U.S. Treasury Department Releases Premium Tax Credit Regulations

The Affordable Care Act, the legislation derisively known as “Obamacare” that is meant to provide health care to more people for less money, includes the creation of insurance exchanges where customers can select a private health care plan that fits their needs, and gives them the same range of choices as members of the U.S. Congress.

On the Morning of May 21, 2012, the U.S. Treasury Department issued its final regulations that let the premium tax credit go into effect, thus providing middle-class citizens an even greater benefit toward affordable insurance.

What exactly does the Premium Tax Credit do? It’s meant to make health care more affordable once the insurance exchanges go into effect in 2014. According to the Congressional Budget Office, once the Affordable Care Act is fully implemented, those people who qualify for assistance in purchasing health insurance will receive premium tax credits averaging more than $5,000/year.

The final regulations also include protections that will make sure people who already have health insurance benefits from their place of employment will only be able to supplement that with insurance purchased on exchanges, and there is language that includes special considerations for people who marry during the tax year.

Other highlights of the Premium Tax Credit are:

• Eligibility is broad. The tax credit will be available to people and families with incomes ranging from 100% to 400% of the federal poverty level (for a family of four, that’s between $23,350 and $89,400 based on 2011 numbers), and it’s estimated that it will allow 18 million people to have private health insurance coverage.
• Scalability. The tax credit amount is linked to the actual cost of insurance, which is great news for senior citizens, since their more expensive health coverage will net them a larger credit.
• Refundability. Because the premium tax credit is fully refundable, families that don’t pay a lot of income taxes, but do pay higher percentages of their income toward other taxes, like payroll taxes, can still receive the full benefit.
• Pays for Premiums in Advance. Those families who don’t have the necessary cash to pay for their entire insurance premium up front can request an advance payment of their premium tax credit directly to the insurance company.

These are just a few of the highlights of the premium tax credit. As these regulations are newly released, and the full force of the Affordable Care Act will not go into effect for two more years, it is likely that the state of health care will continue to evolve.