ACA Subsidy Repayment and Income Overages: A Comprehensive Guide

Understanding the Income Cap

The Affordable Care Act (ACA) sets income limits for individuals and families to qualify for financial assistance with health insurance premiums. For 2024, the income cap for a family of two is $69,890. If your income exceeds this cap, you may need to repay a portion of the subsidy you received.

Changes for 2024

In 2021, the Biden administration suspended the repayment of excess Advanced Premium Tax Credits (APTCs) for those earning between 400% and 600% of the Federal Poverty Level (FPL). However, the suspension has expired, and the repayment rules will apply in 2024.

Calculating the Repayment

If your income exceeds the cap, you may need to repay a portion of the APTCs you received. The amount you owe is calculated by comparing your actual income to the income you reported when you applied for coverage. You will be expected to pay the difference between the actual and estimated subsidies.

Example

Let’s say you estimated your income to be $69,890 and received $15,000 in APTCs. However, your actual income ended up being $76,000.

The premium for the second-lowest cost silver plan is $600 per month.
Based on your estimated income, you were expected to pay $495 per month towards the premium, receiving a $105 subsidy.
Based on your actual income, you should have paid $538 per month, receiving a $62 subsidy.
The repayment amount is (105 – 62) x 12 $516.

Repayment Procedures

The Marketplace will send you a notice if you owe a repayment. You can pay the repayment directly to the IRS or have it deducted from your tax refund.

Avoiding Repayments

To avoid repaying subsidies, you can:

Estimate your income accurately: When applying for coverage, provide accurate income information to avoid overestimating your subsidy.
Report income changes promptly: Notify the Marketplace if your income changes during the year. This will allow them to adjust your subsidy amount.
Contribute to deductible accounts: Contributions to IRAs and HSAs can reduce your income and lower your subsidy repayment amount.
Consider lower-cost plans: Gold plans generally have higher premiums than silver plans. Consider switching to a silver plan to reduce your potential subsidy repayment.

Seek Professional Help

If you have questions about subsidy repayment, it’s recommended to consult with a licensed health insurance agent. They can provide personalized guidance and help you understand your options.