‘Health Insurance Premium Tax Credit & Cost-Sharing Reductions’ – InsuranceNewsNet

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WASHINGTON, Sept. 10 (TNSrep) — The Congressional Research Service issued the next report (No. R44425) on Sept. 7, 2022, entitled “Health Insurance Premium Tax Credit and Cost-Sharing Reductions” by health care financing specialist Bernadette Fernandez.

Listed here are excerpts:

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Summary

Certain individuals without access to subsidized medical health insurance coverage could also be eligible for the premium tax credit (PTC) established under the Patient Protection and Reasonably priced Care Act (ACA; P.L. 111-148, as amended) and amended under the American Rescue Plan Act of 2021 (ARPA, P.L. 117-2) and the enacted budget reconciliation measure (P.L. 117-169; commonly known as the Inflation Reduction Act) to incorporate several temporary provisions. The dollar amount of the PTC varies from individual to individual, based on a formula laid out in statute. Individuals who’re eligible for the PTC could also be required to contribute some amount toward the acquisition of medical health insurance.

To be eligible to receive the premium tax credit in 2022, individuals will need to have annual household income at or above 100% of the federal poverty level; not be eligible for certain varieties of medical health insurance coverage, with exceptions; file federal income tax returns; and enroll in a plan through a person exchange. Exchanges (or marketplaces) will not be insurance firms; moderately, exchanges function marketplaces for the acquisition of medical health insurance. They operate in every state and the District of Columbia.

The PTC is refundable, so individuals may claim the complete credit amount when filing their taxes, even in the event that they have little or no federal income tax liability. The credit is also advanceable, so individuals may decide to receive advanced payments of the credit (or APTC). APTCs are provided on a monthly basis to coincide with the payment of insurance premiums, routinely reducing consumer costs related to purchasing insurance. The credit is financed through everlasting appropriations authorized under the federal tax code.

Individuals who receive premium credit payments also could also be eligible for subsidies that reduce cost-sharing expenses. The ACA established two varieties of cost-sharing reductions (CSRs). One style of subsidy reduces annual cost-sharing limits; the opposite directly reduces cost-sharing requirements (e.g., lowers a deductible). Individuals who’re eligible for CSRs may receive each types. Plans with CSRs were initially provided payments to reimburse them for the price of providing the subsidies to eligible consumers. Although applicable health plans must proceed to offer these CSRs, such plans now not receive direct payments.

The ARPA made temporary changes to the PTC and to CSRs. The ARPA provision to expand eligibility for and the quantity of the PTC applicable to certain exchange plans stays in effect. The ARPA temporary changes to the PTC and CSRs which have expired include the provisions that

* suspended the requirement, for tax 12 months 2020, that individuals pay back PTC amounts that were provided in excess and

* expanded eligibility for and the calculation of each the PTC and CSRs for people who receive unemployment compensation during calendar 12 months 2021.

The budget reconciliation measure, enacted on August 16, 2022, extends the ARPA provision that expands eligibility for and the quantity of the PTC for 3 years, to sunset at the tip of tax 12 months 2025.

This report describes current law and applicable regulations and guidance, specifically with regard to how the PTC and CSR requirements apply in tax 12 months 2022.

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Contents

Background … 1

Premium Tax Credit … 2

Eligibility … 2

File Federal Income Tax Returns … 3

Enroll in a Plan Through an Individual Exchange … 3

Have Annual Household Income at or Above 100% of the Federal Poverty Level … 3

Not Eligible for Minimum Essential Coverage … 4

Determination of Required Premium Contributions and Premium Tax Credit Amounts … 5

Required Premium Contribution Examples … 5

Reconciliation of Advance Premium Tax Credit Payments … 8

Preliminary Tax Credit Data … 8

Tax 12 months 2019 … 9

Enrollment Data … 9

Cost-Sharing Reductions … 10

Reduction in Annual Cost-Sharing Limits … 11

Reduction in Cost-Sharing Requirements … 12

Figures

Figure 1. Cap on Required Premium Contributions for Individuals Who Are Eligible for the Premium Tax Credit in 2022 … 7

Tables

Table 1. Income Levels Applicable to Eligibility for the Premium Tax Credit for 2022, by Chosen Family Sizes … 4

Table 2. Annual Limits on Repayment of Excess Premium Tax Credits, 2022 … 8

Table 3. ACA Cost-Sharing Reductions: Reduced Annual Cost-Sharing Limits, 2022 … 12

Table 4. ACA Cost-Sharing Reductions: Increased Actuarial Values … 12

Contacts

Creator Information … 13

Acknowledgments … 13

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Temporary Amendments to the Premium Tax Credit

The American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) made temporary changes to the premium tax credit (PTC) and cost-sharing reductions (CSRs). Of those temporary changes, one pertains to tax 12 months 2022: the availability to expand eligibility for and the quantity of the PTC applicable to certain exchange plans.

