Open Letter Re: Exchange News and Tax Credits

January 14, 2015

Dear friends, family and neighbors,

There are three things happening that you need to know about: 1) open enrollment, 2) redeterminations and 3) reconciliation.

Open enrollment for the Exchanges (Covered California) will close by February 15, so if you want coverage for the coming year, you have to have your application completed and filed by then. If you miss that deadline you cannot enroll until next November 15 except for life change events (such as job changes, births, deaths, divorces, or moving to a new state) that cause you to lose other coverage and thus become Exchange eligible. The very same rules apply in the individual market outside the Exchanges. If it’s a life change event, act quickly; you only have 60 days to apply outside of open enrollment.

Redeterminations happen once a year, when you restate your income for the coming year and you can choose to change plans if you wish. Since the prices for plans changed, some went up and some went down, you want to carefully look at prices and plan networks to see if you want to keep your existing plan or change plans. The tax credits are pegged to the second lowest priced silver plan, so the difference between the plan you choose and the 2nd lowest price silver is used to calculate your tax credit and reduce your premiums.

If your income is between 138% of federal poverty level and 250% of federal poverty level (between about $16,000 and $30,000 for an individual, or $33,000 to $60,000 for a family of four) you can also get a tax credit to reduce your copays and deductibles, but only if you choose the silver plan. So if you are in that income range, your best choice is likely to be silver, otherwise you lose those credits reducing your copays and deductibles.

Reconciliation also happens annually. Reconciliation only happens for those who applied for and received tax credits to help pay their premiums and out of pocket copays and deductibles. When you applied, you projected your income for the 2015 calendar year to qualify for the tax credit. If it went down, you will get a refund, but you need to file your tax return to get it. If your income went up and you did not report the change, you will get a bill for the added amount you owe for the year. The IRS will be sending Form 1095 to report your tax credits and any amounts they owe you or you owe them.

Tax penalties for those who were uninsured during 2014 were $95 or 1% of income, whichever was higher; they will be due by April 15. In 2015, the penalties will go up to $325 or 2% of income. There are exemptions for reasons such as financial hardship or religious beliefs.

Numbers covered. The most recent projection I saw in the Governor Brown’s Proposed Budget for 2015-16 is that Covered California enrollment will reach 2 million and Medi-Cal will reach 12 million (an increase of 3.2 million due to the Affordable Care Act) during the 2015-16 time frame.

ITUP’s Experience. We just got our renewal rates from Covered California’s SHOP program for small business for the coming year, not only no increase but a small decrease despite the fact we are all one year older. A nice way to start 2015!

Hope this is helpful and Happy New Year,