ACA and graduating seniors and the impact on subsidies (non political post)

Parent Cafe
1

I am hoping this will be a general non-political post to help us that are trying to understand the impact of graduating senors on our health insurance and subsidies.

Currently my daughter is on our insurance. She will hopefully graduating in May of next year. I need to decide what to do about insurance for next year.

The issue is somewhat complicated since we currently get a subsidy. If she is considered a dependent, her income is added to ours to determine the subsidy and will push us off the income cliff next year. However, if she gets a job before June 31, I am assuming she would no longer be an dependent (assuming that her job pays enough to provide her to support herself). In that case, her income is not counted as I understand as part of the household.

So my questions are:

  1. Assuming that she gets a job (in June) that makes her no longer a dependent, can she buy her own policy on the exchange and possibly qualify for a subsidy for the full year? I understand that if the job pays well that she will have to repay the government. Also if she doesn’t earn enough then she will also have to repay the government in full.

  2. What happens if I keep her on my policy as a dependent and she ends up not being qualified as a dependent? I assume that getting a job with insurance would be considered a life change but I am not sure how they treat the subsidy side of the equation. I know I can keep her on my policy until 26. The issue is the subsidy is based on household income (generally the person’s income and all the income of the individuals claimed as a dependent). In this case, would all her income be consider household income or just the first six month of income before the life change?

  3. What happens if she buys a policy assuming she will not be a dependent but ends up being a dependent?

  4. If I keep her on my policy until 26 and she is not a dependent will her income be consider part of the household income for ACA subsidy even if she doesn’t live with us?

I do have the option to buy the school policy which covers her until August 1 for a very reasonable price but that policy is not as good as our policy and it ends on July 31. The quality of the plans is consideration due to amount of medicines she takes. If she finds a job before August 1 then life is good if not then add her to my policy again.

I will contact the ACA people but I got to believe other here have dealt with this and can offer advice. Hopefully my income will increase enough that I won’t qualify for a subsidy but that is not a given since we just started a new business.

For the purpose of this post, assume that ACA as we know will exist next year. With luck, I only need to deal with this next year.

2

If she gets a job, is there a possibility that the job will offer subsidized medical insurance to her as an employee?

3

My kids have employer-provided insurance. I’d highly encourage your soon-to-be college graduate daughter to pay attention to benefits when applying for jobs.

In theory, if she gets a job that does not provide insurance, she should be also able to apply for an exchange plan prior to the open enrollment period because of the change in circumstance – but the specifics could depend on your state, and on where she is living post-employent - and things obviously could change between now and next year.

As to other points:

  1. “Also if she doesn’t earn enough then she will also have to repay the government in full.”

Incorrect. If she qualifies for a subsidy based on anticipated income, and then her income ends up below the qualifying threshold – she won’t owe any money. When she files her tax returns, her subsidy will be calculated as if she earned the minimum required amount.

  1. What happens if I keep her on my policy as a dependent and she ends up not being qualified as a dependent?

You can keep her on your policy, dependent or not, until age 26. But you could end up owing money when you file your 2018 tax returns, if you had a subsidy that is greater than you were entitled to. “Household” income includes everyone on the policy, whether or not a dependent.

Keep in mind that your subsidy is figured on a monthly basis and you can report a change of income any time during the year. Or you can let things go and simply do the math yourself and bank the difference during the year, so you have funds available come tax time (or if you make quarterly tax payments, increase the amount of your quarterly to compensate). There are no tax penalties for overpayment of subidies - just dollars you owe at tax time.

  1. What happens if she buys a policy assuming she will not be a dependent but ends up being a dependent?

If she buys insurance from the exchange, then she has to file a tax return, and if her return reflects that she is somoene else’s dependent, then she would likely have to pay back whatever subsidy she got.

Keep in mind that she isn’t required to buy from the exchange or take a subsidy, and her monthly premium at age ~22 may be very affordable, especially if she is young and healthy and opts for a high-deductible bronze-level plan. So she could choose to either buy insurance off-exchange, or buy on-exchange and pay full cost until her financial situation becomes more clear.

  1. If I keep her on my policy until 26 and she is not a dependent will her income be consider part of the household income for ACA subsidy even if she doesn’t live with us?

  2. “Hopefully my income will increase enough that I won’t qualify for a subsidy but that is not a given since we just started a new business.”

I’m sure you know, but being self-employed with a business gives you a lot of wiggle room on managing income if you are borderline for qualifying for a subsidy, especially with a new business, given start up expenses. And you get the self-employed health insurance deduction in any case.

But the qualifying amount for subsidy also depends on household size, so once your daughter is no longer being counted as in-household, your earnings may be too high to qualify for subsidy regardless of what she earns. See https://obamacare.net/2017-federal-poverty-level/ for current qualifying levels tied to household size.

