Health Insurance Blog

 Does My Income Affect My Insurance Premium?

       I think one of the biggest questions I get when helping out some of our clients is, what if I don’t know what my income will be next year? Or why does my income matter when it comes to my health insurance? Both great questions, but truth be told your income does play a very big role when it comes to your monthly premium and then of course what plan you end up going with. However, it should never be something that stresses you out. The process is actually so much more simple than you probably think, and I feel like most of the time our clients might just need some education to help figure that out. That's where we come in, The Health Insurance Specialists. Our passion is helping people and letting them know that we are here to do all the confusing boring stuff that you don't want to worry about. 

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How does my income change my premium? 

       When you are getting health insurance on the Marketplace ACA you have the possibility to receive help from the government in the form of a tax credit. This tax credit is money that you won't ever see but in other words it's a discount that you will get off of your monthly premium. Now the savings aren't the same for everyone, it's based on a couple things. The main one being your income and how many people are on the plan. Once you have an idea of how much you are going to make that plan year that will determine how much of a discount you will qualify for.

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While it’s important to have the most accurate estimate on your income,

       Now the more you make, the less of a discount you will receive. On the other hand the less you make the more help you will receive. Now it's not just your income that determines that. Your household size, how many dependents are in your household and where you live are important factors as well. When you are estimating your income the one thing you should know is that the more accurate you are on how much your household will actually make that year, the less you have to worry about when filing taxes the following year. For example, let's say you end up making more than what you put on your application. You might have to pay back the money that you didn't deserve when filing your federal tax return. Same works if you were to make less than what you put on your application, then the government would actually owe you money because you were not receiving enough help on your premium.

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Am I able to change my income on my application at any time?

       This is another big question that we get all the time. Once you have calculated your household income when applying, that number is not locked in for that whole year. You are actually able to update your application at any time of the year and as many times as you need too. So if a couple months into the year you start a new job or a life event comes up where your income would be affected, or if you lose or gain a household member then that is when you would want to notify your agent and have them update your application as soon as possible. If you don't then you could be missing out on more tax savings that could lower your monthly premium cost. 

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       After laying this all out on the table, this is not something to lose sleep over. There truly is no way to predict the future and that's okay. The important thing to remember is you can only know your best guess. One thing I like to advocate when helping a client out during the enrollment process, is most people at the end of the year like to get a return and not have to owe anything back. So if that means you aren't too sure and you want to play it safe, then you may want to overestimate your income so that way if you do make less than what you put on your application, you won't have to worry about owing any money back, they will actually owe you! For some people though I understand that they might want to receive more savings throughout the year and worry about it the following year. Everyone's situation is different. What you are comfortable with is what you should do. One thing to remember is that there isn't a penalty for not being 100% accurate on your application. It’s normal for most people to overestimate or underestimate their ACA premium tax credit by a small amount.  We are here to help guide you through this process and we will always put you in the best position so that way you are at peace of mind and not worrying about anything you shouldn't be. 

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