Center on Budget and Policy Priorities
Financial Assistance & the
Affordable Care Act
October 29, 2013
Tara Straw
Center on Budget and Policy Priorities
cbpp.org
Center on Budget and Policy Priorities
Major Components of the Affordable Care Act
Become Effective January 1, 2014
• Insurance reforms that allow everyone to purchase
coverage
• Individual mandate to have coverage
• Creation of Health Insurance Marketplaces
(Exchanges) to make buying insurance easier
• Help paying for insurance
– Medicaid expansion
– Premium tax credits for low- to moderate-income
individuals and families.
1
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Insurance Reforms Will Make Coverage More
Accessible
• Requirement to sell to everyone
• Prohibition from charging more or excluding people
based on health status or pre-existing conditions
• Premium costs can vary only based on:
– Age
– Number of people covered in a policy
– Geographic area
– Tobacco use
• Enrollment limited to defined “open enrollment”
and “special enrollment” periods
2
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Individual Mandate to Make Insurance Reforms
Work
• Individuals must have health insurance coverage or
pay a penalty
• Most existing coverage will satisfy the mandate
(e.g., employer-sponsored insurance, Medicare,
Medicaid)
• Exemptions provided to certain groups, including
people who can’t afford coverage
– People must apply for exemptions and submit
documentation supporting their eligibility
• Penalty assessed as a tax
3
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Eligibility for Premium Tax Credits
• Income between 100% to 400% FPL
• US citizenship or lawful present in the US
• Must not be eligible for:
– Medicare, Medicaid, or most other public coverage
– Employer coverage that meets certain requirements
• Lawfully residing immigrants with incomes below
100% FPL who are not eligible for Medicaid because
of their immigration status
• Must file a return for the year in which credit is used
• If married, must not file separately
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Jumping the “Firewall” Between Employer
Coverage and Premium Tax Credits
If unaffordable or
inadequate
Offer of Employer
Coverage
Premium Tax
Credits
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When is Employer Coverage Affordable and
Adequate?
• Coverage is considered affordable if employee
contribution for self-only coverage is less than 9.5%
of household income
– Employee contribution for self-only coverage is used to
determine affordability for both employee and
dependents
• Coverage is adequate if it has a minimum value
(MV) of 60%
– MV measures how much plan pays for coverage of
certain benefits for a “typical” population
6
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Affordability of Family Coverage (Reyes Family)
Mom works at Acme. She earns $35,000. Dad is an
entrepreneur and earns about $12,000.
Family Income: $47,000
Premium Cost to Employee for Employee-Only Plan:
$196/mo ($2,350/yr) 5% of income
Premium Cost to Employee for Family Plan: $509/mo
($6,110/yr) 13% of income
14%
12%
10%
Bottom Line:
9.5%
8%
13%
6%
4%
2%
5%
5%
No one is eligible for
premium tax credits
because family coverage
is considered affordable.
0%
Employee-Only
Family
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Coverage Choices for Young Adults
John is 24 years old. He holds two part-time jobs.
One of the jobs offers coverage. Income: $17,000
Part-Time Job
Cost: $85/month
6% of income
MV: 40%
John could accept
this offer. BUT
because the plan
has MV under
60%, the offer
doesn’t preclude
premium tax credit
eligibility.
Marketplace
~150% FPL
Cost: $57/month
after premium tax
credit
AV: 94% after
cost-sharing
reduction
John can apply for
premium tax
credits & costsharing reductions
Dad’s Plan
Cost: $0 to John
(Dad pays for
family coverage)
John can join his
Dad’s family plan
because he is
under age 26.
Offer does not
make him ineligible
for a premium tax
credit.
8
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How Are Income and Household Size Measured
for Premium Credits?
• Income: Modified Adjusted Gross Income (MAGI)
Adjusted Gross Income (1040, line 37)
+ Foreign income
+ Tax exempt interest
+ Non-taxable Social Security benefits
MAGI
• Household size: Household unit equals tax unit
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How Is the Amount of the Tax Credit Determined?
Credit amount
=
Cost of benchmark plan
–
Expected premium contribution
Credit amount affected by:
• Individual or family’s expected contribution
based on their income
• Premium cost for benchmark plan
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Expected Contributions at Certain Income Levels
Annual Household Income
% of FPL
Income Amount1
Expected Premium Contribution
% of Income
Dollar Amount2
< 133%3
< $15,282
2%
< $306
133 - 150%
$15,282 - $17,235
3% - 4%
$459 - $689
150 - 200%
$17,235 - $22,980
4% - 6.3%
$689 - $1,448
200 - 250%
$22,980 - $28,725
6.3% - 8.05%
$1,448 - $2,312
250 - 300%
$28,725 - $34,470
8.05% - 9.5%
$2,312 - $3,275
300 - 350%
$34,470 - $40,215
9.5%
$3,275 - $3,820
350 - 400%
$40,215 - $45,960
9.5%
$3,820 - $4,366
> 400%
> $45,960
n/a
n/a
1 for
a household of one (i.e. an individual)
on second-lowest priced SILVER health plan in the Exchange
3 residents <133% FPL that would be eligible for Medicaid are ineligible for tax credits
2 based
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John:
Age: 24
Plan Cost: $3,018
Example 1: 200% FPL
Example 2: 150% FPL
Income: $22,980
Income: $17,235
Expected Contribution:
• Share of income: 6.3%
• Amount: $1,448
Expected Contribution:
• Share of income: 4%
• Amount: $689
Premium Credit: $1,570
Premium Credit: $2,329
3500
Expected Contribution
Federal Premium Credit
3000
2500
1,570
2000
2,329
1500
1000
$1,448
500
$689
0
200% FPL
100% FPL
