The IRS recently issued guidance on two new health care reform measures. The Patient Protection and Affordable Care Act (PPACA) provides a health insurance premium assistance credit to qualifying individuals and mandates that health insurance information be given to individuals in “plain English.”
Premium assistance credit
After 2013, the PPACA generally requires individuals to carry minimum essential coverage. Some individuals are exempt, such as individuals enrolled in Medicare and Medicaid. Employer-provided insurance may be treated as providing minimum essential coverage if they satisfy affordability and other criteria. Additionally, individuals with household income between 100 percent and 400 percent of the federal poverty line (FPL) may qualify for a refundable health insurance premium assistance credit to help offset the cost of coverage.
In proposed regulations, the IRS explained that eligibility for the credit is based on several factors, including income, family size and filing status. Additionally, the individual must be enrolled in a qualified plan through an American Health Benefit Exchange. The PPACA requires states to create these exchanges by January 1, 2014.
The credit will be available on a sliding scale, which begins at two percent and climbs to 9.5 percent. The PPACA also provides for advance payment of the credit. The Treasury Department will make the advance payment to the insurer on behalf of the individual.
The PPACA also requires health insurance issuers and group plans to provide a “plain English” Summary of Benefits Coverage (SBC). Recently proposed regulations give health issuers and plans a template for the SBC. The SBC must describe, among other things, the type of coverage, a list of services that are excluded from coverage and contact information. The SBC also must include three examples of how coverage operates (having a baby, treating breast cancer and managing diabetes). Along with the SBC, the proposed regulations provide a uniform glossary of insurance and medical terms.
The IRS is requesting comments about the SBC and uniform glossary. The PPACA requires the SBC and uniform glossary be made available to participants and new enrollees in 2012.
The IRS is expected to issue more guidance about the health insurance premium assistance tax credit and the SBC. Our office will keep you posted of developments.