Change Your Income, Change Your Health Insurance Plan

People who qualified for subsidies under the Affordable Care Act aren't necessarily locked into the plan they chose. And that can be good news for people whose income fluctuates during the year. Here's our response to the latest reader questions on coverage through the health exchanges.

Do you have any idea how the exchanges will administer changes throughout the year? Our current income is about $38,000 per year, which qualifies us for an enhanced silver plan. My husband often gets seasonal construction work, and that can increase his income to about $65,000. When he reports that change in income, will he be required to stay in the enhanced silver plan and pay the full cost, or can he switch to a lower-cost plan that he can afford?

From your description of your plan and your income, it sounds as if you and your husband currently qualify for both cost-sharing subsidies and premium tax credits. The subsidies are available to people with incomes up to 250 percent of the federal poverty level (currently $38,775 for a couple), and the tax credits are available to those who earn up to four times the poverty level ($62,040 for a couple).

The premium tax credits lower the sticker price and can be applied to any of the four plan types. The cost-sharing subsidies can reduce deductibles, copays and out-of-pocket costs for insurance bought on state and federal exchanges, but are only available to people who buy silver-level plans.

If your husband's income rises above 250 percent of the poverty level, however, you'd lose those cost-sharing subsidies. Then your out-of-pocket costs for copayments for doctors' visits or for prescriptions, for instance, could be less affordable. And if your income reaches $65,000 you'd no longer qualify for premium tax credits. In that case, you might want to switch to a bronze plan with a lower premium, says Cheryl Fish-Parcham, private insurance program director at Families USA, a consumer advocacy group.

And you can do that. Under the health law, if your eligibility for cost-sharing subsidies changes you have 60 days to switch from one marketplace plan to another. A similar though broader rule applies to eligibility for premium tax credits, enabling people to switch plans or enroll for the first time if they aren't already on the exchange.

How will we prove to the government that we have health insurance?

Until the federal income tax forms for 2014 become available, it's not clear exactly what people will be required to report. However, it's likely that 'people will be asked for information about coverage and attest to it in the same way they do other information on their [tax] returns,' says Judith Solomon, vice president for health policy at the Center on Budget and Policy Priorities.

The health law requires employers and insurers to report information to the Internal Revenue Service about the coverage they provide, and also provide that information to individuals. The reporting requirement originally was slated to begin in 2014, but it has been postponed until 2015.

Most people will face a tax penalty in 2014 if they don't have health insurance through employers, federal programs such as Medicare or Medicaid, or insurance they have purchased themselves.

It's unclear if the government will eventually cross check the information it receives from employers and insurers against individuals' self-reported coverage claims.

But even if that doesn't happen, 'you sign your return under penalty of perjury,' says Solomon. 'You always can be audited and required to show proof' of coverage. 'That's the main thing.'