Premium Assistance Subsidy for the State of CA CoveredCA Health Plan

[pmorettini]

Hi, I have a question if there is anyone on here with the expertise to assist in this area.

We live in California and received premium assistance from both the Federal and State of California for a healthcare plan bought on CoveredCA.com.

Everything looks good on the Federal side; all of the premium assistance we received from the federal government was applied on our Federal return.

But I am disappointed and quite confused with what is occurring on our state return. Here are the details:

1. We received STATE premium assistance in the amount of 487/mo for the first 4 months of 2021, for a total of $1948 for the year.
2. Our modified AGI for the year was $75,560 for 2021.
3. I called CoveredCA to confirm that in our application at the beginning of the year, we had estimated our AGI for 2021 was to be $100,000. So they were providing premium assistance at the level like we were to make $100,000, which is of course significantly more than the $75,560. That SHOULD mean that we shouldn't have to pay back ANY of the premium assistance from the State.
4. BUT Turbotax has calculated that we have to pay back ALL of the $1948 premium assistance that was provided to us upfront in the first 4 months. I don't understand how this can be.
5. I have printed out CA form 3849 as well as the smart sheets associated with this form. Unfortunately, even though I am not an unsophisticated taxpayer I find this form and worksheet nearly incomprehensible in terms of understanding how this has been computed.
6. Is it possible that TurboTax could be calculating this improperly? Or can someone provide me with some other reasonable explanation as to how this can be the exact opposite of what I think it should be?

Anyone that can assist me in any way would be appreciated.

Thanks,

Phil

[MaryK4]

Unfortunately, Taxpayers who received a California subsidy for health coverage in 2021 may have to pay back some or all of the amount received from California. On March 11, 2021, the American Rescue Plan Act (ARPA) increased the amount of federal subsidy available to taxpayers.  This additional federal subsidy, or premium tax credit, was retroactive to January 1, 2021.  Due to the late passage of the ARPA, California subsidies were issued from January through April 2021, which resulted in an overallotment of financial help.   Taxpayers must reconcile their California subsidies on Form 3849, Premium Assistance Subsidy, when filing their 2021 tax returns.

For the amounts, see Financial Help Repayment Limits.

[pmorettini]

Mary, thanks for your response. I understand what you are saying, but are you finding people have to pay EVERY PENNY of their state assistance back, even when they were receiving that assistance based upon a 30%+ overestimation of what turned out to be their actual income?

I guess that you're telling me that every person in the state of CA who received state premium assistance will have to pay ALL of their state premium assistance from 2021? Is that correct? Because my case doesn't make sense otherwise.

[skadonski]

I sent an email to Governor Gavin Newsom. 

My wife and I have to pay back $2139 of subsidies paid by California.  This is unfair.  The reason we signed up for Covered California was because they said they would assist in paying for health insurance.  We would not have signed up to Covered California if we had known this would happen.  We would have gladly just pay for the penalty.  We need to fight this.  This appears to be a trick by California to force people to sign up and then pull the rug out from under us.   

[Leftylou]

I had the same exact scenario happen last year as well but after 7 weeks of constant contact with FTB, Covered CA and an Ombudsman and no answers I contacted Call Kurtis on a local TV station and they figured out there was a glitch in the tax preparer’s system supposedly last year but this year I run into the same scenario so I paid my previous preparer to do my taxes but she says again I have to pay them back so I assumed it was a software problem again but she says not this year that I really have to pay it all back and we also made far less than projected.  I will proceed with huge caution next year on Covered CA as no one truly has any answers and if I do not get a subsidy then it is actually cheaper to buy my insurance directly from Blue Shield than to get it through Covered CA which is also very wrong when you are buying it through that huge program and they add on to the actual premium price.  I do not understand why I continue to be approved and eligible for the subsidy and then expected to give it back?  

[HelenC12]

You may be eligible and get approved for a health insurance subsidy if you enter the wrong annual income amount based on the number of people in your household. 

The Premium Tax Credit is based on your annual income and your income needs to fall within a certain range.

• The range is 100% to 400% of the federal poverty line amount for the size of your family for the current tax year.

Please click here for the Federal Poverty Level (FPL) for 2021 and scroll down to the 2021 POVERTY GUIDELINES FOR THE 48 CONTIGUOUS STATES AND THE DISTRICT OF COLUMBIA table.

Please see below how the federal poverty levels are used to determine eligibility for reduced-cost health coverage:

• Income above 400% FPL: If your income is above 400% FPL, you may now qualify for premium tax credits that lower your monthly premium for a 2021 Marketplace health insurance plan.
• Income between 100% and 400% FPL: If your income is in this range, in all states you qualify for premium tax credits that lower your monthly premium for a Marketplace health insurance plan.
• Income below 138% FPL: If your income is below 138% FPL and your state has expanded Medicaid coverage, you qualify for Medicaid based only on your income.
• Income below 100% FPL: If your income falls below 100% FPL, you probably won’t qualify for savings on a Marketplace health insurance plan or for income-based Medicaid.

The Marketplace uses an income number called modified adjusted gross income (MAGI) to determine eligibility for savings. It’s not a line on your tax return.

Your MAGI is the total of the following for each member of your household who’s required to file a tax return:

• Your adjusted gross income (AGI) on your federal tax return
• Excluded foreign income
• Nontaxable Social Security benefits (including tier 1 railroad retirement benefits)
• Tax-exempt interest
• MAGI does not include Supplemental Security Income (SSI)

[pmorettini]

Helen,

I appreciate your reply. I am aware of all of the information that you posted here. My situation fits within all of these parameters, with respect to qualifying for a state subsidy. Yet, TurboTax still made me pay every penny of it back.

Phil

[tve2100]

This stuff is a mess due to lack of communication from CoveredCA and inscrutable forms... However, complaining about having to pay back subsidies to CA is not fair.

What I see in my case is that I got CA subsidy ("premium assistance subsidy", form 3895 part II column C) for a part of the premium for jan-apr. Then I got Fed subsidy for essentially the full premium ("premium tax credit", form 1095-A, part II column C) for may through dec. This PAS and PTC is money CA respectively the feds paid to the insurance for me, so it's money I already "got".

What happens now is that, as previously mentioned in this thread, the federal subsidy is retroactive to january. In my case, I am eligible for a total federal PTC  in 2021 of ~$20k (in turbotax look at form 8962 line 24) and I actually got ~16k (may-dec. see line 25 in form 8962) so I am eligible for another $4k (line 26), which turbotax "gets for me" in the form of a tax credit (see sched 3).

On the California return, due to the Fed paying for so much of the premium I am no longer eligible for california subsidy, so they want their money back (can't really complain about that), which turns out to be ~$3k. This means that effectively I am shuttling $3k from the IRS to the FTB and pocket another $1k in tax credit in the process. I am really upset about the hour+ it has taken me to track all this down, but overall given that I'm $1k ahead it's not the end of the world.

Now in addition to sorting all this out, my insurance (BlueShield) withdrew the "premium minus CA subsidy" amount from my account for jan-may 2021, i.e., they over-withdrew one month. So at first I thought I had to complain to get reimbursed until I figured out they finally applied the credit to jan-feb 2022.

Not looking forward to what all this nets out for TY 2022...