The ARPA temporary changes to the PTC and CSRs which have expired include the provisions that

* suspended the requirement, for tax 12 months 2020, that individuals pay back PTC amounts that were provided in excess and

* expanded eligibility for and the calculation of each the PTC and CSRs for people who receive unemployment compensation during calendar 12 months 2021.

The budget reconciliation measure enacted on August 16, 2022 (P.L. 117-169; commonly known as the Inflation Reduction Act) makes temporary changes to the PTC. The measure extends the ARPA provision that expands eligibility for and the quantity of the PTC. It extends this provision for 3 years, to sunset at the tip of tax 12 months 2025. The improved PTC extension under the reconciliation measure, like ARPA, provides full premium subsidies (toward benchmark exchange plans) to PTC-eligible households with annual incomes between 100% and 150% of the federal poverty level (FPL). Eligible individuals and families with higher incomes may receive partial subsidies for such plans. For all eligible households with incomes at or above 400% of FPL, each such household could be required to spend as much as 8.5% of its income (prorated monthly) before receiving any credit. For some higher-income households, this ends in receiving no credit despite being eligible.

This report describes current law and applicable regulations and guidance, specifically how the PTC and CSR requirements apply in 2022, and includes historical enrollment and spending data.

Sources: 26 U.S.C. Sec.36B(b)(3)(A)(iii) and (c)(1)(E); and CRS Report R46777, American Rescue Plan Act of 2021 (P.L. 117-2): Private Health Insurance, Medicaid, CHIP, and Medicare Provisions.

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Background

Certain individuals and families without access to subsidized medical health insurance coverage could also be eligible for a premium tax credit (PTC). This credit, authorized under the Patient Protection and Reasonably priced Care Act (ACA; P.L. 111-148, as amended) and amended under the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) and the enacted budget reconciliation measure (P.L. 117169; commonly known as the Inflation Reduction Act), applies toward the price of buying specific varieties of health plans offered by private medical health insurance corporations./1

Individuals who receive PTC payments also could also be eligible for subsidies that reduce cost-sharing expenses./2

To be eligible for the PTC and cost-sharing reductions (CSRs), individuals and families must enroll in health plans offered through medical health insurance exchanges and meet other criteria.

Exchanges operate in every state and the District of Columbia (DC).3 Exchanges will not be insurance firms; moderately, they’re marketplaces that provide private health plans to qualified individuals and small businesses. The ACA specifically requires exchanges to supply insurance options to individuals and to small businesses, so exchanges are structured to help these two several types of customers. Consequently, each state has one exchange to serve individuals and families (a person exchange) and one other to serve small businesses (a Small Business Health Options Program, or SHOP, exchange).

Medical health insurance corporations that take part in the person and SHOP exchanges must comply with quite a few federal and state requirements. Amongst such requirements are restrictions related to the determination of premiums for exchange plans (rating restrictions). Insurance firms are prohibited from using health aspects in determining premiums. Nevertheless, they’re allowed to differ premiums by age (inside specified limits), geography, number of people enrolling in a plan, and smoking status (inside specified limits)./4

Premium Tax Credit

The dollar amount of the PTC relies on a statutory formula and varies from individual to individual. Individuals who’re eligible for the premium credit generally are required to contribute some amount toward the acquisition of their medical health insurance.

The PTC is refundable, so individuals may claim the complete credit amount when filing their taxes even in the event that they have little or no federal income tax liability. The credit is also advanceable, so individuals may decide to receive the credit upfront of filing taxes on a monthly basis to coincide with the payment of insurance premiums (technically, advance payments go on to insurers). Advance payments (or APTC) routinely reduce monthly premiums by the credit amount. Subsequently, the direct cost of insurance to a person or family that’s receiving APTC payments generally will likely be lower than the advertised cost for a given exchange plan.

Eligibility

To be eligible to receive the PTC, individuals must meet the next criteria:

* file federal income tax returns;

* enroll in a plan through a person exchange;

* have annual household income at or above 100% of the federal poverty level (FPL)/5 for tax 12 months 2022;/6 and

* not be eligible for minimum essential coverage (see the “Not Eligible for Minimum Essential Coverage” section on this report), with exceptions.

These eligibility criteria are discussed in greater detail below.

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1 Sec.1401 of the Patient Protection and Reasonably priced Care Act (ACA; P.L. 111-148, as amended); latest Sec.36B of the Internal Revenue Code of 1986 (IRC); Sec.Sec.9661-9663 of the American Rescue Plan Act of 2021 (ARPA, P.L. 117-2); and Sec.12001 of the enacted budget reconciliation measure (P.L. 117-169).

2 ACA Sec.1402; and latest Sec.18071 of the Public Health Service Act (PHSA).

3 For added background in regards to the exchanges, see CRS Report R44065, Overview of Health Insurance Exchanges.

4 For added discussion regarding these rating restrictions, see CRS Report R45146, Federal Requirements on Private Health Insurance Plans.

