Tax returns used as basis for credits under Affordable Care Act

8% of Americans to qualify for health subsidies

April 19, 2013 | Jonnelle Marte

About 8% of Americans will qualify for the new federal health-insurance subsidies next year, according to a report released today.

A study by Families USA, a Washington, D.C.-based nonprofit group that advocates for lower health-care costs, found that nearly 26 million Americans will be eligible for federal subsidies that will reduce health-care expenses next year. But it’s not clear how many people will actually use the subsidies to lower costs when the insurance exchanges open in October, since some people will instead qualify for Medicaid if their state expands eligibility. Others, meanwhile, still aren’t aware of how the subsidies and the insurance exchanges will work, and some critics say the application is daunting. “The challenge we have right now is just helping people realize they may be eligible for some serious help,” says Kathleen Stoll, director of health policy at Families USA.

Part of the difficulty will be in helping people understand that the subsidies, which will be offered to those buying health coverage through the state and federally run insurance exchanges created under the Affordable Care Act, will be administered as tax credits that will influence 2014 tax liabilities, says Stoll. The less a person makes, the bigger their credit will be. The more they make, the smaller the credit. But this tax credit comes with a twist: the Internal Revenue Service will make monthly payments directly to the insurance companies, lowering the upfront costs for families. “It’s a funny type of tax credit because it’s based on your income but it’s not going to be given to you,” says Roberton Williams, an economist with the nonpartisan Tax Policy Center, based in Washington, D.C. “It’s basically a transfer of money from the federal government to the insurance company.”

And those families who underestimate what their income will be next year may face an unwelcome surprise: a tax bill. That’s because the subsidies will be issued using estimates of what a person expects to earn in 2014, using the prior year’s income as a proxy. The exact size of the subsidy won’t be calculated until a person files their 2014 tax return, a process that won’t happen until 2015. At that time, if the subsidy due turns out to be bigger or smaller than what they received, the difference will be added or subtracted from their tax refunds — or their tax bills, according to the IRS.

Those people who get a big enough raise that they no longer qualify for the subsidies will have to pay back the money. But some families won’t actually have to pay back the full difference, since repayment amounts will be capped by income and family size. For example, for those making less than two times the poverty level, the maximum amount that needs to be paid back is $300 for a single person or $600 for a family. Those making between two and three times the poverty level won’t have to pay back more than $750 for an individual or $1,500 for a family. And those earning between three and four times the poverty level will face a maximum bill of $1,250 for a single person, and $2,500 for family.

The idea of having to repay the tax credit may be daunting for some families, even with the caps in place, says Stoll. But taxpayers receiving insurance subsidies can soften the blow or avoid such bills completely if they keep the insurance exchanges updated about any changes in income, says Stoll. “You want to report changes as they come up,” she says. The subsidies won’t have to be paid back if income estimates used when signing up are in line with actual income.

Taxpayers can apply for the subsidies, which will cap health-care spending at a certain percentage of income, when they sign up for insurance on the exchanges that are scheduled to open Oct. 1. For a family of four making $32,500, the credit could amount to $11,430, according to Families USA. A family of the same size earning $94,200 would qualify for a smaller subsidy of $3,550.

Families will be able to use the subsidies, which will be based on the cost of the second-lowest-cost silver plan in their area, to buy any plan they want, but the size of the subsidy will stay the same. That means those who buy a less expensive plan will have smaller out-of-pocket costs.

As with other tax credits, taxpayers will have to take a few steps in order to qualify. For example, while people won’t need to have filed tax returns prior to applying for the subsidies; they will have to file returns in order to receive the federal help, according to IRS regulations. There is no way to know how many of the people receiving the subsidies will be filing taxes for the first time, but some experts predict the tax credit will lead to an increase in the number of people filing. Married couples must file jointly if they want to get the subsidy, and the credit will not be issued to people who are claimed as a dependant by someone else.

