While PPACA is simmering in the Supreme Court, the U. S. Treasury Department has been busy defining who will be the recipient of the Health Insurance Premium Tax Credits (HIPTC). These new regulations were published last week and can be seen in their entirety here.
Who gets the subsidy?
As PPACA outlines, individual and families with incomes from 100% to 400% of the Federal Poverty Level (FPL) are eligible for the credit. (In 2011 dollars, eligible incomes would fall between $22,350 and $89,400) A recent estimate from the Congressional Budget Office (CBO) puts the average credit in the area of $5,000. With the latest cost estimate for family coverage topping the $20,000 level this year, many will find this a welcome relief. (How are you doing so far?)
Eligibility will be determined by the difference between the “benchmark plan” and the amount your contribution is expected to be. Now stay with me on this. The “benchmark plan” will be the second lowest (or Silver) plan offered through the Exchange. Your contribution will be calculated between 2% to 9.5% of your annual income depending on where you stand on the FPL scale.
But what will it really cost?
It is hard for industry and non industry citizens to envision what this means because PPACA changes everything so radically that the rates you see today and the rates post-PPACA are a mystery. When you consider the complete lack of underwriting, an unenforceable mandate* and rating restrictions that limit the ratio in premium between an 18 year old and a 64 year old to 1 to 4……your guess is an good as mine. As soon as the rates are out they will be subject to change at the next legal opportunity. The effect of the shift in the demographic of the insured public and the dumping of employer sponsored coverage (directly or indirectly from the 9.5% AGI limit) is yet to be seen.
PPACA subjects employers to “shared responsibility” penalities if they don’t offer affordable coverage and this set of regulations suggests there are more penalties to come if the employer contribution toward the cheapest plan offered exceeds 9.5% of the the employee’s AGI. For employers who might pay into Health Savings Accounts (HSA) for their employees, you may be surprised to note that these regulations do state that the IRS will not include the employer HSA contributions into that calculation when determining if the employees coverage is affordable. This is because HSA contributions cannot be used to pay for group medical insurance premiums and therefore, cannot reduce the “cost” of the insurance for the employee.
As I read this 87 page document my head is reeling with questions of implementation. It’s almost like these people have never run a business or spent much time working with employers on the intracacies of providing benefits. Employers who run any kind of benefits program spend money on many health related items in addition to “Health Insurance Premiums”. Even employer expenses on Wellness Programs may not necessarily be counted as an employer contribution to the health plan.
If you are asking yourself how in the heck the average Joe is supposed to follow all of this, think about how they get through it now and consider this.
Employee Benefits experts and consultants are going to need an entirely new set of expertise in their portfolio to assist employers in determining where to put their benefit dollars. The lifespan of the Health Insurance Agent is not only under direct attack from PPACA, but the day of the agent who provides “rates only” as a mode of service is over. Benefit Professionals like our agency will survive as long as we are welcome in the market and not regulated out of existence.
For the individual purchaser, things may get more impersonal. Government employed Exchange “agents” are going to spend more time calculating your subsidy than worry too much about advising you what is best for you and your family.
Well, it’s not all bad….you might get $5,000!
Paula L. Wilson, RHU, REBC
*subject to SCOTUS decision due in June, 2012.