5 Household income is measured in keeping with the definition for modified adjusted gross income (MAGI); see the “Have Annual Household Income at or Above 100% of the Federal Poverty Level” section of this report. The rules that designate the federal poverty level (FPL) are utilized in various federal programs for eligibility purposes.

The poverty guidelines vary by family size and by whether the person resides within the 48 contiguous states and the District of Columbia, Alaska, or Hawaii. See Office of the Assistant Secretary for Planning and Evaluation, “Regularly Asked Questions Related to the Poverty Guidelines and Poverty,” at https://aspe.hhs.gov/frequently-askedquestions-related-poverty-guidelines-and-poverty#programs.

6 ARPA Sec.9661 expands eligibility for the premium tax credit (PTC) by temporarily eliminating the phaseout for households with annual incomes above 400% of FPL. Elimination of the phaseout applies to tax years 2021 and 2022 under ARPA. Sec.12001 of the enacted budget reconciliation measure (P.L. 117-169) extends the APRA provision through the tip of tax 12 months 2025. The phaseout would resume starting in tax 12 months 2026.

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File Federal Income Tax Returns

Because premium assistance is provided in the shape of a tax credit, such assistance is run by the Internal Revenue Service (IRS) through the federal tax system. The premium credit process requires qualifying individuals to file federal income tax returns, even when their incomes are at levels that normally don’t necessitate the filing of such returns.

Married couples are required to file joint tax returns to assert the premium credit, with some exceptions. The calculation and allocation of credit amounts may differ within the event of a change in tax-filing status during a given 12 months (e.g., individuals who marry or divorce)./7

Enroll in a Plan Through an Individual Exchange

Premium credits can be found only to individuals and families enrolled in plans offered through individual exchanges; premium credits will not be available through SHOP exchanges. Individuals may enroll in exchange plans in the event that they (1) reside in a state during which an exchange was established; (2) will not be incarcerated, except individuals in custody pending the disposition of charges; and (3) are residents or produce other lawful status./8

Undocumented individuals (individuals without proper documentation for legal residence) are prohibited from purchasing coverage through an exchange, even in the event that they could pay all the premium. Since the ACA prohibits undocumented individuals from obtaining exchange coverage, these individuals will not be eligible for the PTC. Although certain individuals will not be eligible to enroll in exchanges attributable to incarceration or legal status, their relations should still receive the PTC so long as those relations meet all eligibility criteria.

Have Annual Household Income at or Above 100% of the Federal Poverty Level

Individuals generally will need to have household income (based on FPL) that meets a minimum level to be eligible for the PTC in 2022, as specified under the ARPA./9

Household income is measured in keeping with the definition for modified adjusted gross income (MAGI)./10

A person whose MAGI is at or above 100% of FPL could also be eligible to receive the PTC for tax 12 months 2022./11

Table 1 displays the income levels corresponding to 100% of FPL, for the placement and size of family, that correspond to the eligibility criteria for the PTC in 2022 (using poverty guidelines updated by the Department of Health and Human Services [HHS] for 2021)./12

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7 See IRS, “Health Insurance Premium Tax Credit: Final Regulations,” 77 Federal Register 30377, May 23, 2012.

8 Generally, enrollment through individual exchanges is restricted to a certain time period: an open enrollment period (OEP). The OEP for exchanges occurs near the tip of a given calendar 12 months for enrollment into health plans that begin the next 12 months. Under certain circumstances, individuals may enroll in exchange plans outside of the OEP. For people who experience a “triggering event” through the plan 12 months, exchanges are required to offer a “special enrollment period” (SEP) to permit such individuals the choice of enrolling into an exchange for that plan 12 months. SEP rules are specified at 45 C.F.R. 155.40, at https://www.govinfo.gov/content/pkg/CFR-2013-title45-vol1/xml/CFR2013-title45-vol1-sec155-420.xml. As well as, “because FEMA declared COVID-19 a national emergency,” if a person qualifies for an SEP but misses their SEP enrollment deadline attributable to the impacts of COVID-19, they could still qualify for an additional SEP; see “Special Enrollment Periods for Complex Issues” at https://www.healthcare.gov/seplist/.

9 There are exceptions to the lower certain income threshold at 100% of FPL. One exception pertains to the state option under the ACA to expand Medicaid for people with income as much as 138% of FPL. If a state chooses to undertake the ACA Medicaid expansion (or has already expanded Medicaid above 100% of FPL), eligibility for premium credits would begin above the income level at which Medicaid eligibility ends in such a state. (Note that in states that don’t expand Medicaid to not less than 100% of FPL, some low-income residents in those states are ineligible for each premium credits and Medicaid.) One other exception is for lawfully present aliens with incomes below 100% of FPL, who will not be eligible for Medicaid for the primary five years that they’re lawfully present. The ACA established Sec.36B(c)(1)(B) of the IRC to permit such lawfully present aliens to be eligible for premium credits. Lastly, the ultimate regulation on premium credits provided a special rule for credit recipients whose incomes at the tip of a given tax 12 months find yourself being lower than 100% of FPL. Such individuals will proceed to be considered eligible for the PTC for that tax 12 months.

