In order to accomplish its objective of “affordable health insurance coverage”, the Affordable Care Act (ACA) created three (3) separate, cost reducing initiatives:
1. Premium Tax Credits – reduce out of pocket PREMIUM costs;
2. Cost Sharing Reductions (CSR) – reduce point of service out of pocket costs such as copays, deductibles, and coinsurance; and
3. Medicaid Expansion – designed to close the gap on eligibility for coverage based on income that is below the thresholds for nos. 1. and 2. above.
Eligibility for, and applicability of premium tax credits and cost sharing reductions is based on “modified adjusted gross income” (individual or family), and affect insureds differently depending on the number of individuals in the household. Medicaid eligibility rules vary by state, and are impacted by each states decision to expand its Medicaid program, pursuant to the ACA. Generally speaking, individuals that are not eligible for the above tax credits and/or CSR’s because their income falls below the minimum thresholds (generally less than 100% of the federal poverty level – see below), may be eligible for Medicaid. (Note: Another program – the Children’s Health Insurance Program (CHIP) – provides low-cost health insurance to children (and in some cases, pregnant women) whose families earn more than the Medicaid threshold.)
The 2017/2018 calendar year chart below lists the income eligibility thresholds for:
1. Premium tax credits only;
2. Premium tax credits and CSRs; and
3. Medicaid eligibility in states that expanded under the ACA .
So for example, a family of four with income below $61,500 per year would be eligible for both premium tax credits (to offset the cost of the coverage); and CSRs (to offset point of service costs such as copays, deductibles, and coinsurance). The range of income figures depicted reflects the lower end of the federal poverty level scale (i.e., 100%) to the highest level (i.e., 400%). Per ACA guidelines, the lower the income amount, the higher the premium subsidy and CSR, and vice versa.
Note: The CSR’s are only available to individuals making between 100% – 250% of the federal poverty income thresholds. Also, in order to receive either the premium tax credits or the CSRs, individual health insurance coverage must be purchased on the Exchange (see www.healthcare.gov).
| 2017/2018 POVERTY GUIDELINES FOR THE 48 CONTIGUOUS STATES AND THE DISTRICT OF COLUMBIA | ||||
|---|---|---|---|---|
| Persons in Family/Household | 100% FPL: Minimum to Qualify forACA Assistance | 138% FPL: MedicaidCap (in States that Expanded) | 250% FPL CSR SubsidiesCap |
400% FPL: Premium Tax Credit Cap |
| 1 | $12,060 | $16,643 | $30,150 | $48,240 |
| 2 | $16,240 | $22,412 | $40,600 | $64,960 |
| 3 | $20,420 | $28,180 | $51,050 | $81,680 |
| 4 | $24,600 | $33,948 | $61,500 | $98,400 |
| 5 | $28,780 | $39,717 | $71,950 | $115,120 |
| 6 | $32,960 | $45,485 | $82,400 | $131,840 |
| 7 | $37,140 | $51,254 | $92,850 | $148,560 |
| 8 | $41,320 | $57,022 | $103,300 | $165,280 |
| For families/households with more than 8 persons, add $4,180 for each additional person | ||||
Source: Obamacarefacts.com 2017
It’s important to note that while the premium tax credits are firmly embedded in the ACA, the CSR’s are not, and have actually been challenged in a court of law. The U.S. House of Representatives sued the U.S. Department of Health and Human Services (HHS) over the release of CSR payments and a district judge ruled in favor of the House. The ruling was appealed by the Secretary of HHS, and CSR payments were permitted to continue…FOR THE TIME BEING. Insurance companies rely heavily on both premium tax credits AND CSR’s in order to offer individual health insurance, subject to all the ACA guidelines, both on and off the exchanges. Either a court ruling or a unilateral decision by the White House could summarily end CSR payments, and thus create a significant disruption in the health insurance marketplace.
