Affordable Health Insurance: ARPA Expansions

The American Rescue Plan Act of 2021 (ARPA) has put into place several temporary expansions to the Affordable Care Act (ACA) provisions that can help Americans access health coverage at affordable prices. In general, these benefits apply to people who purchase health insurance in the Marketplace (created by the ACA) because they do not have an affordable option available through employment. The expansion has two dimensions: 1) more people are eligible for help paying the health insurance premiums for plans purchased in the Marketplace, AND 2) those who are eligible for help are now eligible for MORE help, so that their share of the monthly premium can be reduced.  People who are unemployed will especially benefit.

The Health Insurance Marketplace is now open for enrollment through August 15, so if this information makes you want to enroll in a plan OR change the plan you chose, you should be able to do so in the next few weeks. NOTE: The law took effect March 11. The agency in charge of the Health Insurance Marketplace expects to be ready to implement many of the changes on April 1. Suggestion: if you call or log in to the Marketplace in early April, ASK if the new rules are yet in place. It might be worth waiting a week or two in order to be sure the changes have been built into the system.

More Help. The ACA created a maximum cost people would have to pay for health insurance premiums, stated as a % of your income. The ARPA dramatically reduced that percentage of income for 2021 and 2022.  For example, suppose you are a 2-person household with income of $43,000/year (which is just under 250% of the poverty level); under the ACA your share of the premium for a benchmark silver plan would have been 8% of your income; under the new ARPA guidelines, your share of the premium cost for that same silver plan is just 4% of your income. Implications:

  • Some people who previously decided health insurance was too expensive will NOW decide it is affordable under the new rules.
  • People who chose a less-expensive bronze plan despite its higher deductible and copays may NOW decide a silver plan is worthwhile.
    This is of special value to those who are at or below 250% of the federal poverty mark, because these folks are eligible for plans that sell for a “silver” price but have smaller deductibles and copays so that they are more like a gold or platinum plan. In other words, folks under the 250% level can get a premiere plan for a budget price.
    It’s sort of like getting a brand-new luxury SUV for the price of a 2014 compact sedan!
  • If you are already enrolled in a Marketplace plan, there is a good chance that your share of the monthly premium is reduced under the new rules. Consider contacting the Marketplace (800-318-2596) sometime later in April.

More People Eligible.  Under the original ACA rules, if your income was over 4 times the poverty level, you were not eligible for help paying for health insurance. Under the ARPA expansion, people of any income level are eligible if the cost of the Marketplace plan would exceed 8.5% of their income. This will be especially valuable for those in their 50’s and 60’s, since health insurance premiums rise with age. This provision is also in effect for 2021 and 2022. 
Implication: some people with incomes above the 400% threshold may have compromised to save money by purchasing health coverage that was poorer quality (that is, it does not meet the ACA standards related to broad coverage and value). With the new cap of 8.5% of income regardless of income level, these folks might now be able to purchase a high-quality plan for an affordable price.

Huge Benefit for Those Unemployed at ANY time during 2021.  Note: this benefit is ONLY in effect in 2021.  If you receive(d) Unemployment Income at ANY time during the 2021 calendar year, special rules apply for your eligibility. With regard to eligibility for help paying for health insurance in the Marketplace, any income above 133% of the poverty level will be disregarded. That means these households will be eligible for the “platinum-like” silver plans for FREE – the premiums will be entirely covered by the subsidy.  Note: all other qualifications must also be met. For example, if you have workplace coverage available that is considered affordable, then you will not be eligible for the free silver plan.  However, if you are unemployed now, take advantage of the free silver plan. If you get a new job in a couple months that provides insurance, you can then drop the silver plan.
For those whose incomes are below 100-133% of poverty, they will be eligible for Medicaid coverage (also free), even in states where Medicaid was not expanded.

COBRA Subsidy. For people who lost health coverage due to being laid off or having their work hours reduced, the government will cover the cost of their COBRA premiums for up to six months, from April 1 – September 30, 2021. Check with your employer about how this might help you. Even if you lost your job months ago and did not sign up for COBRA at that time, you should now be able to sign up for COBRA.
Note: if you are in this group, you might also benefit from Marketplace insurance or Medicaid, so be sure to evaluate all your options.