10 See CRS Report R43861, The Use of Modified Adjusted Gross Income (MAGI) in Federal Health Programs, for background information in regards to the use of MAGI in determining eligibility for premium tax credits.

11 ARPA Sec.9661 expands eligibility for the PTC by temporarily eliminating the phaseout for households with annual incomes above 400% of FPL. Elimination of the phaseout applies to tax years 2021 and 2022 under ARPA. Sec.12001 the enacted budget reconciliation measure (P.L. 117-169) extends the APRA provision through the tip of tax 12 months 2025.

The phaseout would resume starting in tax 12 months 2026.

12 The poverty guidelines are updated annually, at first of the 12 months. Nevertheless, premium credit calculations are based on the prior 12 months’s guidelines to offer individuals with timely information as they compare and enroll in exchange plans through the OEP (which occurs prior to the start of the plan 12 months).

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Table 1. Income Levels Applicable to Eligibility for the Premium Tax Credit for 2022, by Chosen Family Sizes

Source: Congressional Research Service (CRS) computations based on Department of Health and Human Services (HHS), “Annual Update of the HHS Poverty Guidelines,” 86 Federal Register 7732, February 1, 2021, at https://www.govinfo.gov/content/pkg/FR-2021-02-01/pdf/2021-01969.pdf.

Notes: For 2022, the income levels used to calculate premium credit eligibility and amounts are based on 2021 HHS poverty guidelines. The poverty guidelines are updated annually for inflation. FPL = Federal Poverty Level. DC = District of Columbia.

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Actuarial Value and Metal Plans

Most health plans sold through exchanges established under the ACA are required to fulfill actuarial value (AV) standards, amongst other requirements. AV is a summary measure of a plan’s generosity, expressed as the proportion of medical expenses estimated to be paid by the insurer for a regular population and set of allowed charges. In other words, the upper the proportion, the lower the price sharing, on average, for the population. AV shouldn’t be a measure of plan generosity for an enrolled individual or family, neither is it a measure of premiums or advantages packages.

An exchange plan that’s subject to the AV standards is given a precious metal designation: platinum (AV of 90%), gold (80%), silver (70%), or bronze (60%).

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Not Eligible for Minimum Essential Coverage

To be eligible for a premium credit, a person will not be eligible for minimum essential coverage (MEC), with exceptions (described below). The ACA broadly defines MEC to incorporate Medicare Part A; Medicare Advantage; Medicaid (with exceptions); the State Kid’s Health Insurance Program (CHIP); Tricare; Tricare for Life, a health care program administered by the Department of Veterans Affairs; the Peace Corps program; any government plan (local, state, federal), including the Federal Employees Health Advantages Program (FEHBP); any plan offered in the person medical health insurance market; any employer-sponsored plan (including group plans regulated by a foreign government); any grandfathered health plan; any qualified health plan offered inside or outside of exchanges; and some other coverage (reminiscent of a state high-risk pool) recognized by the HHS Secretary./13

Nevertheless, the ACA provides certain exceptions regarding eligibility for MEC and PTC. A person could also be eligible for premium credits even when she or he is eligible for any of the next sources of MEC:

* the person (nongroup) medical health insurance market;/14

* an employer-sponsored health plan that’s either unaffordable/15 or inadequate;/16 or

* limited advantages under the Medicaid program./17

Medicaid Expansion

Under the ACA, states have the choice to expand Medicaid eligibility to incorporate all nonelderly, nonpregnant individuals with incomes as much as 138% of FPL./18

If a person who applied for premium credits through an exchange is set to be eligible for Medicaid, the exchange will need to have that individual enrolled in Medicaid as a substitute of an exchange plan. Subsequently, in states that implemented the optional Medicaid expansion to incorporate individuals with incomes at or above 100% of FPL (or any state that decided to expand eligibility to individuals regardless of the ACA’s Medicaid expansion provisions), premium credit eligibility begins on the income level at which Medicaid eligibility ends.

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13 See CRS Report R44438, The Individual Mandate for Health Insurance Coverage: In Transient.

14 The private medical health insurance market continues to exist outside of the ACA exchanges. Furthermore, just about all exchange plans could also be offered out there outside of exchanges.

15 For 2022, if the worker’s premium contribution toward the employer’s self-only plan exceeds 9.61% of household income, such a plan is taken into account unaffordable for premium credit eligibility purposes. For added information, see IRS, Revenue Procedure 2021-36, at https://www.irs.gov/irb/2021-35_IRB#REV-PROC-2021-36.

16 If a plan’s actuarial value is lower than 60%, the plan is taken into account inadequate for premium credit eligibility purposes.

17 Limited advantages under Medicaid include the pregnancy-related advantages package, treatment of emergency medical conditions only, and other limited advantages.

