For many of our clients, income and subsidy eligibility determination have replaced medical underwriting as a source of confusion when enrolling in a new health insurance policy. If your income is above 400% of the poverty level (for current enrollments, that’s anything above $46,680 for a single person, and $94,500 for a family of four), it won’t be a factor in your enrollment. Premium subsidies are only available for incomes below that amount, so while people with incomes above that mark can choose to enroll in a plan through the exchange or outside the exchange, they’ll pay full price for whatever plan they choose.
But for everyone else, getting a plan through the exchange means that the government will subsidize a portion of your premiums if the premium for the second-lowest-cost silver plan in your area is more than a certain percentage of your income. And Medicaid is available in Colorado for people with incomes up to 138% of poverty. Of course, that makes a lot of people wonder:
“What counts as income for subsidy eligibility?”
Good question. The ACA has its own definition of Modified Adjusted Gross Income (MAGI) for subsidy eligibility, and it’s different from MAGI calculations used for other purposes. Last fall, I wrote a post explaining how it works.
And although that calculation is still accurate, there’s another little wrinkle in the “what counts as income?” question, and I thought it would be good to add a bit more detail. Many thanks to Bethany Pray from the Colorado Center on Law and Policy for guidance on this issue.
How to calculate ACA MAGI or “household income” for subsidies
Premium Subsidies And Cost-Sharing Subsidies
By and large Social Security income has to be included in your MAGI when you’re enrolling in Medicaid or determining subsidy eligibility for coverage through the exchange. Non-taxable Social Security income is one of the three things that you must add back to your AGI in order to determine your MAGI under the ACA. But for dependent children who are not required to file a tax return, none of their income is included in the household MAGI, even if some or all of it comes from Social Security. For more details in terms of who’s required to file a tax return, read this post from Georgetown University Health Policy Institute.
The Colorado Center on Law and Policy discovered that Connect for Health Colorado was mistakenly including Social Security income for dependent children who were not tax filers, and the situation has since been rectified (it appears that this was a widespread problem impacting many other exchanges as well).
To summarize, if you have a dependent child who has an income that does not require her to file a tax return, her income is not added to the household MAGI for Medicaid or subsidy eligibility, regardless of whether that income comes from a part-time job or from Social Security. On the other hand, if your dependent child’s income does require her to file a tax return, her income (including Social Security) would be included in the household’s MAGI.
The Colorado Center on Law and Policy estimates that about 33,000 children in Colorado receive Social Security income and are in households that would be eligible for Medicaid or premium subsidies (ie, MAGI under 400% of the poverty level). If you think that your subsidy eligibility determination for 2014 or 2015 was incorrect because you have a dependent child receiving Social Security income, you can request a redetermination of Medicaid eligibility or 2015 subsidy eligibility. For your 2014 coverage, you can request a refund from the IRS if your subsidy was underpaid due to the erroneous inclusion of a dependent child’s Social Security income.
