Tax Credits Available for Individual Purchasers of Health Insurance for 2014

The Kaiser Family Foundation released an issue brief, entitled “Quantifying Tax Credits for People Now Buying Insurance on Their Own,” addressing the tax credits that will be available to individuals purchasing insurance individually starting in 2014. This is to address the “sticker prices” of premiums that have been released by states—they are not taking into account the premium assistance that will be available to those individuals to help purchase their insurance.

Changes in Premiums

There are a number of reasons why individual premiums will be changing beginning in 2014, both for the good and bad. Companies will no longer be able to charge more to the older and sicker population, or based the individual’s gender, and cannot discriminate based on pre-existing health conditions. These reasons all will result in higher premiums for some, reduced premiums for others. However, requiring a minimum level of coverage will require a greater expenditure on premiums, but would ultimately reduce out-of-pocket costs when the services are utilized. In general, however, premiums will most likely be higher in most states in 2014.

Tax Credits

Available for individuals with incomes from 100 percent to 400 percent of the poverty level that buy their own insurance and are ineligible for Medicaid or for affordable employer-provided insurance, tax credits will be available based on a benchmark premium amount. The credit, to be used in any plan available through the health insurance marketplace, will be determined based on the benchmark premium (being the second-lowest-cost silver plan in their geographical area) minus their expected responsibility (determined on a sliding scale between 2 percent to 9.5 percent of income).

Overall, current individual market buyers will see an average premium in 2014 of $8,250 for their family, and the average tax credit they will see would be $2,672. About half of those purchasing their own insurance will be eligible for a tax credit, and over one million more people will be eligible for Medicaid in their states.