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Thursday, March 26, 2015

Another Affordable Care Act Oddity

To help more people obtain health insurance, the Affordable Care Act (ACA) provides a subsidy in the form of a refundable, advanceable tax credit - the Premium Tax Credit (PTC). Generally, if your household income is at least 100% of the Federal poverty line, but not over 400% of that line, and you are not offered affordable coverage from your employer, you are eligible.

For many people, their household income is roughly the same each month. But not for everyone. Perhaps you started the year with monthly income within the eligibility range and obtained subsidized insurance for those months. But, then you get a better paying job or a bonus (but still no offer of affordable health insurance from your employer), and your annual household income goes above 400% of the FPL?  Well, then you have to repay the subsidy you got in the earlier months even though for those months, you could not afford the coverage.

Sounds rough, but not easy to resolve.  If the PTC were changed to be based month by month on your income, it would favor those who can defer lots of income to the last month of the year. Perhaps the problem is more tied to the "cliff" in the PTC that causes someone to completely lose the subsidy once their income crosses the 400% of the FPL (more on that here).  And, all of this puts the PTC person in a situation that an employee with employer-subsidized coverage is not in. That is, there is no cliff that causes an employee to lose his or her income exclusion for what the employer pays towards the employee's health coverage.

What do you think would work to make the PTC more fair?


Brian said...

Certainly won't be easy to resolve, but here's hoping it improves in the near future.

Unknown said...

The Affordable Care Act is something that has given more headaches than anything else. You're right in that there are some people who have an income each month that changes, and if the subsidies were based on these amounts, then it might work better for those who don't see the same income throughout the year.