If you receive a subsidy to help pay for your health insurance premiums, you probably already know that these subsidies are calculated based upon your household size and income. But what you might not know is that errors regarding those calculations can lead to an unpleasant surprise later.
Each year, your subsidy is calculated based upon your anticipated income for the year. Those subsidies are then paid directly to your health insurance provider, as Advanced Premium Tax Credits (APTC) each month. But if your income exceeds expectations for the year, and your the APTC paid is larger than it should have been, then you will owe the difference when this discrepancy is discovered. This generally happens when you file your income tax return, which reflects your true income for the year. If you received a raise during the year, your spouse’s employment situation changed, or if you worked a lot of overtime, you could earn more than the original estimate of your annual income.
Certain limitations do apply to the repayment demand, according to IRS rules, so you might not owe the full balance. However, this is a situation that you definitely do not want to risk! No one wants to discover that they unexpectedly owe hundreds or even thousands of dollars.
Luckily, there is a simple way to avoid this unpleasant situation. Simply keep track of your income throughout the year, and update the system if it looks like your earnings will exceed the original calculation of your expected income. Log into www.coveredca.com to update your earnings record, so that your subsidy can be recalculated to reflect your true income.
If you have more questions about health insurance subsidies or how they are calculated, give us a call so that we can assist you. The system can be confusing at times, but with professional assistance you can maintain health insurance coverage while avoiding overpayments and subsequent repayment demands.