Do I Have to Payback of Subsidies if they are Declared Illegal?
I have been trying to get an answer to the following two questions, but no one seems to know the answer and instead of useful information tries to give me the party line. As you know a case is in the Supreme Court to determine if the government can actually give subsidies to anyone who signed up through the federal and not a state exchange. Recently, if you ignore the far right or far left reports, most constitutional lawyers are weighing in that due to the nature of statutory construction it will probably be held that the subsidies cannot be given, and since Missouri passed a law preventing the state government from establishing its own exchange that would exempt most people, including me, from the penalty since even the lowest payments for ACA approved insurance would be way over the 8% of my income, and I have no problem with that. My two questions no one will answer are:
1) If the court does rule against the subsidies to those signing up on the federal exchange, would anyone who took them be required to pay them back because they were unauthorized? Before you laugh me off, remember, I am in the age group that when they decided to try and expand Medicaid they said the government could go after our estates when we die. I try to stay away from the government and the IRS as much as possible taking only standard deductions. I don’t want to have to pay the $285 family max penalty, but since one months subsidy is more than that I cannot afford to get hit with a 1-2000 payback if I did sign up.
2) If the subsidies are declared unauthorized, then will those of us penalized be able to get back our penalty ($95 in my case) since we would be exempt under the 8% of income rule or will the government just keep the money?
Since the deadline is approaching fast I would appreciate any response
That is a smart question, and there is nothing funny about it. Here is a truthful answer.
There is a limit to the amount of Tax Credits you can pay back the IRS each year.
- Less than 200% FPL ………………………….. $300 single, $600 any other filing status
- At least 200% FPL but less than 300% … $750 single, $1,500 any other filing status
- At least 300% FPL but less than 400% … $1,250 single, $2,500 any other filing status
Declaring subsidies illegal, doesn't declare the entire law illegal. So you will still owe the payment for not having coverage.
In state's that didn't set up an exchange, most likely, the IRS will not force Americans to payback their tax credits if Federal subsidies are declared illegal. Instead, a fix is more likely to include states having their exchanges set up for them by the Federal Government (as this is allowed by the law). That would mean states would start issuing tax credits instead of the Federal Government issuing them on their behalf.
The lawsuit is focusing on nit-picking a section of the law which doesn't include details on how Federally run exchanges issue subsidies. However the details around that part of the law give states, the Federal Government, and HHS lots of power to come up with alternative solutions. It's complex, but seriously, you should not in anyway reject subsidies you qualify for due to a fear that you may owe them back due to the Supreme Court case. Feel free to comment with excepts from or links to any "Constitutional" lawyer who makes a case against this and we will be happy to debunk it and point to the parts of the law that back up what we are saying.