The credit will be refundable, meaning that if people turn out not to owe any taxes, they can still receive the cash. The IRS says it will be able to enforce collection of overpaid subsidies in the same ways that it collects all other unpaid tax bills, meaning those taxpayers could face liens or levies if they don’t pay back the difference. But families can also set up payment plans, paying by credit card and consider other options if they don’t think they’ll be able to pay back the difference in time.

Those people who get a big enough raise that they no longer qualify for the subsidies will have to pay back the money. But some families won’t actually have to pay back the full difference, since repayment amounts will be capped by income and family size. For example, for those making less than two times the poverty level, the maximum amount that needs to be paid back is $300 for a single person or $600 for a family. Those making between two and three times the poverty level won’t have to pay back more than $750 for an individual or $1,500 for a family. And those earning between three and four times the poverty level will face a maximum bill of $1,250 for a single person, and $2,500 for family.

The idea of having to repay the tax credit may be daunting for some families, even with the caps in place, says Stoll. But taxpayers receiving insurance subsidies can soften the blow or avoid such bills completely if they keep the insurance exchanges updated about any changes in income, says Stoll. “You want to report changes as they come up,” she says. The subsidies won’t have to be paid back if income estimates used when signing up are in line with actual income.

Taxpayers can apply for the subsidies, which will cap health-care spending at a certain percentage of income, when they sign up for insurance on the exchanges that are scheduled to open Oct. 1. For a family of four making $32,500, the credit could amount to $11,430, according to Families USA. A family of the same size earning $94,200 would qualify for a smaller subsidy of $3,550.

Families will be able to use the subsidies, which will be based on the cost of the second-lowest-cost silver plan in their area, to buy any plan they want, but the size of the subsidy will stay the same. That means those who buy a less expensive plan will have smaller out-of-pocket costs.

As with other tax credits, taxpayers will have to take a few steps in order to qualify. For example, while people won’t need to have filed tax returns prior to applying for the subsidies; they will have to file returns in order to receive the federal help, according to IRS regulations. There is no way to know how many of the people receiving the subsidies will be filing taxes for the first time, but some experts predict the tax credit will lead to an increase in the number of people filing. Married couples must file jointly if they want to get the subsidy, and the credit will not be issued to people who are claimed as a dependant by someone else.

The credit will be refundable, meaning that if people turn out not to owe any taxes, they can still receive the cash. The IRS says it will be able to enforce collection of overpaid subsidies in the same ways that it collects all other unpaid tax bills, meaning those taxpayers could face liens or levies if they don’t pay back the difference. But families can also set up payment plans, paying by credit card and consider other options if they don’t think they’ll be able to pay back the difference in time.

Health care law could overwhelm addiction services

April 17, 2013 11:22:00 PM

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By Carla K. Johnson

 

CHICAGO — It has been six decades since doctors concluded that addiction was a disease that could be treated, but today the condition still dwells on the fringes of the medical community. Only 1 cent of every health care dollar in the United States goes toward addiction, and few alcoholics and drug addicts receive treatment. One huge barrier, according to many experts, has been a lack of health insurance.

But that barrier crumbles in less than a year. In a major break with the past, 3 million to 5 million people with drug and alcohol problems — from homeless drug addicts to working moms who drink too much — suddenly will become eligible for insurance coverage under the new health care overhaul.

The number of people seeking treatment could double over current levels, depending on how many states decide to expand their Medicaid programs and how many addicts choose to take advantage of the new opportunity, according to an Associated Press analysis of government data. The analysis compared federal data on the addiction rates in the 50 states, the capacity of treatment programs and the provisions of the new health law.

The surge in patients is expected to push a marginal part of the health care system out of church basements and into the mainstream of medical care. Already, the prospect of more paying patients has prompted private equity firms to increase their investments in addiction treatment companies, according to a market research firm. And families fighting the affliction are beginning to consider a new avenue for help.

“There is no illness currently being treated that will be more affected by the Affordable Care Act than addiction,” said Tom McLellan, CEO of the nonprofit Treatment Research Institute and President Barack Obama’s former deputy drug czar. “That’s because we have a system of treatment that was built for a time when they didn’t understand that addiction was an illness.”

