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

ACE TA Center

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. Can a PTC or CSR be used for any Qualified Health Plan on the Marketplace?
  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
  11. What if a client’s circumstances change?
  12. Is financial assistance reviewed at the end of the year to account for changes in clients’ circumstances?
  13. Does immigration status affect eligibility for financial help in the Marketplace?
  14. How do PTCs and CSRs compare?

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?

APTCIndividuals eligible for a premium tax credit can choose to:

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?

APTCClients must file a federal income tax return after the end of the year regardless of whether they received the premium tax credit in advance or plan to claim it as a lump sum. The client will then use the return to reconcile the difference between the APTC payments and the actual amount of the credit that the client is eligible for at the end of the year.

Clients must file a tax return for every year that they receive a PTC to continue to be eligible for future PTCs. For example, an individual who received a PTC in 2019 must have filed and reconciled their 2019 taxes before receiving a PTC in 2020. Those that do not reconcile their taxes will receive a notice from the IRS.

Eligibility for individuals who receive PTCs for the first time will be determined using the financial information in their Marketplace application. For later years, financial eligibility will be determined using the most recent available tax return.

If married, the client must file a joint tax return with their spouse unless the client is a victim of domestic abuse or spousal abandonment. The applicant cannot be claimed as a dependent on someone else’s tax return.

CSRThere is no relationship between the CSR and filing taxes. This means that when an individual files taxes at the end of the year, there is no reconciliation process for the CSR.

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6. How do clients apply for a PTC or CSR?

APTCClients must apply for APTCs through the Marketplace as part of the online application. This is called “eligibility determination.” The client must authorize collection of tax data from the IRS during the application process so that the Marketplace can determine their eligibility.

Even if a client is renewing Marketplace coverage, they should update household and income information in the Marketplace every year to be sure they receive the correct amount of APTC. If they do not update their information, they might get  too much APTC and have to pay it back at the end of the year, or they might get too little APTC which might make it difficult to afford their monthly premium costs. 

CSRCSRs do not have a separate application process. Clients who apply for a PTC through the Marketplace are automatically assessed for CSR eligibility.

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7. Can a PTC or CSR be used for any Qualified Health Plan on the Marketplace?

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.

CSRCSRs are only available for Silver-level plans.

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8. Will clients still have to pay for coverage?

APTC and CSREven if they receive both PTCs and CSRs, a client may still have health insurance expenses they will be responsible for, such as premiums, deductibles, co-insurance and copays.

The RWHAP can help eligible consumers pay for health insurance premiums and out-of-pocket expenses. Check with RWHAP recipients in your state, including ADAP, to see what financial assistance is available and as you help clients compare plan costs, make sure they understand all costs associated with their health insurance plan.

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9. Can ADAPs help if the cost of care with a PTC and CSR is still unaffordable?

RWHAP funds may be used to cover any remaining portion of the client’s premium or out-of-pocket costs (i.e., copayments, deductibles, coinsurance). This additional assistance is available in many jurisdictions and you should contact the RWHAP recipient, including ADAP, in your state to learn more. For more information about the use of RWHAP funds for premium and cost-sharing assistance for the purchase and maintenance of private health insurance coverage, see HRSA/HAB Policy Clarification Notice (PCN) #13-05. For more information about the use of RWHAP funds to purchase health insurance for clients in the Marketplace and the reconciliation of advance premium tax credits, see HRSA/HAB Policy Clarification Notice (PCN) #14-01.

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10. How do clients renew their financial assistance?

APTC and CSRClients will get a notice from their insurance company that explains any changes from last year’s plan. This letter will also include an estimate of the PTC for the upcoming plan year. 

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 Open Enrollment Period. If they do not reconcile PTCs or authorize collection of tax data, they will not receive PTCs or CSRs.

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11. What if a client’s circumstances change?

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?

APTCPTCs are reconciled at the end of the year, meaning that the IRS will review and determine whether the correct amount of credit was applied. When a person files federal taxes, they will need to fill out IRS Form 8962 to document premium tax credits received and actual amount of premium tax credits owed based on income and household size at the end of the year. The amount of premium tax credits received can be found in a letter from the Marketplace that is typically sent to clients at the end of January, following the end of the plan year.

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.

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13. Does immigration status affect eligibility for financial help in the Marketplace?

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

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