| || |
Health care reform: Tax credits and cost-sharing reductions
February 28, 2011 - Mary Ann Heath
Ah, March...warmer, longer days, green beer and pots of gold, er, tax returns.
When this week’s reading on health care reform opened up with “Premium Tax Credits and Cost-sharing Reductions,” it seemed timely. Except, what I understand about taxes equates to what TurboTax suggests I do, as I muddle my way through filing online.
I’m not a numbers person; I prefer to do my reading in letters. So, about three paragraphs into Part I of Subtitle E, “Premium Tax Credits and Cost-Sharing Reductions,” I encountered the following: “except as provided in clause (ii), the applicable percentage with respect to any taxpayers for any taxable year is equal to 2.8 percent increased by the number of percentage points (not greater 7) which bears the same ratio to 7 percentage points...” (and this is just a small example of the breakdown on how new tax credits will work).
Although, I get the gist. Eligible taxpayers will receive a tax credit determined by income level. To be eligible, income must fall between 100 and 400 percent of the poverty line, and taxpayers should not be eligible for other affordable coverage (not offered “affordably” through an employer or spouse’s employer). Income between 100 and 400 percent of the poverty line should not be mistaken for 100 to 400 X more poor than the poverty line (yes, initially, I made this mistake).
About 400 percent of the poverty line in 2010 was $43,000 for an individual. Not exactly what you’d call poor...though the middle class has been feeling more of a pinch in recent economic times. I highlight this because it’s important to realize tax credits are aimed at helping the middle class when it comes to “affordable” health care.
These refundable tax credits are also available in advance, so families may reduce premium payments each month rather than waiting for tax season.
According to the Journal of Accountancy (the flagship publication of the American Institute of Certified Public Accountants), premium assistance credits work like this:
• An eligible individual enrolls in a plan offered through an exchange and reports his/her income to the exchange. Based on the information provided to the exchange, the individual will receive a premium assistance credit. The Treasury will pay the credit directly to the insurance plan in which the individual is enrolled. The individual then pays the plan they are enrolled in the difference between the tax credit amount and the total premium charged for the plan.
• The credit amount is determined by the Secretary of Health and Human Services, based on the percentage of income the cost of premiums represents, rising from 2 percent of income for those at 100 percent of federal poverty level for the family size involved to 9.5 percent of income for those at 400 percent of federal poverty level for the family size involved.
It is also important to note that large employers (50 or more employees) face a penalty if they: fail to offer insurance for all their full-time employees; offer coverage that is not affordable; or only offer minimum essential coverage and costs to the plan are less than 60 percent. Employers must pay a penalty for employees who are certified to the employer as having bought insurance through an exchange by using a tax credit or cost-sharing reduction. This places responsibility on employers to offer employees valued health care, ultimately keeping costs low for everyone.
The law also strictly forbids the use of any credits for illegal aliens.
The same individuals who are eligible for tax credits may also qualify for reduced cost-sharing (copayments, co-insurance, and deductibles), according to healthcare.gov. To be eligible, individuals must be enrolled under the silver level of coverage through an exchange and household income must be between 100 and 400 percent of the poverty line. Reductions in cost-sharing must first be done by reducing the out-of-pocket limit for:
• Individuals with income between 100 and 200 percent of the poverty line, by two-thirds.
• Individuals with income between 200 and 300 percent of the poverty line, by one-half.
• Individuals with income between 300 and 400 percent of the poverty line, by one-third.
The secretary must also ensure that these reductions do not result in a rise of a health plan’s total allowed costs. The bill again sets forth special provisions to ensure illegal aliens do not benefit from cost-sharing.
Other key parts of this portion of the bill include:
• Eligibility determinations: Around seven pages of the bill are dedicated solely to procedures regarding how individuals will be deemed eligible for exchange participation, premium tax credits and reduced cost-sharing, as well as individual responsibility requirements. To put it most simply, it establishes what information must be provided, to whom it must be provided to and who it must be cross-referenced and verified with. It is set up to ensure the right individuals receive benefits provided by tax credits and cost-sharing reductions. It also sets forth an appeals process so that individuals may fight determinations if they feel they are unjust. Procedures related to inconsistencies in information, as well as penalties for providing fraudulent information, are also established.
No comments posted for this article.
Post a Comment
News, Blogs & Events Web