People Found Ineligible for Obamacare Coverage Must Repay Subsidies

A report from Berkeley's Greenlining Institute called on Covered California to make its enrollment website available in more languages than English and Spanish.

The rule primarily affects immigrants. Many people have not provided sufficient documentation to prove lawful presence or citizenship in California.

By Julie Appleby, Kaiser Health News

Consumers getting government subsidies for health insurance who are later found ineligible for those payments will owe the government, but not necessarily the full amount, according to the Treasury Department.

100,000 Californians must provide proof of legal residency or lose eligibility for subsidies.

The clarified rule could affect some of the 300,000 people enrolled in a health plan through healthcare.gov. They face a Sept. 5 deadline to submit additional documents to confirm their citizenship or immigration status, and also apply broadly to anyone ultimately deemed ineligible for subsidies.

California runs its own exchange and is on a different timeline. Covered California will send notices starting next week to 100,000 people affected. They have until September 30 to respond. 

First reported by the newsletter Inside Health Policy on Thursday, the clarification worries immigration advocates, who say many residents don’t know about the requirement. If people do not provide the necessary information, they could be deemed ineligible for subsidies and lose their coverage.

If found ineligible, residents could owe thousands of dollars.

Under the health law, people who earn between 100 percent and 400 percent of the federal poverty level, about $11,670 to $46,680 for an individual this year, are eligible for premium subsidies to help them purchase coverage if they buy through the new state and federal marketplaces, such as healthcare.gov.

Some exceptions apply. For example, undocumented immigrants cannot enroll in coverage through the new marketplaces. And people with job-based insurance that meets the law’s requirements are not allowed to get a subsidy, no matter their income.

A Treasury official said an enrollee who gets such an advance tax credit, but is later found ineligible to have received it, would have to pay those amounts back, generally through a tax refund reduction.

Such a rule would not just affect the 300,000 immigrants who have received notices requesting additional information. It could also apply to someone who had job-based insurance, for example, but was approved incorrectly for a subsidy through the new marketplaces. If later found ineligible because of that job-based coverage, that person would also owe the government what was paid to insurers on his behalf.

What’s less clear is how much an ineligible person would have to pay.

The health law caps repayments for subsidy-eligible lower income residents to between $300 and $2,500, depending on family size and income, according to the Internal Revenue Service. But people who earn more than four times the federal poverty rate must pay any subsidies received back in full, with no cap. Whether those caps apply to people who received subsidies but were later deemed ineligible is not clear.

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  • jskdn

    The caps on repayments of non-qualified subsidies through the exchanges for those earning less than 400% of the federal poverty level represent a great opportunity to get free money from the taxpayers that can only be had by claiming subsidies in excess of the repayment caps to which you weren’t entitled to receive. Having to pay back a portion of excess subsidies shouldn’t deter a financially wise person from trying to receive them. It’s leaving money on the table. Just save enough to pay back the share that’s required. Even then, I understand the federal government will only take your tax refunds due for repayment.

    Furthermore, I suspect that it is only the premium subsidies they will come after. The out of pocket cost subsidies for medical care received can be a significant factor for many people. If you are close to line where they go away, claiming a lower income can be very financially advantageous.

    Those who had access to employer plans that met the minimum requirement may not qualify but how is the federal government going to know? I thought that reporting requirement was delayed.

    For some of those receiving premium subsidies who income crosses 400% of the federal poverty level by even $1, the consequences can be huge and should outrage the sensibilities of decent people. In some case an additional $1 in income could cost a family in excess of $10,000. That would be an effective 1,000,000% tax rate on that dollar. People exposed to this risk should take any steps they can to avoid this financial trap.

  • Melissa Hamilton Moon

    jskdn—-you are incorrect. I work in the insurance industry-the IRS will not take action to collect except to take your refund if you are charged a penalty for not having insurance, but if you owe money back from a subsidy-they will be taking full action! BEWARE!!!!!