Health Affairs

Premium Tax Credits

Bethesda, MD -- Later this year, millions of uninsured Americans will begin enrolling in coverage through new health insurance exchanges--or marketplaces--in every state. A substantial portion of that group will be eligible for a government subsidy to help them pay their premiums--and many still don't know it. A new Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation explains how the new premium tax credits work, who is eligible to receive them, and what the government and outside groups are doing to educate the public.

Topics covered in this brief include:

• What's in the Law? The Affordable Care Act requires most Americans either to enroll in a health insurance program beginning in January 2014 or pay a fine. Those currently uninsured--about one in five Americans--who are not eligible for a government health program or whose employer does not offer health insurance, will be able to purchase insurance through their state exchanges. Those purchasing insurance through an exchange will be eligible to receive a subsidy if their modified adjusted gross income is 100-400 percent of the federal poverty level and they are US citizens or lawful immigrants. Otherwise eligible people who are offered coverage by an employer will still be allowed to purchase coverage through the exchange, as long as that employer-provided coverage is considered "unaffordable" (more than 9.5 percent of household income).
  
  
• How is the subsidy calculated and given? The subsidies take the form of tax credits, deductible at the end of the year on federal tax returns. The credit will be based on family income and the cost of health insurance on the exchange available to the taxpayer. The brief provides a detailed explanation and examples of how the subsidies are calculated.
  
  
• What's the debate? Many of the law's proponents are concerned that there has not been sufficient public outreach; a recent tracking poll by the Kaiser Family Foundation showed that more than half of the respondents feel they lack sufficient information to understand how the Affordable Care Act affects them and their families. A study from Consumers Union demonstrated that explaining the subsidy in simple terms increases the number of people interested in taking advantage of the benefit. Others are worried about the cost of the subsidies: the Congressional Budget Office once estimated that the federal government will spend $5,290 per subsidized enrollee in 2014. But supporters point to the new revenues and expenditure reductions included in the Affordable Care Act that will largely offset the subsidy costs. As the state exchanges ready for the start of open enrollment beginning on October 1, government and private groups are organizing campaigns for public education and outreach, hoping to make eligible US residents aware of the tax benefit that may be available to them.

Health Affairs is the leading journal at the intersection of health, health care, and policy. Published by Project HOPE, the peer-reviewed journal appears each month in print, with additional Web First papers published periodically and health policy briefs published twice monthly at www.healthaffairs.org. Read daily perspectives on Health Affairs Blog. Download weekly Narrative Matters podcasts on iTunes.