Ask the Advisor: October 2013

Ask the Advisor: October 2013

Q: I'm 60 and I buy my own health insurance. Would I qualify for the new Obamacare health insurance exchanges?  How much would I pay? I paid $271 per month this year, but I have a $5,000 deductible with a $10,000 annual maximum to keep my premiums affordable. My husband is getting Medicare and we depend on his Social Security for most of our income.

A: If you have not been offered affordable insurance through your employer, you are not receiving Medicare, and you purchase your own health insurance coverage, you may be among those who have the most to gain from shopping for health insurance on the new health insurance exchanges. Depending on your income, you may be eligible for new premium subsides that would cover part of the cost of your health insurance premiums. The exchanges are now open for comparing health insurance coverage that becomes effective January 1, 2014.

Premium subsidies are actually advance federal tax credits and available only for people buying their own insurance on the insurance exchanges. You qualify if your income is less than $45,960 for individuals or $62,040 for a family of two. Your "modified adjusted gross income" (MAGI) will be used to determine your income. That includes your household’s adjusted gross income plus any tax-exempt Social Security, interest and foreign income you have. When you apply, the government will access your most recent tax return to confirm the income data that you report.

The health premium subsidy will be paid on your behalf directly to your selected insurance plan, and you will get tax credits that reduce the total amount of tax you owe to the IRS. This can mean a bigger refund if you don't owe. The credit begins with insurance that starts January 1, 2014 or later.

Like all things tax-related, it's important to estimate income accurately. Estimate too low and you may wind up having to repay those premium subsidies in higher taxes. Taking too low a subsidy may mean paying substantially more in premiums, but a bigger tax refund. If you take the tax credit in advance, changes to your income or family size could affect your health insurance subsidies and you will need to report those changes during the year. You can also opt to take a partial subsidy to both lower the premium and avoid repayments if your income fluctuates.

When you are ready to compare coverage and costs, get a copy of the most recent materials from your current health plan to have on hand. In addition to your current premium and deductible, you will need to know what your current coinsurance or copayments are, and your annual maximum out-of-pocket in order to calculate the "actuarial value" of your plan. To learn whether you qualify and how much credit you will get, contact your state's Health Insurance Marketplace: or Call Center 1-800-318-2596.

Resources: Consumer's Union has a brochure to explain how it works.