CBPP and Cato papers examine tax subsidy availability

Posted on July 19, 2012 | No Comments
Filed under Library, Tax Policy, Third Party Resources

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Implementation Briefs

Key Developments

The Affordable Care Act (ACA) provides tax credits and subsidies for the purchase of qualifying health insurance plans on state-run insurance exchanges.

According to a paper recently released by the Cato Institute, the Internal Revenue Service (IRS) rule that extends tax credits and subsidies to the purchase of health insurance in federal exchanges created in states without exchanges of their own, lacks “statutory authority. The report argues that the” text, structure, and history of the Act show that tax credits and subsidies are not available in federally run exchanges” and that the IRS rule is thus “contrary to congressional intent and cannot be justified on other legal grounds.”

However, an article published by the Center on Budget Policy and Priorities (CBPP) takes a different perspective. In providing for a federal exchange, CBPP argues, the Congress intended that it substitute for a state exchange. The CBPP article makes the case that one of the primary functions of an exchange is to determine eligibility for, and the amount of, advance premium tax credits so that people can afford to buy coverage. CBPP cites section 1321 of the ACA and section 36B of the Internal Revenue Code as evidence regarding this point. Even if the statute were ambiguous, CBPP argues, a court examining whether the Treasury regulations are valid would defer to the agency’s interpretation of the statute.

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Jackson Hewitt explores issue of "unbanked" Americans gaining ACA insurance coverage

May 24, 2013

A new study released by Jackson Hewitt Tax Service Inc. describes an issue that may arise when uninsured individuals without bank accounts enroll into the Affordable Care Act's (ACA) health insurance Exchanges. Uninsured + Unbanked = Unenrolled= How Health Insurance Companies May Exclude 1 in 4 Eligible Americans from ACA Coverage- and What the Federal Government Can Do to Stop It finds that one quarter of Americans eligible for federal premium subsidies under the ACA, meaning their annual income falls between 100-400% of the federal poverty level, do not have a checking account. This presents an issue in regards to the types of premium payments insurers are willing to accept, as many insurers will not take debit or credit card as a payment form. The US Department of Health and Human Services (HHS) claimed they ameliorated this concern in their guidance letter issued last month by stating that insurance companies must "accept payment in ways that are non-discriminatory."

Jackson Hewitt releases study on employer tax penalties for states that do not expand Medicaid

March 13, 2013

Today, Jackson Hewitt Tax Service released a study entitled, "The Supreme Court's ACA Decision and Its Hidden Surprise for Employers: Without Medicaid Expansion, Employers Face Higher Tax Penalties Under ACA." The study describes how employers in states that refuse expansion may face higher shared responsibility payments under the Affordable Care Act (ACA). Jackson Hewitt cites Texas as a specific example, stating that their refusal to expand may increase federal tax penalties on Texas employers by $299 to $448 million annually.

Heritage Foundation finds ACA will negatively impact labor supply

March 13, 2013

A study released yesterday from the Heritage Foundation indicated that many Americans will bypass better jobs in order to retain healthcare subsidies provided to them by the Affordable Care Act (ACA). Beginning in 2014, insurance subsidies will be provided to families with household incomes below 400% of the federal poverty line. Since subsidy amount is tied to income, the Heritage Foundation argues that this provision in the law will deter individuals from taking higher paying jobs in order to subsidize their insurance purchase through the state marketplaces.

UPDATE: When Should Uninsured Family Members of Employees with Access to Affordable Self-Only Employer Coverage Qualify for Premium Tax Credits?

February 1, 2013

As noted in a previous Implementation Brief , the Affordable Care Act (ACA) allows for premium assistance through tax credits for the purchase of family coverage from qualified health plans sold through health insurance marketplaces. To be eligible for tax credits, individuals must not otherwise be “eligible for minimum essential coverage” and must have annual incomes of 100-400 percent of federal poverty level. With regard to individuals who are offered employer-sponsored coverage, the law states that in order to qualify for the premium tax subsidy, the employer-sponsored coverage must be deemed unaffordable, defined by the IRS as an employee contribution requirement for self-only coverage that exceeds 9.5 percent of household income. Although the ACA extends eligibility for assistance (based on the affordability test) to workers’ dependents, the remaining question, as noted in another earlier Brief, was whether uninsured family members of employees with access to affordable self-only employer coverage can qualify for a premium tax credit. The IRS answered that question...

