Health Exchange Subsidies – You Might Have to Pay the Government Back

Summary: Did you know that under healthcare reform you might be entitled to government subsidies based on your income level? Did you also know that you might be required to pay that back, or at least a portion?

We have all read about the health insurance exchanges, which are an integral part of the Patient Protection and Affordable Care Act (PPACA). The PPACA was enacted in 2010, with portions becoming effective through 2015. 2014 is the year with the most significant changes, including the creation of health insurance exchanges. The PPACA will require all Americans to have health insurance as of January 1, 2014. Enrollment begins October 1, 2013. Those who don’t have health insurance through their employer will be required to purchase insurance through the exchanges. For those at lower income levels, the government will provide a subsidy to assist with the premium payments.

Individual states were given the option to set up their own exchange, default to a federal exchange, or form a partnership exchange that combines some aspects of both federal and state. As of March 25, 2013, the status of exchanges in the U.S. is shown below:

Health Exchange Subsidies

The subsidies will be income-based, up to 400% of the poverty level. For 2013, the poverty levels are:

What will the subsidies look like?

So, how will these subsidies work? The subsidies will be similar to estimated income for tax purposes. When you sign up for the exchanges in October 2013, you will provide your 2012 tax information, as 2013 will not yet be complete. The subsidy will be based on this figure in conjunction with your age. If your actual 2014 income is more than your estimate, you will be required to pay back at least a portion of the subsidy you received. If your actual 2014 income is less than your estimate, you may be eligible for additional subsidy funds. Below are the maximum repayment limits:

Just as the government giveth, it also taketh away. This was an interesting perspective on the exchanges that I thought was worth sharing — not everything is as it seems on the surface. This is how the issue stands as of now, but, as with all things related to legislation, it may change between now and January 1, 2014. For more information on the exchanges, please visit Healthcare.gov.

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