Dania Palanker, Senior Counse l , NWLC

Susanna B i rdsong, Fe l low, NWLC

Tara St raw, Senior Health Pol icy Analyst , Center on Budget and Pol icy Pr ior i t ies

Stefanie Coste l lo , Health Insurance Specia l is t , Center for Medicare and Medicaid Ser vc ies

PREMIUM TAX CREDIT

101

January 14, 2015

General overview of access to insurance under the ACA

Financial Assistance Available under the ACA Cost-sharing subsidies

Premium Tax Credit

Eligibil ity for the Premium Tax Credit

How the Premium Tax Credit Works

What happens… After signing up for health insurance

At tax time

CMS Information and Resources

Outreach tools

WHAT WE’RE GOING TO COVER:

The Affordable Care Act is making health coverage

more affordable and easier to obtain for millions of

American women and their families.

In the first year alone, 8 million people (4.3 million of

whom were women) signed up for health insurance

through the Marketplace.

Of those 8 million, 85% of them received financial

assistance to help cover the monthly cost.

THE ACA AND ACCESS TO AFFORDABLE

HEALTH INSURANCE

The 2015 “open enrollment period”—when anyone will

be able to sign up for health insurance or to change

their current plan—runs through February 15, 2015.

Outside of open enrollment, people may qualify for

special enrollment periods if they experience certain

life events such as marriage, the birth or adoption of

a child, or a job change.

THE ACA AND ACCESS TO AFFORDABLE

HEALTH INSURANCE

Beginning in 2014, individuals must:

Have minimum essential health coverage for

each month of the year, or

Qualify for an exemption to minimum

essential coverage, or

Make a payment when filing his or her federal

income tax return.

QUICK NOTE ON THE

INDIVIDUAL MANDATE

Employer -sponsored coverage

Coverage purchased in the

indiv idual market , including a

quali f ied health p lan of fered by the

Health Insurance Marketplace

Medicare Par t A coverage and

Medicare Advantage plans

Most Medicaid coverage

Chi ldren's Heal th Insurance

Program (CHIP) coverage

Cer ta in types of veterans heal th

coverage administered by the

Veterans Administrat ion

Most types of TRICARE coverage

“MINIMUM ESSENTIAL COVERAGE”

INCLUDES:

Coverage provided to Peace Corps

volunteers

Coverage under the Nonappropriated

Fund Health Benefit Program

Refugee Medical Assistance supported

by the Administration for Children and

Families

Self-funded health coverage offered to

students by universities for plan or policy

years that begin on or before Dec. 31,

2014

State high risk pools for plan or policy

years that begin on or before Dec. 31,

2014

Other coverage recognized by the

Secretary of HHS as minimum essential

coverage

Cost-sharing subsidies help cover the cost of out-of-

pocket expenses like co-pays and deductibles

Available to individuals and families with incomes below 250%

of the federal poverty line ($59,625 for a family of four).

Premium Tax Credits help cover the cost of monthly

health insurance premiums

Available to individuals and families with incomes between

100%-400% of the federal poverty line ($23,850 and $95,400

for a family of four).

Lawfully residing immigrants with incomes below 100% of poverty who are

ineligible for Medicaid in their state because they resided in the U.S. for

less than five years can qualify for Premium Tax Credits.

FINANCIAL ASSISTANCE AVAILABLE

UNDER THE ACA

Must have a household income between 100%-400% of the federal poverty line ($23,850 and $95,400 for a family of four).

Must not be eligible for adequate and affordable healthcare outside the Marketplace—either through other government programs like Medicare or Medicaid, or an employer.

Must not be already enrolled in an employer-sponsored plan.

Must be a U.S. citizen or lawfully -residing immigrant.

ELIGIBILITY FOR THE PREMIUM TAX

CREDIT

In most cases, married couples will only be eligible for

the Premium Tax Credit if they file their taxes jointly.

The IRS recently clarified that there is an exception to

this rule for survivors of domestic violence and

abandoned spouses.

Married DV survivors and abandoned spouses can certify

that they meet this exception by checking a box on the

tax form when filing their tax return to remain eligible

for the Premium Tax Credit.

ELIGIBILITY FOR THE PREMIUM TAX

CREDIT, CON’T.

The Premium Tax Credit can be used to buy one of four different types of health insurance plans offered through the health insurance Marketplace:

Bronze: generally the least expensive, but provide the least comprehensive coverage and require the most “cost -sharing”—out of pocket expenses like co-pays and deductibles.

Silver

Gold, or

Platinum: usually have the highest monthly premium but provide the most comprehensive coverage and require the least cost-sharing.

