ACA/Covered California, how to avoid Medi-Cal?

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Fractalleaf
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ACA/Covered California, how to avoid Medi-Cal?

Post by Fractalleaf »

My daughter will graduate with her Masters degree soon and will hopefully have a job within a few months, but no guarantees. She will turn 27 in January so needs to obtain her own health insurance. Even though income from her part-time job is below the federal poverty level, she does not want to have Medi-Cal coverage. We learned from friends that Medi-Cal will not cover some of the benefits that she currently can access through our insurer (Kaiser) and she wants to keep the same level of coverage. We are able and willing to pay for her insurance until she gets a full-time job but want her to take advantage of federal subsidies since she is eligible.

So the question is, how can she obtain federal subsidies for Covered California while avoiding Medi-Cal? Should she just enter her income as $23,000 per year, which is above the Medi-Cal eligibility threshold? Would that be considered fraud? She could sell stocks and/or redeem savings bonds and generate that level of income if necessary, but would prefer not to do that.
Last edited by Fractalleaf on Thu Sep 23, 2021 5:34 pm, edited 1 time in total.
calwatch
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Re: ACA/Covered California, how to avoid Medi-Cal?

Post by calwatch »

I think it's important to note that Medi-Cal eligibility in California is based on MONTHLY reported income. https://insuremekevin.com/the-basics-of ... alifornia/

To get over the hump you could either realize income, or earn income from a Proposition 22 (gig worker) job. But if you fall under the 138% threshold, and estimated your income per the rules of Covered California, you would still receive the subsidy.
curmudgeon
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Re: ACA/Covered California, how to avoid Medi-Cal?

Post by curmudgeon »

In SOME cases, current Kaiser members can remain on Kaiser when they shift to Medi-Cal. I'm not sure her case would apply, however, but it would be something to investigate.

The coveredCA system is definitely prone to dump people into Medi-Cal when you apply, and it can be quite difficult to get out; when she applies, be very careful and if the application says you "might" be eligible for Medi-Cal, stop there and review. In particular, Medi-Cal eligibility is based on monthly income, while ACA subsidy is based on annual. Best to estimate income as evenly divided across the year for the application.

Some of the ACA subsidy rules have been relaxed for this year and next year, but I don't know if that would affect her (if she over-estimates income). I suspect she'd be OK for the first year.
nalor511
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Re: ACA/Covered California, how to avoid Medi-Cal?

Post by nalor511 »

You have a few months before you have to worry about this, open enrollment for ACA is ususally through at least Dec 15. She may have a job by then? If not, does she have an IRA that you could roth convert? You can't just "give" her money and call that income for taxes, unfortunately.
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Fractalleaf
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Re: ACA/Covered California, how to avoid Medi-Cal?

Post by Fractalleaf »

It seems most people are focused on maintaining eligibility for Medi-Cal so that their costs are minimized, but we're trying to figure out if it is okay to overestimate income in order to avoid Medi-Cal. If all else fails we could pay the full unsubsidized premium to keep her enrolled with full benefits at Kaiser, but of course would prefer she take advantage of the federal subsidies.

I did not realize that calculations are based on monthly income, that may be better because she could sell assets to push her over the threshold each month until she hopefully gets a job with health benefits.

If someone is a Kaiser member and transitions to Medi-Cal they can continue with Kaiser, but some services (i.e. mental health and perhaps others) are "carved out" and off-loaded to the overburdened county health care system. Kaiser negotiated contracts to offer to continue some, but not all, services for Medi-Cal patients. Even the Kaiser salespeople who answer questions about Medi-Cal do not understand the details.
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Fractalleaf
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Re: ACA/Covered California, how to avoid Medi-Cal?

Post by Fractalleaf »

The website linked earlier has a discussion on overestimating income to avoid Medi-Cal, but no firm conclusions.
https://insuremekevin.com/inflating-inc ... -medi-cal/

Though monthly income is used to estimate Medi-Cal eligibility, the IRS uses annual income to verify that the insurance subsidies were appropriate. So it seems the best strategy may be to report monthly income above the Medi-Cal threshold and just ensure that MAGI is in the appropriate range when filing taxes for the year.
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gobel
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Re: ACA/Covered California, how to avoid Medi-Cal?

Post by gobel »

Do you have coveredca yourself? I think your daughter gets to stay on your plan till the end of the year that she turns 26. However, if this is an emp plan, it's probably only until the end of the month that she turns 26. Check your plan to make sure though.
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Fractalleaf
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Re: ACA/Covered California, how to avoid Medi-Cal?

