Making up for Covered CA anticipated income discrepancies

December 7, 2015 10:12 AM

I significantly underestimated my (often wildly varying) income when I signed up for Kaiser health insurance through Covered California at the beginning of the year, and later dragged my feet about updating my income information, figuring I'd have to pay it back in a tax penalty next April anyway. I have a few thousand dollars in a non-expiring medical reimbursement account with ADP. Is there a way to apply those funds to my tax penalty somehow, or do something equivalent?

I know I can submit bills for my health insurance premiums to be reimbursed, and obviously that would've been the smarter approach. Since it's too late for that, and since a check to the IRS isn't a medical expense (even though the premiums I'll be making up the difference for were), am I just out of luck and paying the penalty of bad planning? Ugh.

posted by tapir-whorf to Health & Fitness (4 answers total)

I'm not as familiar with non-expiring medical reimbursement accounts, but I know with the regular accounts, the money cannot be used to pay for premiums. I might be wrong, but I don't think you're paying a tax penalty (since you WERE covered through Covered California, right) but rather a back payment on premiums that you were underpaying. I'm assuming what happened here is that you took a subsidy you were not entitled to? If what you're paying is essentially a lump sum premium payment, I think a medical reimbursement account will not cover that since it wouldn't cover premiums (again, unless the rules of your account are different from what I have had in the past).
posted by rainbowbrite at 11:17 AM on December 7, 2015

Response by poster: Yes, I received more subsidy than I should've. I assumed I'd be required to repay it as part of my tax bill, rather than separately; is that not the case? For what it's worth, my reimbursement account is mandated to be non-expiring by the city of SF, and I believe is more or less identical to the one city employees are offered (although I'm not a city employee). I do know that premiums are reimbursable.
posted by tapir-whorf at 11:43 AM on December 7, 2015

Without us knowing exactly what the deal is with your specific medical savings account we cannot answer this.

Your link says very clearly premiums are an allowable expense for that kind of account. HSAs cannot pay premiums.
posted by JPD at 1:09 PM on December 7, 2015

I don't know about the specifics of your case, but I got a subsidy last year that it turned out I wasn't entitled to either, and I did have to pay it back when I did my taxes this year.
posted by number9dream at 1:33 PM on December 7, 2015