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The Premium Assistance Tax Credit
By Lon Jefferies MBA CFP®
The Premium Assistance Tax Credit (PATC) is designed to help “lower” income individuals and families pay for health insurance plans purchased through the new health care exchange program.
However, more people may qualify for government assistance when purchasing health care through the exchange than may realize.
Terms and Definitions
The program defines “lower” income as households that earn less than 400% of the Federal Poverty Level (FPL), which is based on the number of individuals in the home. In 2013, the FPL for a single individual was $11,490.
Similarly, the FPL for a household of two people was $15,510 and the FPL for a home of four individuals was $23,550. Consequently, at least some premium assistance credit is available for individuals earning less than $45,960, couples earning less than $62,040, and a household of four earning less than $94,200. (Click here for more information on the Federal Poverty Level for households of various size.)
It’s important to note that for the purposes of the assistance program, income is defined as modified adjusted gross income. This means that a taxpayer’s adjusted gross income will include all Social Security benefits received (whether it was taxable or not), and all bond interest (tax-exempt or not). This factor will reduce a person’s eligibility for aid if he begins receiving Social Security before age 65 (at which point he qualifies for Medicare and can no longer participate in the health care exchange).
A Reverse Calculation
The amount of aid the government will provide is essentially calculated in reverse – the maximum amount that an individual or family can owe is calculated, and the government will pay the remaining premium. This table shows the Premium Assistance Tax Credit thresholds based on income relative to the Federal Poverty Level:
###
| Income Relative To FPL: | Premiums Limited To: |
| Up to 133% of FPL | 2% of household income |
| 133% to 150% of FPL | 3% to 4% of income |
| 150% to 200% of FPL | 4% to 6.3% of income |
| 200% to 250% of FPL | 6.3% to 8.05% of income |
| 250% to 300% of FPL | 8.05% to 9.5% of income |
| 300% to 400% of FPL | 9.5% of income |
###
Example:
For example, assume John is a single 62-year-old living in Utah and making $30,000 per year. (Again, remember that when calculating the PATC, it really doesn’t matter whether John’s $30,000 of income is from employment, a Social Security benefit, or a combination of the two.) John’s income is 261% of the FPL amount for singles [($30,000/$11,490) * 100], so this puts his threshold between 8.05% and 9.5% of his income. His exact threshold is 11/50ths of the way between 250% and 300% of the FPL, so his maximum premium is 11/50th of the way between 8.05% and 9.5%, which means his maximum premium is 8.37% of his $30,000 income, or $2,511 per year ($210 per month). This is the most John will need to pay for an adequate health insurance plan.
What is Adequate Health Insurance?
What is deemed an adequate health insurance plan? The next relevant figure in the calculation involves determining the cost of the second least expensive Silver plan in the state. This can be determined by obtaining a quote at www.healthcare.gov. Assuming John lives in Salt Lake County, the second least expensive Silver plan available to him cost $5,100 per year ($425 per month). Whether or not John decides to purchase this exact policy, the $5,100 annual cost of the plan is significant.
Since the second least expensive Silver plan available to John cost $5,100, but the most John will be required to pay is $2,511 per year (8.37% of his income), the PATC program will cover the cost difference of $2,589. This amount will be the tax credit available to John for purchasing any health insurance policy through the exchange.
However, this does not mean that John is required to actually purchase and utilize the second least expensive Silver plan available to him. If John is so inclined, he can purchase a less expensive policy and he will still receive the $2,589 tax credit determined to be available to him.
Nevertheless, since the policy is less expensive, John would need to cover less of the cost of the inferior policy out of his own pocket. Similarly, John could also purchase a more expensive policy, but his tax credit would still be $2,589 and he would need to cover the additional cost of the superior policy with his own money.
Assessment
People are still familiarizing themselves with the options available within the health care exchange. Many will be surprised by their eligibility for assistance, and the amount of government aid available. Determining whether you qualify for a Premium Assistance Tax Credit will help you evaluate the attractiveness of the program.
More: Understanding Basics of the Health Insurance Exchanges [HIEs]
Conclusion
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Filed under: Health Insurance | Tagged: federal poverty level, Health Information Exchanges, HIE's, Lon Jefferies, Obamacare subsidies, PATC, Premium Assistance Tax Credit |
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What the Obamacare Health Insurance Exchanges Can – and Can’t – Do
According to the Massachusetts Connector architect John Kingsdale, writing in the prestigious New England Journal, the Obamacare insurance exchange was supposed to list health insurance options in a user-friendly fashion while simultaneously determining eligibility for exemptions and subsidies.
