Health insurance premium credits are one form of redistribution built into the Affordable Care Act. Cost sharing subsidies are the other form. The objective is to make having health insurance more affordable for people in lower income brackets.
Both subsidies hinge upon the family's modified adjusted gross income relative to the federal poverty level. Subsidies phase in for families at 100% of the federal poverty level, and phase out for families at 400% and above.
The government pays a portion of the health insurance through premium credits, based upon the family's projected income.
The health insurance premium tax credit is a creation of the Affordable Care Act (ObamaCare) and first became available January 1, 2014. In general, individuals and families whose income falls between 100% and 400% of the Federal Poverty Level will qualify for some level of subsidy for health insurance that they purchase through the Federal or state health insurance marketplaces in the person's state of residence. The amount of premium credit a person qualifies for is based upon a sliding scale that is highest at the low end of the Federal Poverty Level and declines to almost nothing as a person gets to the 400% level. A person can only receive this premium tax credit for health insurance plans they purchase through the government health insurance marketplace.
You do have a choice when you learn that you qualify for a premium tax credit. You can choose to receive it in the form of an "Advanced Premium Tax Credit" or you can wait until you do your annual taxes and capture it at that time. With the "Advanced Premium Tax Credit" choice your credit amount will be sent to the insurance carrier you select each month to pay a portion of your monthly premium and you will be balance billed for the rest. If you opt to pay for your health insurance in full and then claim your credit on your income taxes the amount of the credit you qualified for would be included in any income tax refund you receive. This might be a very important choice. Your premium subsidy will be based upon what you estimate your income will be in the coming year. If you guess wrong and receive a higher subsidy than it turns out you actually qualified for based on the income you report on your income tax form for that year then the overpayment can be withheld from any income tax refund you might have had coming. Conversely, if you made less than you had projected you would find your possible income tax refund increased by the remaining subsidy amount you would have qualified for.
While the premium tax subsidies do provide a mechanism to assist persons in certain income levels to purchase health insurance they might not have otherwise been able to afford, it will also complicate the income tax filing process for many of these people.
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Both subsidies hinge upon the family's modified adjusted gross income relative to the federal poverty level. Subsidies phase in for families at 100% of the federal poverty level, and phase out for families at 400% and above.
The government pays a portion of the health insurance through premium credits, based upon the family's projected income.
You do have a choice when you learn that you qualify for a premium tax credit. You can choose to receive it in the form of an "Advanced Premium Tax Credit" or you can wait until you do your annual taxes and capture it at that time. With the "Advanced Premium Tax Credit" choice your credit amount will be sent to the insurance carrier you select each month to pay a portion of your monthly premium and you will be balance billed for the rest. If you opt to pay for your health insurance in full and then claim your credit on your income taxes the amount of the credit you qualified for would be included in any income tax refund you receive. This might be a very important choice. Your premium subsidy will be based upon what you estimate your income will be in the coming year. If you guess wrong and receive a higher subsidy than it turns out you actually qualified for based on the income you report on your income tax form for that year then the overpayment can be withheld from any income tax refund you might have had coming. Conversely, if you made less than you had projected you would find your possible income tax refund increased by the remaining subsidy amount you would have qualified for.
While the premium tax subsidies do provide a mechanism to assist persons in certain income levels to purchase health insurance they might not have otherwise been able to afford, it will also complicate the income tax filing process for many of these people.