Primary Source: Kaiser Health News Details for the % of income (paragraph 3) from Kitces.com
For more information see: https://www.healthcare.gov/more-savings/

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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$1400 Stimulus: The Same, Yet Different

People are excited about the extra $1400 stimulus payments that are coming. Last Saturday, just ONE day after the bill was signed, I heard by the grapevine that some folks already received their payment! More received it this past week, and more will be receiving it in the next several weeks. Even though Americans knew this was coming, and even though it is the third in a series of payments promoting economic recovery from the impact of the pandemic, it does involve some differences worth noting.

  • All dependents qualify. Under the earlier stimulus payments, households received extra payment only for dependents who were eligible for the Child Tax Credit (i.e. under age 17). However, the new round of payments will include dependents who are older children, parents or others. Caveat: it may not be safe to assume that this includes dependents who are not relatives or other atypical dependents – we will need to watch how the law is applied.
    This is the BIGGEST change, and will affect MANY families!
  • The payments are protected from being held back to pay federal debts, such as back student loans, back taxes or back child support. However, as of now, these funds are not protected against private debt collectors after they arrive in your bank account; they could be seized (garnished) for repayment of credit card debt or other private debt.
  • The payments are available to people below certain income limits, just as before, but this time the phaseout is steeper. The phaseouts are as follows: Single Filers and Married Filing Separate phase out from $75,000 – $80,000; Head of Household phases out from $112,500 – $120,000; Married Filing Joint, from $150,000 – $160,000.
  • The steep phaseout means that for some households, the difference in income from one year to the next may be important. The income guidelines may be applied to your income for either of two or three tax years, and if you meet the rule for any of the years, then you will be eligible. For starters, they will check your most recently-filed return, which may be either 2019 or 2020. If you were below the threshold for 2019 but above it for 2020, it may be worthwhile to delay filing your 2020 return until you receive your payment. If your 2020 income is within the limits, then your 2020 return will be used, as long as it is filled within 90 days of the tax-filing deadline of May 17, 2020. And if you didn’t qualify based on 2020, you can still receive the payment as part of your 2021 tax return.
    One key implication: if your income in a normal year would put you above the limits, but you had lower income in 2020, then get your 2020 tax return filed before that deadline of 90 days after May 17!
  • If the payment is made based on your 2019 or 2020 income, and then your 2021 income proves to be above the limit, you will not need to pay anything back.

Source: Kitces.com

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Unemployment Compensation Exclusion – Stay tuned!

When the American Rescue Plan was passed recently, consumers paid most attention to the $1400 stimulus checks (which we’ll discuss in an upcoming post), but there’s another feature that has gotten less attention. If you received unemployment compensation in 2020, it’s good news for you!

The first $10,200 of unemployment income you received in 2020 will now be excluded from your taxable income. This exclusion applies in 2020 only. Exception: you are not eligible for the exclusion if you are a high-income household (over $150,000). In states that follow most provisions of federal tax law, including Iowa, the exclusion also applies to state income tax.

This Unemployment Compensation Exclusion will make a big difference on tax returns for people who qualify, reducing tax bills (and/or increasing refunds) by $1,000 or more for some households. Note: the amount depends on how much unemployment compensation you received and on your total taxable income.

The software we use at Volunteer Income Tax Assistance (VITA) sites was updated very quickly; the update was in place by Friday March 19, only a week after the law was signed. I’m sure the same is true for most other tax software packages.

Some of you may be wondering: what if I filed my tax return earlier in the season??

Do not fear – you are also eligible for the exclusion. However, we do not yet know how that is going to be handled; we need to wait for word from the IRS. For now, the IRS says: “WAIT – don’t take any action until we’ve announced how you should handle it.” The worst-case scenario is simply that you would need to file an amended tax return.  However, some of us are hoping that the IRS and their computers will be able to simply pull out those tax returns, recalculate them, and issue the additional refunds. If that would happen, taxpayers would see two results: 1) an additional refund (check or direct deposit); and 2) a letter explaining the adjustment. Don’t be surprised if the refund arrives before the letter. The same issue arises for state tax returns, and the possibilities are basically the same as well: they may be able to recalculate and issue additional refunds with no action from you, OR you may have to file an amended return. Reminder: for now, the IRS does NOT want anyone to file amended returns for this purpose.

If you are eligible for the Unemployment Compensation Exclusion but filed your taxes before it was enacted, you will need to stay tuned for more information and you may need patience. As always, never ignore a letter from the IRS, and pay attention to your bank statements.

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Spring! Money?

This clump of allium is always a happy surprise later in spring.

The other day, a friend of mine posted a picture of crocuses blooming in her yard. That’s on top of a string of beautiful weather that we Iowans have been delighting in. It’s a good reminder for all of us that many of the best things in life are completely independent of money.

