If you are eligible for a premium subsidy and you apply for Health insurance through the health insurance exchange, you need to estimate what your family income for 2015 will be. If you estimate it will be below 400% of the federal poverty level for a family your size, you will be eligible to receive a subsidy to help pay your monthly insurance premiums. The amount of the premium assistance is based on your estimated income and the amount of your health insurance premiums. This premium assistance can be worth thousands of dollars per year. But what happens if it turns out you underestimate your 2015 income? If you already benefited form premium assistance payments, you’ll have to pay them back to the IRS when you file your 2015 income taxes. The amount you’ll have to pay back depends on your 2015 family income. If your 2015 income is below 400% of the federal poverty level, there is a cap on the amount you’ll have to pay back, even if you received more in assistance than the amount of the cap. However, at higher income levels, you’ll have to pay back the entire amount you received, which could be a lot. The following chart shows how much individuals and families will be required to pay back.
|Income, based on federal poverty level||Annual Household Income for an Individual||Individual Payback of Premium Assistance||Annual Household Income for a Family of Four||Family Payback of Premium Assistance|
|Less than 200%||Under $22,980||Capped at $300||Under $47,100||Capped at $600|
|At or above 200% to 300%||$22,980 – $34,470||Capped at $750||$47,100 – $70,650||Capped at $1,500|
|At or above 300% to 400%||$34,470-$45,960||Capped at $1,250||$70,650 – $94,200||Capped at $2,500|
|Greater than 400%||$45,961 and higher||Full amount received||$94,201 and higher||Full amount received|
Example: Ernest, a 45-year-old single self-employed writer who lives in Dallas, obtained health coverage through the health insurance exchange. He estimated that his 2015 income would be $30,000. Based on his age and income, he qualified for a premium assistance of $216 per month, or $2,592. However, it turns out that Ernest had a better year than he thought he would: He actually earned $40,000 in 2015. Based on this income, he was actually entitled to premium assistance of only $109 per month, or $1,308. He received $1,284 more in assistance than he should have. However, he only has to pay back $1,250 because this is the cap for people at his income level. Had his income been $46,000 or more, he would have to pay back the entire $2,592. One way to avoid having to pay back all or part of your premium assistance is to report to your health exchange any changes in your income during the year. The exchange can adjust downward the amount of premium assistance you receive for the remainder of the year. Another way to avoid having to repay all or part your premium assistance is to elect to have all or part of your premium assistance sent to you as a tax refund when you file your tax return, instead of paid in advance to your health insurer during the year. In other words, you pay the entire amount out of your own pocket during the year, and then you are reimbursed by the amount of premium assistance you qualify for.