You Might Have To Repay Your Obamacare Subsidy!

With the final enrollment deadline for the Affordable Care Act coming up, I have been trying to do as much information gathering as possible on Obamacare and what it means for me. You see, I have private health insurance as I am self-employed and my insurer is allowing me to keep my current plan for one year, if I want to do so. The other option is to jump into Obamacare and get a plan from the health insurance marketplace.

After completing an application on Healthcare.gov, I discovered that I qualify for a bit of a subsidy to lower the cost of my monthly health insurance. The subsidy is based on your adjusted gross income on your 2014 tax return. Since we don’t file those until next April, you have to have an idea of how much money you’re going to make. This is problematic for someone, like me, who is self-employed. This got me to wondering what happens if my income end up being different from what I reported. The answer might surprise you.

If your income changes – either goes up or down – then you might have to repay some or all of that monthly subsidy! Yikes! If you’re getting over $200 per month, then you are looking at over $2400 that you have to repay!

And that’s not the worst part.

If you end up losing the subsidy (or part of it), then you can end up owing money to the IRS! Double yikes!

Let’s look at how bad this could be for you (or me). Assume that you take a health insurance plan from Healthcare.gov that has a monthly premium of $233. Then, let’s assume that you qualify for a subsidy in the amount of $265 per month. Obviously, this would mean that your monthly healthcare cost would be completely free…unless you end up losing that subsidy and then owe a lump sum of $2796. And you’d have to pay that to the IRS. Blech.

So, this is something to keep in mind as you consider your health insurance options for the year.

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