Helping People Afford Premiums and Cost-Sharing Under Health Reform

The main reason most uninsured people don’t have coverage is that they can’t afford it, so several core elements of the new health reform law are designed to make coverage more affordable.  One of them is a system of tax credits to help people of modest means pay premiums and out-of-pocket costs (like co-payments for doctor visits).  Here, very briefly, is

People who don’t have coverage through their employers and aren’t eligible for Medicare or Medicaid will be able to choose a private plan in their state through a regulated marketplace called an “exchange.”  Two kinds of tax credits will help people afford coverage:

• Premium credits. Individuals and families with incomes between 133 and 400 percent of the federal poverty line (between about $30,000 and $88,000 a year for a family of four) will get help paying for health insurance premiums.  The credits ensure that people don’t have to pay more than a certain percentage of their income to purchase a comprehensive health insurance package.  The smaller your income, the larger your credit.

• Cost-sharing credits. People who earn less than 250 percent of the poverty line (about $55,000 a year for a family of four) will also receive tax credits that would lower the cost of getting health care from a doctor or hospital.  These credits will effectively reduce the deductibles and co-payments that people pay.
  

The cost-sharing credits raise a plan’s “actuarial value,” which is the average share of the plan’s covered costs that the insurer (rather than the beneficiary) pays, from 70 percent to as high as 94 percent for the lowest-income people in the exchange. 

The table shows how much people at different income levels would pay in premiums, and the actuarial value of their coverage, if the health reform law were fully in effect this year.