18 See CRS In Focus IF10399, Overview of the ACA Medicaid Expansion.

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Determination of Required Premium Contributions and Premium Tax Credit Amounts

Required Premium Contribution Examples

The quantity of the PTC varies from individual to individual. Calculation of the credit relies on the annual household income (i.e., MAGI) of the person (and tax dependents), the premium for the exchange plan during which the person (and any dependents) is enrolled, and other aspects. For simplicity’s sake, the next formula illustrates the calculation of the credit:

Benchmark Plan Premium – Required Premium Contribution = Premium Tax Credit Amount

Premiums are allowed to differ based on a couple of characteristics of the person (or family) searching for medical health insurance. For purposes of this report, Benchmark Plan premium refers back to the premium for the second-lowest-cost silver plan (see text box within the “Eligibility” section of this report) within the person’s (or family’s) local area. Required Premium Contribution refers back to the amount that a premium credit-eligible individual (or family) may pay toward the exchange premium. The required premium contribution is capped in keeping with household income, with such income measured relative to FPL (see Table 1). The cap requires lower-income individuals to contribute a smaller share of income toward the monthly premium for the benchmark plan, compared with the requirement for higher-income individuals. The required premium contribution caps typically are updated through IRS guidance on an annual basis. Nevertheless, the ARPA and the enacted budget reconciliation measure temporarily replace those caps (see Figure 1)./19

The quantity of the credit for a given individual is calculated because the difference between the premium of the plan during which the person enrolls and his or her required contribution. On condition that the premium and required contribution vary from individual to individual, the premium credit amount likewise varies. An extreme example is when the premium for the benchmark plan could be very low, the tax credit may cover all the premium and the person may pay nothing toward the premium. The other extreme scenario, for some higher-income individuals, is when the required contribution exceeds the premium amount, resulting in a credit of zero dollars, meaning the PTC-eligible individual (or family) would pay all the premium amount.

In 2022, eligible households with annual incomes between 100% and 150% of FPL receive full premium subsidies (toward benchmark plans); eligible individuals with higher incomes may receive partial subsidies for such plans. For all eligible households with annual incomes at or above 400% of FPL, each such household could be required to spend as much as 8.5% of its income (prorated monthly) before receiving any credit. For some higher-income households, this ends in receiving no credit despite being eligible. Starting in 2026, the chances of income utilized in the credit formula will revert back to the annual adjustment process established under the ACA.

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19 See ARPA Sec.9661. The brand new percentages apply to the PTC for tax years 2021 and 2022. Under Sec.12001 of the enacted budget reconciliation measure (P.L. 117-169), these same percentages apply through the tip of tax 12 months 2025. Starting in tax 12 months 2026, the annual update to those percentages would revert to pre-ARPA statute and applicable IRS guidance.

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Figure 1. Cap on Required Premium Contributions for Individuals Who Are Eligible for the Premium Tax Credit in 2022

Source: Internal Revenue Service (IRS), Revenue Procedure 2021-36, at https://www.irs.gov/irb/202135_IRB#REV-PROC-2021-36.

Notes: The cap assumes that the person enrolls within the benchmark plan (second-lowest-cost silver plan) used to calculate premium credit amounts. If the person enrolls in an exchange plan that’s dearer than the benchmark plan, the person could be chargeable for paying any premium amount that exceeds the calculated credit amount. Section 9661 of the American Rescue Plan Act of 2021 (ARPA, P.L. 117-2) applies these percentages to tax years 2021 and 2022. Sec.12001 of the enacted budget reconciliation measure (P.L. 117-169) extends the APRA provision through the tip of tax 12 months 2025.

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As an instance the premium credit calculation for 2022, consider a premium credit eligible individual living in Lebanon, KS – the geographic center of the continental United States–with household income of $19,320 (150% of FPL, in keeping with applicable regulations). For 2022, such a person could be required to contribute 0.0% of that income toward the premium for the benchmark plan in his or her local area (see Figure 1). In other words, the person would have a zero dollar premium if she or he enrolled within the benchmark plan. In contrast, a person residing in the identical area with income of $32,200 (250% of FPL) could be required to contribute 4.0% of his or her income toward the premium for a similar plan. The utmost amount this individual would pay for the benchmark plan could be $1,288 (that’s, $32,200 x 4.0%) for the 12 months or roughly $107 per thirty days./20

An identical calculation is used to find out the required premium contribution for a family. For example, consider a pair and one child residing in Lebanon, KS, who’re eligible for the PTC with household income of $32,940 in 2022. For a family of this size, this income is corresponding to 150% of FPL for premium credit purposes. Just as in the instance above of the person with income at 150% of FPL, this family could be required to contribute 0.0% of its annual income toward the premium for the benchmark plan in its local area. In contrast, a family residing in the identical area with income of $54,900 (250% of FPL) could be required to contribute 4.0% of its income toward the premium for a similar plan. The utmost amount this family would pay for the benchmark plan could be $2,196 ($54,900 x 4.0%) for the 12 months (roughly $183 per thirty days).

