PREMIUM TAX CREDIT 101 · The Affordable Care Act is making health coverage more affordable and...
Transcript of PREMIUM TAX CREDIT 101 · The Affordable Care Act is making health coverage more affordable and...
Dania Palanker, Senior Counse l , NWLC
Susanna B i rdsong, Fe l low, NWLC
Tara St raw, Senior Health Pol icy Analyst , Center on Budget and Pol icy Pr ior i t ies
Stefanie Coste l lo , Health Insurance Specia l is t , Center for Medicare and Medicaid Ser vc ies
PREMIUM TAX CREDIT
101
January 14, 2015
General overview of access to insurance under the ACA
Financial Assistance Available under the ACA Cost-sharing subsidies
Premium Tax Credit
Eligibil ity for the Premium Tax Credit
How the Premium Tax Credit Works
What happens… After signing up for health insurance
At tax time
CMS Information and Resources
Outreach tools
WHAT WE’RE GOING TO COVER:
The Affordable Care Act is making health coverage
more affordable and easier to obtain for millions of
American women and their families.
In the first year alone, 8 million people (4.3 million of
whom were women) signed up for health insurance
through the Marketplace.
Of those 8 million, 85% of them received financial
assistance to help cover the monthly cost.
THE ACA AND ACCESS TO AFFORDABLE
HEALTH INSURANCE
The 2015 “open enrollment period”—when anyone will
be able to sign up for health insurance or to change
their current plan—runs through February 15, 2015.
Outside of open enrollment, people may qualify for
special enrollment periods if they experience certain
life events such as marriage, the birth or adoption of
a child, or a job change.
THE ACA AND ACCESS TO AFFORDABLE
HEALTH INSURANCE
Beginning in 2014, individuals must:
Have minimum essential health coverage for
each month of the year, or
Qualify for an exemption to minimum
essential coverage, or
Make a payment when filing his or her federal
income tax return.
QUICK NOTE ON THE
INDIVIDUAL MANDATE
Employer -sponsored coverage
Coverage purchased in the
indiv idual market , including a
quali f ied health p lan of fered by the
Health Insurance Marketplace
Medicare Par t A coverage and
Medicare Advantage plans
Most Medicaid coverage
Chi ldren's Heal th Insurance
Program (CHIP) coverage
Cer ta in types of veterans heal th
coverage administered by the
Veterans Administrat ion
Most types of TRICARE coverage
“MINIMUM ESSENTIAL COVERAGE”
INCLUDES:
Coverage provided to Peace Corps
volunteers
Coverage under the Nonappropriated
Fund Health Benefit Program
Refugee Medical Assistance supported
by the Administration for Children and
Families
Self-funded health coverage offered to
students by universities for plan or policy
years that begin on or before Dec. 31,
2014
State high risk pools for plan or policy
years that begin on or before Dec. 31,
2014
Other coverage recognized by the
Secretary of HHS as minimum essential
coverage
Cost-sharing subsidies help cover the cost of out-of-
pocket expenses like co-pays and deductibles
Available to individuals and families with incomes below 250%
of the federal poverty line ($59,625 for a family of four).
Premium Tax Credits help cover the cost of monthly
health insurance premiums
Available to individuals and families with incomes between
100%-400% of the federal poverty line ($23,850 and $95,400
for a family of four).
Lawfully residing immigrants with incomes below 100% of poverty who are
ineligible for Medicaid in their state because they resided in the U.S. for
less than five years can qualify for Premium Tax Credits.
FINANCIAL ASSISTANCE AVAILABLE
UNDER THE ACA
Must have a household income between 100%-400% of the federal poverty line ($23,850 and $95,400 for a family of four).
Must not be eligible for adequate and affordable healthcare outside the Marketplace—either through other government programs like Medicare or Medicaid, or an employer.
Must not be already enrolled in an employer-sponsored plan.
Must be a U.S. citizen or lawfully -residing immigrant.
ELIGIBILITY FOR THE PREMIUM TAX
CREDIT
In most cases, married couples will only be eligible for
the Premium Tax Credit if they file their taxes jointly.
The IRS recently clarified that there is an exception to
this rule for survivors of domestic violence and
abandoned spouses.
Married DV survivors and abandoned spouses can certify
that they meet this exception by checking a box on the
tax form when filing their tax return to remain eligible
for the Premium Tax Credit.
ELIGIBILITY FOR THE PREMIUM TAX
CREDIT, CON’T.
The Premium Tax Credit can be used to buy one of four different types of health insurance plans offered through the health insurance Marketplace:
Bronze: generally the least expensive, but provide the least comprehensive coverage and require the most “cost -sharing”—out of pocket expenses like co-pays and deductibles.
