Health Insurance Premium Tax Credit: What’s In It for You?

Health Insurance Premium Tax Credit: What’s In It for You?

The IRS has issued final regulations regarding the health insurance premium tax credit enacted by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act. The final regulations provide guidance to employees who may enroll in eligible employer-sponsored coverage and who want to enroll in qualified health plans through affordable insurance exchanges and claim the health insurance premium tax credit.

Certain individuals who buy qualified health care coverage through a state insurance exchange are entitled to a refundable tax credit equal to the premium assistance credit amount for tax years ending after December 31, 2013. Which “certain individuals?” That would be people whose household incomes fall between 100% and 400% of the federal poverty line. If you’re married, you must file a joint return to claim the credit.

Under the final rules, an eligible employer-sponsored plan is considered “affordable” if the annual premium for self-only coverage (the required contribution percentage) doesn’t exceed 9.5 percent of their household income. The final regulations apply to tax years ending after December 31, 2013. The Department of Health and Human Services says the law and its final regulations will be beneficial to the market and the health of a nation.

“We expect that the premium tax credits, combined with the new insurance reforms, will significantly increase the number of individuals with health insurance coverage, particularly in the individual market. These programs, in combination with the medical loss ratio program and market reforms extending guaranteed availability and prohibiting the use of factors such as health status, medical history, gender, and industry of employment to set premium rates, will help ensure that every American has access to high-quality, affordable health insurance.”

Among the department’s health care-related parameters: Premium stabilization programs such as permanent risk adjustment, transitional reinsurance and temporary risk corridors. They believe reinsurance payments will contribute to a 10-15 percent decrease in premiums for the individual markets.

“The transitional reinsurance program,” the department states, “will help to stabilize premiums in the individual market. Reinsurance will attenuate individual market rate increases that might otherwise occur because of the immediate enrollment of higher risk individuals, potentially including those currently in state high-risk pools.”

As we march toward October’s ACA enrollment period, stay tuned for more on the ins and outs and ups and downs of these bold new regulations.