Post by Fractalleaf »

gobel wrote: Thu Sep 23, 2021 2:37 pm Do you have coveredca yourself? I think your daughter gets to stay on your plan till the end of the year that she turns 26. However, if this is an emp plan, it's probably only until the end of the month that she turns 26. Check your plan to make sure though.
I corrected my original post, she will be 27 and needs to transition off of our employer sponsored plan.
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Watty
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Re: ACA/Covered California, how to avoid Medi-Cal?

Post by Watty »

Fractalleaf wrote: Thu Sep 23, 2021 5:36 pm
gobel wrote: Thu Sep 23, 2021 2:37 pm Do you have coveredca yourself? I think your daughter gets to stay on your plan till the end of the year that she turns 26. However, if this is an emp plan, it's probably only until the end of the month that she turns 26. Check your plan to make sure though.
I corrected my original post, she will be 27 and needs to transition off of our employer sponsored plan.
She can likely use COBRA for up 18 months and stay with Kaiser and not have to restart her deductible for the year.

When looking at the cost of other plans be sure to also keep in mind that she would also need to restart the 2021 deductible if she changes plans.
calwatch
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Re: ACA/Covered California, how to avoid Medi-Cal?

Post by calwatch »

Fractalleaf wrote: Thu Sep 23, 2021 2:28 pm The website linked earlier has a discussion on overestimating income to avoid Medi-Cal, but no firm conclusions.
https://insuremekevin.com/inflating-inc ... -medi-cal/

Though monthly income is used to estimate Medi-Cal eligibility, the IRS uses annual income to verify that the insurance subsidies were appropriate. So it seems the best strategy may be to report monthly income above the Medi-Cal threshold and just ensure that MAGI is in the appropriate range when filing taxes for the year.
Correct, because of the monthly rule. If you want to be exact about this, earn or realize income in the month where the application is made to be 1/12 of the 138% poverty line. There is no repayment of the tax credit, unless you *provided* incorrect information during the year of coverage.

https://www.irs.gov/publications/p974#e ... k100023198
Determining eligibility for Medicaid or CHIP at enrollment. An individual is treated as ineligible for Medicaid, CHIP, and similar programs (such as a Basic Health Program) for the period of coverage under a qualified health plan if, when the individual enrolled in the qualified health plan, the Marketplace determined that the individual was ineligible for Medicaid or CHIP based on the applicable Medicaid and CHIP income standards. However, this exception does not apply if you, or the individual you are including in your tax family, with intentional or reckless disregard for the facts, provided incorrect information to the Marketplace for the year of coverage. You provide information with intentional disregard for the facts if you know that the information provided is inaccurate. You provide information with a reckless disregard for the facts if you make little or no effort to determine whether the information provided is accurate and your lack of effort to provide accurate information is substantially different from what a reasonable person would do under the circumstances.

https://www.irs.gov/pub/irs-pdf/i8962.pdf
Household income below 100% of the federal poverty line.
If the amount on line 5 is less than 100%, you can take the PTC if
you meet the requirements under Estimated household income
at least 100% of the federal poverty line next or Alien lawfully
present in the United States below.
Estimated household income at least 100% of the federal
poverty line. You may qualify for the PTC if your household
income is less than 100% of the federal poverty line and you
meet all of the following requirements.
• You or an individual in your tax family enrolled in a qualified
health plan through a Marketplace.
• The Marketplace estimated at the time of enrollment that your
household income would be at least 100% but not more than
400% of the federal poverty line for your family size for 2020.
• APTC was paid for the coverage for one or more months
during 2020.
• You otherwise qualify as an applicable taxpayer (except for
the federal poverty line percentage).
Topic Author
Fractalleaf
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Re: ACA/Covered California, how to avoid Medi-Cal?