4

She is allowed to stay on your insurance until she’s 26. Full stop.

https://www.healthcare.gov/young-adults/children-under-26/

If she’s moving out of state though, it would probably be better to get her own policy in her new home state.

5

@romanigypsyeyes

It sounds like this family has a subsidized family plan…not employer based.

They are self employed, I believe.

6

Uh huh…

So repeating:


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If you’re on a parent’s Marketplace plan, you can remain covered through December 31 of the year you turn 26 (or the age permitted in your state).

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7

I believe if the daughter stays on their plan…her income will be added in…and they won’t be eligible for,the subsidy…and that is their concern.

To the OP…check the price of individual plans in your state. You might find it’s more cost effective for your daughter to have her own plan…than to lose your subsidy.

And as noted…when she is looking for jobs…benefits are something to consider as well as salary.

8

Sorry I must’ve misread something. I thought one of the questions was whether or not she could stay on the insurance even if she didn’t qualify as a dependent. She can- regardless of whether or not she has insurance through her company or not.

Either way, she can stay on but yes- you may lose subsidy if your income increases that much. In that case, it would make more sense for her to get her own plan.

9

@calmom and other. Thank you.

My daughter has medical issues so a bronze plan or a high deductible plan is not a good option. Of course she will carefully evaluate the health care options offered by a future employer. The odds are high that a full time job in her field will have health benefits. However, it could take time to find that job. The issue is I need to make a health care issue without knowing when/if she will be employed and without knowing if I can claim her as a dependent.

So some options are:

  1. Keep her on our plan until she is employed. Once she if off the plan, does her income count as household income? If I understand Calmom, the subsidy is calculated monthly based on that months income. Say she gets a job on June 1. I assume her income (scholarships) from 1/1-5/31 is counted as household income to determine the monthly subsidy. What about the income from 6/1-12/31? What if she is still a dependent?

  2. Get her a separate policy assuming that she will get a job. What if she doesn’t end up making enough to qualify? Calmom seems to indicate that at the end of the year she would file a return and the subsidy would be based on the lowest qualifying income even though she made less. That seems odd since anybody could claim to make enough for a subsidy during open enrollment even if they know they won’t.

  3. Buy a private non-exchange plan. I assume that the ACA pre-existing protection applies to private non-exchange plans. Correct? She definitely needs a plan with good drug coverage.

  4. Keep the school plan and hope she gets a job. If not then add her to our plan when the time comes.

The reality is I have no idea what plans (if any) will be on the exchange. Nor do I know what the cost will be. We only had one provider last year on the exchange and I don’t know if they are still plan to be on the exchange. I believe they will. The other risk (low but not zero) is that there is no guarantee that she will not need a medical withdraw for either of the last two semesters. Based on the last 6 semesters, I would guess the chance of this is 10-20%.

10

@noname87

We have two kids who are over 26. Neither one has employer health insurance. Both have pre-exosotong conditions.

  1. Kid 1 has a plan through the ACA in his state. His income is sich that he receives a subsidy for his premiums, but not his copays and deductibles. He has a high deductible plan...but has decent RX coverage for generic drugs. Not so much so for name brand. You have to read carefully. On his plan, you have to satisfy the high deductible tomget a break on name brand RX. Generics are $20 a month.

Plan costs him out of pocket about $290 a month.

  1. Kid 2 has a plan purchased directly from Blue Cross Blue Shield in her state. Hers is also high deductible...I think $4500. But it's a POS plan, and does cover her in other states as well. In her situation this was essential as she is doing some of her schooling in other states. It's $385 a month. Her RX coverage is decent...80/20 split for name brand preferred...and very low cost for generics.

You can read about the policies available in your state. Perhaps that would be a good way to start.

In any event…whatever coverage she has can easily be discontinued should she get a job with health benefits.

11

What we did was buy U insurance because S was aging off our family plan. Then when the U’s plan ended in August, we bought him a continuing policy with our insurer until he was covered again on 1/1 under the ACA as a person under age 26 years old. It is very difficult to evaluate costs because there are just so many unknowns with the current climate. Since my kids have pre-existing health conditions, I have always made sure there have been no gaps in their policies. Our insurance was provided by H’s employer and we never qualified for any subsidies, so I have no idea about how those work.

Perhaps it might be worthwhile speaking with your state insurance commissioner’s office to best evaluate your options. Even they would likely have trouble considering how uncertain the medical insurance is currently. There are private insurance agents that can also help at no charge (sorry, no personal experience).

BCBS in our state proposes significant premium increases this year due to all the uncertainty in the industry.