Silver
Gold, or
Platinum: usually have the highest monthly premium but provide the most comprehensive coverage and require the least cost-sharing.
WHAT KIND OF HEALTH INSURANCE CAN BE
PURCHASED WITH
THE PREMIUM TAX CREDIT?
The Premium Tax Credit is designed so that individuals and families spend no more than a certain percentage of their income on health insurance.
Families with incomes up to 133% of the federal poverty level will be required to contribute no more than 2% of their income toward their monthly premiums, while families with incomes between 300-400% of the federal poverty level will be required to contribute no more than 9.5% of their income.
The Premium Tax Credit is calculated to cover the difference between the actual cost of the health insurance plan (using the standard benchmark—the second lowest cost silver plan available) and a family’s contribution.
HOW MUCH WILL THE PREMIUM TAX CREDIT
COVER?
Health Insurance Premium Tax Credits for a Family of Four
Income Family Contribution
Percentage of poverty line Annual dollar amount
(using 2014 figures)
Contribution as a percentage
of income
Maximum Monthly
Contribution
Up to 133% FPL $23,850-$31,721 2% of income $40-$53
133%-150% FPL $31,721-$35,775 3-4% of income $79-$119
150-200% FPL $35,775-$47,700 4-6.3% of income $119-$250
200-250% FPL $47,700-$59,625 6.3-8.05% of income $250-$400
250-300% FPL $59,625-$71,550 8.1-9.5% of income $400-$566
300-350% FPL $71,550-$83,475 9.5% of income $566-$661
350-400% FPL $83,475-$95,400 9.5% of income $661-$755
HOW MUCH WILL THE PREMIUM TAX CREDIT
COVER?
EXAMPLE: ALICE*
Meet Alice
Age: 24
Plan cost: $2,535
Example 1: 200% FPL Example 2: 250% FPL
Income: $23,340
Expected contribution: • Share of income: 6.34%
• Dollar amount: $1,480
Premium Tax Credit:
$1,055
Income: $29,175
Expected contribution: • Share of income: 8.10%
• Dollar amount: $2,363
Premium Tax Credit:
$172
*Slide adapted from CBPP powerpoint Health care coverage Post 2014 and Premium Tax Credits, Oct. 9, 2014, available at
http://www.healthreformbeyondthebasics.org/wp-content/uploads/2014/10/Webinar-10.09.14-Eligibility-for-Coverage.pdf#page=32
Alice: Eligible for a Premium Tax Credit of $1,055
HOW DOES PLAN CHOICE AFFECT WHAT
PEOPLE WILL PAY?*
$1,055 $1,055 $1,055 $1,055
$1,480 $1,245
$645
$2,445
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
Actual Contribution
Premium Tax Credit
*Slide adapted from CBPP powerpoint Health care coverage Post 2014 and Premium Tax Credits, Oct. 9, 2014, available at
http://www.healthreformbeyondthebasics.org/wp-content/uploads/2014/10/Webinar-10.09.14-Eligibility-for-Coverage.pdf#page=32.
Individuals and families can apply for the Premium Tax Credit when they sign up for health insurance through the Marketplace in their state.
They will need to provide information about their family’s income, the other people in their household, and whether their job offers them health insurance.
Based on the information provided, the Marketplace will determine eligibility for tax credits, other cost -sharing subsidies, Medicaid, and the Children’s Health Insurance Program (CHIP).
Remember that open enrollment ends February 15! Encourage people to visit www.healthcare.gov or call (800) 318-2596 to get started if they haven’t already.
APPLYING FOR THE PREMIUM TAX CREDIT
Most people who qualify for the Premium Tax Credit
choose the advanced option—every month, their
Premium Tax Credit is paid directly to their insurer
and they are responsible for making up the difference.
Another option is to wait until tax time—a family can
cover their entire premium every month, and then
when they file their taxes claim the Premium Tax
Credit and reduce their tax liability and/or get that
amount back as a refund.
TWO OPTIONS FOR RECEIVING THE
PREMIUM TAX CREDIT: NOW OR LATER
It is important that individuals and families remember to update the Marketplace throughout the year!
The Advance Premium Tax Credit is based on estimates of income and household size for the coming year.
Changes (i.e. birth or adoption of a child, marriage, changes in income or in employer-sponsored insurance eligibility)?
Report it to the Marketplace!
Adjustments will need to be made throughout the year so that people can avoid tax time surprises.
FOR THE ADVANCE PREMIUM TAX
CREDIT…
Maria is single and has no dependents.
