Many of the financial details of the health insurance exchanges remain fuzzy, and they likely will be until Oct. 1, when consumers should be able to punch their income and family size into an online calculator to get some choices.
Most families don’t have to worry about it. If you’re covered by an employer group policy or one of the existing government health insurance programs, you almost certainly will be better off sticking with what you’ve got.
But if you are uninsured or pay for your own insurance in the open market, you are candidates for the insurance plans offered through the exchange – and for the premium tax credit designed to make that coverage more affordable.
How will the premium tax credit work? Here are a few tips from the journal Health Affairs.
• People buying insurance will be given tax credits based on family income and the cost of health insurance in the exchange. If you have a low income and choose the least expensive insurance option, you could receive enough tax credits that the insurance will be free. Better insurance and a higher income translate into more out-of-pocket expense for insurance.
For example, a couple with two children and an income of $47,100 could get insurance from the exchange with a price tag of $9,000 a year. They would receive a $7,032 tax credit, reducing their out-of-pocket expense to $1,968 annually, or $164 per month.
• Unlike most tax credits, which don’t pay off until you file for taxes the next year, the insurance exchange credits will be immediate. In the case above, the IRS would send a monthly payment of $586 to the insurance company, adding up to the $7,032 annual tax credit.
• The tax credit is designed to limit the maximum anyone would pay out-of-pocket based on their income. An individual making $15,280 would pay a maximum of $300, an individual making $22,980 would pay a maximum of $1,450, an individual making $34,470 would pay a maximum of $3,275. There’s no tax credit for individual incomes over $45,960. The scale also adjust by family size, so a family of four making $70,650 would pay a maximum of $6,711.