What happened instead was the mother of all procurement debacles. What’s worse, it was all predictable because it turns out that less than 10% of government’s IT development contracts are successful.
But, says Dr. Kingsdale in this essay, assuming Uncle Sam gets its act together, there are four big reasons to still like a functioning health insurance exchange.
What are they?
http://diseasemanagementcareblog.blogspot.com/2014/02/what-obamacare-health-insurance.html
Ann Miller RN MHA
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Enrollment in the Health Insurance Marketplace: Oct. 1, 2013, through Feb. 1, 2014
Nearly 3.3 million (3,299,500) people selected Marketplace plans from Oct. 1, 2013, through Feb. 1, 2014, including 1.4 million in the State Based Marketplaces and 1.9 million in the Federally-facilitated Marketplace:
• Of the almost 3.3 million:
-55 percent are female and 45 percent are male;
-31 percent are age 34 and under;
-25 percent are between the ages of 18 and 34;
-62 percent selected a Silver plan, while 19 percent selected a Bronze plan; and
-82 percent selected a plan and are eligible to receive Financial Assistance, up from 79 percent during the Oct. 1 through Dec 28, 2013 reporting period.
Source: U.S. Department of Health & Human Services
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Surveys find few uninsured enrolling through marketplaces
Two surveys released last week both found that the new health insurance marketplaces are struggling to enroll the uninsured.
http://www.healthpolicyreview.org/daily_review/2014/03/surveys-find-few-uninsured-enrolling-through-marketplaces.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+typepad%2Fhealthpolicyreview+%28Ohio+Health+Policy+Review%29
(Source: “New health insurance marketplaces signing up few uninsured Americans, two surveys find,” Washington Post, March 6, 2014).
Belinda
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State insurance exchanges fighting for survival
Between the wave of complicated regulatory changes, technical glitches and tepid interest from millennials, can insurance exchanges achieve their goal of sustainable risk pools?
http://www.govhealthit.com/news/hixs-fighting-survival?topic=29,34
And, will they even survive?
Barbara
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Maryland Aborts HIE
My home State of Maryland reportedly abandons their $125M ObamaCare exchange for a new system.
http://www.foxnews.com/politics/2014/03/29/maryland-to-reportedly-abandon-125m-obamacare-exchange-for-new-system/
Way to go, Governor!
Dr. David E. Marcinko MBA
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Dr. Marcinko,
Yep – Maryland is outsourcing to Connecticut.
Governor Martin O’Malley wasted $125 million dollars.
Think of the health care that money could have provided to citizens.
Ellen
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Breakdown Of The More Than 8 Million People Selected Marketplace Plans from October 1, 2013, Through March 31, 2014
1. 54 percent are female and 46 percent are male
2. 34 percent are under age 35
3. 28 percent are between the ages of 18 and 34 35% of employer premium contributions, and can access the credit as a refund.
4. 65 percent selected a Silver plan, while 20 percent selected a Bronze plan
5. 85 percent selected a plan with financial assistance
Source: U.S. Department of Health & Human Services
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Life Changes to Report if you have Marketplace Coverage
1. Get married or divorced
2. Have a child, adopt a child, or place a child for adoption
3. Have a change in income
4. Get health coverage through a job or a program like Medicare or Medicaid
5. Change your place of residence
6. Have a change in disability status
7. Gain or lose a dependent
8. Become pregnant
9. Experience other changes that may affect your income and household size
10. Change in tax filing status
11. Change of citizenship or immigration status
12. Incarceration or release from incarceration
13. Change in status as an American Indian/Alaska Native or tribal status
14. Correction to name, date of birth, or Social Security number
Source: HealthCare.gov
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Tax forms could pose challenge for HealthCare.gov
[Form 1095-A – What it is – How it works?]
If you are a Financial Advisor, or got health coverage through President Barack Obama’s law this year, you’ll need a new form from your insurance exchange [HIE] before you can file your tax return next spring.
