Insurance considered unaffordable

[oceanlovin'ea]

The guidelines say if insurance would be 8.16% of AGI, insurance is considered unaffordable.

Example:
AGI - $65,000.00
8.16% of AGI is $5304.00 or $442 per month

On marketplace insurance would be $800 per month.

Insurance would be considered unafforable and the exception would apply. Thus no penalty.

Am I missing something? or is this correct?

Linda F

[BP.]

On marketplace insurance would be $800 per month.

Did you factor in any PTC available?

[oceanlovin'ea]

client said

The client said they were told they would have to pay $800 per month. That was the information I was given. They couldn't afford that and I don't think they went any further.

How would I or they know that? Do they need to have some kind of proof that they were quoted that amount?

When you are told that it will cost $800 per month and you have a $5000 deductible, there is no way a family of four could afford that. With that deductible, the premium money is just thrown down the drain and who can afford to throw away $800 a month.

I have several clients in this situation. In fact, my daughter's family is in that situation. They can pay to go to the doctor without insurance cheaper than that.

Sorry, it is very infuriating to me.

Linda F.

[Rapid Robert]

The client said they were told they would have to pay $800 per month. That was the information I was given. They couldn't afford that and I don't think they went any further.

They can pay to go to the doctor without insurance cheaper than that.

Third-hand information isn't always the most reliable. I don't know about the deductible, but $800/month for a family of four is actually pretty good, on a par with what the vast majority of Americans covered through their employer pay. When I say "vast majority" I refer to the 85% who were not directly affected by ACA because they were already covered, and other than checking a box on the tax form, nothing changed.

As for paying to go to the doctor without insurance, great, as long as they agree to pay the full six-figure hospital bill as well when they are in a car accident or shot by someone, or one of their kids gets appendicitis. You were saying they would gladly pay that too instead of having insurance, correct?

[kathyc2]

As for paying to go to the doctor without insurance, great, as long as they agree to pay the full six-figure hospital bill as well when they are in a car accident or shot by someone, or one of their kids gets appendicitis. You were saying they would gladly pay that too instead of having insurance, correct?

No worries. They will still receive life saving treatment without the ability to pay and the rest of us that are responsible enough to have insurance will pay it via cost shifting.

More often than not "can't afford it" is actually "it's not my priority".

[TaxGuyBill]

How would I or they know that? Do they need to have some kind of proof that they were quoted that amount?

When you are told that it will cost $800 per month and you have a $5000 deductible, there is no way a family of four could afford that. With that deductible, the premium money is just thrown down the drain and who can afford to throw away $800 a month.

Assuming employer insurance was not available, you need to look up the numbers, to determine the cost after the Premium Tax Credit that they could have received.

https://www.irs.gov/pub/irs-pdf/i8965.pdf#page=11

Unfortunately, the law dictates specific requirements for "affordable", which may not be real-life "affordable".

[oceanlovin'ea]

What is affordable??

That is the question. Client is starting his own business, wife works part-time. Two children at home. No insurance is available to them. House payment, car and truck payment, food, clothing take up the majority of their income. Where do you carve out $800 a month to spend on insurance premium that you will never get any benefit from because the deductible is $5000.00. Do you not make the house payment? Maybe not have 2 vehicles, although both are necessary? Let's cut out food or put them all on a diet? Priorities are giving family shelter and food and clothing. Insurance is necessary but not if you don't have the money for it.

I found on an old thread a reference to Value Penguin. So I went there ( for a different client) MAGI is around 75,000 with family of 3. Here is the results of the Affordable Care Act Subsidy Calculator:
Income as % of Fed Poverty level - 386.98%
Premium Cap as % of Income (Second cheapest available silver plan) 9.50%
Annual Premium Cap - 7179.91
Monthly Premium Cap - $598.33

So what does this mean? Am I comparing the 8.16% of MAGi which is around $6100.00 to the $7179.91? Does this show unaffordability since the $7179 is more than the $6100? Or the other way around?

I also did the worksheets that you referred me to. If I did them correctly, it was very close but by just a few dollars they missed the unaffordability point.

I am so confused......

Linda F

[TaxGuyBill]

Those Value Penguin numbers only show the 'net' cost of the Second Lowest Cost Silver Plan (SLCSP) after the Premium Tax Credit ($7179.91). You need to know the Lowest Bronze after the credit, so you can't directly use those numbers (but they do come into play on the worksheet link that I gave you).

That worksheet link is the 'final' answer from a IRS viewpoint. So if that shows it was 'affordable', unfortunately the penalty would apply.


The taxpayer can see if anything else applies to waive the penalty:

https://www.healthcare.gov/health-coverage-exemptions/exemptions-from-the-fee/

[oceanlovin'ea]

Thanks

Thanks so much for all your help. This stuff drives me crazy!!!!!!! It is enough to make me want to retire from the tax business!!! But then who else would take the time to figure all this out for my wonderful clients who I really do like.

Linda F

[Gretel]

I am with you

100% - maybe 2018 is the last year for the penalty

[oceanlovin'ea]

Joke's on me!!

Well now, the joke is on me!

My tax program figures the affordability worksheet. I do have to fill in a couple of figures is all. After I have spent hours working on these worksheets for several
clients I am checking over a return and there it is. But this was a person who had insurance part of the year so it worked it all out. The others were people with
no health insurance for the entire year. So I didn't go to that screen.

Oh well.....now that the season is over (almost) I get smart. lol that's life!

Hope you all have a great summer!

Linda F