When she enrolled in health insurance
through the Marketplace in November 2013,
she projected that her 2014 income would
be $27,925.
In August 2014, Maria started a new job and became eligible for
employer-sponsored coverage on Sept. 1 , 2014.
Maria is responsible for contacting the Marketplace to let them
know about this change, since she may only be eligible to claim
a Premium Tax Credit for January -August 2014.
EXAMPLE
Most taxpayers will just check a box on their tax
return to indicate full -year coverage for everyone on
the tax return.
WHAT HAPPENS AT TAX TIME?
Reconciliation: Reconciling any advance payments of the
Premium Tax Credit made to a health insurer throughout the
year with the final credit based on actual income and
household size.
Exemptions: If you don’t have minimum essential coverage
for all or part of the year, there are many exemptions that
can be claimed on the tax return to avoid paying the
penalty.
Shared Responsibility Payment: Calculation of the penalty
for failure to maintain coverage in each month.
WHAT HAPPENS AT TAX TIME?
Anyone who took the premium tax credit in advance is
required to file a tax return.
By January 31, the Marketplace will send Form 1095-
A, Health Insurance Marketplace Statement, to give
the taxpayer the information needed to claim or
reconcile their premium tax credit.
For the FFM, the 1095-A will also be available on
enrollees’ online accounts.
PREMIUM TAX CREDIT RECONCILIATION
Credit is calculated based on actual income, filing
status, and household.
If no PTC was taken in advance, or if less than the total credit
was taken, a taxpayer will receive an additional credit.
If PTC is disallowed or if too much PTC was taken in advance, all
or part of the PTC must be repaid.
PREMIUM TAX CREDIT RECONCILIATION
On His 1040 (at tax time):
Household MAGI: $32,000 (279% FPL)
Expected contribution: 8.88% of income ($2,842)
Benchmark: $2,756
PTC Calculation:
$2,756 - $2,842 = 0
PTC: $0
Result: John has a final PTC of $0. His repayment cap is $750. He
needs to repay the full amount of $724.
EXAMPLE: JOHN
When He Applied:
Household MAGI: $27,000 (235% FPL)
Expected contribution: 7.52% of income ($2,032)
Benchmark: $2,756
PTC Calculation:
$2,756 - $2,032 = $724
APTC: $724
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John wins $5,000 in a fantasy football prize league!
WHAT HAPPENS WHEN INCOME FALLS
UNDER 100% FPL?
In general, a person must have income between 100%-400% FPL to qualify for PTC.
Exception: Lawfully present immigrants who are not eligible for Medicaid because of their immigration status are eligible with income below 100% FPL
A special rule applies when income falls below 100% FPL during the year if:
A person was enrolled in a qualified health plan (QHP)
The Marketplace estimated income between 100%-400% FPL
APTC were authorized for one or more months
The taxpayer was otherwise eligible for APTC
If these rules are met, the person is still an applicable taxpayer
The PTC will be calculated using actual income
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EXAMPLE: LISA
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Lisa lives with her son, Jackson. She is divorced from Jackson’s dad, David.
Lisa and David alternate claiming of Jackson as a dependent on their tax return.
When Lisa applied for coverage, she applied as a household of 1, expecting her son to be claimed by David in 2014.
Lisa’s financial situation:
$15,400– Lisa’s income
$10,000 – Child support received by Lisa (not counted)
EXAMPLE: LISA
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On Her 1040 (at tax time):
Household MAGI: $15,400 (99% FPL for a household of 2)
Expected contribution: 2% ($308)
Benchmark: $3,139
PTC: $3,139 - $308 = $2,831
Result: An additional $163 added to Lisa’s tax refund.
David fails to pay child support. As a result, Lisa does
not permit David to claim their son as a dependent.
When She Applied:
Household MAGI: $15,400 (134% FPL for a household of 1)
Expected contribution: 3.06%
APTC: $2,668 (Lisa lives in a non-expansion state)
Note: The expected
contribution is 2% in all
households with income
less than 133% FPL
EXEMPTIONS THAT CAN BE CLAIMED ON
THE TAX RETURN
Part III – Exemptions for certain individuals, in certain months:
Certain noncitizens and citizens living abroad
Health care sharing ministry
Federally-recognized Indian tribe or eligible for IHS
Limited benefit Medicaid
Incarceration
Insurance is unaffordable
Aggregate cost of insurance is unaffordable
Individuals in a state that did not expand Medicaid
Short coverage gap
Coverage by May 1 or “in-line” for coverage
Non-calendar year coverage
Part II – Exemption for the entire family, for the entire year
Household income or gross income below the filing threshold:
Single $10,150
Head of Household $13,050
Married Filing Jointly $20,300
Married Filing Separately $3,950
Qualifying Widower $16,350
*Amounts are for non-dependents under age 65
Part III – Exemption for an individual, for the entire year
In the Medicaid coverage gap in 2014: (1) Income < 138% FPL (2) Live in a non-expansion state
INDIVIDUALS IN A STATE THAT DID NOT
EXPAND MEDICAID (CODE G)
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New! as of
11/21/14
This exemption applies to:
• Individuals who resided at any time during the year in a non-expansion state, and
• Had income below 138% FPL (i.e., would have been eligible for Medicaid if the state
had expanded).
