Aid for health insurance cost to come in form of tax creditFor a family of four, that means those earning between $23,000 and $92,000 in 2012 would be eligible for a subsidy, which would come in the form of a tax credit, says Cigna spokesman Joseph Mondy. About 19 million people who purchase health insurance through a state exchange are expected to be eligible for a subsidy. "This is a wide-sweeping change for the middle class," Sutton says. Each state must have an exchange in place by October and start enrolling clients at that time. Some states will set up their own exchanges; in other cases the federal government will run the state exchanges.
"If you have insurance you bought yourself as an individual policy, you're probably paying relatively high premiums," says Brian Haile, senior vice president for health policy at Jackson Hewitt Tax Service. If you qualify for the tax credits, "it's a tremendous savings for a lot of families."Haile says as a result of the state exchanges, some employers might stop offering health insurance. If that happens to you, you'll be eligible to buy insurance on the state exchange. "It's almost like a fail-safe."
Review taxes for health insurance implications next yearThe amount you receive in a subsidy can fluctuate. It's based on your modified adjusted gross income, which can change markedly each year for those in certain professions or if you're self-employed. Or other events, such as changing jobs can impact your income, Sutton says. Your household size also is crucial, so if you marry, divorce, have a baby or something else happens that changes the size of your family, the subsidy will change, Haile says. "Even if your income is the same, your place on the poverty scale changes." So if your household size increases or your income falls, the amount you pay out of pocket for insurance will decline. If your household shrinks or your income rises, you'll have to pay more, he says. That means you need to report any life changes so your subsidy will be adjusted. A survey by the Tax Institute at H&R Block found 77 percent of consumers are unaware of the link between their 2012 tax return and their health insurance coverage starting in 2014. H&R Block is tackling the issue by doing a free review of every client's tax return so each person will know about the amount of the tax credit they'd be eligible for, or the penalty they might pay, Sutton says.
"This is a way for them to understand the personal impact on themselves and their family," she says.