Affordable Care Act: Income estimating for students


“I am a college student in Alabama and I’m trying to find a better healthcare plan for myself starting in January.  I’m currently in graduate school full time trying to finish, and I am unemployed.  I get financial aid, and my mom is willing to still help me pay for my insurance.  What do I put on the application for my income?  I know my state isn’t expanding Medicaid, and I’m not sure what my options are or how to properly fill out my application.  Thanks!” 

Almost Alumna

Dear Almost Alumna,

Congratulations on closing in on the finish line of your degree!

Figuring out what to list as your income can be tricky.  In the ideal world, you would list your current income (zero or close to zero) on your application.  You would then receive subsidies based upon that income.  When your income changed – say, you got a fabulous job in your field – you would then report this and your subsidies would change.

It’s not an ideal world, so let’s talk about what will happen.  This is especially difficult in states that are not expanding Medicaid.  Since your income is zero, you are below 100 percent of Federal Poverty for a household of one.  This means that you do not qualify for a subsidy to purchase a plan from the insurance exchange.

You are faced with paying full price for an “off exchange” plan unless you have at least $11,490 in annual earnings.  You could estimate your annual income at $11,490, even while you are still in graduate school.  As long as you earn at least that much during the year, you would be in the clear when you file your taxes for 2014.  If you earned less than that, you could potentially be charged back the entire subsidy that you had received.  It’s a bit of a ridiculous situation, but technically the IRS could hit you with a bill for the entire subsidy because you were too poor to qualify for it.

Estimating your annual income at some amount greater than 100 percent of Federal Poverty is probably your best bet.  Keep in mind that the systems for paying the subsidies, let alone changing them in mid-year, are brand new.  It may be hard to get your subsidy changed during the year.  For most people, this means that estimating their income a bit higher than they expect is a good strategy.  That way, they are less likely to have to pay back any of their subsidy.

Another strategy would be to pursue coverage through your mother, if she has access to a group plan.  If you are under age 26 and her plan covers children, you could get coverage there.

You might also check with the school to see if they have a low-cost health plan for students.  This might be sufficient to get you through the rest of your school work, until you land that fabulous job.

Since your income is low, you would not be faced with paying the penalty (or tax) for being uninsured.   This is not much comfort if your goal is to have a good health insurance plan.  But at least the penalty is not an additional worry for you.

Best wishes for your future success!

Linda Riddell

About Linda Riddell

A published author and health policy analyst with 25 years’ experience, Linda Riddell's goal is to alleviate the widespread ailment of not knowing what your health plan can do for you.