Generally, the arithmetic difference between the premium and the person’s (or family’s) required contribution is the tax credit amount provided to the person (or family). Subsequently, aspects that affect either the premium or the required contribution (or each) will change the premium credit amount; such aspects include age, family size, geographic location, and alternative of metal plan.

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20 For estimates of premium credit amounts based on aspects for which insurance firms are allowed to differ premiums (as described within the “Background” section of this report), see Kaiser Family Foundation, “Health Insurance Marketplace Calculator,” at http://kff.org/interactive/subsidy-calculator/.

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Reconciliation of Advance Premium Tax Credit Payments

As mentioned previously, an eligible individual (or family) may receive advance payments of the premium credit to coincide with when insurance premiums are due. For such a person, the advance premium tax credit (APTC) is provided on a monthly basis and the quantity is calculated using an estimate of income. When a person files his or her tax return for a given 12 months, the entire amount of APTC she or he received in that tax 12 months is reconciled with the quantity she or he must have received, based on actual income, as determined on the tax return.

If a person’s income decreased through the 12 months and she or he must have received a bigger tax credit, the extra credit amount will likely be included in the person’s tax refund for the 12 months or used to cut back the quantity of taxes owed. If a person’s income increased through the 12 months and she or he received an excessive amount of in APTC payments, the surplus amount generally will likely be repaid in the shape of a tax payment.

For people with incomes below 400% of FPL, any repayment amount is capped with greater tax relief provided to individuals with lower incomes (see Table 2).

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Table 2. Annual Limits on Repayment of Excess Premium Tax Credits, 2022

Source: IRS, Internal Revenue Bulletin 2021-48, at https://www.irs.gov/irb/2021-48_IRB.

Notes: The applicable dollar limit for all other tax filers is twice the limit for single individuals.

a. Doesn’t include surviving spouses or heads of households.

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Preliminary Tax Credit Data

The IRS has published preliminary data in regards to the PTC in its annual “Statistics of Income” (SOI) reports. Essentially the most recently published SOI report is for tax 12 months 2019./21 The next data provide summary statistics about two overlapping populations: tax households that received APTC, and households that claimed the credit on their individual income tax returns./22

Tax 12 months 2019

For tax 12 months 2019, around 5.8 million tax returns indicated receipt of advance payments of the tax credit, totaling to greater than $44.4 billion. Of those 5.8 million returns, nearly 2.2 million tax households received advance payments that were lower than what they were eligible for, and roughly 3 million tax households received advance payments that were greater than what they were eligible for./23 The remaining difference represents households that received the correct quantity in APTC.

The SOI data indicate that roughly 5.2 million tax returns for the 2019 tax 12 months claimed a complete of greater than $40.5 billion of tax credit. The 5.2 million returns represent the variety of tax households that were actually eligible for the credit, based on the data provided within the 2019 tax returns./24 These eligible households represent those that received advance payments of the credit and those that claimed the credit after the tip of the tax 12 months./25 The IRS also has published limited tax credit data by state, county, and zip code./26

Enrollment Data

HHS repeatedly publishes data on individuals choosing and enrolling in exchange plans, including individuals who were determined eligible for the PTC. For plan 12 months 2021, HHS posted reports and public-use files available with national enrollment data, in addition to limited data by state, county, and zip code./27 Throughout the 2021 open enrollment period (OEP), roughly 88% of all exchange enrollees were eligible for the tax credit./28 Along with the annual OEP, the Administration provided a special enrollment period (SEP) in response to the continuing public health emergency attributable to the Coronavirus Disease 2019 (COVID-19) pandemic./29 Throughout the 2021 SEP, roughly 91% of “consumers with Recent SEP Plan Selections” were eligible for the PTC./30

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21 The info represent tax return information on the time of filing; due to this fact, the information don’t incorporate corrections or amendments made to the tax returns at a later time. IRS, “Reasonably priced Care Act Items,” Table 2.7, at https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-returns-complete-report-publication-1304.

22 The SOI report doesn’t include all estimates of tax credit recipients and claimants mandatory to totally describe the overlap of those two taxpayer populations.

23 The three million taxpayers who received excess advanced payments paid back a complete of roughly $4.2 billion.

24 The variety of taxpayers who received advance payments exceeded the number who were eligible for the credits, indicating that some taxpayers received unauthorized credits. The IRS didn’t include, within the SOI report, an estimate of the variety of taxpayers who received unauthorized credits.

25 The IRS didn’t include, within the SOI report, separate estimates of the variety of eligible taxpayers who received advance payments and the number who didn’t.

26 See IRS, “ACA Data from Individuals,” at https://www.irs.gov/statistics/soi-tax-stats-affordable-care-act-acastatistics-individual-income-tax-items.

27 CMS, “2021 Marketplace Open Enrollment Period Public Use Files,” at https://www.cms.gov/research-statisticsdata-systems/marketplace-products/2021-marketplace-open-enrollment-period-public-use-files.