Update: Shared Responsibility for Employers Regarding Health Coverage

January 23, 2013

On January 2, 2013, the Department of Treasury issued proposed regulations (78 Fed. Reg. 218) that describe in detail the standards that will be applied in determining which employers are covered by the Affordable Care Act’s “shared responsibility” requirements covering large employers. The proposed rules, which build on earlier guidance issued over the 2011-2012 time period, interpret §4980H of the Internal Revenue Code, as added by the ACA. This section provides...

When Should Uninsured Family Members of Employees with Access to Affordable Self-Only Employer Coverage Qualify for Premium Tax Credits?

October 3, 2012

This Implementation Brief on premium tax credits examines the question of how the Affordable Care Act (ACA or the Act) addresses the problem that arises when low- and moderate-income employees have affordable “self-only” employer coverage, but face prohibitively high costs for family coverage, well beyond levels considered “affordable” under the Act. Coverage for a full family is extremely expensive: according to the Kaiser Family Foundation, the average 2012 cost of family coverage approaches $16,000, placing unsubsidized family benefits beyond the reach of all but affluent families. Kaiser further reports that while...

Update: Health Insurance Premium Tax Credits

September 2, 2011

This Update is the third in a series on a group of three regulations, all of which are summarized at HealthReformGPS.org. Together the rules are designed to implement both the Medicaid eligibility expansions, the process of determining eligibility for premium tax credits and cost sharing assistance in the Exchange individual market, and standards for employers purchasing coverage in Exchanges. Collectively, the rules are designed to allow individuals and families to acquire and keep coverage and move more seamlessly among publicly-supported sources of health insurance as family income and circumstances change.

Treasury issues final rules on premium tax credits

May 21, 2012

The Affordable Care Act (ACA) established American Health Benefit Exchanges (the Exchange or Exchanges), a marketplace where consumers can choose a private health insurance plan to fit their health needs. The Exchanges will provide Americans with access to the same health insurance choices as members of Congress. Today, the Treasury Department issued final regulations implementing the premium tax credit that will give middle-class Americans unprecedented tax benefits to make the purchase of health insurance affordable. Premium tax credits will, first and foremost, make...

CCIIO and IRS release simultaneous info bulletins on premium tax credits

April 27, 2012

Yesterday, the Center for Consumer Information and Insurance Oversight (CCIIO), a branch of the Centers for Medicare and Medicaid Services (CMS), released a bulletin outlining how government will verify access to employer-sponsored coverage. This is a necessary part of the process for determining eligibility for advance payments of the premium tax credit available to support the purchase of qualified health plans (QHPs) through Affordable Insurance Exchanges. The purpose of the bulletin is to request comment from the public on a proposed interim strategy and potential regulatory approach for verification of an applicant’s access to qualifying coverage in an employer-sponsored plan under section 1411 of the Affordable Care Act (ACA). The Department of Health and Human Services (HHS) also solicits comments on the development of a long-term verification strategy. Also yesterday, the Internal Revenue Service (IRS)...

HHS and IRS release NPRMs on exchange eligibility, tax credits, medicaid expansion

August 12, 2011

The U.S. Department of Health and Human Services (HHS) and the Internal Revenue Service (IRS) have released Notices of Proposed Rulemaking (NPRM) on Exchange eligibility and insurance premium tax credits, respectively. Additionally, the Centers for Medicare and Medicaid Services (CMS) has released an NPRM related to the Medicaid eligibility expansion authorized by the Affordable Care Act (ACA). All three NPRMs are designed to simplify Exchange eligibility and enrollment by coordinating with state Medicaid agencies and the IRS to determine eligibility for premium tax credits and Medicaid under the new expanded eligibility rules laid out in the ACA. Also addressed in the proposed rules is the eligibility and calculation of tax credits for small businesses. For more information on the Medicaid eligibility expansion, click here. For more information on tax credits, click here. For more information on Exchange eligibility, click here. Finally, for more information on tax credits for small businesses, click here.