WHAT KIND OF HEALTH INSURANCE CAN BE

PURCHASED WITH

THE PREMIUM TAX CREDIT?

The Premium Tax Credit is designed so that individuals and families spend no more than a certain percentage of their income on health insurance.

Families with incomes up to 133% of the federal poverty level will be required to contribute no more than 2% of their income toward their monthly premiums, while families with incomes between 300-400% of the federal poverty level will be required to contribute no more than 9.5% of their income.

The Premium Tax Credit is calculated to cover the difference between the actual cost of the health insurance plan (using the standard benchmark—the second lowest cost silver plan available) and a family’s contribution.

HOW MUCH WILL THE PREMIUM TAX CREDIT

COVER?

Health Insurance Premium Tax Credits for a Family of Four

Income Family Contribution

Percentage of poverty line Annual dollar amount

(using 2014 figures)

Contribution as a percentage

of income

Maximum Monthly

Contribution

Up to 133% FPL $23,850-$31,721 2% of income $40-$53

133%-150% FPL $31,721-$35,775 3-4% of income $79-$119

150-200% FPL $35,775-$47,700 4-6.3% of income $119-$250

200-250% FPL $47,700-$59,625 6.3-8.05% of income $250-$400

250-300% FPL $59,625-$71,550 8.1-9.5% of income $400-$566

300-350% FPL $71,550-$83,475 9.5% of income $566-$661

350-400% FPL $83,475-$95,400 9.5% of income $661-$755

HOW MUCH WILL THE PREMIUM TAX CREDIT

COVER?

EXAMPLE: ALICE*

Meet Alice

Age: 24

Plan cost: $2,535

Example 1: 200% FPL Example 2: 250% FPL

Income: $23,340

Expected contribution: • Share of income: 6.34%

• Dollar amount: $1,480

Premium Tax Credit:

$1,055

Income: $29,175

Expected contribution: • Share of income: 8.10%

• Dollar amount: $2,363

Premium Tax Credit:

$172

*Slide adapted from CBPP powerpoint Health care coverage Post 2014 and Premium Tax Credits, Oct. 9, 2014, available at

http://www.healthreformbeyondthebasics.org/wp-content/uploads/2014/10/Webinar-10.09.14-Eligibility-for-Coverage.pdf#page=32

Alice: Eligible for a Premium Tax Credit of $1,055

HOW DOES PLAN CHOICE AFFECT WHAT

PEOPLE WILL PAY?*

$1,055 $1,055 $1,055 $1,055

$1,480 $1,245

$645

$2,445

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

Actual Contribution

Premium Tax Credit

*Slide adapted from CBPP powerpoint Health care coverage Post 2014 and Premium Tax Credits, Oct. 9, 2014, available at

http://www.healthreformbeyondthebasics.org/wp-content/uploads/2014/10/Webinar-10.09.14-Eligibility-for-Coverage.pdf#page=32.

Individuals and families can apply for the Premium Tax Credit when they sign up for health insurance through the Marketplace in their state.

They will need to provide information about their family’s income, the other people in their household, and whether their job offers them health insurance.

Based on the information provided, the Marketplace will determine eligibility for tax credits, other cost -sharing subsidies, Medicaid, and the Children’s Health Insurance Program (CHIP).

Remember that open enrollment ends February 15! Encourage people to visit www.healthcare.gov or call (800) 318-2596 to get started if they haven’t already.

APPLYING FOR THE PREMIUM TAX CREDIT

Most people who qualify for the Premium Tax Credit

choose the advanced option—every month, their

Premium Tax Credit is paid directly to their insurer

and they are responsible for making up the difference.

Another option is to wait until tax time—a family can

cover their entire premium every month, and then

when they file their taxes claim the Premium Tax

Credit and reduce their tax liability and/or get that

amount back as a refund.

TWO OPTIONS FOR RECEIVING THE

PREMIUM TAX CREDIT: NOW OR LATER

It is important that individuals and families remember to update the Marketplace throughout the year!

The Advance Premium Tax Credit is based on estimates of income and household size for the coming year.

Changes (i.e. birth or adoption of a child, marriage, changes in income or in employer-sponsored insurance eligibility)?

Report it to the Marketplace!

Adjustments will need to be made throughout the year so that people can avoid tax time surprises.

FOR THE ADVANCE PREMIUM TAX

CREDIT…

Maria is single and has no dependents.

When she enrolled in health insurance

through the Marketplace in November 2013,

she projected that her 2014 income would

be $27,925.

