Final regulations for implementing the health insurance purchase tax credit provisions in the Patient Protection and Affordable Care Act of 2010 (PPACA) are set to appear in the Federal Register Wednesday.
PPACA opponents are challenging PPACA in Congress and the courts. If the act takes effect on schedules and works as drafters hope, individuals and small groups will be able to use PPACA tax incentives to buy coverage through a new system of health insurance exchanges, or Web-based health insurance supermarkets.
The new regulations, the Health Insurance Premium Tax Credit regulations, apply to individuals who buy coverage through the exchanges. The final regulations are based on draft PPACA tax credit regulations that were published in August 2011.
PPACA calls for individuals with incomes under 100% of the federal poverty level to be eligible for free coverage.
The U.S. Treasury Department, the parent of the IRS, says PPACA individual health insurance tax credits will be available to individuals and families with incomes from 100% to 400% of the poverty level. In 2011, families of four with incomes of $22,350 to $89,400 could have qualified for the credit, officials say.
The average credit for eligible individuals and families could be about $5,000 per year, officials say, citing estimates from the Congressional Budget Office. Milliman Inc., Seattle, recently reported that a typical employer is probably spending about $21,000 per year on health benefits for good preferred provider organization coverage for a worker in a family of four.
The typical credit amount will be equal to the difference between the premium for a "benchmark plan" and the taxpayer's "expected contribution" for health coverage.
Taxpayers can get the credit during the year, months before they file their income tax returns, to help them pay for coverage.
Under PPACA, exchanges are supposed to offer 4 levels of health plans — platinum, gold, silver and bronze — with the levels based on how much of the cost of "essential health benefits" that a particular plan will cover.
For health insurance tax credit purposes, the benchmark plan will be the second-lowest-cost plan available through an exchange that would cover a family at the "silver" level of coverage, officials say.
The "expected contribution" is defined by PPACA and will range from 2% of income for families at 100% of the federal poverty level to 9.5% of income for families at 400% of the federal poverty level.
PPACA will not let carriers reject applicants with health problems or base premiums on applicants' age, but it will let carriers charge older enrollees up to 4 times as much as they charge younger enrollees. Older tax credit recipients will be able to get larger credits than younger recipients, officials say.
Families can receive the full value of the credit even if the value of the credit exceeds the value of the income taxes they pay, but no family can get a credit that exceeds the premium for the plan purchased, officials say.
