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FAQ: Premium Tax Credits (PTCs) and Cost-Sharing Reductions (CSRs)

October 2019

ACE TA Center

Tax Form

Financial support is available for many consumers who get health coverage through the Marketplace. Learn how Premium Tax Credits (PTCs) and Cost-Sharing Reductions (CSRs) can help Ryan White HIV/AIDS Program (RWHAP) clients pay for health insurance.

Premium Tax Credit (PTC)

Premium tax credits help lower the cost of premiums for health coverage purchased through the Health Insurance Marketplace. Advance payments of the tax credit can be used right away to lower your monthly premium costs.

Cost-Sharing Reduction (CSR)

A discount that lowers the amount individuals and families have to pay out-of-pocket for deductibles, coinsurance, and copayments. CSRs are NOT used to pay premiums.

If eligible, a person may receive both a PTC and a CSR. People who apply for PTCs are automatically assessed for CSRs.

Frequently Asked Questions

  1. Who is eligible?
  2. How much financial help is available?
  3. What income is considered?
  4. How are PTCs and CSRs given out?
  5. Do clients need to file a federal tax return?
  6. How do clients apply for a PTC or CSR?
  7. Will clients still have to pay for coverage?
  8. Can ADAPs help if the cost of care with an PTC and CSR is still unaffordable?
  9. How do clients renew their financial assistance?
  10. Is financial assistance reviewed at the end of the year to account for changes in clients’ circumstances?

Answers

1. Who is eligible?

APTCIndividuals may be eligible for a premium tax credit if they meet all of the following criteria:

  • Buy health insurance through the Marketplace
  • Have annual household incomes between 100% to 400% FPL (Federal Poverty Level)
  • Are ineligible for other “minimum essential coverage”
  • Are ineligible for Medicare, Medicaid, CHIP or TRICARE programs
  • Do not file a Married Filing Separately tax return (unless victim of domestic abuse or spousal abandonment)
  • Cannot be claimed as a dependent by another person

CSRIndividuals and families may be eligible for savings on out-of-pocket costs if they meet all of the following criteria:

  • Have annual household income between 100% to 250% FPL
  • Are eligible for a premium tax credit
  • Enroll in a CSR Silver-level plan on the Marketplace

Clients are not eligible for a PTC or a CSR if they are eligible for “minimum essential coverage” outside the Marketplace. Minimum essential coverage includes most other types of health insurance such as Medicare or Medicaid. It also includes employer-sponsored coverage that is affordable and provides minimum value. Employers must notify employees if plans meet these two requirements.

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2. How much financial help is available?

APTCThe premium tax credits are administered on a sliding-scale based on the client’s household income and size. Those who have a lower income get a larger credit to help cover the cost of their insurance. In other words, the higher your income, the lower the amount of your credit.

CSRCost-sharing reductions are based on income and household size. The lower a person’s income, the more they will benefit from a CSR.

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3. What income is considered?

APTC and CSRBoth subsidies are determined based on modified adjusted gross income (MAGI). Generally, MAGI is the individual or household’s adjusted gross income, plus any tax-exempt Social Security, interest, or foreign income.

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4. How are PTCs and CSRs given out?

Get it now: Have some or all of the credit paid in advance directly to the insurer by the Marketplace every month. The person/family then pays less for their monthly premium. This is also known as an “advance payment of the premium tax credit,” or APTC. In most cases, RWHAP clients are required to take the APTC to avoid owing any money to the program. The advantage of APTCs to the client is that they do not have to pay as much out of pocket and then wait for the tax credit to be applied at the time they file taxes.

Get it later: Wait to get the lump sum credit when they file their federal income tax return at the end of the year. If a person or family decides to receive the PTC later, they will pay their full premium each month.

CSRThe CSR is applied all year long, reducing the cost of deductibles, copayments, and coinsurance and lowering the out-of-pocket maximum for the year. Clients cannot get the CSR in a lump sum at the end of the year.

5. Do clients need to file a federal tax return?
6. How do clients apply for a PTC or CSR?

APTCPTCs can be used for any metal-level plan (Platinum, Gold, Silver, or Bronze). The amount of the PTC is based on the cost of the Silver-level plan, but it can be applied to any plan, except catastrophic plans.

CSR CSRs are only available for Silver-level plans.

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8. Will clients still have to pay for coverage?
9. Can ADAPs help if the cost of care with an PTC and CSR is still unaffordable?
10. How do clients renew their financial assistance?

As part of tax filing, clients must reconcile the APTCs they received with their actual year-end income to determine whether they received the correct amount of assistance and if they need to pay back or are owed money. Clients must also authorize the collection of tax data when updating their application for the next OpenEnrollment Period. If they do not reconcile PTCs or authorize collection of tax data, they will not receive PTCs or CSRs.

APTC and CSRChanges in some circumstances can affect the PTC or CSR amount. These circumstances include change in household income; life events such as marriage, divorce, birth, or adoption of a child; other changes to household composition; and gaining or losing eligibility for government or employer health care coverage. Note that changes in household income or composition may not qualify as a life event that would allow someone to enroll during a Special Enrollment Period.

It is important for clients to report accurate income information and any income or family size changes throughout the year to avoid owing money at the end of the year.

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12. Is financial assistance reviewed at the end of the year to account for changes in clients’ circumstances?

The information a person includes on Form 8962 will be used to indicate whether that person is owed a refund or owes the IRS money because of an advance premium tax credit overpayment.

CSRCSRs are not reconciled at the end of the year.

APTC and CSRYes. Lawfully present immigrants with incomes between 100% to 400% FPL may be eligible for premium tax credits and those with incomes between 100% to 250% FPL may also be eligible for cost-sharing reductions. Lawfully present immigrants with household incomes below 100% FPL and not otherwise eligible for Medicaid based on immigration status may be eligible for tax credits and lower out-of-pocket costs if they meet all other eligibility requirements.

Undocumented immigrants are not eligible to buy health coverage through the Marketplace. They are not eligible for premium tax credits or other savings on Marketplace plans.

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14. How do PTCs and CSRs compare?
  PTC CSR
Can they be used to pay for:
Premiums check x
Deductibles x check
Copays x check
Coinsurance x check
How the financial assistance is applied:
Money sent directly to the insurer every month to lower the premium check
for APTCs only
x
Money sent to the insured individual in one lump sum once their annual taxes have been file

check
for PTCs only

x
Discounts given by the insurer to lower an individual's out-of-pocket costs x check
Can they be used for the following QHP categories?
Platinum check x
Gold check x
Silver check check
Bronze check x
Reconciled at the end of the year? check x
Sources

http://www.healthreformbeyondthebasics.org/cost-sharing-charges-in-marketplace-health-insurance-plans-part-2/
http://www.irs.gov/uac/The-Premium-Tax-Credit

Related ACE TA Center Sources

Help Clients Prepare for Tax Season
Taxes and Health Coverage - Consumer Resource
 

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