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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.


Income changes and CSR?

By on | 6 Comments

Question: I'm currently on a Silver 94 PPO with Blue Shield. I'm sort of expecting to make more money than I anticipated around midyear. The way I understand it is that I have to report changes on income to Covered CA. Will this bump me out of the Silver 94 plan and force me to a plan with full deductible at mid year whenever I make the change?

Answer: Yes. Higher income will change your eligibility for cost sharing reductions (silver plan benefit enhancements) as well as advance premium tax credits (subsidy).

6 Comments

My unemployment insurance ended as of 1/17/14. Will there be a change of insurance payment. What documentation is needed & where does it need to be sent to & how long to make change?

Back in Dec we sent in a notarized affidavit for our 2014 MAGI estimate (about 300% of the 2013 poverty level). Last week we received notification from CoveredCA that we are not eligible for APTC (Advanced Payment Tax Credits). No explanation was given, other than our income was above the 250% poverty level (which is the limit for cost sharing, not APTC). We called CoveredCA today and they are looking into it and will get back to us. But it clearly states on the website that our account is “Not approved for premium assistance”.

I was wondering if anyone else has tried an affidavit and whether or not it worked for them?

Before everybody gets too worked up over Andy’s report, please keep in mind that what happened to Andy may have been due to the specific circumstances of his case, and may not be applicable to anyone else. (See my comments re: Andy’s situation in the preceding thread “No Prior Tax Returns?”)

First of all, Andy states that a reported change of income that requires a revision to the advance premium tax credit (APTC) would result in the termination of a policy. That is incorrect. The regulations seem to clearly spell out the procedure that Covered California would follow: they would recalculate your APTC for the remainder of the year. For example, let’s say your initial 2014 income estimate led Covered CA to give you $300 APTC for each of the first 6 months of 2014, or a total $1800 APTC to date. Then you report an increased income estimate at mid-year that would only entitle you to a lower $200 APTC per month, or $2400 for the entire year. Covered CA would then decrease your APTC as follows: they would figure that you had already received $1800 APTC so far, and you are only entitled to $2400 APTC for the entire year, so your APTC will be reduced to $100 per month for the last 6 months of the year. That would result in a correct year-end total of $2400 APTC.

Similarly, if you report a decrease in your income estimate, Covered CA will recalculate and raise your APTC for the remainder of the year so that your overall APTC for the entire year would be correct. And if it turns out in other cases that too much APTC has already been paid out, Covered CA will not try to clawback the incorrectly paid APTC via a “negative” APTC - the APTC would be ended and reconciliation in such cases will be handled by the IRS at tax time.

It’s harder to figure out what happens when your revised income estimate results in a change in or the elimination of your cost sharing reduction (CSR). The regulations indicate that Covered CA would determine you to be eligible for the correct and revised CSR level, but does NOT explicitly impose any administrative requirements on the carrier. It seems that a carrier should be able keep your current enrollment intact except to change your co-pays, deductibles, etc. effective with the reporting date. But there’s nothing to insure that such a changeover would be seamless (it’s conceivable that a carrier could insist that your first plan be terminated and require re-application for a new plan at the correct CSR level, which would lead to Andy’s concern that a gap in coverage could occur).

Obviously, Covered CA and the carriers seem to be overwhelmed simply processing new applications, so it’s not surprising if there is no procedure in place yet to handle reported income changes. Such reports may simply be backlogged without action for now. It may be easy enough to recalculate APTC and CSR, but it’s far more cumbersome to coordinate the necessary sequence of actions (recalculation by Covered CA, advance notice to the enrollee, and then the actual implementation by the carrier).

There’s a companion issue of how Covered CA will handle the semiannual reexamination of income (presumably when they have access to 2013 tax return data) and the annual eligibility redetermination. Andy’s statements would clearly not apply - Covered CA is not going to trigger a mass termination of policies due to a revision in APTC. APTC will be adjusted in a way that is hopefully seamless for the enrollee. But what about changes in CSR - for example, what if the new data requires an enrollee to switch from a Silver 94 plan to a Silver 87 plan? Would that be seamless as well? It’s hard to have a lot of faith, but we’ll see.

If reporting a change in income results in an actual cancellation and re-app, with possibility of a gap, doesn’t it make more sense to deal with the reconciliation on the 2014 tax return.

CC accepted 2012 tax returns for verification of income for 2013 apps. 2013 could be a different number, which could be different from 2014 income….the one that counts.

Are there any penalties other than the clawback?

Andy, Covered California is not providing a Qualifying Event 60 day allowance to change plans?

Is it a systems thing, where the CovCal reps don’t know any better because the system tells them this and that, and/or the system only gives particular options, or does CovCal actually intend to disenroll people without allowing them 60 days to enroll in a new plan for which they are newly eligible?

Have you been ‘Terminating Participation’ first for your clients, and this is the cause for the plan termination? Because I notice the CovCal system does not seem to recognize an inputted change in income to affect eligibility for my clients through the ‘Report Change’ avenue. Phil mentioned likewise previously as well.

Thanks.

Please be aware that if you report income changes mid year and you are still eligible for enhanced silver or a premium tax credit, the change will result in your current plan being terminated. A re-application based on the new income number will be generated at the same time.

But the termination will arrive at your carrier first. Believe me - this is a very ugly situation. I’m dealing with it now. Covered CA will assure you that the new re-app will be backdated and that you will be covered for claims in that time frame between the termination date and when the re-app is processed by the carrier (at least two weeks). The carrier will promise you nothing.

The potential for being left uncovered and vulnerable is very high.

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