Right about now, some low-income people who just barely qualified for subsidies on the health insurance marketplace are starting to worry: What if my income for the year ends up below the poverty level? Will I have to pay back the premium tax credits I received?
A couple of readers have posed this question in recent weeks.
Their concern stems from an unfortunate wrinkle in the health law. Premium tax credits that make coverage on the health insurance exchanges more affordable are available only to people with incomes between 100 and 400 percent of the federal poverty level ($11,490 to $45,960 for an individual this year). People whose income is below the poverty line don’t qualify.
When the health law passed that wasn’t expected to be a problem because in addition to providing subsidies to help pay for health plans purchased on the health insurance marketplace, the law expanded Medicaid coverage to adults with incomes up to 138 percent of the federal poverty level ($15,856 this year). That meant that people with incomes below the subsidy threshold on the private exchanges would generally qualify for Medicaid. They wouldn’t need premium tax credits.
But it didn’t work out that way. The Supreme Court ruled that the Medicaid expansion was optional for states; so far, 26 states plus the District of Columbia have adopted the expansion, and Pennsylvania will join them in January.
Now, people who didn’t qualify for Medicaid and whose estimated income is coming up short of the poverty level are worried they’ll have to repay thousands of dollars in premium tax credits.
One reader wrote: “What is going to happen? Will he have to pay back all of the money that he received for the tax credit since he no longer qualifies?”
The short answer is no. No repayment will be required. According to a Treasury Department rule, if the insurance marketplace estimates that someone’s income will be between 100 and 400 percent of poverty and it turns out that his income for the year is below the poverty threshold, the individual won’t be on the hook for any premium tax credits he received.
Since the marketplace always makes the eligibility determination for tax credits, no one whose income ends up below the poverty level should have to repay them, says Judith Solomon, vice president for health policy at the Center on Budget and Policy Priorities.
The same isn’t true for people whose income is above the poverty line, however. Above that threshold, people who received too much in premium tax credits will be responsible for repaying those amounts up to a cap, based on their income. And above 400 percent of the poverty level, they’re responsible for repaying the entire amount.