In August 2014, Maria started a new job and became eligible for

employer-sponsored coverage on Sept. 1 , 2014.

Maria is responsible for contacting the Marketplace to let them

know about this change, since she may only be eligible to claim

a Premium Tax Credit for January -August 2014.

EXAMPLE

Most taxpayers will just check a box on their tax

return to indicate full -year coverage for everyone on

the tax return.

WHAT HAPPENS AT TAX TIME?

Reconciliation: Reconciling any advance payments of the

Premium Tax Credit made to a health insurer throughout the

year with the final credit based on actual income and

household size.

Exemptions: If you don’t have minimum essential coverage

for all or part of the year, there are many exemptions that

can be claimed on the tax return to avoid paying the

penalty.

Shared Responsibility Payment: Calculation of the penalty

for failure to maintain coverage in each month.

WHAT HAPPENS AT TAX TIME?

Anyone who took the premium tax credit in advance is

required to file a tax return.

By January 31, the Marketplace will send Form 1095-

A, Health Insurance Marketplace Statement, to give

the taxpayer the information needed to claim or

reconcile their premium tax credit.

For the FFM, the 1095-A will also be available on

enrollees’ online accounts.

PREMIUM TAX CREDIT RECONCILIATION

Credit is calculated based on actual income, filing

status, and household.

If no PTC was taken in advance, or if less than the total credit

was taken, a taxpayer will receive an additional credit.

If PTC is disallowed or if too much PTC was taken in advance, all

or part of the PTC must be repaid.

PREMIUM TAX CREDIT RECONCILIATION

On His 1040 (at tax time):

Household MAGI: $32,000 (279% FPL)

Expected contribution: 8.88% of income ($2,842)

Benchmark: $2,756

PTC Calculation:

$2,756 - $2,842 = 0

PTC: $0

Result: John has a final PTC of $0. His repayment cap is $750. He

needs to repay the full amount of $724.

EXAMPLE: JOHN

When He Applied:

Household MAGI: $27,000 (235% FPL)

Expected contribution: 7.52% of income ($2,032)

Benchmark: $2,756

PTC Calculation:

$2,756 - $2,032 = $724

APTC: $724

23

John wins $5,000 in a fantasy football prize league!

WHAT HAPPENS WHEN INCOME FALLS

UNDER 100% FPL?

In general, a person must have income between 100%-400% FPL to qualify for PTC.

Exception: Lawfully present immigrants who are not eligible for Medicaid because of their immigration status are eligible with income below 100% FPL

A special rule applies when income falls below 100% FPL during the year if:

A person was enrolled in a qualified health plan (QHP)

The Marketplace estimated income between 100%-400% FPL

APTC were authorized for one or more months

The taxpayer was otherwise eligible for APTC

If these rules are met, the person is still an applicable taxpayer

The PTC will be calculated using actual income

24

EXAMPLE: LISA

25

Lisa lives with her son, Jackson. She is divorced from Jackson’s dad, David.

Lisa and David alternate claiming of Jackson as a dependent on their tax return.

When Lisa applied for coverage, she applied as a household of 1, expecting her son to be claimed by David in 2014.

Lisa’s financial situation:

$15,400– Lisa’s income

$10,000 – Child support received by Lisa (not counted)

EXAMPLE: LISA

26

On Her 1040 (at tax time):

Household MAGI: $15,400 (99% FPL for a household of 2)

Expected contribution: 2% ($308)

Benchmark: $3,139

PTC: $3,139 - $308 = $2,831

Result: An additional $163 added to Lisa’s tax refund.

David fails to pay child support. As a result, Lisa does

not permit David to claim their son as a dependent.

When She Applied:

Household MAGI: $15,400 (134% FPL for a household of 1)

Expected contribution: 3.06%

APTC: $2,668 (Lisa lives in a non-expansion state)

Note: The expected

contribution is 2% in all

households with income

less than 133% FPL

EXEMPTIONS THAT CAN BE CLAIMED ON

THE TAX RETURN

Part III – Exemptions for certain individuals, in certain months:

Certain noncitizens and citizens living abroad

Health care sharing ministry

Federally-recognized Indian tribe or eligible for IHS

Limited benefit Medicaid

Incarceration

Insurance is unaffordable

Aggregate cost of insurance is unaffordable

Individuals in a state that did not expand Medicaid

Short coverage gap

Coverage by May 1 or “in-line” for coverage

Non-calendar year coverage

Part II – Exemption for the entire family, for the entire year

Household income or gross income below the filing threshold:

Single $10,150

Head of Household $13,050

Married Filing Jointly $20,300

Married Filing Separately $3,950

Qualifying Widower $16,350

*Amounts are for non-dependents under age 65

Part III – Exemption for an individual, for the entire year

In the Medicaid coverage gap in 2014: (1) Income < 138% FPL (2) Live in a non-expansion state

INDIVIDUALS IN A STATE THAT DID NOT

EXPAND MEDICAID (CODE G)

28

New! as of

11/21/14

This exemption applies to:

• Individuals who resided at any time during the year in a non-expansion state, and

• Had income below 138% FPL (i.e., would have been eligible for Medicaid if the state

had expanded).

