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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.


Conditionally Eligible for 90 Days?

By on | 13 Comments

Question: My wife & I are retired; most of our income is from investments. We received notification today from CoveredCA that we were approved for only 90 days of coverage until we show proof of income. But we don’t know how to show proof of income, since our 2014 income will be considerably lower than our 2012 or 2013 income. (This is because we had been converting portions of our traditional IRAs to Roth IRAs, artificially raising our income each year.) What are we supposed to do to “prove” our 2014 income? Thank you!

Answer: There’s no app for that :-) I suggest you write an explanation in a bit more detail than you have above and include any documents that back it up - e.g. IRA withdrawals and Roth deposits . If they are not satisfied with that, let them request something specific.

13 Comments

Yes, in my haste, I worded that incorrectly…it’s been a little busy around here…but yes, I knew that. And you’re right, perhaps Covered CA should be more lenient but I’m assuming the federal government or IRS is requiring them to put these safe guards in place? Yes?

Dina …

While your numbers are accurate, your’re reasoning is incorrect. Which is precisely why CoveredCA should not be overly concerned about a person’s claimed income. They may be a “watchdog” for the IRS, but they are not the determiner of income. Congress set up these cockamamie rules, and it will be their problem to resolve.

“If they could get it all back then likely they wouldn’t be scrutinizing income as much.”

The “they” in your statement refers to CoveredCA. But CoveredCA has absolutely no financial interest in the premium tax credits. Tax credits do not come from CoveredCA and there is nothing for CoveredCA to recover. Only the IRS is involved in that. The best thing CoveredCA can do for folks is let them obtain as much in the way of tax credits as they are willing to claim, subject to criminal prosecution for fraud.

While the “clawback” is limited, the IRS has many other tools at its disposal if a taxpayer fraudulently misrepresents his/her income for the purpose of obtaining any tax credit or deduction to which he/she is not entitled.

Andy, great advice. We called Covered CA and a supervisor there gave the exact same advice: Submit an affidavit stating our 2014 estimated income (MAGI), and explaining why it will be less than previous years. Hopefully that will do the trick.

Kevin, you’re absolutely right, it will be a very big improvement over what we would pay for our grandfathered plan next year (even with the increase, though the increase wasn’t as bad as the average increase we’ve experienced over the last 5 or more years). But as I understand it, besides the advance tax credit, a benefit of satisfying Covered CA now is lower deductibles and maximum out-of-pocket should we actually need to use the insurance.

Several people have stated that proof of income is not that crucial because of the final reconciliation that will occur with the filing of your 2014 tax return. In other words, even if you do not get the proper advance premium tax credit (APTC) now, you will get in when you file your tax return.

However, that only applies to the APTC. Applicants under 250% Federal Poverty Level (FPL) who select a silver plan are also entitled to the cost sharing reduction (CSR) that can substantially reduce their out-of-pocket costs during 2014. Anyone who wants the CSR and who is asked for proof of income MUST pursue that issue NOW. If you fail to provide acceptable proof of income now and fail to receive the CSR during 2014, you will not receive the benefits of CSR even if your 2014 income tax return comes in under 250% FPL. In other words, you will not receive any rebates for the unnecessarily higher co-pays and out-of-pocket costs that you paid during 2014.

Again, if your expected 2014 income would entitle you to cost sharing reduction, it is important that you provide proof of income NOW.

There’s another more important reason Covered CA wants to verify that indeed you’re eligible for the advance tax credits. They might not get all of it paid back at tax time. Here are the clawback rules: If income is under 200% of fpl then $600 maximum If between 200-300% then $1,500. If 300%-400% then $2,500. If they could get it all back then likely they wouldn’t be scrutinizing income as much.

Well, the proof of income is needed if you are requesting an ADVANCE tax credit, because you are asking the government to advance you money based on what you think your 2014 income will be. Covered Cal is does need a way to verify, as theoretically some people who don’t qualify for subsidies could lie in order to get premium subsidies they are not entitled to.

