Health Care Reform

Financial Aid Part I: Tax Credits

you buy health insurance through your state’s health insurance Marketplace, also called an Exchange, you may be able to get some financial help. The health care reform law helps lower the cost of health insurance for families with low to moderate incomes who make too much money to qualify for Medicaid.

There are two main types of financial help: tax credits and cost-sharing subsidies. This article answers common questions about tax credits, and “Financial Aid Part II” covers cost-sharing subsidies.

The amount of tax credit you qualify for depends on your income and the size of your family. In addition, households with lower incomes may qualify for subsidies to help lower the cost of doctor visits, hospital stays, and other types of medical care.

What Is a Tax Credit?

A tax credit is one way the government may save you money on health insurance when you enroll in a plan through a state Marketplace. It is one type of subsidy. Its full name is the Advance Premium Tax Credit. “Premium” refers to the payments you make each month for your insurance. “Advance” refers to the fact that you can have the money sent directly to your insurance company in advance of making your first payment.

How Do I Know If I Can Get a Tax Credit?

You can use WebMD’s Health Insurance Calculator to find out if you’ll be eligible for a tax credit.

When you enroll in a plan in your state’s Marketplace, you’ll see if you can get a tax credit and how much it will be.

How much money you can get depends on four things:

1.How much money your family makes in a year

2.How old you are

3.How many family members you want on your health insurance policy

4.Where you live — an area with a high cost of living or a low one

How Much Money Can I Make and Get a Tax Credit?

You may be eligible for a tax credit if the amount of money you expect to make for all of 2013 is in the following income ranges:

•$11,490 to $45,960 for one adult

•$15,510 to $62,040 for a family of 2

•$19,530 to $78,120 for a family of 3

•$23,550 to $94,200 for a family of 4

The less money you make, the more financial aid you can get. These amounts may change in 2014. The income amounts for people who live in Alaska and Hawaii are slightly different.

Can I Get a Tax Credit If I Get Insurance From an Employer?

In general, people who get insurance through an employer probably won’t use a state Marketplace. And the Marketplace is the only place where this kind of financial aid is available.

Some people, though, may want to buy a health plan through a Marketplace even though an employer offers affordable insurance. In that case, the employee will not be eligible for tax credits or subsidies, even if their income falls within the ranges listed above.

In some cases, an employer’s plan may not be affordable enough. If either of the statements below is true for you, you may enroll in a health plan in a state Marketplace. When you do, you’ll see if you’re eligible for a tax credit.

•None of the health plans available from your employer covers at least 60% of your average health care costs.

•The cost of enrolling in a plan from your employer would cost more than 9.5% of your annual income.

How Do I Get the Money From a Tax Credit?

When you sign up for health insurance in a Marketplace, you’ll have a few choices for how you’d like to use the money from a tax credit.

•You can use it in advance. In this case, you don’t receive any money directly. Instead, the IRS sends a monthly payment to your insurance company to pay part of your premium. You pay the rest of the premium.

•You can split the money between premiums and a tax refund. You choose how much of the credit you want to go toward your premium each month. You get the rest of the credit as a tax refund.

•You can pay all of the premium yourself and apply the tax credit to your taxes. When you file your taxes, you can subtract the full amount of your tax credit from the tax you owe. If you don’t owe any taxes, then you’ll get a bigger refund.

What Should I Do If My Job or My Income Changes?

If you get a new job that makes you ineligible for the credit, tell your state’s Marketplace. Every Marketplace will have an 800 number, so call and talk with a representative. If you don’t, you may have to pay back advance payments the IRS made from the time you became ineligible.

If your income goes down, call a representative at your state’s Marketplace because you may be able to get a larger tax credit or qualify for Medicaid.

If My Income Qualifies Me for Medicaid but My State’s Not Expanding It, Can I Get a Tax Credit or Cost-Sharing Subsidy?

It depends on your income level. In general, you may be able to get financial aid if your income for 2013 is:

•$11,490 to $15,856 for one adult

•$23,550 to $32,499 for a family of four

The amounts for people who live in Alaska and Hawaii will very.

Unfortunately, people with even lower incomes may find themselves without financial help for health insurance.

Health Care Reform