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Affordable Care Act: Tax credits provide help in paying premiums

The Affordable Care Act requires most Americans to buy health insurance and includes a way to help people pay their premiums if their income is below certain levels: tax credits.

During debate on the 2010 law, the cost of insurance was a major controversy. Many working Americans can’t afford coverage on their own, even if their income is too high to qualify for Medicaid or other government health programs.

The resulting federal income tax credits are designed to fill the gap between Medicaid and people who can afford to buy their own individual insurance or who belong to affordable health plans through their jobs.

Monthly insurance premiums under the Affordable Care Act may cost more than today’s health policies, in general, because insurers are required to provide more benefits than are in many current policies. The tax credits are intended to help ease that increase and encourage more people to buy health insurance and pay at least part of the premiums.

Starting Tuesday, the state marketplaces created under the law, also known as Obamacare, will determine whether people are eligible for tax credits, based on information that consumers provide to the marketplaces.

The tax credits work like this:

If you do not qualify for Medicaid, Medicare or another government program, you may qualify if your household income is between 100 percent and 400 percent of the federal poverty level.

That’s between $11,490 and $45,960 for a single person, $15,510 and $62,040 for a couple, and $23,550 to $94,200 for a family of four. The higher your income, the lower your tax credit.

You may qualify for a tax credit if your employer doesn’t offer insurance or if your out-of-pocket spending with your employer’s plan is more than 9.5 percent of your wages, which makes it “unaffordable” under the law.

Obamacare required the states to expand eligibility for Medicaid to 138 percent of the federal poverty level, but a U.S. Supreme Court ruling found that state governments should decide whether to expand that eligibility. Gov. Pat McCrory and the N.C. General Assembly chose not to expand Medicaid coverage.

As a result, some people in North Carolina have incomes too high for Medicaid but too low for a tax credit on the health insurance marketplace.

If you qualify for the income tax credit, you can use all, some or none of it to offset the monthly cost of health insurance. The government pays the amount you choose to the insurance company, and you pay the rest. Or you can use all, some or none of the tax credit toward your income taxes, and pay the entire insurance cost yourself.

According to nonprofit advocacy group Families USA, more than 896,000 North Carolinians — including more than 176,000 in the Triad and Northwest North Carolina — will be eligible for the tax credits. In some cases, one spouse might qualify but not the other.

If your income ends up higher than you listed on your application, or you misstated other information such as your employer’s health plan, you might have to pay back some or all of the tax credit when you file your income tax return.

For an online tax credit estimate, go to www.kff.org/interactive/subsidy-calculator/.

Winston-Salem Journal reporter Richard Craver contributed to this article.  10.1.2013

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