Government Subsidies Under the Affordable Care Act
Citizens and legal residents in families with incomes between 100% and 400% of poverty who purchase coverage through a health insurance exchange are eligible for a tax credit to reduce the cost of coverage. In states without expanded Medicaid coverage, people with incomes less than 100% of poverty will not be eligible for exchange subsidies, while those with incomes at or above poverty will be. People offered coverage through an employer are also not eligible for premium tax credits unless the employer plan does not have an actuarial value of at least 60% or unless the person’s share of the premium for employer-sponsored insurance exceeds 9.5% of income. People who meet these thresholds for unaffordable employer-sponsored insurance are eligible to enroll in a health insurance exchange and may receive tax credits to reduce the cost of coverage purchased through the exchange.
What is the amount of the tax credit provided to people?
The amount that a person can receive is based on the premium for the second lowest cost silver plan in the exchange and area where the person is eligible to purchase coverage. A silver plan is a plan that provides the essential benefits and has an actuarial value of 70% (meaning that on average the plan pays 70% of the cost of covered benefits for a standard population of enrollees.) The amount of tax credit varies with income such that the premium that a person would have to pay for the second lowest cost silver plan would not exceed a specified percentage of their income (adjusted for family size), as follows:
|
Income Level |
Premium as a Percent of Income |
|
Up to 133% FPL |
2% of income |
|
133-150% FPL |
3 – 4% of income |
|
150-200% FPL |
4 – 6.3% of income |
|
200-250% FPL |
6.3 – 8.05% of income |
|
250-300% FPL |
8.05 – 9.5% of income |
|
300-400% FPL |
9.5% of income |
How will premium subsidies be provided?
Premium tax credits would be refundable and advanceable. A refundable tax credit is one that is available to a person even if he or she has no tax liability. An advanceable tax credit allows a person to receive assistance at the time that they purchase insurance rather than paying their premium out of pocket and waiting to be reimbursed when filing their annual income tax return.
PPACA requires exchanges to provide information to prospective enrollees about their eligibility for premium tax credits. The process through which people apply for premium tax credits will likely be established by the Secretary of Treasury through regulation.
How will cost-sharing subsidies be structured?
Cost-sharing subsidies protect lower income people with health insurance from high out-of-pocket costs at the point of service. PPACA provides for reduced cost sharing for families with incomes at or below 250% of poverty by making them eligible to enroll in health plans with higher actuarial values. The premium tax credits, discussed above, generally are based on a plan with an actuarial value of 70%. PPACA provides that people with lower incomes have their cost sharing reduced so that plan on average pays a greater share of covered benefits. The amount of additional protection varies with income, as follows:
|
Income Level |
Actuarial Value |
|
100-150% FPL |
94% |
|
150-200% FPL |
87% |
|
200-250% FPL |
73% |
Source:www.healthreform.kff.gov
