Summary of Cost-Sharing Program
Previous FAQs have covered the premium tax credit (PTC) provided by §36B, but there is one more subsidy, the cost-sharing subsidy, that assists taxpayers in affording coverage. In order to qualify, the taxpayer generally must meet three criteria.
- The taxpayer must qualify for the PTC.
- The taxpayer must purchase a silver-level qualified plan.
- The taxpayer cannot have household income in excess of 250% of the federal poverty level (FPL).
Although the law specifically states that an individual must have income less than 400% of the FPL, the cost-sharing subsidy drops to zero once the taxpayer surpasses 250%, effectively reducing the maximum FPL to qualify. Not all benefits are covered by insurance. Most taxpayers can expect to pay out of pocket for co-insurance, copayments and deductibles. Cost-sharing eases these out-of-pocket expenditures.
The IRS does not provide a credit for the cost-sharing subsidy; rather, the subsidy is paid by Health and Human Services (HHS). When a taxpayer qualifies, the percentage of total costs the taxpayer pay through the year decrease and the insurer must pay for more out of pocket items, then HHS reimburses the insurer.
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TAXPRO Weekly - August 29, 2013