Don’t Overpay for Health Insurance: Why You Need to Update Your Marketplace Application Now
If you signed up for subsidized health coverage through a state or federally-administered exchange last year, you should refresh your application now.
Americans who qualified for Affordable Care Act (a.k.a. “Obamacare”) subsidies on their exchange-based policies last year but do not refresh their applications now could lose out on bigger subsidies next year, or could face surprise tax bills for next year, if they fail to update before the December 15th deadline to switch or renew coverage. Additionally, if someone did not check the box that would allow the marketplace to pull their IRS data, they may lose their subsidy altogether on January 1st, if they do not log back into their account to refresh their application for 2015. Although the final deadline is February 15th, all changes would be effective the 1st of the following month at the earliest – and paying a full-price premium in the meantime could create a financial hardship in the meantime.
There are two factors in play here — your income-to-household ratio, and what’s called the benchmark plan premium — and each could positively or negatively affect your subsidy level. Let’s look at each in turn.
What income changes in 2014 could mean for your subsidy.
Income, as you know, can go up or down in a given year. If your Modified Adjusted Gross Income went up in 2014, or if the number of members in your household changed even as income stayed the same (say, an adult child moved out and can no longer be claimed as a dependent), you may have exceed the income threshold in 2015 for the subsidy you took in 2014.
If you do not update your application and are currently receiving a premium subsidy, you’ll continue getting that subsidy for now, but you’ll end up getting socked with a big tax burden for 2015, because when you file your income tax, the government will take back the subsidy it overpaid to you. The subsidies are APTCs – Advance Premium Tax Credits. When you apply for your subsidy, you’re in fact applying for an income tax credit which you can have assigned to the insurance carrier to pay your premium. If the tax credit you qualified for based on your estimated earnings is incorrect, you will either get the remainder back as an income tax refund (if you overpaid for your insurance) or be charged the balance in premium (if you underpaid).
Likewise, if your household grew (you had a new baby, say) and income stayed constant, or if your income fell, you may qualify for a bigger subsidy in 2015 than you did in 2014. Again, though, if you did not update your application, you’ll end up with the same subsidy level as 2014 and could end up overpaying for your health insurance every month.
The benchmark plan premium for your area may have changed.
The benchmark plan premium is the premium for the second-lowest priced Silver plan available on-exchange in your area and, under the Affordable Care Act, the government must that price as one of the factors in its formula for calculating your subsidy level.
Essentially, your subsidy is based on the government ‘s assessment of whether, based on your MAGI, household size and the benchmark plan premium price in your area, you are likely to be able to afford the second-cheapest Silver plan.
From one year to the next, the benchmark plan premium price can vary in a given area. So, if your area’s benchmark plan premium goes up, you might qualify for additional subsidy dollars, holding income and household size changes constant.
If, however, the benchmark plan premium in your area goes down, you might qualify for less financial assistance than last year. And, again, if you keep taking last year’s subsidy without factoring in these changes, you could be in a world of hurt when next year the tax man cometh.
Once you have refreshed your marketplace application, call your health insurance agent.
Now is a great time to look at the plans available in your area next year, and to see if there are better, more affordable options for you — either on-exchange or off. Although exchanged-based plans are the only types toward which you may apply a federal subsidy, sometimes off-exchange plans can offer better coverage at competitive rates.
Make sure, too, that you have your health insurance agent’s Marketplace ID (FFM ID) and National Producer Number (NPN) close at hand (call us — we’re happy to provide it to you). If you do buy an exchange-based plan, the application will ask if you are working with an agent or broker and request that information. If you put in your agent’s Name, ID, and NPN; then he or she can act on your behalf — i.e., calling the insurance company to verify coverage, clarify billing questions, or resolving problems. Note: your agent does NOT have access to your protected health information – PHI is HIPAA protected so your privacy is protected. PII (other personally identifiable information) is securely protected – all FFM registered agents are licensed in the states in which they sell, appointed with the companies they represent, and certified each year to be permitted to sell on the healthcare exchange.
Inputting your agent’s NPN will not increase your premium; it merely gives your agent permission to talk to your insurance provider, and vice versa. That way, if questions or challenges crop up, you can make them your agent’s responsibility to handle. And, after all, that is why we’re here for you.