Same Sex Marriage Couples: May lose Obamacare Subsidy

As a health insurance agent I can’t help but find it interesting that same sex marriage became legal within 24 hours of the Supreme Court’s ruling to uphold Obamacare subsidies. Could there be a link between the two?

The Supreme Court sometimes goes for long intervals without seeming to decide much on important issues and then we get a flurry of activity including upholding State’s execution methods for lethal injection drug/procedures, overturning landmark EPA anti-pollution regulations for nuclear power plants based on the costs outweighing the benefits in terms of the billions of dollars it would cost businesses and the American people, and continuing to allow abortion clinics to stay open in Texas.

Much of the Supreme Court’s activity is over my head, but I understand Same Sex Marriage and I understand Obamacare. Let’s follow the money and see how this shakes out!

Suppose we have a same sex unmarried couple who are both 58 years old. They each make $32,000 a year. Neither of their employers offers benefits, so they both receive federal Obamacare Subsidies of a little over $300 a month from the Federal Government in the form of APTC (Advance Premium Tax Credit) to help pay for their health insurance. Based on their income level, they also receive a cost-share reduction of $2,000 to $3,000 per year in reduced deductible. For this example we will just stick to the APTC to keep it simple. At this income level, the $300 a month multiplied by 12 months is $3,600 per a year, per a person subsidy. Or $7,200 federal money received per a year per a couple.

HOWEVER, once the two are married, their combined joint household income would be listed as $64,000, which is above the federal subsidy level. These newlyweds would lose their subsidies and owe back the money they had collected. For this reason, the Obamacare law is heavily weighted toward individuals as opposed to married couples or families.

The newlyweds would have to each pay an additional $300 per a month to have the same health insurance they had before they were married.
While we used $32,000 annual income for our example, many combinations of income could lead to a loss of income (example $20,000 and $43,000 income). Here are some helpful pointers if you and your significant other are both on Obamacare.

If you are considering getting married (same sex or not), take a look at the combined household income. If the new number is over $62,920, then you will lose your Federal subsidy.

Question 1: Can’t I file a single return after I am married?

Yes, but filing as a single individual would make you ineligible to receive federal subsidy money. Anyone married must file a Joint return to be eligible for Federal Obamacare subsidy.

Question 2: What should we do?

First, you may want to talk to an accountant. Second, you may want to open a bank account for your honeymoon and save the $600 a month while you have it. If you wait until 2016 to get married, you could both ride out the rest of 2015 without owing back the 2015 subsidy you are currently receiving. It would be a shame to get married and then find out next tax season that you earned too much money and you each owe back the $300 per a month subsidy.

So I don’t know if there is any government conspiracy here or not, but I think it would be a pretty sad story if a couple waits 20 years to get married and the government says, “OK Get married!” Then six months later the IRS sees the combined income and comes knocking in search of the $7,200 repayment for the Obamacare subsidy.

While this situation could unfold for any couple, same sex or not, I expect there are a great deal of same sex couples who are between the 50 – 65 year-old age  bracket and are excited to finally be married. Those ages create very high health insurance premiums. The general public should be aware of this potential pitfall and prepare accordingly.