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Are Obamacare premiums based on prior year income?

 
 
ddbell
 
Reply Thu 15 Nov, 2012 12:41 pm
I'm trying to figure out how the Obamacare premiums are calculated. The max premium cost based on income seems easy enough to understand. However, is that based on current or prior year income?

My situation is that I have a job that pays really well. I currently have insurance through my work so there no issues now. However, my company is going through a lot of changes. There is a possibility that I won't be employed with them in 2014.

What will happen if I earn over the subsidized income amount in 2013 but I end up being unemployed in 2014? Does this mean that I will need to pay the full unsubsidized Obamacare premiums in 2014 since my 2013 tax return will show the higher income?
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Type: Question • Score: 4 • Views: 4,908 • Replies: 5
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sozobe
 
  2  
Reply Thu 15 Nov, 2012 12:54 pm
@ddbell,
This isn't conclusive but it seems to indicate that it's based on your current income:

http://healthreform.kff.org/SubsidyCalculator.aspx
ddbell
 
  1  
Reply Thu 15 Nov, 2012 01:10 pm
@sozobe,
I did see that calculator. However, there are also articles online that state it's based on your adjusted gross income. This is only done once per year on your tax return.

Perhaps you pay based on your AGI but then at the end of the year you would enter your insurance cost on your new tax return. It would then be adjusted based on your current year income so you would get a refund or pay more based on whether you paid too much or not enough.

I think this would seem to make sense for people who have variable incomes such a someone who is self employed. It may be difficult to predict your income for a home business for example. Therefore, adjustments at the end of the year tax return seem to make sense. I just can't seem to find any conclusive answers anywhere online.
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tsarstepan
 
  1  
Reply Thu 15 Nov, 2012 01:13 pm
@sozobe,
Thanks Soze. That may be helpful... I think.

If I enter this year's income (I really don't expect to make too much more if any more at all) when 2014 eventually rolls around. What is that? Like 10 years away? Rolling Eyes :
Quote:
$1529
Actual person/family required premium payment (which equals 6.48% of income and covers 33% of the overall premium)

That's $127 per month if I understand it. Very painful.
0 Replies
 
InsuranceLady
 
  1  
Reply Mon 23 Sep, 2013 09:03 am
@ddbell,
Should you buy through the Marketplace, you may also make changes to your profile (i.e. income in this case) to adjust your tax credits. I highly recommend doing this in the event you get a better job just so you do not owe taxes for getting to much help with your insurance costs. However, if you get a job with less pay, you will receive more help in the form of a premium tax credit.
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D0C
 
  1  
Reply Wed 25 Sep, 2013 09:46 am
@ddbell,
The amount of subsidy you receive (actually goes directly to insurer) is based on next years income. You must estimate your next years income and the subsidy is based on that. If you estimate to high, your subsidy will be adjusted upwards; estimate low and actually earn more - the subsidy is less and adjusted down. This is where the IRS comes in. Their function (the only function) is to track the income and adjust these subsidies. Good article about plan costs Edit [Moderator]: Link removed
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