Most people have days (or weeks or months) when money is tight, or money decisions are overwhelming, or it’s clear that you will need to choose to do without something that you normally spend money on, When those days occur, let’s all remind ourselves of the crocuses, or the greening grass, or the beautiful sunset, or the smiles and hugs of our children.

Money does matter. But it is never the most important thing. It is encouraging to remember that.

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Another Fraud-fighting Tool

I recently learned about the USPS service called Informed Delivery. If you choose to sign up, you will then receive notifications when mail and packages arrive, but they’re not just blank notifications; you actually get a picture of the letter(s). That means I can see who my letter is from. Note: it does not provide an image of items that are not “letter-sized,” such as magazines or advertising. Depending on the security of your personal mailbox, this could be a great reassurance that no one has taken any of your mail. OR if an important piece of mail is scheduled to be delivered, it may allow you to plan ahead and make sure someone is there to pick up the item immediately.  

Informed Delivery also confirms package delivery, so it could protect you against “porch pirates” who might steal your packages. It also allows you to leave specific delivery instructions if you won’t be home to receive a package on a certain day.

Preventing mail theft is valuable — if certain pieces of mail end up in the wrong hands, they could leave you susceptible to identity theft and other types of fraud. I see it as a nice convenience too. I’m thinking about my adult children, both of whom live in housing complexes where they have to walk outside to get to their mailboxes. This service would let them know whether it’s worth going after the mail on any given day! 

The notifications arrive by email; additionally an app is available for either I-phones or Android devices. Learn more!
A big thanks to my friend Janel, who has family connections in the postal service, for sharing this tip!

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Health Insurance Marketplace Reopens

Normally the health insurance marketplace is open just once a year in the fall (Nov 1 – Dec 15). This year, however, the government is opening the federally-run Marketplace today (February 15) for three months. Since Iowa uses the federal marketplace (www.healthcare.gov), this opportunity is available to Iowans. For readers in other states: many of the state-run health insurance marketplaces are also opening for the same three-month period.

Are you worried about choosing a health insurance policy? ISU Extension is offering a one-hour online workshop called “Smart Choice Basics” to help you understand key factors to consider when choosing a policy. The workshop is free, but pre-registration is required. Two options are available – choose the one that fits your schedule, and preregister today!

In the health insurance marketplace, Americans who do not have quality coverage available on the job can enroll in insurance plans that cover the ten essential benefits (including prescriptions, mental health care, rehabilitation, and more). In addition, you may qualify to get help paying the premiums, through the Premium Tax Credit. You may be eligible for a Premium Tax Credit if your income is below: $51,000 (single); $68,900 (couple); or $104,800 (family of four). Find out more at www.healthcare.gov. NOTE: if you are very near the income limit, you are eligible for only a small amount of help, but it does cap the percentage of your income you’ll need to pay for health insurance.

Keep in mind: You can always have a “special enrollment period” in the marketplace if you lose your insurance (e.g. leave your job, get divorced, or other reason). This new opportunity can be helpful for people who didn’t sign up when they could have, but have now decided that they need insurance after all.

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Reduced Income in 2020? Check on the EITC

Today is EITC Awareness Day — a great day to remind people about the benefits of the Earned Income Tax Credit. This credit is an “add-on” to your tax refund if you qualify — it is designed to provide a financial boost to working people with low and moderate incomes. This one-minute video gives a great overview!

Even if you’ve never been eligible for the EITC in the past, there’s a chance you might be eligible for it in 2020 if your income was lower, and within the income guidelines. Two figures affect the amount you receive: your total income (Adjusted Gross Income) AND your earned income — income that was payment for work. The maximum income guidelines depend on family size; the highest limit ($56,844) applies to married-filing-jointly households with three or more children. Other eligibility rules apply as well; check out the details and/or use the IRS screening tool.

P.S. Maybe you never guessed the IRS had a YouTube channel! Their videos do a great job explaining lots of tax topics!

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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File Your Taxes for Free

Due to COVID, many VITA or AARP volunteer income tax sites are either closed this year or operating at limited capacity, in order to protect the health of all involved. If you have relied on free tax assistance in the past, what can you do now?

IRS Free File is one great answer. It’s an agreement the IRS has made with a number of tax software companies, so that people with incomes below $72,000 can use the software packages to file their federal return (and sometimes their state return) for free. There is no need to be intimidated by the idea of filing your own tax return — these software packages are designed to be very consumer-friendly. If you paid attention last year when your tax preparer reviewed your return with you, and if your situation this year is similar to last year, you are a perfect candidate to do it yourself!

