New York: Proposal made to factor student debt into subsidy calculation

via Greg Land at Benefits Pro:

Amid a pandemic-stricken nation struggling to find ways to reopen, massive unemployment and employees lucky enough to have jobs hanging onto them as tightly as possible, New York health care strategists are floating a plan to offer health insurance tax credits assistance to loan-saddled college graduates who have no overage or fear of losing what they do have.

As envisioned in a new report released last week by the United Hospital Fund, recent college graduates could be allowed to deduct the monthly costs of their student loan payments from their total adjusted income as calculated under the Affordable Care Act. 

Remember, ACA tax credits utilize a formula based on your modified adjusted gross income (MAGI) measured against the premium cost of the 2nd lowest-cost Silver plan available on the exchange (aka the benchmark plan). If the benchmark plan costs more than a certain percentage of your annual income, you're eligible for the difference between the two.

For instance, let's say you're single/no kids and have an annual income of 300% FPL (around $38,000/year). Let's say the benchmark plan would cost you $500/month at full price. Since that's more than ~9.8% of that ($3,700/year, or $310/month), you're eligible for the difference between them...roughly $190/month or $2,280/year. Furthermore, you don't have to buy the benchmark plan--you can apply that $2,280 towards any exchange plan at any metal level. The exact formula is slightly different but you get the idea.

Because New York maintains its own marketplace, New York State of Health, it can roll the student debt calculations into its formula for pricing health care plans without having to rely on the federal plans other states rely on. 

...ACA guidelines set tax credits based on a consumer’s modified adjusted gross income. Individuals making between 200% and 400% of the federal poverty level ($24,980 to $49,960 for an individual) are eligible for credits ranging from 6.54% to 9.78% paid to health plans to help defray the total cost of coverage. 

ACA tax credits are actually available to those earning 100-400% FPL; the article states 200-400% because in New York, exchange enrollees earning less than 200% FPL are actually eligible for the Essential Plan instead, which is an even better deal and which has a whole different pricing structure.

The idea in this proposal would be to allow recent graduates to subtract their monthly student loan payments from their MAGI, thus lowering their official MAGI for purposes of estimating their annual income.

As an example it cited a post-graduate earning $60,900 a year, too high for a ACA tax credit, but paying $800 a month in loan debt; such an individual could see his monthly insurance premium cut by 35%

Lower-paid workers eligible for ACA subsidies and carrying less debt would also see reduced premiums, but not as much.

It's not a bad idea, though of course if H.R. 1425 (the ACA 2.0 bill recently passed by the U.S. House) were to also pass the Senate and be signed into law, it would become mostly moot, since HR1425 eliminates the ACA's subsidy cliff anyway and makes the standard ACA subsidy formula more generous.

Since that's not gonna happen before next January at the earliest, however, this is a pretty good idea for New York specifically.