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Health Insurance & Affordable Care Act

Deciphering The Health Law’s Subsidies For Premiums

WebMD News from Kaiser Health News

By Julie Appleby

Tue, Jul 23 2013

Tax credits to help low- and moderate-income Americans buy health insurance will become available in January under the health law, when for the first time, most people will be required to have coverage or pay a fine.

The process could be complicated for some consumers, but information about how the system will work may help.

Cathy Livingston, a partner with Jones Day in Washington, D.C., who specializes in tax issues involving the federal health law, spoke recently with KHN about how to find out if you’re eligible for a premium subsidy and how the process will work. Before joining the law firm, Livingston worked in the IRS' Office of Chief Counsel.

The credits are available to people who don't get what is considered affordable, comprehensive coverage through their jobs, and whose household income is less than 400 percent of the federal poverty level, which this year is about $46,000 for an individual, or about $78,000 for a family of three.

Most of the 7 million people projected to shop for coverage in new online health insurance marketplaces, also called exchanges, will be eligible for the subsidies, expected to average $5,290 per enrollee.

People who don’t have insurance coverage could face fines, which are $95 per adult and $47.50 per child the first year, or 1 percent of family income, whichever is greater. The fines will rise in later years. Here is an excerpt, edited for length and clarity, of Livingston’s conversation with KHN staff writer Julie Appleby.

Q: The law bases eligibility on household income. What does that include?

A: It is income, not assets. The value of a house, stocks or bank accounts is not taken into consideration. Household income starts with adjusted gross income -- a number people can find on their tax returns. Q: Who determines eligibility?

A: The exchange. It will have information from an applicant's last filed tax return. So, for example, if a person filed taxes on time in 2012, the exchange this fall would have income information from that year. There will also be other sources of information, such as state wage databases to which employers already report every quarter. The application also asks people to project their income for 2014.

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