Premium Tax Credit is one of two affordable health insurance options provided by the federal government (the other is Cost-Sharing Reductions). It will help low and moderate income families who are not eligible for other programs to reduce the cost of premiums; assuming they are enrolled in one of the metal level Qualified Health Plans (QHPs).
Premium Tax Credit Eligibility
The following eligibility criteria must be met in order to be eligible for the premium tax credit:
- Not be eligible for minimum essential coverage – including affordable employer-sponsored coverage, Medicaid, CHIP, Medicare, and other forms of coverage – other than through the individual insurance market. Affordable here stands for the employee not paying for the insurance coverage at a cost of more than 9.5% of his/her income.
- Have an annual household income that is between 100% and 400% of the Federal Poverty Level ($24,250-$97,000 for a family of four in 2015).
- Be a part of tax household that will file a tax return for the coverage year. Does NOT file a tax return using the “Married Filing Separately” filing status.
- Be eligible for coverage through a metal level Qualified Health Plan (QHP) obtained through the Marketplace. There is no premium tax credit for catastrophic plans.
Calculating the Premium Tax Credit
Premium Tax Credit is based on annual household income, family size, and the cost of a Silver Plan. An individual or family who wants a more expensive plan (i.e., Gold or Platinum) must pay the difference.
The above information is used by individual Marketplaces to compute a maximum premium tax credit for each family, which can then be applied to a purchase of one or more QHPs. If the plan cost is more than the premium tax credit, the individual or family will pay a difference as a monthly premium cost. If the plan cost is less than premium tax credit, no monthly payment is required.
Individuals and Families who are eligible for Medicaid are not entitled to the credit. Individuals with income above 400% of the FPL are also not entitled to the credit.
Table 1 shows how the Silver plan monthly premium for a family of four is reduced depending on the percentage of the FPL. The percent of Government Premium Subsidy is also shown. FPL equal to $23,850 (2014) is assumed. The table is for states that approved Medicaid expansion.
Table 1. Premium Limits Based on Income for 2015
|Percent of Federal Poverty Level (FPL)||Household Income||Silver Plan Monthly Premium||Silver Plan Monthly Premium as Percent of Income||Unsubsidized Silver Plan Monthly Premium||Government Premium Subsidy (%)||Your Premium as % of Unsubsidized Premium|
How the Premium Tax Credit can be applied
The credit may be applied in one of two ways:
- As Advanced Premium Tax Credit with advanced payments paid directly to the health plan on a monthly basis
- Advanced payments are based on projected household income.
- Reconciliation takes place at tax time against the actual Premium Tax Credit for which you are eligible.
- As a Premium Tax Credit received on the federal tax return filed for the coverage year
Let Liberty Medicare help you to get coverage through the Health Insurance Marketplace
Liberty Medicare is here to help you learn about Marketplaces and assist with eligibility determination for enrollment in a Qualified Health Plan (QHP) and for insurance affordability programs, which include Medicaid, CHIP, premium tax credit, and cost-sharing reductions. We will help you to compare plans, and enroll in coverage. All of our services are offered to you at no cost.
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If you are considering buying insurance in the Health Insurance Marketplace, let us guide you. To see real quotes from insurance providers visit Federal or State Marketplace, fill out our Individual Health Quote form, or give us a call at 877-657-7477.