Nov 232014

by Joseph Doratan

The Affordable Care Act (ACA) has defined an affordable health plan as one that you  pay 8% or less of your income to have. To ensure that you have an affordable plan, Covered CA even provides premium assistance in their plans or put you under Medi-Cal if you are low income. The discussion below would be irrelevant if you are disqualified by income or uninterested with premium assistance; surely though, you can still have ACA plans.

Whose income? The right answer is the income of the taxpayers and their dependents, whether they file an income tax return or not AND whether they want a health insurance or not. For example, a husband may be in Medicare and hence does not want a health insurance from Covered CA, yet his income must also be known in the health insurance application. A related note about couple is that they have to file their tax as ‘Married Filing Jointly’ to be eligible for premium assistance.

What is income? For most people, that would be the adjusted gross income (AGI) found in the 1040. AGI can be just the gross income for most wage earners. Or AGI can be just the net income of the self-employed. In reality, other incomes like distributions from IRA or pensions, unemployment income go into the AGI as well. Deductions like IRA contributions, student loan interest can be used to reduce the AGI. For the purpose of determining Covered CA or Medi-Cal income eligibility, Modified AGI (MAGI) is used. Three (3) types of incomes must be added back to get MAGI. One is non-taxable Social Security benefit, except for SSI. Another is tax-exempt interest. Lastly, foreign earned income and housing expenses for Americans living abroad have to be added back.

How significant is the closest estimated income computation? First, income, household size and your age determine whether you go to Covered CA or to Medi-Cal. For example, a single who earns $20,000 annually goes to Covered CA, while a couple who earn total of $20,000 go to Medi-Cal. MAGI is compared against the Federal Poverty Levels (FPLs) to classify eligibility. If MAGI is within 138% of the FPL, then you are Medi-Cal eligible. Second, income affects assistance. The lower the income, the higher amount of premium assistance you get; in other words, you pay less premium. If you select a certain level of health plan called the Silver plan, you may also enjoy assistance in the form of lower deductibles or co-pays. Covered CA and Medi-Cal truly want to provide affordable health insurance to Californians.

You can find updates on Covered CA at If you need help renewing or enrolling, please call 855-955-1800.

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