ACA: Navigating the Marketplace and Understanding Affordability Standards

Navigating the Affordable Care Act (ACA) marketplace can be confusing, especially when determining eligibility for subsidies. This blog will explore a common question about ACA eligibility: whether income from part-time employment should be included when qualifying for subsidies.

Eligibility for ACA Subsidies

To qualify for subsidies on the ACA marketplace, individuals must meet certain income requirements. The modified adjusted gross income (MAGI) is a key factor in determining subsidy eligibility. MAGI is generally the same as your taxable income, excluding certain deductions and adjustments.

Employer-Sponsored Coverage and Income Considerations

When you have employer-sponsored coverage, the affordability of that coverage is considered when determining subsidy eligibility. The affordability standard is based on the cost of the lowest-cost, employer-sponsored plan that meets minimum value standards. This affordability standard is applied to your individual premium, not the premium for your entire family.

Including Part-Time Income

The question arises as to whether income from part-time employment should be included when calculating MAGI for subsidy eligibility. The answer is yes. All income, including income from part-time jobs, should be included in your MAGI calculation.

Example Case

Let’s say an individual has a full-time job in New York but lives in a neighboring state. Their employer-sponsored health insurance costs $500 per month for individual coverage. They also have a part-time job that earns them an additional $5,000 per year.

Step 1: Calculate MAGI
MAGI Taxable income + Excluded deductions

Excluding 401(k) contributions:
MAGI $40,000 (taxable income) + $0 (excluded deductions) $40,000

Step 2: Determine Employer-Sponsored Coverage Affordability
Affordability standard 9.5% of MAGI
Affordability standard 9.5% x $40,000 $3,800

Step 3: Calculate Part-Time Job Income
Part-time job income $5,000 per year

Step 4: Determine Subsidy Eligibility
Since the cost of the employer-sponsored plan ($500 per month) exceeds the affordability standard ($3,800), the individual would be eligible for ACA subsidies.

Conclusion

When determining eligibility for ACA subsidies, all income sources, including part-time employment, must be included in the MAGI calculation. By accurately calculating MAGI and considering affordability standards, individuals can maximize their chances of obtaining subsidies and reducing the cost of health insurance through the ACA marketplace. If you need assistance in navigating the ACA marketplace and evaluating your eligibility for subsidies, it’s recommended that you seek professional guidance from a licensed health insurance agent.