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Covered California Q&A

Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.


What If We Report Separate Income?

By on | 3 Comments

Question: Is the federal subsidy based on the total household income of a person/family or just based on those person(s) enrolling in Covered California? For example, could a couple “work” the system by enrolling as 2 separate individual policies and base the subsidy on his/her own earnings instead of a combined earnings total?

Answer: The household income on which the advance tax credit eligibility is based for a married couple would usually be the total income. This would be verified by IRS data showing joint income for federal income tax purposes. So in this scenario it would be very difficult to game the system. The subsidy would be calculated on the joint income even if one of the spouses did not apply for subsidized coverage in Covered California (example: one spouse on Medicare). In this case, the percentage that the couple’s subsidy represents for dual coverage in a Silver Level Plan, could be applied by one eligible spouse for the purchase on any qualified plan in the exchange.

3 Comments

Hi Linda,

When I posted my comment in May, I was thinking of issues that could arise. I wrote it as a “possibility”, but it is still an open question. The issue is an important one for many couples. For a two person household, the threshold for 2014 is $62K annually. Many couples with combined income over this amount could potentially benefit. However, the subsidy must be weighed against the increase in tax liability that would result in a large majority of cases.

Brad Miller

Let me see if I understand this correctly. My husband is 63 and I turn 65 in Feb 2014. I will then be on medicare.
When I apply, I use total household income and enter 2 people in the household in order to calculate the subsidy that is allowed.
I didn’t understand the percentage comment.

In regard to splitting income, the couple could file separate tax returns. This move would, in most cases, increase the total tax liability. However, this increase may be more than offset by the increased health insurance subsidy. This plan is open to this type of manipulation.

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