Post by Fractalleaf »

calwatch wrote: Thu Sep 23, 2021 5:49 pm
Fractalleaf wrote: Thu Sep 23, 2021 2:28 pm The website linked earlier has a discussion on overestimating income to avoid Medi-Cal, but no firm conclusions.
https://insuremekevin.com/inflating-inc ... -medi-cal/

Though monthly income is used to estimate Medi-Cal eligibility, the IRS uses annual income to verify that the insurance subsidies were appropriate. So it seems the best strategy may be to report monthly income above the Medi-Cal threshold and just ensure that MAGI is in the appropriate range when filing taxes for the year.
Correct, because of the monthly rule. If you want to be exact about this, earn or realize income in the month where the application is made to be 1/12 of the 138% poverty line. There is no repayment of the tax credit, unless you *provided* incorrect information during the year of coverage.

https://www.irs.gov/publications/p974#e ... k100023198
Determining eligibility for Medicaid or CHIP at enrollment. An individual is treated as ineligible for Medicaid, CHIP, and similar programs (such as a Basic Health Program) for the period of coverage under a qualified health plan if, when the individual enrolled in the qualified health plan, the Marketplace determined that the individual was ineligible for Medicaid or CHIP based on the applicable Medicaid and CHIP income standards. However, this exception does not apply if you, or the individual you are including in your tax family, with intentional or reckless disregard for the facts, provided incorrect information to the Marketplace for the year of coverage. You provide information with intentional disregard for the facts if you know that the information provided is inaccurate. You provide information with a reckless disregard for the facts if you make little or no effort to determine whether the information provided is accurate and your lack of effort to provide accurate information is substantially different from what a reasonable person would do under the circumstances.

https://www.irs.gov/pub/irs-pdf/i8962.pdf
Household income below 100% of the federal poverty line.
If the amount on line 5 is less than 100%, you can take the PTC if
you meet the requirements under Estimated household income
at least 100% of the federal poverty line next or Alien lawfully
present in the United States below.
Estimated household income at least 100% of the federal
poverty line. You may qualify for the PTC if your household
income is less than 100% of the federal poverty line and you
meet all of the following requirements.
• You or an individual in your tax family enrolled in a qualified
health plan through a Marketplace.
• The Marketplace estimated at the time of enrollment that your
household income would be at least 100% but not more than
400% of the federal poverty line for your family size for 2020.
• APTC was paid for the coverage for one or more months
during 2020.
• You otherwise qualify as an applicable taxpayer (except for
the federal poverty line percentage).
Thank you for those links. So clearly simply overstating monthly income would be “reckless disregard for the facts”. We'll have to do the math to determine how much she will need to supplement her wages with capital gains in the month she applies for insurance to meet eligibility for the silver plans, but it’s probably about $1000. It’s a good time for her to realize capital gains anyway, before her income goes up with a full time job.
AQ
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Re: ACA/Covered California, how to avoid Medi-Cal?

Post by AQ »

I was a bit surprised to learn this discussion, i.e., if income is too low, one has to take Med-cal. I would imagine some early retiree may have minimal income. Wouldn't they have to go to Med-cal? But I didn't come across such discussions so I wonder what I missed.
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Re: ACA/Covered California, how to avoid Medi-Cal?

Post by oldcomputerguy »

This topic is now in the Personal Finance forum (insurance question).
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anonenigma
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Re: ACA/Covered California, how to avoid Medi-Cal?

Post by anonenigma »

I believe that there is a requirement that individuals must not have more than $2,000 in financial assets to be eligible for Medi-Cal.
fortunefavored
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Re: ACA/Covered California, how to avoid Medi-Cal?

Post by fortunefavored »

Depending on your needs, Medi-Cal can be better than many county ACA plans. 0 deductibles, dental included, wider(!) networks, etc.

This is mostly a reflection how bad the ACA plans have become vs. how good Medi-Cal is.. but there ya go.

In this case the OP has done their homework and decided it is not for them, but I would not dismiss it out of hand.
Topic Author
Fractalleaf
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Re: ACA/Covered California, how to avoid Medi-Cal?

Post by Fractalleaf »

anonenigma wrote: Fri Sep 24, 2021 6:04 am I believe that there is a requirement that individuals must not have more than $2,000 in financial assets to be eligible for Medi-Cal.
Surprisingly, Medi-Cal eligibility is entirely determined by income without regard to assets. This does have the desirable effect of protecting people from losing everything due to a medical crisis after a job loss.

Medi-Cal is an excellent safety net but is not universally accepted by providers. As mentioned previously, some services and medications are “carved out” from insurance plans and assigned to county services. Our friend’s son was making good progress in an addiction medicine program at Kaiser and was dropped from it after going on Medi-Cal, despite assurances from Kaiser’s own representatives that his coverage would be unaffected. Some of Kaiser’s mental health services are also assigned to the county for Medi-Cal patients. We don’t know what else might be different with Medi-Cal, Kaiser does not provide a clear explanation of benefit comparison between all of their plans and Medi-Cal.
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