The new availability of tax credits for qualified low-income people purchasing individual coverage through exchanges could be a game changer.

Qualified individuals with family incomes between 100% and 400% of the Federal Poverty Level (FPL) will be eligible for sliding-scale premium tax credits that will cap the amount they may pay for coverage. Individuals with family incomes at or below 250% of the FPL also qualify for reduced cost-sharing.

Forty-eight percent of those who are currently buying insurance on the individual market will be able to collect tax credits if they enroll on the exchanges.

WHO GETS A SUBSIDY?

  • Single individual who works for a company with 30 FTE employees that offers an “affordable” bronze plan. NO
  • Spouse and children of an individual who work for a company with 30 FTE employees that offers the whole family “affordable” bronze coverage even though the cost of the family coverage is too much for them because their family income is 275% FPL NO
  • Spouse of an individual who works for a large employer with a spousal carve-out. Family income is 350% FPL YES
  • Employee and family who are offered family coverage by a company with 30 FTE employees, but even the single employee premium for the low-cost bronze plan is unaffordable. YES
  • Individual with income of 85% FPL in a state that does not expand Medicaid. NO
  • Single 25 year old male with no employer coverage and an income of 125% of FPL that wants to buy the exchange’s “young and invincible” catastrophic plan. NO

HOW WILL THE SUBSIDIES WORK?

  • Individuals and their dependents who have been offered coverage through an employer that meets an affordability and minimum value test are not eligible to purchase coverage through an exchange and get a subsidy.
  • Qualified individuals with family incomes between 100% and 400% of the federal poverty level are eligible for a premium tax credit. Individuals with family incomes at or below 250% of the FPL also qualify for reduced cost-sharing.
  • While consumers can buy any type of policy, the amount of the tax credit received is based on the premium for the second lowest cost silver plan in the rating area where the individual is eligible to purchase coverage.
  • The law requires consumers to contribute a specific percentage of income to the premium. It’s a sliding scale based on the federal poverty level. The subsidy then makes up the difference between that amount and the cost of the benchmark plan.
  • The premium subsidy will come in the form of a refundable and advanceable tax credit paid directly to the individual’s insurer.

WHAT ABOUT INCOME VERIFICATION?

  • Individual applies for exchange coverage. Self-reports current household income.
  • Income is verified with most recent data from IRS and Social Security. If there is more than a 10% income disparity, further checking ensues. Federal exchanges will check every case. State exchanges may double-check a sample.
  • Additional verification will come through voluntarily reported employer data and Equiflax. If needed, the individual may be asked to provide more substantiation data. If none is provided, the tax credit advance payments will be halted.
  • Individuals will have to claim their credit on their annual income tax filings. If income doesn’t match up with what was reported, there will be tax consequences.
  • Inappropriate subsidies must be repaid. Amount is capped based on income, but if you make more than 400% of FPL, the full subsidy must be repaid. The exception is there will be no repayment of cost-sharing subsidies.

National Association of Health Underwriters

from the National Association of Health Underwriter’s Government Affairs Department