28 See CMS, “Health Insurance Marketplaces 2021 Open Enrollment Report,” at https://www.cms.gov/files/document/health-insurance-exchanges-2021-open-enrollment-report-final.pdf.

29 This SEP was available in all states using the HealthCare.gov enrollment platform from February 15 – August 15, 2021; states with state-based exchanges (SBEs) were “strongly encouraged” to take similar motion. All SBEs did so, although the dates of their SEPs varied. CMS, “2021 Special Enrollment Period in Response to the COVID-19 Emergency,” at https://www.cms.gov/newsroom/fact-sheets/2021-special-enrollment-period-response-covid-19emergency.

30 That is the share of “unique consumers who did not have an lively enrollment” on the time the SEP began of their respective states, and “made a plan selection” through the SEP, which became “lively” (i.e., was not cancelled), as specified. CMS, 2021 Final Marketplace Special Enrollment Period Report, at https://www.hhs.gov/sites/default/files/2021-sep-final-enrollment-report.pdf. Also see this report for more details about SBEs’ SEPs.

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Cost-Sharing Reductions

A person who qualifies for the PTC, is enrolled in a silver plan (see text box above, “Actuarial Value and Metal Plans”), and has annual household income no greater than 250% of FPL is eligible for cost-sharing reductions (CSRs)./31 The aim of CSRs is to cut back a person’s (or family’s) expenses related to cost-sharing requirements under the silver plan; such requirements may include deductibles, co-payments, coinsurance, and annual cost-sharing limits./32 There are two varieties of CSRs, and the extent of assistance for every varies by income band (see descriptions below). Individuals who’re eligible for cost-sharing assistance may receive each varieties of subsidies, so long as they meet the applicable eligibility requirements.

The ACA requires the HHS Secretary to offer full reimbursements to insurers that provide CSRs. Federal outlays for such reimbursements totaled the next amounts:/33

* FY2014: $2.111 billion,

* FY2015: $5.382 billion,

* FY2016: $5.652 billion, and

* FY2017: $7.317 billion.

Although the ACA authorized the cost-sharing subsidies and payments to reimburse insurers, it didn’t address the financing for such payments. The Obama Administration provided CSR payments to insurers using an existing appropriation that funds the PTC (amongst other tax advantages). The House of Representatives filed suit in 2014, claiming the payments violated the appropriations clause of the U.S. Structure. After holding that the House has standing to sue the Obama Administration, the U.S. District Court for the District of Columbia concluded that payments for CSRs were unconstitutional for lack of a sound appropriation enacted by Congress.

The court barred the Obama Administration from making the payments but stayed its decision pending appeal of the case. Following the November 2016 election, the court delayed the case to permit for nonjudicial resolution, including possible legislative motion. Congress didn’t provide appropriations, and on October 13, 2017, the Trump Administration filed a notice announcing it will terminate payments for these subsidies starting with the payment that was scheduled for October 18, 2017. In response, attorneys general of 18 states and the District of Columbia filed suit within the U.S. District Court for the Northern District of California difficult HHS’s decision to terminate CSR payments./34

Despite the executive decision to terminate CSR payments, such decision provides no relief to insurers that proceed to be required under federal law to offer CSRs to eligible individuals.

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31 ACA Sec.1402.

32 A deductible is the quantity an insured consumer pays for covered health care services before the applicable insurer begins to pay for such services (with exceptions). Coinsurance is a share of costs, expressed as a percentage, an insured consumer pays for a covered health service. A co-payment is a set dollar amount an insured consumer pays for a covered health service. An annual cost-sharing limit is the entire dollar amount an insured consumer could be required to pay out of pocket to be used of covered services in a plan 12 months. Once an insured consumer’s out-of-pocket spending meets this limit, the insurer generally pays 100% of covered costs for the rest of the plan 12 months.

33 Data provided to CRS by the IRS Budget Office.

34 For a discussion of legal considerations related to the termination of CSR payments, see CRS Legal Sidebar LSB10018, Department of Health and Human Services Halts Cost-Sharing Reduction (CSR) Payments.

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In response, health insurers increased premiums to offset this loss in reimbursements (if permitted by state insurance regulators); this practice is referred colloquially as silver loading./35

As a part of the legal challenges related to CSR payments, the Federal Circuit Court of Appeals concluded that insurers were “entitled to get well unpaid cost-sharing reduction (CSR) payments that the Trump Administration withheld, but only to the extent insurers had not recouped their losses through higher premiums.”/36

Reduction in Annual Cost-Sharing Limits

Each metal plan limits the entire dollar amount an insured consumer will likely be required to pay out of pocket to be used of covered services in a plan 12 months (known as an annual cost-sharing limit on this report). In other words, the quantity a person spends in a given 12 months on health care services covered under his or her plan is capped./37 For 2022, the annual cost-sharing limit for self-only coverage is $8,700; the corresponding limit for family coverage is $17,400./38 One style of cost-sharing assistance reduces such limits (see Table 3). This CSR reduces the annual limit faced by premium credit recipients with incomes as much as and including 250% of FPL; greater subsidy amounts are provided to those with lower incomes. On the whole, this cost-sharing assistance targets individuals and families that use a fantastic deal of health care in a 12 months and, due to this fact, have high cost-sharing expenses. Enrollees who use little health care may not generate enough cost-sharing expenses to succeed in the annual limit.