Process for 2014 only. In future years, must apply for (and be denied) Medicaid to claim this exemption!
Example
Rashid was uninsured for all of 2014. His wife, Miriam, had insurance all
year through work. Leila was born in November, was covered by
Medicaid. Their household income was $25,000 (128% FPL for a family
of 3) and they live in Texas, a non-expansion state. They are all U.S.
citizens.
Does Rashid qualify for an exemption?
Yes, Rashid’s household income is below 138% FPL and he lived in a
non-expansion state. Rashid qualifies for this exemption for the entire
year even if he had other insurance options, such as coverage through
his wife’s employer or insurance in the Marketplace with PTC.
MARKETPLACE EXEMPTIONS
Hardship Exemptions Granted by Marketplace Duration
Financial or domestic circumstances Homelessness
Eviction in the last 6 months or facing eviction or foreclosure
Utility shut-off notice
Bankruptcy
Domestic violence
Recent death of family member
Disaster that resulted in significant property damage
Debt from medical expenses
High expenses caring for ill, disabled or aging relative
Failure of another party to comply with a medical support order for a dependent child who is determined ineligible for Medicaid or CHIP
Through an appeals process, determined eligible for a Marketplace QHP, PTC, or CSR but was not enrolled
Individual health insurance plan was cancelled and Marketplace plans are considered unaffordable
Other hardship in obtaining coverage (including for people in AmeriCorps, VISTA and NCCC who are enrolled limited duration or self-funded coverage)
At least one month before and after hardship
When Can I Apply?
Up to 3 years after the month of the hardship (but documentation is required in most circumstances so earlier is better)
APPLYING FOR A MARKETPLACE
EXEMPTION
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Hardship application
https://marketplace.cms.gov/applications-and-forms/hardship-exemption.pdf
• A Marketplace exemption application must be printed and mailed
• People in every state (except CT) must use the application on healthcare.gov
• Processing takes at least 2 weeks (may be significantly longer)
• Documentation is required in most cases
* Capped at national average premium of a bronze level plan purchased through a
Marketplace. For 2014, the cap is $2,448 per individual ($204 per month per individual),
with a maximum of $12,240 for a family with five or more members ($1,020 per month for a
family with five or more members).
Year Full-year payment is greater of:
2014 1% of income above tax filing
threshold (up to cap*)
$95 per adult, $47.50 per child
(up to cap of $285)
2015 2% of income above tax filing
threshold (up to cap*)
$325 per adult, $162.50 per child
(up to cap of $975)
2016 2.5% of income above tax filing
threshold (up to cap*)
$695 per adult, $347.50 per child
(up to cap of $2,085)
In 2017 and beyond, values increased by a cost-of-living adjustment
INDIVIDUAL SHARED RESPONSIBILITY
PAYMENT (ISRP)
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IRS-sponsored Volunteer Income Tax Assistance (VITA) Sites provide free tax help to low -to-moderate-income (generally, $50,000 and below) people.
Call the IRS’ free hotline at 1 -800-906-9887 to locate a VITA site near you. You can also visit http://irs.treasury.gov/freetaxprep/.
The IRS also coordinates with AARP to offer tax help to people of low-to-moderate-income, with special attention to those age 60 and older, through a program called Tax -Aide. Call 1-888-227-7669 or visit www.aarp.org/money/taxaide/ to locate an
AARP-sponsored Tax-Aide site near you.
Individuals with income below $60,000 can use the Free File Program with free tax prep software . Visit http://freefilealliance.org/ to learn more.
WHERE CAN PEOPLE GO FOR HELP?
Need health insurance?
Open enrollment runs through February 15, 2015.
People may be eligible for special enrollment periods at other times of
the year due to life changes (i.e. having a baby, getting married, losing
insurance or income)
Financial assistance is available. Spread the word about the Premium Tax Credit and cost -sharing
subsidies that are already helping millions of families afford insurance.