Process for 2014 only. In future years, must apply for (and be denied) Medicaid to claim this exemption!

Example

Rashid was uninsured for all of 2014. His wife, Miriam, had insurance all

year through work. Leila was born in November, was covered by

Medicaid. Their household income was $25,000 (128% FPL for a family

of 3) and they live in Texas, a non-expansion state. They are all U.S.

citizens.

Does Rashid qualify for an exemption?

Yes, Rashid’s household income is below 138% FPL and he lived in a

non-expansion state. Rashid qualifies for this exemption for the entire

year even if he had other insurance options, such as coverage through

his wife’s employer or insurance in the Marketplace with PTC.

MARKETPLACE EXEMPTIONS

Hardship Exemptions Granted by Marketplace Duration

Financial or domestic circumstances Homelessness

Eviction in the last 6 months or facing eviction or foreclosure

Utility shut-off notice

Bankruptcy

Domestic violence

Recent death of family member

Disaster that resulted in significant property damage

Debt from medical expenses

High expenses caring for ill, disabled or aging relative

Failure of another party to comply with a medical support order for a dependent child who is determined ineligible for Medicaid or CHIP

Through an appeals process, determined eligible for a Marketplace QHP, PTC, or CSR but was not enrolled

Individual health insurance plan was cancelled and Marketplace plans are considered unaffordable

Other hardship in obtaining coverage (including for people in AmeriCorps, VISTA and NCCC who are enrolled limited duration or self-funded coverage)

At least one month before and after hardship

When Can I Apply?

Up to 3 years after the month of the hardship (but documentation is required in most circumstances so earlier is better)

APPLYING FOR A MARKETPLACE

EXEMPTION

30

Hardship application

https://marketplace.cms.gov/applications-and-forms/hardship-exemption.pdf

• A Marketplace exemption application must be printed and mailed

• People in every state (except CT) must use the application on healthcare.gov

• Processing takes at least 2 weeks (may be significantly longer)

• Documentation is required in most cases

* Capped at national average premium of a bronze level plan purchased through a

Marketplace. For 2014, the cap is $2,448 per individual ($204 per month per individual),

with a maximum of $12,240 for a family with five or more members ($1,020 per month for a

family with five or more members).

Year Full-year payment is greater of:

2014 1% of income above tax filing

threshold (up to cap*)

$95 per adult, $47.50 per child

(up to cap of $285)

2015 2% of income above tax filing

threshold (up to cap*)

$325 per adult, $162.50 per child

(up to cap of $975)

2016 2.5% of income above tax filing

threshold (up to cap*)

$695 per adult, $347.50 per child

(up to cap of $2,085)

In 2017 and beyond, values increased by a cost-of-living adjustment

INDIVIDUAL SHARED RESPONSIBILITY

PAYMENT (ISRP)

31

IRS-sponsored Volunteer Income Tax Assistance (VITA) Sites provide free tax help to low -to-moderate-income (generally, $50,000 and below) people.

Call the IRS’ free hotline at 1 -800-906-9887 to locate a VITA site near you. You can also visit http://irs.treasury.gov/freetaxprep/.

The IRS also coordinates with AARP to offer tax help to people of low-to-moderate-income, with special attention to those age 60 and older, through a program called Tax -Aide. Call 1-888-227-7669 or visit www.aarp.org/money/taxaide/ to locate an

AARP-sponsored Tax-Aide site near you.

Individuals with income below $60,000 can use the Free File Program with free tax prep software . Visit http://freefilealliance.org/ to learn more.

WHERE CAN PEOPLE GO FOR HELP?

Need health insurance?

Open enrollment runs through February 15, 2015.

People may be eligible for special enrollment periods at other times of

the year due to life changes (i.e. having a baby, getting married, losing

insurance or income)

Financial assistance is available. Spread the word about the Premium Tax Credit and cost -sharing

subsidies that are already helping millions of families afford insurance.

Tax time assistance is available. VITA Sites and AARP Tax-Aide Sites are located across the country and

can help individuals and families with the new tax return requirements related to the Premium Tax Credit and the Individual Mandate.

