Trying to understand the ACA income reporting procedure [View all]

[BlueStreak]

In order to qualify for a subsidy, you have apply through the exchange. That requires you to state expected income for 2014. You have the option to have the government send the insurance company the subsidies to reduce your premiums each month, or you can pay the full premiums and then claim the subsidy as a credit when you file your 2014 return. Or if you are uncertain about your income, you can take PART of the subsidy monthly and then reconcile the rest at tax return time. That is all explained here:

http://www.irs.gov/uac/The-Premium-Tax-Credit

What I don't understand is this. Some people would find it very difficult to estimate their income. Highly commissioned sales people might make $30,000 one year and $120,000 the next. A person who retired before age 65 might have tax-deferred investments that will eventually be taxable, but may not know exactly when these taxable events will be needed. Individual contractors have income that varies a lot based on the economy, weather and other factors.

So if I am prepared to wait until I file the 2014 tax return to claim whatever subsidy I am entitled to, do I actually have to claim any income level when applying on the exchange? Do I have to send in any income documentation if I am not actually requesting any subsidies until I do my tax return?

And here is another area of confusion. Some of the pricing and benefits make no sense at all. I see cases where the exchange says a Silver policy is vastly superior to the equivalent Gold policy from the same insurance company. For example, the silver shows up as a $0 deductible where the gold is $6000 deductible. When I asked the company about this, the rep said that the actual benefits displayed on the exchange can change depending on what income level I typed in. I just arbitrarily put in $20,000. If this rep is true, then how will the insurance company know what my actual deductible should be. I mean, if I don't know my actual income until I do my 2014 tax return, and they are basing the policy benefits on income, how can that work? I understand that it is easy to reconcile the subsidy at tax return time. But it is way too late then to adjust the benefits of the policy (such as the deductible or co-pay amounts).

What am I missing?