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35 For background on silver loading, see Bipartisan Policy Center, “Stabilizing the Individual Insurance Market: What Happened and What Next?,” March 2018, at https://bipartisanpolicy.org/wp-content/uploads/2019/03/BPC-HealthStabilizing-The-Individual-Health-Insurance-Market.pdf. The practice of silver loading was protected under federal law during plan 12 months 2021; see Sec.609 of the Further Consolidated Appropriations Act, 2020, P.L. 116-94.

36 Aviva Aron-Dine and Christen Linke Young, “Silver-Loading More likely to Proceed Following Federal Circuit Decision on CSRs,” Health Affairs, October 13, 2020, at https://www.healthaffairs.org/do/10.1377/hblog20201009.845192/full/.

37 The annual cost-sharing limit applies only to health services which might be covered under the health plan and are received throughout the provider network, if applicable.

38 See “Patient Protection and Reasonably priced Care Act; HHS Notice of Profit and Payment Parameters for 2022 and Pharmacy Profit Manager Standards,” 86 Federal Register 24140, May 5, 2021, at https://www.federalregister.gov/documents/2021/05/05/2021-09102/patient-protection-and-affordable-care-act-hhs-notice-of-benefit-and-paymentparameters-for-2022-and.

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Table 3. ACA Cost-Sharing Reductions: Reduced Annual Cost-Sharing Limits, 2022

Source: Department of Health and Human Services (HHS), Table 10, “Patient Protection and Reasonably priced Care Act; HHS Notice of Profit and Payment Parameters for 2022 and Pharmacy Profit Manager Standards,” 86 Federal Register 24140, May 5, 2021, at https://www.federalregister.gov/documents/2021/05/05/2021-09102/patient-protection-and-affordable-care-act-hhs-notice-of-benefit-and-payment-parameters-for-2022-and.

Note: ACA = Patient Protection and Reasonably priced Care Act (P.L. 111-148, as amended).

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For instance, consider the hypothetical individual who resides in Lebanon, KS, and has household income at 150% of FPL (as discussed within the “Required Premium Contribution Examples” section of this report). An individual eligible to receive CSRs at that income level would face an annual cost-sharing limit of $2,900, in comparison with an annual limit of $8,700 for somebody also enrolled in a silver plan but doesn’t receive this subsidy. The sensible effect of this reduction would occur when this individual spent as much as the reduced amount. For added covered services received by the person, the insurance company would pay all the cost. Subsequently, by reducing the annual cost-sharing limit, eligible individuals are required to spend less before benefitting from this financial assistance.

Reduction in Cost-Sharing Requirements

The second style of CSR also applies to premium credit recipients with incomes as much as and including 250% of FPL. For eligible individuals, the cost-sharing requirements (for the plans during which they’ve enrolled) are reduced to be sure that the plans cover a certain percentage of allowed health care expenses, on average. The sensible effect of this CSR is to extend the actuarial value (AV) of the exchange plan during which the person is enrolled (Table 4). In other words, enrollees face lower cost-sharing requirements than they might have without this assistance. On condition that this kind of CSR directly affects cost-sharing requirements (e.g., lowers a co-payment), each enrollees who use minimal health care and those that use a fantastic deal of services may profit from this assistance.

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Table 4. ACA Cost-Sharing Reductions: Increased Actuarial Values

Source: 45 C.F.R. Sec.156.420.

Note: ACA = Patient Protection and Reasonably priced Care Act (P.L. 111-148, as amended).

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To be eligible for cost-sharing subsidies, a person have to be enrolled in a silver plan, which already has an AV of 70% (see text box above, “Actuarial Value and Metal Plans”). For a person who receives the CSR referred to in Table 4, the health plan will impose different cost-sharing requirements in order that the silver plan will meet the applicable increased AV. The ACA doesn’t specify how a plan should reduce cost-sharing requirements to extend the AV from 70% to one in every of the upper AVs. Through regulations, HHS requires each insurance company that gives a plan subject to this CSR to develop variations of its silver plan; these silver plan variations must comply with the upper levels of actuarial value (73%, 87%, and 94%)./39 When a person is set by an exchange to be eligible for CSRs, the person is enrolled within the silver plan variation that corresponds along with his or her income.

Consider the identical hypothetical individual discussed within the previous section. Since this person’s income is at 150% of FPL, if she or he receives this kind of subsidy, the silver plan during which she or he is enrolled can have an AV of 94% (as indicated in Table 4), as a substitute of the same old 70% AV for silver plans.

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39 See 45 C.F.R. Sec.156.420.

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The report is posted at: https://crsreports.congress.gov/product/pdf/R/R44425

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