The Advance Premium Tax Credit probably contributed to an expansion in health insurance coverage last year, but some taxpayers may still lack access to affordable health plans.
The Advance Premium Tax Credit is a refundable tax credit that can be paid on an advance basis. The new government report, issued by the Government Accountability Office on the five-year anniversary of the passage of the Affordable Care Act, found the APTC likely contributed to an expansion of health insurance coverage in 2014 because it significantly reduced the cost of exchange plans' premiums for those eligible.
Although there are limitations to measuring the effects of the APTC using currently available data, the surveys that the GAO identified estimated that the uninsured rate declined significantly among households with incomes eligible for the APTC.
For example, one survey found that the rate of uninsured among individuals with household incomes that make them financially eligible for the APTC fell 5.2 percentage points between September 2013 and September 2014.This expansion in health insurance coverage is likely partially a result of the APTC having reduced the cost of health insurance premiums for those eligible, the GAO noted. Among those eligible for the APTC whom the Department of Health and Human Services initially reported selected a plan through a federally facilitated exchange or one of two state-based exchanges, the APTC reduced premiums by 76%, on average. As of January 2015, data were not yet available on the extent to which the APTC reduced 2015 premiums, although studies have found that, on average, premiums (before applying the APTC) changed only modestly from 2014 to 2015, though some areas saw significant increases or decreases.
Most nonelderly adults had access to affordable health benefits plansas defined by Affordable Care Actbut some may face challenges maintaining coverage, according to the GAO report. Most nonelderly adults had access to affordable plans through their employer, Medicaid, the exchanges, or other sources as of March 2014, although about 16% of nonelderly adults remained uninsured.
The number of uninsured individuals and the rising cost of health insurance have been long-standing issues, the GAO noted. The Affordable Care Act mandated that most individuals have health insurance that provides minimum essential coverage or pay a tax penalty. To make health insurance more affordable and expand access, the ACA created the APTC to subsidize the cost of exchange plans' premiums for those eligible. The Act used two standards for defining affordability of health insurance: 8% of household income for the purposes of minimum essential coverage and 9.5% for APTC eligibility for individuals offered employer-sponsored plans.
While there are many reasons people remain uninsured, some people may not have access to affordable coverage, including (1) low-income nonelderly adultsthose with household income below 100% of the federal poverty levelwho live in one of the 23 states that chose not to expand Medicaid and (2) some nonelderly adults who do not have affordable employer-sponsored insurance and who were not eligible for the APTC.
For those with incomes too high to qualify for the APTC, the affordability of health insurance coverage available in the individual exchanges in 2014 varied by age, household size, income, and location, said the report. For example, a 60-year-old with an income of 450 percent of the federal poverty level would have had to spend more than 8 percent of their household income for the lowest-cost plan in 84 percent of all health insurance rating areas in the United States, but a 27-year-old had access to an affordable plan in all but one. Regardless of the affordability of premiums, some may face challenges in maintaining coverage that qualifies under PPACA as minimum essential coverage; for example, changes in income can result in changes in APTC eligibility.
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