And, some tax professionals [CPAs, EAs and FAs] are worried that federal and state insurance marketplaces won’t be able to get those forms out in time, creating the risk of delayed tax refunds for millions of consumers.
http://money.msn.com/business-news/article.aspx?feed=AP&date=20140830&id=17894828&33009
Yep – The same federal agency that had trouble launching HealthCare.gov last fall is facing the heaviest lift.
The Health and Human Services Department must send out millions of the forms, which are like W-2s for people getting tax credits to help pay health insurance premiums.
Barbara
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See ya! Many Health Information Exchange users to bail
[Survey]
A new survey finds that 51 percent of people who used the government-run Obamacare health insurance exchanges in the past year say they will not to do so again when open enrollment resumes Nov. 15th.
http://www.msn.com/en-us/money/insurance/see-ya-many-health-exchange-users-to-bail-survey/ar-BBcFnjy
Bertrum
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HIEs,
Holding down health insurance premium increases on the Public Exchanges and meeting affordability requirements for employer-sponsored health plans has required much attention be focused on the narrowing of provider networks.
However, in the coming year, the significance of specialty pharmaceuticals is likely to gain greater notice. The plan designs for many bronze level and minimum value plans will include increased patient cost-sharing for these high-cost specialty drugs.
For example, a focus on Hepatitis C and the introduction of new specialty drugs to treat this condition can be expected to bring to the forefront the cost of these products and the amount health consumers will pay toward their cost. More than half of the 2015 bronze plans will now require patients to pay 30% or more toward a specialty prescription. Sovaldi, a recently introduced blockbuster Hepatitis C drug, could have a price tag around $80,000 for a course of treatment.
At that rate, the upfront copayment for many consumers could potentially create an insurmountable barrier to entry. The out-of-pocket maximums imposed under the Affordable Care Act limit patient exposure to these significant costs to some degree, but for a subsidized individual whose budget only allows for the minimum amount of health premium, most specialty drugs are all but out of reach.
Health plans and pharmacy benefit managers will make purchasing arrangements with specialty pharmaceutical manufacturers which could lower the price somewhat. Keenan’s KPPC coalition has done that quite successfully. Even with negotiated discounts, this magnitude of cost sharing will be a heavy burden on lower and middle income patients.
Specialty prescriptions only account for about 1% of all prescriptions, but represent 25% of the cost. It won’t be a widespread issue that will affect many plan participants, but what could begin to appear on the media’s radar are the personal stories of individuals who have purchased health insurance but are unable to pay the out-of-pocket costs for lifesaving or other tertiary treatment. Such press coverage could reflect on the business of health care in a challenging way and the industry may find itself being judged on the merits of whether it can find a solution that offers more affordable access.
Henry Loubet
[Chief Strategy Officer]
Keenan
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Survey: 5 Things to Know About 2018 Marketplace Premiums
1. Obamacare Premiums Estimated to Rise 10 to 20 Percent in 2018
2. Medical Inflation to rise 6 to 10 Percent in 2018
3. Most Carriers Likely to File Rates in 2018
4. 50% Surveyed are Waiting for More Claims Information
5. 2018 Increases Higher Than Expected
Source: BNA
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34% Live in Regions With 1 or 2 Marketplace Insurers
The Robert Wood Johnson Foundation and Urban Institute recently released a brief on marketplaces with one or two insurers. Here are some key findings from the report:
• The median monthly premium is $451 in rating regions with one insurer.
• In regions with two insurers, the median benchmark monthly premium is $400.
• The median premium is $311-$317 monthly for markets with 3-5 insurers.
• 34% of the population lives in regions with one or two marketplace insurers.
• The median population in rating regions with one insurer is about 148,000.
• In rating regions with two insurers, the median population is 258,000.
Source: Robert Wood Johnson Foundation, May 2017
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Nongroup Premiums Would Rise 37% If Insurers Exit Marketplaces
The Urban Institute recently released an analysis of three scenarios that could occur in 2018 if federal CSR payments stop. Here are some key findings from the report:
• If insurers stay, the surcharge would increase silver premiums by 23% in 2018.
• The government would spend 18% more on premium tax credits ($7.2 billion in 2018).
• If insurers exit the marketplaces, the number of uninsured would rise by 9.4 mil.
• Enrollment in the private nongroup market would decrease by 57%
• Nongroup premiums would rise by 37% if insurers exit the marketplaces.
• Eliminating tax credits and CSRs would reduce federal spending by $40.7 billion.
Source: Urban Institute, September 2017
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