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Health Care Reform:

Health Insurance & Affordable Care Act

Deciphering The Health Law’s Subsidies For Premiums

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Q. How is the maximum premium subsidy amount determined?

A: There is a complex formula that includes household income, as well as the cost of a benchmark insurance plan, which the law has identified as the second lowest priced silver plan – one of four levels of plans -- offered on that exchange.

The law requires consumers to contribute a specific percentage of income to the premium. It’s a sliding scale based on the federal poverty level. For example, if your household income is at 150 percent of the FPL, you are required to contribute 4 percent of income toward the premium. If your income is at 300 percent of poverty, then you’re required to contribute 9.5 percent. The subsidy then makes up the difference between that amount and the cost of the benchmark plan.

Q. Do people have to buy the silver plan?

A: No, an individual can choose any plan they like. They might choose a bronze plan with a lower premium or a higher cost gold or platinum plan. The credit is computed against the silver plan. If they choose a bronze plan with a lower premium, it’s possible the advance payment will cover the entire premium. But the credit cannot exceed the actual premium.

Q. Can I decide not to take the credit as an advance payment?

A. Yes but you would need to make sure you have the cash to pay the premiums. If you get past 90 days and the premium is not paid in full, the regulations direct the insurer to terminate coverage.

Q. Do consumers have to file information about the insurance subsidies on their tax returns?

A. People getting subsidies in 2014 will report them on tax returns they file in April 2015.

Q. What kind of information will be reported to the IRS?

A: The exchanges will report the level of coverage chosen by an individual, total premium and the amount of premium credit made to the insurance company.

Q. Is a worker who gets job-based insurance eligible for a premium subsidy?

A. Only if the employer coverage is either not affordable or doesn’t provide minimum value. Those definitions mean the employee’s share of the premium for a policy that covers just the individual (not a family policy) cannot exceed 9.5 percent of household income. And the plan has to cover at least 60 percent of expected medical costs.

Q. Does the administration's decision to delay by a year the requirement that employers offer coverage or pay a fine affect the subsidies?

A. It does not affect rules on eligibility. But it may mean that more people are eligible. Employers no longer have the incentive to offer policies or make plans affordable because they are no longer at risk of a penalty.

Tue, Jul 23 2013

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