Question about ACA credit or payments

[question everything]

Do subscribers receive tax credits for their premiums? I am on Medicare but before that I carried an individual policy and always wished that I could get a tax credit, the way employer provided cover does.

Thus, I have never been on ACA but think, perhaps I am wrong, that there are payments are rebates that can be quite convoluted but not direct credit.

Anyone?

[Maine-i-acs]

1. It's a "premium Tax Credit"

How it works:
Declare your income when filing
This dictates the degree of discount (premium tax credit) you get
This decides your payment for the ACA insurance.

THEN

File a tax return
You should get an additional form for tax purposes from the insurer showing your PTC
You have a supplemental IRS form you need to file with your taxes
Here it will compare your actual income (including dependents!) versus what you declared when filing for ACA benefits.
The difference here has to be settled out at tax time.

Example (real world)
I declared income when filing last year
I needed one month coverage
My discount was around $1100 (Thanks Obama!)

BUT
My income went up a bit in 2016 vs. what I thought when I applied.
SO
I filled out the forms as required and have to give back around $400 of the $1100 I saved.

Note
If income goes down, you can get a rebate at tax time.

[question everything]

3. Thanks. It is convoluted, sorry

I wish that if the premiums were, say, $4,000 a year (is it realistic?) that there would be a line in the gross income adjustment section for the total amount, regardless of income.

I just looked at an old income tax return when my spouse was covered by the employer. The taxable income was reduced - as reported on the W-2 - by the amount deducted for medical insurance as well as the amount set aside for "MedFlex." The amount paid for insurance was fixed, regardless of income.

[Cal Carpenter]

2. It is more of a subsidy that directly reduces your monthly premium payment

Say your policy through the exchange has a $700 monthly premium. Due to your low income (higher than medicaid level, but not much) you get $450 paid for by the ACA, so your portion of the actual premium that you pay is reduced to $250 per month.

It is not really a rebate or tax refund. I don't know the precise arrangements between the gov/t and insurance company in terms of when the insurance company is paid, but basically a chunk of your premium is reduced off the bill you actually pay each month.

If your income is extremely low, you would qualify for medicaid (although in states that have refused the medicaid expansion it's not that simple). But if it is a little higher, and you don't get employer-sponsored healthcare, you can get it through the exchange and the exact amount of the subsidy depends on your income, family size, etc.

(eta: Reply #1 above covers what happens at tax time. So far, for me, I haven't had to owe or get more after filing taxes. My income is sort of predictable - I am essentially self-employed and I know almost exactly what I will pay myself each year. Not much, obviously, LOL).

[question everything]

4. Thank you. I can see that many actually need assistance

in paying the premiums, thus straight tax credit may not work.

Or, would it, if it were?

[Cal Carpenter]

5. Yes, people need assistance

That's the whole point. In my household, premiums would be about one-third of our take-home pay. We couldn't possibly pay it each month and wait for a tax refund.

Before the ACA, my spouse and I were without healthcare for several years. The company where he worked for almost 20 years went out of business. We both had some work in the interim, but no full-time jobs that offered health care. And we couldn't afford insurance, but we made too much to qualify for medicaid. There's a wide gap between making $15k and getting medicaid, and making enough money to pay $800 or more for insurance premiums out of pocket every month. That's the gap the ACA is supposed to fill

So it has been a huge benefit to us. We are fortunate enough to be relatively healthy, and to be able to afford the copays and deductibles so far. If we had a major medical problem come up, though, we'd still be screwed because our deductible is huge. I don't think the ACA solves many of the problems of our health care system. It hardly even addresses some of them. But it has allowed millions of people to get insurance who didn't have it. And it is literally a lifesaver for many.

Btw, it's not that convoluted in terms of filing taxes. It's one extra form that gets emailed and mailed to you, corresponding to one extra page to fill out on your tax return, box by box. Not much different than having an extra W-2 from a second job. And Turbo Tax or any other tax preparation method makes it easy.

If your income changes during the year, you can report it immediately so the subsidy is changed, or wait until you file taxes and find out what you owe/are owed at that point.

[question everything]

6. Yes, I can see it. It is different for each of us

and I can see why waiting for the credit at tax time cannot work for many.

And with your employer going out of business, you did not even had COBRA - if you could afford it. Many who take employer provided insurance take it for granted, don't realize how expensive the policy is until they leave and rely on COBRA.

Glad that things are now working for you.

[Luz]

8. Same boat. Our premium is over half my income.

We were without until the aca, now we depend on it for my hubbys life.

Credits, or even a full refund at tax time, is out of the question. We barely make pmts now.

(Hubby is disabled, still waiting on ssi outcome)

[Lee-Lee]

7. Straight tax credit won't work for two reasons

Most people who would qualify for subsidies don't have the cash on hand to prepay a years premiums and wait for tax time.

And

Most Americans don't have the financial discipline to get a ax credit as a lump sum and keep it saved all year to pay premiums as they come due. If someone has a $10,000 credit in the bank from a credit on their return in April that they need tonpy $800 a month toward premiums and in May the engine in the only car the have gives out most people will fix the immediate need and neglect the premiums or hope they can make it back and then not be able to.

[question everything]

9. Thank you for the input

It bugs me that the Republicans see even credit as "entitlement" while their plan, as with all employer provided cover, reduce the taxable income and a loss for the treasury of... $25 billion! And this is not entitlement? How many people can get adequate health cover at $250 billion?

[Ms. Toad]

10. If it works via a credit, it needs to be an advance credit

not one you wait for tax time to receive. (And it is simplest the way it is currently designed, going directly to the insurance provider - as opposed to the Advance Earned Income Tax Credit - which is supposed to be paid to you during the year to supplement your income, but I've never yet met anyone who used it that way)

If it works via a credit, it needs to be tied to income. Under the ACA, not only are the premiums reduced based on income - but also the coinsurance, copays, and out of pocket caps. The tax credit proposed has only been compared with the premium subsidy in calculations I've seen - not the overall subsidy.