financial assistance & the affordable care act
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Center on Budget and Policy Priorities
cbpp.org
Financial Assistance & the Affordable Care Act
October 29, 2013Tara Straw
Center on Budget and Policy Priorities
Center on Budget and Policy Priorities
cbpp.org
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. 2
Center on Budget and Policy Priorities
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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
3
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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 tax4
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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
Premium Tax Credits
Offer of Employer Coverage
If unaffordable or
inadequate
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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” population7
Center on Budget and Policy Priorities
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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
9.5% Bottom Line:No one is eligible for premium tax credits because family coverage is considered affordable.
Premium Cost to Employee for Family Plan: $509/mo ($6,110/yr) 13% of income
Center on Budget and Policy Priorities
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Coverage Choices for Young Adults
9
John is 24 years old. He holds two part-time jobs. One of the jobs offers coverage. Income: $17,000
Part-Time JobCost: $85/month 6% of incomeMV: 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% FPLCost: $57/month after premium tax creditAV: 94% after cost-sharing reduction
John can apply for premium tax credits & cost-sharing reductions
Dad’s PlanCost: $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.
Center on Budget and Policy Priorities
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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 affected by:•Individual or family’s expected contribution based on their income•Premium cost for benchmark plan
Credit amount =
Cost of benchmark plan–
Expected premium contribution
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Expected Contributions at Certain Income Levels
Annual Household Income Expected Premium Contribution% of FPL Income Amount1 % 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)2 based on second-lowest priced SILVER health plan in the Exchange3 residents <133% FPL that would be eligible for Medicaid are ineligible for tax credits
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John: Example 1: 200% FPL
Income: $22,980
Expected Contribution: •Share of income: 6.3%•Amount: $1,448
Premium Credit: $1,570
Example 2: 150% FPL
Income: $17,235
Expected Contribution: •Share of income: 4%•Amount: $689
Premium Credit: $2,329
Age: 24 Plan Cost: $3,018
Center on Budget and Policy Priorities
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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
Center on Budget and Policy Priorities
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John: Age 24
Premium: $3,018
Premium Credit: $1,570
Income:22,980 (200% FPL)
Expected Contribution:
6.3% or $1,448
Age 64
Premium: $9,054
Premium Credit: $7,606
Center on Budget and Policy Priorities
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Benchmark Rates for APTC Calculations
Sample Family Baltimore Metro
Eastern MD
DC Metro Western MD
Individual (age 21) $ 180 $ 177 $ 168 $ 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)
$1,185 $1,162 $1,104 $1,091
Family of five (ages 40, 38, 16, 14, and 8)
$ 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
Center on Budget and Policy Priorities
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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
Center on Budget and Policy Priorities
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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
Center on Budget and Policy Priorities
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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
Center on Budget and Policy Priorities
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Cap on Amount of Advance Credits that Must Be Paid Back
Income as percentage of poverty line
Annual income for an
individual (2013 $)
Single taxpayers
Annual income for a family of
four (2013 $)
Married taxpayers filing
jointly
Under 200% Under $22,980 $300 Under $47,100 $600
At least 200% but less than
300%
$22,980 - $34,470 $750 $47,100 -
$70,650 $1,500
At least 300% but less than
400%
$34,470 - $45,960 $1,250 $70,650 -
$94,200 $2,500
400% and above
$45,960 and higher
Full reconciliatio
n
$94,200 and higher
Full reconciliatio
n
Center on Budget and Policy Priorities
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Cost-Sharing Reductions
• People with income up to 250% FPL qualify for cost-sharing reductions that lower the out-of-pocket charges they must pay for medical care covered by the plan
• 3 levels of cost-sharing reductions based on income
Center on Budget and Policy Priorities
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Sample Cost-Sharing Reduction Plans
Actuarial Value
Deductible (Indiv)
Maximum OOP limit (Indiv)
Inpatienthospital
Office visit
CSR Plan for 151-
200% FPL($17,236-$22,980)
87% AV
$250
$2,000
$250 /admission
$15
CSR Plan for 201-
250% FPL ($22,981-$28,725)
73% AV
$1,750
$4,000
$1,500 / admission
$30
CSR Plan for up to 150% FPL
(up to $17,235)
94% AV
$0
$1,000
$100 / admission
$10
Standard Silver – No
CSR
70% AV
$2,000
$5,500
$1,500 / admission
$30
Center on Budget and Policy Priorities
cbpp.org
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.
Center on Budget and Policy Priorities
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The Penalty for Failure to Obtain Coverage
*Penalties will be calculated by the number of months uninsured. Divide each amount by 1/12 for monthly figure.
Annual Penalty* is the GREATER of:
Flat dollar amount Percentage of income
2014 ADULT: $95 1% of “applicable income” (Applicable income = income above the filing threshold)
CHILD: ½ of $95
CAP: $285 cap
2015 ADULT: $325 2% of applicable incomeCHILD: ½ of $325
CAP: $975
2016 & beyond
ADULT: $695 2.5% of applicable incomeCHILD: ½ of $695
CAP: $2,085 cap
Center on Budget and Policy Priorities
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Exemptions from the Penalty
• 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
Exemptions Granted by the Marketplace
Center on Budget and Policy Priorities
cbpp.org
For more information:
www.healthreformbeyondthebasics.orgwww.centeronbudget.org
•Tara Straw, tstraw@cbpp.org
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