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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.


Wait for Subsidy?

By on | 6 Comments

Question: With variable investment income, I decided not to wait for income verification. If I pay the full premium thru 2014 and then my 2014 Income Tax Return is below the income level, can I receive the subsidy on a retroactive basis?

Answer: Yes. In fact that would be the ideal way to handle your variable income issue.

6 Comments

Dan … your question was answered here https://www.cahba.com/advice/2013/12/infinaldisclosurewhenpurch.html where you first posted it.

Future income problem! CC operator tried to push me into Medical after the system considered that a payment as a contractor will not repeat in 2014. So if you do not prove your future income (like Nostradamus did!) to be high enough the operator does not enroll you in a plan even if you decide to pay the full amount upfront ! (I made the phone call because the web verification blocked my application). So now the concern is: what happens at a latter date if my income is still low and I want to pay the full amount??

Deep …

I realize that no one knows how much their investment income will be, and a person can “estimate” it to be anything they want.

But the point that I was trying to make was that it is not necessary to artificially enter an amount that forces MAGI above 400% FPL. If the estimated income results in an MAGI at or below 400% FPL, and the applicant doesn’t want the tax credit, they simply reduce the amount to $0 in the application process.

Nothing was inherently “wrong” with your advice except that it wasn’t necessary. But it did seem to me that you were telling the person to deliberately “misrepresent” his income on the high side. Someone else might look at that and get the idea to misrepresent on the low side in order to claim a credit, which could be problematic.

It’s simply best to “estimate”. When reporting income in the online application, there are three different income sources that one enters — employment, other, and self-employment — plus one section for income deductions (student loan interest, alimony). Use them appropriately.

The original poster stated he has a “variable” investment income. The question was how to go about applying so that he doesn’t get stuck in the income verification.

The 2014 income is an ESTIMATE.

There are very few people who can know with certainty what the next years income is going to be. It is supposed to be your best guess.

So there is no question of “misrepresentation” on investment income, if you really don’t know what the markets are going to do next year — unless you have a fixed income stream.

The income verification is strict only to make sure someone is subsidy eligible. If there is no subsidy involved (above 400% FPL) the income verification will go through easier. That was my suggestion.

If you have anything constructive to say for the original poster’s question, please post.

“Please be sure buy your coverage inside the exchange by entering an income above the 400% FPL level.”

Although the insurance must be applied for through the exchange to preserve the tax credits, the rest of this advice is NOT necessary … and it is probably not a good thing to misrepresent one’s income, even if misrepresenting on the high side. You’re electronic signature represents that your application contains accurate information.

The reason you don’t need to claim an income above 400% FPL is that you have the option within the CoveredCA process to edit the amount of premium tax credit you wish to receive, and can reduce it all the way to $0 if you choose. You can do this at any time, even in the middle of 2014, or every month if you feel like it. It will give the folks at the IRS something else to do besides auditing your tax return.

I believe that CoveredCA is already underestimating the actual tax credit to avoid persons being faced with the “clawback” in 2015. Additionally, we don’t yet know what the 2014 FPL will be (it should be slightly higher than 2013), and that, too, will increase tax credits at filing time in 2015.

Please be sure buy your coverage inside the exchange by entering an income above the 400% FPL level.

If you go to a carrier directly and purchase insurance, you would be out of luck. You cannot switch your insurance mid-year and you would not be eligible for the entire year 2013.

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