San Francisco Chronicle, October 19, 2013
Readers had lots of questions in response to my columns last week on the Affordable Care Act, especially about what constitutes a household.
I'll answer them below, but first remember that under the law, a household generally includes anyone listed on the same tax return.
To determine whether you are eligible for a tax subsidy when buying health insurance on a state-run exchange (such as Covered California), you generally must include the income of everyone on the tax return. One exception: If a dependent on the return earns income, but not enough to file his or her own tax return, the dependent's income is not included. However, that dependent will be counted as part of the household to determine poverty thresholds for your family size.
Q: Laura R. asks, "If an adult child and elderly parent share a home, sharing expenses equally, but not sharing each other's income, and file separate tax returns, does the adult child-applicant have to add the parent's income to theirs in calculating whether they would be eligible for a subsidy, or can they apply individually as a one-person household?
"If the parent's Social Security and pension payments were added to the applicant's income, they might not be eligible, even though they are self-supporting. The home is paid off and is in the parent's name, if that matters."
A: "Adults who live together but are not married to each other or on the same tax filing are treated as separate households," says Laurel Lucia, policy analyst with the UC Berkeley Labor Center.
As long as the child is not claimed as a dependent on the parent's tax return, he or she can apply for coverage individually. They do not have to list each other's income on their applications. "They are treated as separate people, like two 20-year-old roommates," Lucia says.
The home does not matter. There is no asset limit for the subsidy. Only income matters.
Q: Diane P. writes, "I'm 62 and married. My husband has Kaiser Senior Advantage (a Medicare plan). I have a Kaiser plan provided by my employer, but I work part time and that coverage will be eliminated.
"Can I file married filing separately and due to the fact I make less than $45,000 a year get some help with an exchange plan? I'd like to stay with Kaiser. My husband and I each pay our own bills. Together our income is above $76,000."
A: Married couples, including same-sex couples, must file a joint tax return to get the federal tax subsidy, says Anne Gonzales, a spokeswoman for Covered California. If you filed your 2013 return as married filing separately, you can still get the subsidy for 2014 as long as you file your 2014 taxes as married filing jointly.
No matter how many people need insurance, to qualify for a subsidy the modified adjusted gross income reported on your 2014 tax return must fall between 138 and 400 percent of the federal percent of poverty level for your household size ($21,404 to $62,040 for a family of two based on 2013 poverty figures).
"The income of a spouse will be counted toward a household's income even if the spouse doesn't need coverage through Covered California," Lucia says.
Q: John D. asks, "What is a tax subsidy? Is it a reduction in federal income tax, and also California income tax? Is the subsidy limited to the amount of income tax paid in a year?"
A: The subsidy is a federal income tax credit that reduces the cost of health insurance for eligible individuals. It does not reduce state income taxes.
For coverage starting Jan. 1, you can have the federal government pay the credit directly to your insurance company in advance, in which case it reduces the monthly premiums you pay.
Alternatively, you can pay your full premium and get the credit refunded when you file your 2014 tax return. Or you can choose some combination thereof.
The tax credit is refundable, which means it is not limited to the amount of income tax you pay. You could be entitled to the credit even if you have no income tax liability, says Mark Luscombe, principal federal tax analyst with CCH.
However, the tax credit cannot reduce your insurance premium below zero.
Q: Bill G. asks, "A daughter earns about $11,000 per year and lives with her parents. She is happy with her grandfathered Kaiser plan, which she needs for ongoing medical issues (epilepsy) and does not want to change to Medi-Cal. Can she apply for a subsidy for her existing plan for which she pays her own premiums without being forced into Medi-Cal? She is not on Social Security disability or Medicare.
A: You cannot get a subsidy for health insurance purchased on an exchange if you qualify for affordable health coverage at work, Medi-Cal (California's version of Medicaid) or Medicare.
If the daughter is not a dependent and her income is below 138 percent of poverty ($15,857 for a one-person household) she qualifies for Medi-Cal. Therefore, she is not eligible for a subsidy, regardless of her medical condition. The daughter should check with her county's Medi-Cal office to see if Kaiser is an option in her county's Medi-Cal program.
Q: "I qualify for the subsidy but am unfamiliar with health insurance issues. Can I talk to some organization to make sure I am not paying more for insurance than needed? I also need to find out if dental and vision are covered."
A: The act requires companies that sell plans on the exchange to offer pediatric vision and dental care for children through age 18. Companies must include pediatric vision in all policies on Covered California but can offer pediatric dental as a stand-alone plan. Parents are not required to buy pediatric dental, but "you can get one for as low as $9 or $10 a month," Gonzales says.
Insurers are not required to offer adult vision and dental through Covered California and they don't, Gonzales says.
As for finding help, Covered California is paying community-based organizations to hire counselors who can help people understand and enroll in exchange plans.
The Covered California website will soon have an assistance locator, where people can enter their ZIP code and find certified enrollment counselors in their area. To use this tool, go to Coveredca.com, click on Find Help Near You and then on Find an Enrollment Counselor. As of last week counseling agencies were listed for only a handful of ZIP codes.
In the meantime, you could try calling Covered California's main help desk at (800) 300-1506 for answers to your questions.
You also could call insurance agents trained and certified to sell Covered California products. To find one, go Coveredca.com, click on Find Help Near You and then on Agents. These agents can sell any Covered California policy. They get paid by insurance companies, and their commission can vary depending on which policy you choose, according to Eddy Tse, a San Mateo insurance agent. Just keep that in mind.
At some point, you should be able to help yourself. When you actually apply for a policy on Covered California, you will have the option of entering information about your health care usage and based on that, "they estimate the total cost you may incur under various plans including out-of-pocket costs like co-pays," Lucia says.
Eventually, the site "will let you put in the name of doctors and hospitals you currently use and it will tell you which networks those doctors are in." However, that medical provider tool was not functioning and has been taken down for now.