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Pillars of Justice

Marketplace Premium Subsidies Create Traps for the Unwary

A crucial part of the Affordable Care Act (ACA) is the subsidies which make Marketplace health care insurance affordable for low wage earners. In the state of Georgia, when someone applies for health insurance on the Federal Marketplace, he or she can be eligible for a subsidy depending on income and household size. For example in 2019, if you are in a household of 1, the minimum income to receive a subsidy is $12, 140. For a family of 4, the minimum income to receive a subsidy is $25,100. As income levels increase, the subsidy amount decreases. Once household income reaches four times the federal poverty level, subsidies are phased out altogether. For that same family of 4, if household income is above $100,400, there are no subsidies.

Trap #1: Receipt of Social Security Backpay after a favorable disability decision may mean you to have to repay your subsidies.

The Affordable Care Act was, and is, a complicated piece of legislation. No matter how carefully drafted any law is, there is always the possibility of an unintended consequence. How the IRS attributes your backpay and how that interacts with the ACA is one such unintended consequence. An example will better explain the problem.

Assume a family of two in 2019: husband and wife. Husband is retired and receiving SSA retirement of about $22,000 per year and has Medicare. His wife is not old enough to retire, but is unable to work and has a pending disability claim that she filed at the beginning of 2017 with an alleged onset date in early 2016. She receives health insurance through the ACA Marketplace. Because their household income is only 138% of the federal poverty level,* her monthly premium for health insurance is subsidized.

At some point in 2019, the wife’s disability claim is approved. However, because she has had to wait two and a half years, the back pay she receives in 2019 is $44,000. That $44,000 represents disability payments she should have received in 2016, 2017, 2018, and 2019. However, because of how the payment is made, it counts as $44,000 of income only in 2019. You cannot “disburse” the income across the four years. Thus, for 2019, for this family of two, household income just went from $22,000 to $66,000. Per the 2019 cut off, when household income for two is higher than $65,840, there are no subsidies. Accordingly, this family of two will have to repay all of the ACA subsidies received in 2019. Those subsidies can be thousands of dollars.

What can be done? Unfortunately, this can only be fixed by Congress. Senator Angus King (I) of Maine is introducing legislation to try to fix this problem. If this situation has happened to you, or you fear it will happen to you, please contact your local representatives here in Georgia and voice your support for this bill.

Trap #2: You cannot have two subsidized health insurance plans at the same time.

Continuing our example couple from Trap #1, the wife will become Medicare eligible by virtue of her approved disability claim. She cannot continue to have the insurance through the ACA Marketplace and have Medicare. If she does, she will have to pay back the subsidies received under the ACA. You are not allowed to have two subsidized health insurance plans. Medicare counts as subsidized health care. Thus, if you have been on an ACA plan and are approved for Medicare or Medicaid, be sure that you make the appropriate transition off of your ACA plan. Contact your local office for assistance with Medicare/Medicaid eligibility.

* The Federal Poverty rate for 2019 for a family of two is $16,910. If your income is below this threshold, you will likely not qualify for subsidies in the Marketplace.

There are so many ways in which the interplay of various disability programs can cause problems when you can least afford to have those problems. We can help! Please contact our office.


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