People applying early in open enrollment for advance payments beginning in January 2014, therefore, would have likely had their incomes verified by their 2012 tax returns (as this was the most recent tax return they would have had). Unless applicants actively accounted for changes between 2012 and current income, their subsidies may have been based on an already out-of-date income. People applying toward the end of 2014 open enrollment may have been more likely to use 2013 income in their applications, particularly if they had filed their 2013 taxes before applying, but they still may have experienced changes in income during 2014.
As shown below, household incomes change, sometimes significantly, over the course of a year. Enrollees are expected to contact the Marketplace when they experience changes in their incomes so that their subsidies can be recalculated, but there is as of yet no indication of how often this contact is made.
The law requires that any advance payments received in a year be reconciled against the tax credits for which individuals and families are eligible based on their annual income reported on their tax return. If the advance payment exceeded the amount of the credit for which individuals were ultimately eligible, a portion of the overpayment must be repaid. While the ACA originally limited the amount that had to be repaid to $250 for an individual and $400 for a family, Congress subsequently raised the repayment caps and created a scaled repayment structure, as shown in the table below.
|100% to <200%
|200% to <300%
|300% to 400%
|Greater than 400% FPL
Note: Enrollees with incomes that fall below poverty at the time of reconciliation are not expected to repay the tax credit.
Source: 2012-24 Internal Revenue Bulletin, § 1.36B–4.
Repayments and Refunds: Estimating the Effects of 2014 Premium Tax Credit Reconciliation | The Henry J. Kaiser Family Foundation.