New federal tax credits were authorized in the Patient Protection
and Affordable Care Act (ACA, P.L. 111-148, as amended), to help
certain individuals pay for health insurance coverage, beginning in
2014. ACA requires "American Health Benefit Exchanges" to be
established in every state by January 1, 2014, either by the state
itself or by the Secretary of Health and Human Services (HHS).
Exchanges will not be insurers, but will provide eligible
individuals and small businesses with access to private health
insurance plans. Generally, the plans offered through the exchanges
will provide comprehensive coverage and meet all ACA market
reforms, as applicable. One of the requirements that most exchange
plans must meet is to provide a certain level of coverage
generosity based on actuarial value. Each level of coverage
generosity is designated according to a precious metal and
corresponds to a specific actuarial value: Bronze (actuarial value
of 60%), Silver (70%), Gold (80%), and Platinum (90%). To make
exchange coverage more affordable, certain individuals will receive
premium assistance in the form of federal tax credits. The premium
credit will be an advanceable, refundable tax credit, meaning
taxpayers need not wait until the end of the tax year in order to
benefit from the credit, and may claim the full credit amount even
if they have little or no federal income tax liability. Although
the premium credits will not be available until 2014, the
illustrations provided in this report are based on current federal
poverty levels, to reflect how the estimated premium credit amounts
compare to current income levels. Under ACA, the amount received in
premium credits is based on income tax returns. These amounts are
reconciled in the next year and can result in overpayment of
premium credits if income increases, which must be repaid to the
federal government. ACA limited the amount of required repayments.
Since the enactment of ACA, these limits have been increased in
order to raise revenues for other legislative initiatives (e.g.,
P.L. 111-309 and P.L. 112-9). Most recently, on June 7, 2012, the
House passed H.R. 436, the Health Care Cost Reduction Act of 2012,
which includes a measure that would remove all limits on repayment,
making individuals fully liable for the full amount of any premium
credit overpayment. Relative affordability of health insurance
premiums individuals and families might face within health
insurance exchanges will likely vary from exchange to exchange
based on a host of factors, including enrollees' age, the varying
prices paid by plans for medical goods and services, the breadth of
the provider network, the provisions regarding how out-of-network
care is paid for (or not), and the use of tools by the plan to
reduce health care utilization (e.g., prior authorization for
certain tests). Examples provided in the Appendix of this report
depict a range by which premiums might reasonably be expected to
vary based on enrollees' age, and variation in medical costs across
geographic areas, for purposes of illustration only. Actual
premiums will likely vary among health insurance exchanges based on
a wide range of factors other than those depicted in this report.
General
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