When preparing your own tax return, be sure to:

  • Use a secure internet connection (don’t use public wi-fi at a coffee shop)
  • Read and answer the questions carefully
  • Take your time and double-check the information you enter
  • Remember that you can start one day and not finish – you can come back later when you’ve gathered more information.
  • Save the pdf of your return so you have a copy for next year.

If your tax situation has changed significantly since last year and you are not comfortable preparing your own return, there still are volunteer income tax sites available.  The IRS has a VITA site locator tool to help you find a site near you. NOTE: The site locator tool is not yet active — the IRS plans to have it operational by February 1. Likewise, the AARP Foundation Tax-Aide Locator is expected to come on-line in early February.

If you are eager to get moving now, remember that the IRS will not even begin accepting 2020 tax returns until February 12, due to late December changes in the tax law. We’ll all need to be patient for our tax refunds this year!

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Excited for your Tax Refund?

Tax refund season is an exciting time for many families, because the tax refund is often the biggest financial event of the year. If your family is expecting a sizable refund this year, now is a good time to plan for how you will use that money.

Before making specific plans, I encourage you to think about this: the tax refund is a once-a-year event. That means it’s smart to think about the whole year’s worth of possible uses for that money. It’s a good idea because that reminds you to consider whether you’ll want to set aside some of it for things like…

  • Back to school costs
  • Winter coats for next winter
  • 2021 birthdays and holiday expenses
  • Summer day care costs when children are out of school
  • Car repair needs that might arise (or new tires)

If you think through possible expenses for the year ahead, you will be glad you did. It will help you reduce your overall stress load, since you’ll know you have a head start on meeting some of those needs. Of course I understand that if you have past-due bills right now, you’ll probably need to use your tax refund to catch up on those. I also understand that providing something special for yourself and your family right now may be important – whether that be a new piece of furniture or a trip to a restaurant. Only you can sort through all your options and decide on your highest priorities, but your plans will be stronger when you consider the whole year.

Keeping the whole year in mind as you think about your tax refund makes sense, doesn’t it? It’s just like when you get paid weekly or monthly, and you think about the whole week or the whole month before spending. Your tax refund may not be enough to cover all your special needs for the year ahead, but it sure can help.

Important Note: The IRS announced last week that it will not start processing tax returns until February 12. Why? Because the new law passed in the last week of December made several changes, and they need to make sure their computers have those changes programmed in. Result? Chances are your tax refund will be a little slower this year. No refunds will be issued at all until about a week after February 12. Build that delay into your plans.

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Tax Law worth knowing: EITC “Look Back”

If a mention of tax law causes your eyes to roll back in your head, I ask you to snap out of it for a minute, because this one is important to ordinary households. It’s new (and temporary) — part of the new COVID relief bill enacted this past week, and it will be huge for many workers who have been unemployed or had reduced earnings in 2020.

The Earned Income Credit is a powerful tool for helping working families with lower wages. The amount you receive depends on your earned income. Higher earnings (up to a point) means higher EITC.

2019 EITC Chart: Married Couple with 2 children

Here’s a 2019 example: A married couple with 2 children and with earned income between $14,550 and $22,400, was eligible for an earned income tax credit of $5,828 in 2019. That’s an extra $5,828 added to their tax refund. If their income was below $14,550 then their EITC was lower, but even if they only earned a small amount from work, they would receive some EITC. If their income was higher than $22,400 the amount of EITC gradually dropped, but they would still receive some EITC even if their income was as high as $52,400.

Suppose: a married couple with 2 children earned $25,000 in 2019, and received an EITC of $5,785. However, in March of 2020 they were laid off. They did receive unemployment, but that is not earned income. Their actual earnings from work in 2020 was only $5,000, which made them eligible for EITC of $2,010. That’s a loss of over $3,700, in a year when they were already struggling. The “look-back” provision in the new relief bill allows them to receive EITC (and also the Child Tax Credit) based on their 2019 earned income if it would be more beneficial.

By contrast, imagine a married couple with two children who had earned income of $60,000 in 2019. Their income was too high for EITC in 2019. However due to furloughs, their earned income in 2020 was only $40,000. They will be eligible for EITC in 2020 based on their 2020 earnings (assuming they meet other eligibility rules). When calculating EITC and CTC, taxpayers can choose to use either 2019 or 2020 income figures, depending which is better for them.

Tax law worth knowing!

Source: Kitces.com

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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