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Small Business Employee Benefits and HR Blog

What Brokers Need to Know About Premium Tax Credits

The individual health insurance market is growing at a significant rate. To adapt to the changing market, health insurance brokers are dusting off their once-ignored individual product lines to service the demand. One of the factors influencing the growth of the individual health insurance market is the availability of the Obamacare tax credits and subsidies.

Are you comfortable answering clients’ questions about the premium tax credits? To help, here are four questions, and answers, all brokers should know about the premium tax credits.

1. What are the Premium Tax Credits?Reimburse_employees_health_insurance_correctly

The federal government provides discounts for health insurance to eligible individuals and families. The tax assistant program, called premium tax credits, helps people buy more affordable individual or family health insurance coverage through the new state Health Insurance Marketplaces. The health insurance tax credits are "advanced-payable", meaning they can be applied toward your premium when you purchase health insurance coverage.

Your clients can access the premium tax credits by purchasing a health plan available on the Health Insurance Marketplace in your state.

2. Am I Eligible for the Premium Tax Credits?

Clients are eligible for a premium tax credit if they meet certain income requirements and do not have access to affordable health insurance through an employer or government program such as Medicaid or Medicare.

The tax credits are available to households with income up to 400% of the federal poverty line (FPL). This means households earning up to $46,680 for an individual in 2014, or $95,400 for a family of four, qualify.

For more eligibility information, see: Am I Eligible for Premium Tax Credits?

3. How Much Assistance Will I Receive?

The premium tax credits act as a cap on how much your client pays for health insurance. The insurance premium is capped on a sliding scale between 2% to 9.6% of income, depending on income. For example, if your client makes $23,340 a year (200% FPL), the maximum amount they will pay for health insurance is 6.34% of income which is $1,480/year ($123/month).

Your clients can use a premium tax credit calculator (like this one) to estimate their premium and tax credit amounts.

4. How Many People Are Receiving Premium Tax Credits?

In 2015, 87% of people who purchased a health plan through the Marketplace received a discount, paying $105/month on average across all types of health plans (Gold, Silver, etc.).

Related: Marketplace Snapshot - 87% Qualify for Discounts, Average Cost $105/month

Conclusion

As brokers expand their business through individual health insurance policy sales, it’s common for prospects and clients to have questions about the premium tax credits. By mastering the basics such as what the tax credits are, who is eligible, and how much they are eligible for, you  will continue to be a trusted expert on health reform.

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