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“Rating Factors” Affect the Cost of the
Benchmark Plan
• Age
– Limited to no more than 3 to 1 variation
– Each family member rated separately
• Family size
– Total premium for family = Sum of premiums for
each family member
– Exception: In families with > 3 members under 21,
count only 3 oldest children
• Geographic area
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John:
Income:
22,980 (200% FPL)
Expected
Contribution:
6.3% or $1,448
Age 24
Age 64
Premium: $3,018
Premium: $9,054
Premium Credit: $1,570
Premium Credit: $7,606
10000
9000
8000
Contribution
Federal Premium Credit
7000
6000
7,606
5000
4000
3000
2000
1000
$1,570
$1,448
$1,448
24 Years Old
64 Years Old
0
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Benchmark Rates for APTC Calculations
Sample Family
Eastern
MD
$ 177
DC Metro
Individual (age 21)
Baltimore
Metro
$ 180
$ 168
Western
MD
$ 166
Individual (age 64)
$ 541
$ 530
$ 503
$ 498
Couple (ages 40 and 38) $ 455
$ 446
$ 423
$ 419
Family of four (ages 60,
55, 24, and 19)
Family of five (ages 40,
38, 16, 14, and 8)
$1,185
$1,162
$1,104
$1,091
$ 797
$ 782
$ 744
$ 734
• Baltimore Metro Area: Baltimore City and Baltimore, Harford, Howard, and Anne Arundel
Counties
• Eastern Maryland: St. Mary’s, Charles, Calvert, Cecil, Kent, Queen Anne’s, Talbot, Caroline,
Dorchester: Wicomico, Somerset, and Worcester Counties
• DC Metro Area: Prince George’s and Montgomery Counties
• Western Maryland: Garrett, Allegany, Washington, Carroll, and Frederick Counties
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What Factors Affect What People Will Actually
Pay for Coverage?
• Tobacco use
– Limit to no more than 1.5 to 1 variation
– Difference due to tobacco use not accounted for in
premium credit calculation
• Plan chosen by consumer
– Amount of credit pegged to second lowest cost
silver plan
– But consumer can purchase any metal plan
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How Do People Get Premium Credits?
• Submit application to the Marketplace for
advance payment of credits
– Marketplace estimates amount of advance
payment based on projected income
– Credit is sent directly to insurer, individual pays
insurer balance of premium
• Can also wait until tax filing and claim on return
– Only available for months enrolled in a Marketplace
health plan
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What Happens When Estimated Income for the
Year is Different from Actual Income?
• Final amount of credit based on actual income
• At tax filing time, advance payments received
are reconciled with actual credit amount
– If income increases, may have to repay
– If income decreases, may get more credit at tax
time
• To avoid repayment, can reduce the amount of
advance payment received during the year
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Cap on Amount of Advance Credits that Must Be
Paid Back
Income as
Annual income
percentage of
for an
individual
poverty line
(2013 $)
Under 200%
At least 200%
but less than
300%
At least 300%
but less than
400%
400% and
above
Single
taxpayers
Annual income
Married
for a family of taxpayers filing
four
jointly
(2013 $)
Under $22,980
$300
Under $47,100
$600
$22,980 $34,470
$750
$47,100 $70,650
$1,500
$34,470 $45,960
$1,250
$70,650 $94,200
$2,500
$45,960 and
higher
Full
reconciliation
$94,200 and
higher
Full
reconciliation
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Cost-Sharing Reductions
• People with income up to 250% FPL qualify for
cost-sharing reductions that lower the out-ofpocket charges they must pay for medical care
covered by the plan
• 3 levels of cost-sharing reductions based on
income
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Sample Cost-Sharing Reduction Plans
Standard Silver
– No CSR
CSR Plan for up
to 150% FPL
(up to
$17,235)
CSR Plan for
151-200% FPL
($17,236$22,980)
CSR Plan for
201-250% FPL
($22,981$28,725)
Actuarial Value
70% AV
94% AV
87% AV
73% AV
Deductible
(Indiv)
$2,000
$0
$250
$1,750
Maximum OOP
limit (Indiv)
$5,500
$1,000
$2,000
$4,000
$1,500 /
admission
$100 /
admission
$250 /
admission
$1,500 /
admission
$30
$10
$15
$30
Inpatient
hospital
Office
visit
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The Penalty for Failure to Obtain Coverage
• Penalties are low in 2014 for failure to have
coverage
• Taxpayer is responsible for penalty for every
uninsured person on her tax return
• If the penalty isn’t paid, it can be collected out
of a future refund
– However, taxpayer is not subject to criminal
prosecution, liens or levies on property.
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The Penalty for Failure to Obtain Coverage
Annual Penalty* is the GREATER of:
Flat dollar amount
2014
ADULT: $95
CHILD: ½ of $95
CAP: $285 cap
2015
ADULT: $325
Percentage of income
1% of “applicable income”
(Applicable income = income
above the filing threshold)
2% of applicable income
CHILD: ½ of $325
CAP: $975
2016
ADULT: $695
&
beyond
CHILD: ½ of $695
2.5% of applicable income
CAP: $2,085 cap
*Penalties will be calculated by the number of months uninsured. Divide each amount
by 1/12 for monthly figure.
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Exemptions from the Penalty
Exemptions Granted by the
Marketplace
•
• Religious conscience
• Hardship
– Difficulty paying bills
– State failure to expand
Medicaid
– Unaffordability of
insurance
•
•
•
Exemptions Granted
through Tax Filing
Income below filing
threshold
Insurance is unaffordable
Undocumented resident
Short coverage gap (<3
months)
Exemptions Granted by
Either
• Indian tribe membership
• Incarceration
• Health care sharing ministry
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For more information:
www.healthreformbeyondthebasics.org
www.centeronbudget.org
• Tara Straw, tstraw@cbpp.org
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