The goal of the Affordable Care Act is to provide cost-efficient healthcare to people across the country. While many individuals will receive this coverage from their employers, others do not have that opportunity. Starting in 2014, the ACA established the premium tax credit to make insurance more affordable to those who don't have access to it through their company. It's important for businesses, human resources teams and workers alike to understand the PTC and what it takes to be considered eligible for the benefit.
PTC qualifications
The PTC helps individuals with low to moderate incomes get affordable healthcare coverage. For many people, this benefit is crucial to ensuring their families are insured especially in times of need. There are specific qualifications people must meet to be eligible for the PTC. These criteria include:
- Have household income that falls within a certain range.
- Do not file a Married Filing Separately tax return (unless you qualify for a special rule that allows certain victims of domestic abuse and spousal abandonment to claim the premium tax credit using the Married Filing Separately filing status).
- Cannot be claimed as a dependent by another person.
- In the same month, you, or a family member: enroll in coverage (excluding "catastrophic" coverage) through a Marketplace, are not able to get affordable coverage through an eligible employer-sponsored plan that provides minimum value, are not eligible for coverage through a government program, like Medicaid, Medicare, CHIP or TRICARE.
- Pay the share of premiums not covered by advance credit payments.
It's mandatory for people to meet all of the above requirements to receive the PTC for healthcare.
Employees who don't have access to minimum essential coverage through their employer could receive a premium tax credit.Minimum essential coverage
People have to demonstrate that they do not have access to affordable insurance – minimum essential coverage – through their employer before qualifying for the PTC. Company-provided healthcare is considered affordable if the required employee contribution for the lowest-cost self-only coverage does not exceed 9.5 percent of household income. Employers have an obligation to tell their workers if their insurance meets the MEC definition. If it doesn't, employees will have a higher chance of eligibility for the PTC.
A refundable credit
Since the PTC is designed to assist those with lower incomes gain access to affordable healthcare, it's refundable. The amount of the credit is dependent on a sliding scale. Those with lower incomes will receive a higher credit to be used toward their coverage. If the amount of the credit is more than the amount of a person's tax liability, the difference is refunded, according to the IRS. If no tax is owed, people can get the full amount of the credit refunded.
Individuals should be sure to notify the Health Insurance Marketplace if any changes in circumstances occur. Examples include:
- Increases or decreases in household income.
- Marriage or divorce.
- Birth or adoption of a child.
- Address change.
- Gain or loss of eligibility for government-sponsored or employer-sponsored coverage.
These alterations will, most likely, change the amount of the PTC for a person and his or her family.
The ACA's premium tax credit is a beneficial way for low-income employees to receive affordable health care. Organizations and their human resources companies should be sure to provide minimum essential coverage to workers, if required, or face a penalty from the IRS. If employers are not obligated to offer this benefit, they should make people aware of eligibility requirements for the PTC.