If you are considering applying for premium tax credits for coverage in the Marketplace, the test for whether your employer coverage is affordable is based on the cost of self-only coverage in the lowest cost plan your employer offers, compared to your household income (and not just your salary).
Assuming you are eligible for premium tax credits, the amount of your credit will be calculated based on how you file your taxes. If for example, you each claim one of your children, you each will be considered as a household of two. The income of each household would be evaluated separately to calculate eligibility for and the amount of premium tax credits and cost-sharing reductions. Using a different example, if you claim both children as dependents on your tax return, then you and your children will be considered a household of 3, your income will be the basis for determining subsidy eligibility for the 3 of you. Your partner will be a household of one and his/her eligibility for premium tax credits will be determined separately. As for the type of coverage your family can purchase, that may vary based on the Marketplace rules where you live. For example, some insurers may offer family coverage only to married couples. If you buy one policy for the entire family, all the tax credits you are eligible for can be used to reduce the premium for that policy. If you buy separate policies, you can allocate the premium tax credits across two plans.
During Open Enrollment, you and your spouse will apply as a household of two. When the baby is born, you can update your family information with the Marketplace to reflect that you have become a household of three. At that point, you may qualify for a larger premium tax credit. (For example, if you and your spouse together expect to earn a 2019 income that is twice the federal poverty level for a household of two ($32,920), you would be required to contribute about 6.54% of your household income toward the premium for the benchmark plan in the Marketplace. Once the baby is born and you are a household of three, that income would constitute just 158% of the federal poverty level for a family of three and you would only be required to contribute about 4.15% of your income. When you report your new family status to the Marketplace you will also have a 60-day special enrollment opportunity to add the baby to your plan and increase your advanced premium tax credit amount. You will also have the option of enrolling your baby in a different plan. However, you and your spouse generally will not be able to change health plans as a result of the “newborn” special enrollment period.
That’s not advisable. The Marketplace will check the information you provide against a number of databases (including IRS data, Social Security data, wage databases, and others). If the information you provide is very different from what’s in these databases, you may be asked to provide additional documentation. In addition, at the end of the Application for Health Coverage and Help Paying Costs, you will have to sign that you have provided true answers to all questions to the best of your ability. Knowingly providing untrue information is against the law and could even result in civil money fines.
You may be asked for additional information about your projected income. The Marketplace will compare your estimated income to other available data on your most recent income (for example, with tax return data.) If you estimate your annual income will be substantially less — by 25% or $6,000, whichever is greater — than the amount you earned in previous years the Marketplace will ask you to provide documentation to support your estimate. This may include a letter from your employer, a pay stub from your new job or other documents. In some cases, just explaining your changed circumstances may be enough.
Yes, you can make adjustments during the year whenever you need to. There is no limit to the number of times a person may report income, family or insurance-eligibility changes to the Marketplace. Changes that are reported by enrollees will be verified by the Marketplace. Then the Marketplace will send you a notice (called a redetermination notice) showing your revised eligibility for premium tax credits and cost-sharing reductions. In addition, people can always ask the Marketplace to provide them with a monthly advance premium credit below the amount the Marketplace determines based on the household’s income if they want to minimize the chance of owing money at the end of the year.
It’s common for income to fluctuate, particularly if you are self-employed, perform seasonal work or have multiple jobs. To achieve the most accurate premium tax credit amount, you should report income changes to the health insurance Marketplace during the year, as they happen. Otherwise, if you claim a premium tax credit during the year and your actual income for the entire year edges over 400% FPL, you will need to pay back the full credit amount. To avoid this result, if you estimate your annual income will be close to 400% FPL, you could also consider waiting until you file your taxes to take all or a portion of the premium tax credit on your tax return instead of receiving advance payments.
Unfortunately, in most states so far, the data match inconsistency notices are not very specific in describing the additional documentation that is required. Instead, notices list generic types of types of income documentation without specifying the documentation appropriate for you. If you are self-employed and estimate your income next year will be significantly less than what you reported on your most recent tax return, you should provide copies of any documents that support your estimate. Make sure to provide copies and not original documents. If you don’t have documents, a signed statement explaining your estimate may be accepted. Be sure to include your name and ID number, a description of the income you expect to earn next year, a description of how you arrived at your estimated income amount, and an explanation of why other documentation is not available.
In reviewing your application, the Marketplace will compare the amount of income you estimate for next year to the most recent information about your income that is available (usually, that will be the tax return you filed this year reporting last year’s income.) Generally, if that amount differs from the amount you put on your application by more than 25% or $6,000 (whichever is greater), you might receive a data match inconsistency notice from the Marketplace and you’ll need to provide more documentation.
In cases of an income data match inconsistency, the Marketplace will ask you to provide documentation within 90 days. During that period, you can get premium tax credits based on the income you attested to in your application. However, if you have not resolved the data match inconsistency within 90 days, the Marketplace will adjust or end your advance premium tax credit based on the most recent income information it can find.