Peter Freska, CEBS
Benefits Advisor
The LBL Group, A UBA Partner Firm
So many of us have heard about tax credits in relation to Health Care Reform, but does everyone know the difference?
Let’s start with the part most people seem to understand, and the Premium Tax Credit.
Beginning January 1, 2014, there will be a premium tax credit available on qualified health plans purchased through the appropriate exchange for eligible individuals and families with incomes between 100-400 percent of Federal Poverty Level (FPL). The tax credit (or premium subsidies) will be associated with the second-lowest cost SILVER plan offered through the exchange, associated with where the individual lives. The premium subsidies are limited to the following:
- 100-133% of FPL/ 2% of Income
- 133-150% of FPL/ 3-4% of Income
- 150-200% of FPL/ 4-6.3% of Income
- 200-250% of FPL/ 6.3-8.05% of Income
- 250-300% of FPL/ 8.05-9.5% of Income
- 300-400% of FPL/ 9.5% of income
To calculate the subsidy associated with a particular income level, the Kaiser Family Foundation has created a site: http://healthreform.kff.org/subsidycalculator.aspx.
The other part of the federal plan affects the actual value of the benefits received. PPACA provides for eligible individuals and families, a cost-sharing subsidy. This cost-sharing actually will reduce the amounts and limits that are paid for services. This subsidy effectively increases the actuarial value of the benefits on the purchased plan. These subsidies are only available for individuals who are eligible and purchase a plan from the exchange. Here are the values for the specific income levels:
- 100-150% of FPL 94%
- 150-200% of FPL 87%
- 200-250% of FPL 73%
- 250-400% of FPL 70%
So, it is important to remember the differences between a tax credit (commonly referred to as a subsidy) and an actual subsidy that changes the cost-sharing amounts and the annual out-of-pocket limits for a plan.
KFF outline on Premium Tax Credit and Cost-Sharing Subsidy
