Making Sense of the Unmanageable Subsidy Tax Credit
Subsidies (Pre-Paid Tax Credits)
Fundamentally, Subsidies are impossible to administer appropriately, as people cannot predict “future” income; meaning people get penalized if they work more hours, get a raise, or get a Bonus! Therefore, the Subsidy system MUST change for the majority of people to actually be able to get financial help paying for their health insurance plan, without having to pay most or all of the financial help back at the end of the year, due to any number of administrative or unforeseen issues that impact a persons income.
From an administrative perspective, Third-Party Administrators (TPAs) or health insurance companies should be the administers of the Subsidies, as they have the experience and the financial incentive to enroll people and to keep them enrolled, unlike the Exchanges. TPAs already administer many benefit programs for around a third of the cost of the Exchanges and do so with “Experienced and Licensed” health Insurance staff that are actually legally able to advise people on which health plan is best for them. This means the TPAs do a better job signing people up for health insurance and keeping them insured than the Exchanges.
We should Replace the Subsidy System with a Tax Credit Program and keep in mind what people pay for their health insurance at work, and that even Medicare enrollees pay ~$200~$300 per month per person for Medicare B, C and D. Employer plans cost $25~$50 per week for an Employee-Only plan; so why should we expect people to pay less on their own, ‘if’ they are taking home the same income”?
The current method for determining and providing Subsidies is inherently backwards, to be polite. Asking someone to ‘predict’ their future income is impossible; and in essence, the system penalizes a person from trying to earn more income than they expect to earn, due to having to pay back the Subsidy, and probably a whole lot more, at tax time.
Note that even People that get Subsidies and/CSRs during the year end up having to pay them back at tax time, “if” their income dictates that they should have been on Medicaid all year, the prior year!
The chart for calculating what percentage of income a person pays for their insurance is incredibly complicated and creates ‘cliffs’ at set dollar amounts that make it extremely difficult for the average person/family to plan around for the future. The Subsidy Tax Credit system should use a floor and not a ceiling for determining how much help a person receives in Subsidies. For example, if your income is below $50,000, you should be able to plan on at least $4,000 in assistance at age 40, a basic example.
Whatever decisions are made for providing assistance to people for the future needs to be more realistic, use a more common-sense approach, and needs to not punish people for finding employment, working more hours, and bettering themselves and their families.
The main thing to plan on addressing is to NOT have a minimum income to qualify for a Subsidy; but have a maximum income. In addition, If you’re not on Medicaid, or do not want to be enrolled in Medicaid, even if that’s what your income says you should have for insurance, then you should be able to use the maximum available Subsidy to purchase a personal health plan. The program should have an income “ceiling” not a floor!
For individuals over 55, and especially those over 62, it is important to note that if they take money out of their Retirement Accounts and/or start collecting Social Security early, they almost all lose their eligibility for Medicaid, and most lose their eligibility for Subsidies!!! Why? Well, it’s because Social Security and Retirement account withdrawals are treated as Income!!! Therefore, they get punished twice; and is the reason many Baby Boomers left the Exchanges, to not have to pay back $1,000’s and $10,000’s of dollars at tax time.