REMINDERS

Visit NWLC’s resource page on Open Enrollment:

http://www.nwlc.org/resource/weve-got-you-covered-what-

women-need-know-about-health-care-enrollment

Visit NWLC’s resource page on the Premium Tax Credit:

http://www.nwlc.org/premium-tax-credit-information-resources

Ready for Premium Tax Credit 202 and beyond? Visit CBPP’s

website Health Reform Beyond the Basics to access in-depth

information about the PTC and more:

http://www.healthreformbeyondthebasics.org/

FOR MORE INFORMATION…

Marketplace Coverage & Taxes

Getting Ready

for Tax Season

January 2015

Marketplace Coverage & Your Taxes

If you had coverage through a Marketplace Qualified Health Plan in 2014

• You’ll get a new Form 1095-A in the mail – it will help you fill out Form-8962 to file your federal income taxes with the IRS

• Wait for the form to file

Marketplace Consumers

January 2015 2

Marketplace Coverage & Your Taxes

An envelope labeled “Important Tax or Health Coverage Information Inside” will include Cover letter (English or Spanish depending on user’s language preference)

Form 1095-A instructions (Line-by-line instructions developed by IRS, English only)

Form 1095-A • A separate Form 1095-A will be generated for each policy in which the

household enrolled

• Each member of a tax household, who is on the same policy, will be listed together on one Form 1095-A

• Households of more than 5 enrolled members will receive an additional Form 1095-A that continues Part II

*Consumers also can download a copy of their 1095-A at HealthCare.gov (starting mid-January)

What will Consumers See?

January 2015 3

Marketplace Coverage & Your Taxes

Form 1095-A Elements

The amount of APTC that was

paid to an issuer on a consumer’s

behalf

Information that can be used to

complete a federal income tax return (e.g.,

monthly premium amount)

Information about a tax filer

or other relevant adult, and his/her tax household, who were enrolled in a Marketplace

QHP

January 2015 4

Marketplace Coverage & Your Taxes

There are two types of exemptions

• IRS exemptions that you can get from the IRS by checking

the appropriate box when you file your tax return

• Marketplace exemptions that you’ll need to request by

completing a paper application and mailing it to the

Marketplace

Complete list of exemptions and applications are on

HealthCare.gov or through the Marketplace Call Center

at 1-800-318-2596 (TTY: 1-855-889-4325)

Types of Exemptions

January 2015 5

Marketplace Coverage & Your Taxes

New content on

HealthCare.gov and IRS.gov

Web-based Tax Tools (for some

consumers)

Form 1095-A, with cover letter

& instructions

Fact Sheets

• For consumers

(HealthCare.gov, IRS.gov)

• For partners

(Marketplace.cms.gov, IRS.gov)

How We’ll Share Messages

January 2015 6

Training/outreach for Marketplace

Assisters and Navigators, Agents

and Brokers, Tax Preparers

Email Campaign

Social Media Strategy

Press outreach

Messaging through IRS channels

and programs (Free File and

Volunteer Income Tax Assistance)

Talking points

Marketplace Coverage & Your Taxes

Online tools available mid-January on HealthCare.gov

• Provide a step in filing taxes for certain consumers

• To find essential info that might not appear on 1095-A

Provides report with monthly break down of the SLCSP or LCBP using 2014 plan data

Doesn’t provide APTC, PTC, eligibility, etc.

• No account or login required (anonymous)

Tax Tools in Development

1. Tool if you didn’t take/qualify for APTC and want to see if you can qualify for PTC

2. Tool to see if you qualify for an exemption

January 2015 7

Marketplace Coverage & Your Taxes

Consumers: healthcare.gov/taxes/

Outreach Staff: marketplace.cms.gov • https://marketplace.cms.gov/outreach-and-

education/already-enrolled.html

• https://marketplace.cms.gov/outreach-and-education/new-to-marketplace.html

• https://marketplace.cms.gov/technical-assistance-resources/training-materials/ready-for-tax-season-slides-notes.pdf

Resources

January 2015 8

Marketplace Coverage & Your Taxes

Don’t forget:

• One day left to get coverage beginning February 1, 2015-Enroll by January 15, 2015.

• Open Enrollment Ends on February 15, 2015. Coverage will begin March 1

2015 Open Enrollment

December 2014 9

October 2014

Enroll by January 15th to begin

coverage February 1, 2015

Enrollment ends February 15, 2015 for coverage in 2015

Information for first-time enrollees in the Federally-facilitated Marketplace

Don’t forget