for example if the applicant became unemployed or underemployed since his or her last tax return.