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Income — Not Assets — Will Determine Subsidies In Online Insurance Marketplaces

This week, I answer readers’ questions about how income and other assets will affect health insurance choices and responsibilities under the Affordable Care Act, and whether having access to a student health plan will make a person ineligible for subsidized coverage on the exchanges.

Income -- Not Assets -- Will Determine Subsidies In Online Insurance Marketplaces

Q. In 2012, I earned only $25,000, but I have $300,000 in stocks. I have individual health insurance. Will I be ineligible for a subsidy beginning in January because I am presently insured, or because I have large assets?

A. Neither of those facts would necessarily make you ineligible for subsidized coverage on the health insurance exchanges.

If the only coverage that’s available to you is on the individual market, being covered by an existing individual plan wouldn’t make you ineligible. But subsidies are available only for plans bought through the exchanges, not on the private market.

To be eligible for subsidized coverage, your income would have to be between 100 and 400 percent of the federal poverty level ($11,490 to $45,960 for a single person in 2013).

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Income -- Not Assets -- Will Determine Subsidies In Online Insurance Marketplaces

“Income” in this case means modified adjusted gross income — basically the total of your adjusted gross income from your tax return and any tax-exempt interest income you have as well as certain foreign income. Your stock portfolio wouldn’t be included in that total, experts say.

“Assets would not be counted, except for any income that’s generated from the assets,” says Mark Luscombe, a principal federal tax analyst at CCH, a tax and business information publisher.

Your income of $25,000 is a little more than twice the federal poverty level, so you might be eligible for subsidized coverage, Luscombe says. You can estimate your subsidy using the Kaiser Family Foundation’s subsidy calculator.

Q. If you don’t have reportable income, how will the government know if you don’t have health insurance?

A. Starting next year, most people will be required to have health insurance. But if you don’t have to report your income because it is below the tax filing threshold — $10,000 for individuals and $20,000 for families in 2013 — you’re exempt from that requirement and won’t face any penalties for not having insurance.

Q. Currently my family and I are covered by health insurance through my employer. Next fall, however, I will begin law school. The insurance plan I can obtain through the university is affordable for me, but the plan I can get for my family is very expensive. We will have a small income from my wife’s part-time work — maybe $15,000 annually. If we all qualify for insurance on the health-care exchange, my understanding is that we would pay very little after the tax credit. Does a plan offered by a university count as “employer-offered” insurance? Or can we all sign up for a plan on the exchange in October?

A. Under the Affordable Care Act, student health plans are not considered employer coverage, and if that is the only coverage you’re offered, you could buy a policy on a state exchange and you might qualify for subsidized coverage.

There’s a potential wrinkle, however. Subsidies on the exchanges are available to people with incomes between 100 and 400 percent of the federal poverty level. Assuming you have two children, the federal poverty threshold for a family of four is $23,550 in 2013. Your wife’s income of $15,000 would mean your family may make too little to qualify for subsidies on the exchanges, says Edwin Park, vice president for health policy at the Center on Budget and Policy Priorities. In that case, depending on where you live, some or all of your family members may qualify for Medicaid, the federal-state health insurance program for low-income people.

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