But of course it will all be reconciled in the end. There is no long term benefit to anyone who understates their income to get the subsidy, but it it is essentially an interest-free loan, and I can see the possibility of some people simply using that as a way to solve short-term cash flow problems- probably a fairly attractive option to individuals who derive most of their money from commissions or other irregular lump sum payments, or whose work and income is seasonal.

“Proof of income” is simply any document that shows you have income — a pay stub, a bank statement, etc. there is actually a long list of items that can be submitted as “proof of income”. They are NOT asking for documentation that shows what your 2014 income will be. You just need to submit anything that shows “income”.

I had to submit a statement that a 2-1/2 year old child did not have any income after they demanded proof of income for that applicant.

This whole thing is a bunch of nonsense either give everyone a tax credit or give no one any tax credits. They’ve (Congress) made this far more complex than it ever needed to be.

It’s up to the IRS to determine how much tax credit you will actually receive for 2014 when you file your 2014 income tax return in 2015.

People seem to think that the subsidy they get now for 2014 is set in stone - it is not. On your tax return for 2014 you will have to enter details of the subsidy you got or didn’t get and your tax will be adjusted to whatever it should have been based on your actual income for 2014, not the estimate you make now.

That also means that you aren’t going to miss out on anything in the long run, even if you can’t satisfy Covered CA right now: it will all come out in the wash. Worst case you may have to fund 100% of the premium of your chosen plan premium now and get a refund when you file your 2014 tax return. For the original poster that is probably still a big improvement over what he/she was presumably doing in 2013, which was paying the full premium and getting no refund (ignoring the incredible premium increases that all of us with existing personal insurance seem to be experiencing).

Yuri:

I have read elsewhere (and I think even here at Cahba) that insurance companies are required to make available ALL insurance options available inside the exchange outside the exchange too.

The names may be a little confusing as they may not match up exactly — but all the details should exactly line up such as deductibles, copays, provider network, and premium (unsubsidized). Anecdotally, I can say that seems to check out okay from my area.

So, you may want to go to the insurer’s website directly, or contact them directly and purchase the one you are interested in. As you are not planning to get the premium subsidy anyway, that should be much easier in terms of process and identical in all other aspects.

You can still use the exchange to look at all the options across various insurers side by side to make your comparison shopping easier — exactly the way it is intended to be. Once you on into the insurer’s website, all you will see is their own options, and nothing else.

Re:Retired. I am in the same situation. It was relatively straightforward for me - a 2010 traditional IRA to Roth conversion that took advantage of new income reporting rules to split the income into 2011 and 2012. So I uploaded the 2010 Form 8606, 2011 1040 and 2012 1040 along with a very detailed letter explaining why 2013 would show interest income only. If your situation is not as cut and dried, and the only thing backing your assertion that 2013 income will be much lower is only your say-so, then in addition to a letter uploaded with the appropriate tax forms, I strongly recommend creating a simple legal document called an AFFADAVIT.

It is one of the “proofs” that Covered CA lists as permissible to submit. It is usually used in court cases to support statements of fact. You can order a blank form online, download it instantly, fill it out quickly saying 2013 income will be X as there is no IRA distribution, get it notarized, and upload it to the Covered CA site.

And do it quick, you’ve got no time to lose at this point. It’s getting messier by the second for them, I’ve been in constant contact and noone knows what is going on.

Yuri, as your daughter is not eligible for a subsidy, there is no benefit to you from using the exchange. Instead you can just go straight to the company that offers the policy and buy from there — some of the companies even offer other options beyond what you see on the exchange.

Same here— I am trying to enroll only my child dependent, not myself. I have adequate and affordable employer insurance, but adding my child to my employer plan is personally unaffordable. She is not eligible for a tax subsidy because of my income but coveredca is still a much better deal for coverage for my child even at full price. Today I received a letter asking for details of my employer coverage and an HR contact. I called the customer service number and was told that 1) my employer is “not in our system” (it is headquartered in another state) and 2) that I must substantiate that my work insurance is not affordable per the 9.5% rule. The rep had to keep asking her supervisor questions. This is scary because my open enrollment period at work ended already.

I completed a clients enrollment and it is asking us to submit proof of minimum essential coverage. I’m confused by this as I haven’t seen it before. She won’t have other coverage than her coverage through Covered CA.

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