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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.

October 2018 Archives

Question: I have a very small business (s-corp): 2 employees (myself + full-time employee). The employee currently has a subsidized plan under covered california. I would like to help pay for the employee's health care, but it seems like the employee would lose their subsidy if I did so. When getting quotes I saw that even if I paid 65% of the premium (of the employees current plan), the employees would still be losing over $100/month. Is there any way I can contribute via a cafeteria plan (IRS 125) or similar and they can keep their individual plan? Basically, some way I can contribute that will maintain their subsidy eligibility but not increase their taxable income. Note: my employee is full time and earns > $18/hour. I am covered by my spouse.

Answer: A Health Reimbursement Arrangement (HRA) would allow the employer to reimburse premium and/or out-of-pocket medical, dental, and/or vision expenses up to $4,950 for employee-only coverage and $10,000 for family coverage. Employer contributions under an HRA are pre-tax to the employee so wouldn't increase their reportable income. Employees participating in a small business HRA can access the ACA premium tax credit, but the amount of the credit will be reduced dollar for dollar by the HRA amount, so the employee can't double dip.

Does Rental Income Count?

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Question: We didn't make any money besides on our rental properties. And I'm not sure if that would apply towards our income. Would there be a penalty if we were supposed to be in Medi-cal instead of Covered Ca plan?

Answer: Your net rental income after expenses is taxable and counts toward your adjusted gross income (Line 37 of Form 1040) which is what you report to Covered California. If your adjusted gross income makes you eligible for Medi-Cal, your Covered California coverage will be terminated, but there is no penalty.

Domestic Partnership Eligibility?

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Question: I now quality for health insurance assistance. If I enter into a domestic partnership with someone who is over 62 (opposite sex) who does not qualify for assistance, would I have to include his income to determine if I still quality for assistance?

Answer: In general, California now affords the same rights and responsibilities to registered domestic partnerships (RDP) as married individuals. However, because the IRS does not recognize RDPs as married individuals for federal tax purposes, domestic partners will continue to been seen as unmarried individuals by Covered California. Your eligibility for premium assistance is based on your income alone.

Question: My child is a full time dependant that lives at home and works part-time. This year she earned over the limit of nonreportable income and had to file taxes. My question is this, do I report the income earned through the part- time job that is over the threshold or the entire 9k? Secondly, is it okay to include under entire household income (my income, self employed) estimate, or should I list the income for my dependant alongside the dependant name?

Answer: This is the easy part of your question: all of your adult child's $9,000 income must be reported, not just the amount over the threshold. Part two: If you wish to continue claiming her as a dependent, you must add the $9,000 to your household income. In that case, your dependent must opt out of her personal deduction when filing her income tax return. Otherwise, she can apply for coverage as a one-person household. The income of $9,000 makes her eligible for Medi-Cal, no cost insurance, but you would give up the dependent deduction on your taxes.

Question: My spouse & I are renewing our health plan coverage for 2019, but he will be going on Medicare in April. When he cancels his Covered California plan, how will that affect my rate?

Answer: You and your spouse have individual rates which are now combined. When your husband goes on Medicare, you will pay only your individual rate.

Question: My wife and I sold our primary residence in 2018 with a capital gain of $100,000. We meet the certain conditions to exclude the first $500,000 of gain from the sale of our home from our income and thus don't have to pay taxes on it to the IRS. Because of this fact, is this $100,000 capital gain not counted as income from Covered CA stand point and not affecting the Advance Tax Credits we receive? Thanks

Answer: Covered California considers only taxable income in establishing your eligibility for premium assistance under the Affordable Care Act. Your taxable income is your adjusted gross income (AGI) which can be found on Line 37 of IRS Form 1040. AGI includes capital gains, but since the capital gain from selling your home is excluded from tax in your case, it will not affect your taxable income.

Question: If I divorce before the end of the year I understand I have to file my taxes separately but my annual income to determine coverage was based on both of our incomes as a married couple. My coverage was based on household income of 40K with 2 people, married. If we divorce and I have to file taxes separately as a single person my reported income would only be about 18,000. How does that impact my covered California? My email is below

Answer: In your case, your individual income of $18,000 will qualify you for more premium assistance than you qualified for as a couple. You will receive the added premium assistance as a tax credit when you file your 1040 for 2018 as a single taxpayer.

What is Considered Income?

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Question: What is considered "income" Is savings or proceeds from retirement investments "income"?

Answer: In determining eligibility for premium assistance and cost sharing benefits, Covered California considers only taxable income. A quick way to check your "income" is to look at line 37 of your Form 1040 tax return. This is your Adjusted Gross Income or AGI. It includes interest earned on your savings account and withdrawals from your retirement account.

Question: When is open enrollment this year?

Answer: The Covered California 2019 Individual Health Insurance Open Enrollment Period starts on October 15, 2018 and runs through January 15, 2019. To purchase new coverage effective January 1st 2019, you must apply by December 15, 2018. During Open Enrollment you can apply without a Qualifying Life Event.

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