Are You Eligible for Health Care Tax Credits?

Apr 18, 2013

A new report from consumer health care advocacy group Families USA crunched the numbers, state by state. They found that almost 83,000 Rhode Islanders will be eligible for something called the "premium tax credit" in 2014. Families USA, by the way, calls itself nonpartisan, although some say the organization is biased because of its clear support for the Affordable Care Act. For balance, see this more independent analysis, by zip code, done by the Kaiser Family Foundation.

So what, may you ask, is the "premium tax credit," and how can you get one? Well, let's tackle that first question.

The premium tax credit is an amount paid directly to health insurers on your behalf to help offset the cost of your health insurance coverage. It's part of the Affordable Care Act. The credits are supposed to help low-to-moderate income individuals and families who couldn't previously afford it to buy health insurance through the new online marketplace for insurance. In Rhode Island, that's called the health benefits exchange.

Now for the next question: how can you get such a credit? You have to earn an income between two and four times the federal poverty level. For example, that's between $47,100 and $94,200 a year for a family of four based on the 2013 poverty guidelines. The amount of the credit will vary based on your income.

What about everyone else? Those with very low incomes will presumably qualify for Medicaid. Kaiser Health News (independent from the foundation) explains it well:

"The Affordable Care Act (ACA) includes two primary mechanisms for helping people afford health coverage. Starting in 2014, people with family incomes up to 138% of the poverty level ($31,809 for a family of four and $15,415 for a single person in 2012) will generally be eligible for the Medicaid program. And, people buying coverage on their own in new state-based health insurance exchanges will be eligible for federal tax credits to subsidize the cost of insurance. Tax credits will be calculated on a sliding scale basis for people with family income up to four times the poverty level ($92,200 for a family of four and $44,680 for a single person in 2012). (A calculator from the Kaiser Family Foundation illustrates the assistance people would be eligible for at different income levels and ages.)"

Keep in mind that a premium tax credit can only help offset the cost of your coverage. It's not going to affect whether or not your coverage gets more expensive. If Rhode Island is any bellweather, premiums may be going up in general because of rising health care costs. Some analysts believe that because more people will be gaining health insurance for the first time, many of them sicker than the population already covered, premiums will go up even more. Others say that efforts to boost preventative and primary care, as well as other initiatives to bring down the cost of care may help offset those increases, but only over time.