The Patient Protection and Affordable Care Act (Affordable Care Act), enacted in March 2010, will extend health coverage to millions of Americans by expanding Medicaid to those with the lowest incomes and by creating a tax cut to help low- and middle-income individuals and families afford private coverage. These tax cuts will be provided in the form of new, refundable tax credits that will offset a portion of the cost of health insurance premiums.
This report takes a closer look at these premium tax credits, which will go into effect in 2014 and will help Americans with incomes up to four times the federal poverty level ($88,200 for a family of four in 2010) afford coverage. The unique structure of the tax credits means that individuals and families will have to spend no more than a specified portion of their income on health insurance premiums.
Families USA commissioned The Lewin Group to use its economic models to estimate how many individuals would benefit from the new premium tax credits in 2014 and the value of the dollars going to help pay for insurance (see the Methodology on page 12 for more details). We found that an estimated 28.6 million Americans will be eligible for the tax credits in 2014, and that the total value of the tax credits that year will be $110.1 billion.
The new tax credits will provide much-needed assistance to insured individuals and families who struggle harder each year to pay rising premiums, as well as to uninsured individuals and families who need help purchasing coverage that otherwise would be completely out of reach financially. Most of the families who will be eligible for the tax credits will be employed, many for small businesses, and will have incomes between two and four times poverty (between $44,100 and $88,200 for a family of four based on 2010 poverty guidelines). However, because the size of the tax credits will be determined on a sliding scale based on income, those with the lowest incomes will receive the largest tax credit, which will ensure that the assistance is targeted to those who need it the most.
As this key provision of the Affordable Care Act takes effect, millions of hard-working Americans will enjoy tax relief and the peace of mind that comes with knowing that they and their family members have affordable health insurance that they can depend on, even if they experience changes in income or become unemployed.