How Will Taxes Be Reconciled With Premium Subsidies? – You simply can’t ignore open enrollment for 2015 health insurance coverage

If you are enrolled in health insurance through an Obamacare exchange, it’s time to pay attention. Federally run exchanges will continue your current coverage if you do nothing. However, what you need to be sure is accurate for 2015 is your reported income and hence any subsidy you may receive. You don’t want a nasty surprise when you file next year’s income taxes.

Note that if you are enrolled through a state-run exchange, you may need to re-enroll in your health insurance for 2015.

In any case, regardless of your circumstances, you should not allow the open enrollment period to pass without reviewing your coverage (and in many cases, your income).

Q. What happens to someone who has overestimated his income and received the wrong subsidy amount for a marketplace plan? Does he get a tax refund when he files? What if he underestimated his income and was paid too much? Does the system catch it when he reapplies for coverage in 2015? Will he be prevented from renewing automatically?

A. If you received too small a subsidy because you overestimated your income, that amount will be added to your tax refund — if you’re receiving one — or it will reduce the amount of tax that you owe, says Timothy Jost, a law professor at Washington and Lee University and an expert on the health law.

Similarly, if your subsidy was too large because you underestimated your income, you may have to pay some or all of it back. If your income is more than 400 percent of the federal poverty level ($94,200 for a family of 4 that enrolled for 2014), you’ll owe the full amount of any subsidy overpayment. At lower incomes, the amount that must be repaid is capped.

How your 2015 subsidy will be handled when you renew your coverage this fall will vary. If you live in one of the states where the federal government runs the health insurance marketplace, you may be automatically enrolled in a 2015 plan and, unless you contact the marketplace to update your income and other details, your subsidy amount will remain the same next year. That’s probably not in your best interest, since changing marketplace policy details and changes in your own financial situation could mean you either may not receive the total amount you’re due or you’ll be on the hook to repay a too-generous subsidy. The system, however, won’t prevent someone from renewing next year, automatically or otherwise, because his subsidy amount was incorrect.

“The best thing to do is to get in touch with the exchange to make sure they have the most up-to-date information,” says Jost.

States that operate their own marketplaces may handle enrollment differently. Those states may, for example, require everyone pick a new plan and update their subsidy eligibility information instead of simply auto-enrolling them, says Solomon.

via How Will Taxes Be Reconciled With Premium Subsidies? – Kaiser Health News.