But those eager for a new chance at sobriety may be surprised by the reality behind the promise. The system for treating substance abuse — now largely publicly funded and run by counselors with limited medical training — is small and already full to overflowing in many places. In more than two-thirds of the states, treatment clinics are already at or approaching 100 percent capacity.
Read more: http://www.appeal-democrat.com/articles/law-124658-overwhelm-addiction.html#ixzz2QpGsJtk1

How health care overhaul may affect your tax bill

By John M. Gonzales

CHCF Center for Health Reporting

Published: Sunday, Apr. 14, 2013 – 12:00 am | Page 1D

If you’re among millions of uninsured Californians eligible for government-subsidized insurance, the ripples of health reform start with Monday’s tax deadline.

The government will use your return as its first yardstick for how much of a tax break it contributes to your health coverage. And if you don’t have government-mandated health insurance a year from now, a penalty will be added to your federal tax obligations.

These are among the ways the federal tax code will increasingly be at the forefront of health reform’s implementation. Other provisions are also kicking in as the countdown continues toward full operation of the Affordable Care Act on Jan. 1.

Employers already have started withholding a higher Medicare tax on high-income earners, for example. And 2013 marks the debut of a 3.8 percent tax on the net investment income of high earners.

The provision that will provide the biggest boost to taxpayers is the one that offers subsidies for uninsured people who obtain coverage through new insurance exchanges.

“It’s a tremendous deal for the people who are currently uninsured,” said Larry Levitt, senior vice president for special initiatives at the California-headquartered Kaiser Family Foundation.

“That’s not to tell you that the coverage will be free. The coverage will come with deductibles and co-pays,” said Levitt. “It will start with your current tax return, and ask everyone (to give notice) if their circumstances have changed.”

The subsidies also could create a good deal of confusion for participants in the exchanges, and in some cases come back to haunt. If your income goes up substantially during the year, for example, you could have to give back all, or some, of the tax break.

Oscar Hidalgo, spokesman for Covered California, the state’s health reform insurance exchange, said staff members are shaping plans to work with enrollees “to report changes in income that may change the amount of their subsidy.”

Even if enrollees promptly report such changes to the insurance exchange, though, they could still receive an unexpected tax bill, said Levitt.

For example, if an exchange enrollee was unemployed during the beginning of 2014, he would receive a substantial subsidy for insurance. If he then got a job with health insurance that paid about $46,000 a year, there would be no way for the government to recover the subsidy until taxes were filed.

Such an enrollee wouldn’t literally get a bill in the mail, but the Internal Revenue Service would reconcile that benefit on his next tax return, creating a tax liability.

Currently, the reduced tax credit amounts that people could have to give back are capped according to a sliding scale. They range from $300 for a person making about $23,000, to $1,250 for someone making about $45,000. However, there is legislation pending that seeks to remove the caps entirely.

Of course, the subsidy could also work to someone’s benefit. If a person fell upon hard times and made less money, or lost a job, his tax credit would increase.

“There undoubtedly will be cases where people get either pleasant, or nasty, surprises,” said Levitt.

“These are all new things for people,” he said. Health reform “will ultimately provide a lot of benefits, but it’s also going to generate a lot of confusion.”

The tax penalties, which won’t be assessed until 2015, are tied to the “individual mandate,” the linchpin of health reform that the Supreme Court ruled constitutional in the summer.

The mandate operates on a principle of personal responsibility – and the government’s belief that average Americans will buy into the expansion of health coverage as long as it’s affordable.

President Barack Obama’s health reform law is designed to boost the availability of coverage in two ways: through the establishment of mostly federally funded, state-run insurance exchanges like Covered California; and through an expanded version of Medicaid, or Medi-Cal in California.

Uninsured Americans, in turn, are obligated to participate, either by buying insurance in the exchanges, or, if low-income, by signing up for Medicaid (Medi-Cal).

