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ACA Health Insurance: Ask For Premium Assistance Or Not

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After I eagerly signed up for the ACA health insurance for next year on the first day of open enrollment, I received a letter from the health insurance exchange saying we were only “conditionally eligible.” The letter asked me to submit a number of documents for each one of us in order to make our enrollment final:

  • Proof of citizenship
  • Proof of income
  • Proof of having no other coverage

This is odd because we are already on ACA health insurance right now. When I enrolled us after I left my job, they just let us in. We weren’t asked for these documents. How come they are asking for these now, when we are only trying to continue for another year?

The difference is I gave an estimated income for next year that qualifies for premium assistance, whereas when I enrolled earlier this year our income didn’t qualify for premium assistance. If you are paying the full freight, they just let you in. If you ask them to pay part of your premium, now they are more careful in checking to make sure you are eligible for the money.

I have two choices, either (a) submit the documents as requested, and hope they are satisfied with those documents;  or (b) just pay the full premium during the year and get any eligible premium tax credit at tax time. If I choose (a), I imagine there might be a few rounds of back and forth when they say the documents I sent aren’t good enough and they want something else.

It dawned on me that option (b) not only makes our enrollment simpler but actually we are better off financially with just paying the full premium anyway.

How could we be better off financially when we pay the full premium versus a reduced premium? Doesn’t forking out the money first and getting it back at tax time make us give the government an interest-free loan when we can earn interest on that money ourselves?

If we pay the reduced premium, we will have to pay taxes during the year on our income. If we pay the full premium, we can reduce the taxes we pay during the year because the anticipated tax credit will lower our tax liability. So it really becomes a wash. Either we pay more taxes or we pay more in health insurance premium.

In addition, we can pay the insurance premium by credit card and earn rewards. If we pay taxes by credit card we will have to pay a fee. In a round-about way, paying the full premium is like paying taxes by credit card without a fee. We are better off by a couple hundred dollars when we pay the full premium.

So I updated our ACA health insurance application with a higher estimated income, above the cutoff that qualifies for premium assistance. Our enrollment status changed immediately to “eligible.” No more headaches or stress in submitting documents back and forth to the exchange. We save some administration cost for the exchange as well. They don’t have to review those documents and tell us which ones are not good enough. Win-win.

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