Tax time assistance is available. VITA Sites and AARP Tax-Aide Sites are located across the country and
can help individuals and families with the new tax return requirements related to the Premium Tax Credit and the Individual Mandate.
REMINDERS
Visit NWLC’s resource page on Open Enrollment:
http://www.nwlc.org/resource/weve-got-you-covered-what-
women-need-know-about-health-care-enrollment
Visit NWLC’s resource page on the Premium Tax Credit:
http://www.nwlc.org/premium-tax-credit-information-resources
Ready for Premium Tax Credit 202 and beyond? Visit CBPP’s
website Health Reform Beyond the Basics to access in-depth
information about the PTC and more:
http://www.healthreformbeyondthebasics.org/
FOR MORE INFORMATION…
Marketplace Coverage & Taxes
Getting Ready
for Tax Season
January 2015
Marketplace Coverage & Your Taxes
If you had coverage through a Marketplace Qualified Health Plan in 2014
• You’ll get a new Form 1095-A in the mail – it will help you fill out Form-8962 to file your federal income taxes with the IRS
• Wait for the form to file
Marketplace Consumers
January 2015 2
Marketplace Coverage & Your Taxes
An envelope labeled “Important Tax or Health Coverage Information Inside” will include Cover letter (English or Spanish depending on user’s language preference)
Form 1095-A instructions (Line-by-line instructions developed by IRS, English only)
Form 1095-A • A separate Form 1095-A will be generated for each policy in which the
household enrolled
• Each member of a tax household, who is on the same policy, will be listed together on one Form 1095-A
• Households of more than 5 enrolled members will receive an additional Form 1095-A that continues Part II
*Consumers also can download a copy of their 1095-A at HealthCare.gov (starting mid-January)
What will Consumers See?
January 2015 3
Marketplace Coverage & Your Taxes
Form 1095-A Elements
The amount of APTC that was
paid to an issuer on a consumer’s
behalf
Information that can be used to
complete a federal income tax return (e.g.,
monthly premium amount)
Information about a tax filer
or other relevant adult, and his/her tax household, who were enrolled in a Marketplace
QHP
January 2015 4
Marketplace Coverage & Your Taxes
There are two types of exemptions
• IRS exemptions that you can get from the IRS by checking
the appropriate box when you file your tax return
• Marketplace exemptions that you’ll need to request by
completing a paper application and mailing it to the
Marketplace
Complete list of exemptions and applications are on
HealthCare.gov or through the Marketplace Call Center
at 1-800-318-2596 (TTY: 1-855-889-4325)
Types of Exemptions
January 2015 5
Marketplace Coverage & Your Taxes
New content on
HealthCare.gov and IRS.gov
Web-based Tax Tools (for some
consumers)
Form 1095-A, with cover letter
& instructions
Fact Sheets
• For consumers
(HealthCare.gov, IRS.gov)
• For partners
(Marketplace.cms.gov, IRS.gov)
How We’ll Share Messages
January 2015 6
Training/outreach for Marketplace
Assisters and Navigators, Agents
and Brokers, Tax Preparers
Email Campaign
Social Media Strategy
Press outreach
Messaging through IRS channels
and programs (Free File and
Volunteer Income Tax Assistance)
Talking points
Marketplace Coverage & Your Taxes
Online tools available mid-January on HealthCare.gov
• Provide a step in filing taxes for certain consumers
• To find essential info that might not appear on 1095-A
Provides report with monthly break down of the SLCSP or LCBP using 2014 plan data
Doesn’t provide APTC, PTC, eligibility, etc.
• No account or login required (anonymous)
Tax Tools in Development
1. Tool if you didn’t take/qualify for APTC and want to see if you can qualify for PTC
2. Tool to see if you qualify for an exemption
January 2015 7
Marketplace Coverage & Your Taxes
Consumers: healthcare.gov/taxes/
Outreach Staff: marketplace.cms.gov • https://marketplace.cms.gov/outreach-and-
education/already-enrolled.html
• https://marketplace.cms.gov/outreach-and-education/new-to-marketplace.html
• https://marketplace.cms.gov/technical-assistance-resources/training-materials/ready-for-tax-season-slides-notes.pdf
Resources
January 2015 8
Marketplace Coverage & Your Taxes
Don’t forget:
• One day left to get coverage beginning February 1, 2015-Enroll by January 15, 2015.
• Open Enrollment Ends on February 15, 2015. Coverage will begin March 1
2015 Open Enrollment
December 2014 9
October 2014
Enroll by January 15th to begin
coverage February 1, 2015
Enrollment ends February 15, 2015 for coverage in 2015
Information for first-time enrollees in the Federally-facilitated Marketplace
Don’t forget