If some of the uninsured don’t participate, those who do buy in will wind up shouldering the cost burden for their care. So the government thinks those who choose to remain uninsured should pay a tax penalty.

The penalties will range from $95 in the first year to at least $695 in later years.

The Congressional Budget Office and federal Joint Committee on Taxation estimate that some 30 million non-elderly residents will remain uninsured by 2016.

There will be multiple exemptions, including one if your insurance premium in the exchange exceeds 8 percent of income.

The CBO estimates that only one-fifth of the 30 million uninsured in 2016 will actually be subject to the tax penalty.

To get people statewide informed about the new insurance options, Covered California has initiated a $43 million outreach campaign.

It includes a direct outreach effort that has compiled a 13-page list of institutions that want to participate. School districts, community clinics and churches are seeking grant funds that require them to reach into their communities and provide information on how to enroll.

John M. Gonzales is a senior writer at the CHCF Center for Health Reporting. Based at the USC Annenberg School for Communication and Journalism, it is funded by the nonpartisan California HealthCare Foundation.

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Insurers Flock to Private Exchanges While States Grapple With Obamacare Marketplace

 

The exchanges work like those that are expected to be operational in states under the Affordable Care Act next year in that they offer consumers more choices plus people who buy coverage are “empowered to make the choice that is right for each individual,” benefits consultants say.

“With 56 percent of employers considering a private exchange to provide benefits to their active employees or retirees, the transformation of the U.S. health care landscape is well under way,” saidDavid Rahill, Mercer’s president of health and benefits.

Under the Affordable Care Act signed into law by President Obama, millions of Americans in January of next year who have no coverage will receive federal subsidies of about $5,000 to help them buy coverage from health insurance companies that sell individual and small group policies. That subsidized coverage will be offered on exchanges as well but those marketplaces will be operated by each state or the federal government or a partnership between state insurance administrations and the U.S. Department of Health and Human Services depending on the state.

But in the private sector, the exchanges can work with so-called “insured plans” that tend to be sold to individuals or small businesses or self-insured plans that are typically offered by large companies.

Mercer rival Aon Hewitt, for example, has said its exchange launched last year that each employer in the exchange decides on the subsidy or “credit” that each worker will get to purchase coverage. Then, the employees take to the exchange to select their coverage. The subsidy will vary from employer to employer.

Critics of the exchange approach say it’s a way for employers to freeze the amount of money they provide to workers by essentially giving them a chunk of money and telling them to “go buy their own health care” with no promise that the amount offered to workers will rise or keep up with medical inflation in the future.

Mercer, however, sees the exchange approach as an “attraction and retention tool” for employers who will have more flexibility while their workers will have more choices. Mercer’s marketplace is at www.mercermarketplace.com.

Aon Hewitt has described its exchange will turn “selecting health benefits into a retail shopping experience” akin to Amazon.com (AMZN), or Orbitz (OWW).  More than 100,000 workers from employers such as Sears Holdings (SHLD) and Darden Restaurants are already using the Aon Hewitt exchange.

“This year, we were able to offer a broader array of health care choices than we have in the past, giving our employees the flexibility to choose the level of coverage that best meets their needs at a price they could afford,” Danielle Kirgan, senior vice president of total rewards and shared services at Darden Restaurants said in an Aon Hewitt statement.

Industry data shows an even faster growing participation rate on the horizon. The firm said two-thirds, or 66 of large employers are “considering moving” to a retiree exchange in the next three to five years while 28 percent of employers plan to move active employees into an exchange during that same time frame.

“A well-constructed private exchange can benefit employees, employers and insurers,” said Ken Sperling, Aon Hewitt’s national exchange strategy leader. “Many of these insurance companies experienced positive enrollment results in the Aon Hewitt Corporate Exchange last fall so it is not surprising to see growing carrier participation in private exchanges for 2014.”

Article Link: http://www.forbes.com/sites/brucejapsen/2013/04/15/insurers-flock-to-private-exchanges-while-states-grapple-with-obamacare-marketplace/