Tax Credits to Offset Healthcare Premium Costs for 2.6 Million Texans
The Savvy Consumer

By Teresa McUsic

Texans Eligible for Health Insurance Premium Tax Credit
By County
1. Harris (Houston) 446,850
2. Dallas 291,960
3. Tarrant/Parker 191,330
4. Bexar (San Antonio) 168,880
5. Hays/Travis 113,170
  State of Texas 2.6 million
*Employment figures are both full- and part-time
Source: Families USA

Some 2.6 million Texans, including 191,330 in Tarrant and Parker counties, will be eligible for tax credits to help offset the cost of health insurance next year, according to Families USA in a report released Thursday.

The premium tax credit and other federal help for some with deductibles, co-pays and other out-of-pocket costs is expected to bring between $21.7 billion and $31.5 billion into the state over its first four years, according to data from the Texas Department of Insurance.

The tax credit will be available on a sliding scale for individuals and families making less than four times the poverty level, or $46,000 for an individual and $94,200 for a family of four, according to Families USA, a national consumer health advocate.

The tax relief will begin in January 2014 as the tax credit is passed through to insurance companies to offset monthly premiums. Texans may begin signing up for a health insurance plan through the federal exchange beginning October 1.

By 2014, health insurance is required for all citizens as part of the Affordable Care Act, or they will face a penalty.

The tax credit will help make private health insurance more affordable, said Ron Pollack, executive director of Families USA.

“The tax credit subsidies are a game changer,” he said. “They make health care coverage available for a huge number of families who have been priced out of the market for the care they need and for those with coverage having trouble affording it.”

The report is based on U.S. Census data.

One key finding in the report is that people with annual incomes between 200 and 400 percent of poverty--between $47,100 and $94,200 for a family of four in 2013--will constitute more than half of the Texans who will be eligible for the premium tax credit. Also 88 percent of those who qualify in the state are employed either full-time or part-time.

“This reaches deeply into the middle class and moderate income families,” Pollack said. “It substantially diminishes the remaining insurance cost families have to bare to purchase insurance.”

The report is broken down by county, and shows that of those eligible for the tax credit in Tarrant and Parker counties that the majority—some 61 percent—who are eligible are under age 34. The second largest age group is between the ages of 35-54, which make up 28 percent of those eligible.

USA Families also divided up the data of those who qualify by race, showing that in Tarrant and Parker counties, 45 percent of those who could receive the premium tax credit are white, while 36 percent are Hispanic and 11 percent are African American. Statewide, about 48 percent of those eligible for the credit are Hispanic.

Those on Medicare or Medicaid are not eligible for the tax credit. Workers in group insurance plans are also ineligible for the credit, unless the cost for the plans exceeds between 3.3 percent and 9.5 percent of wages, depending on income level, or if the employer picks up less than 60 percent of the cost of the covered benefit.

U.S. Rep. Lloyd Doggett (D-Austin) said if Texas does not expand its Medicaid program under healthcare reform, an additional 422,000 Texans will be eligible for the new tax credit. But, in a loophole created when the Supreme Court allowed states to decide on whether to expand Medicare, anyone making under the poverty line will not be eligible for the tax credit.

“Those who are poor, but are below the poverty level, will not have a means to gain health insurance without Medicaid expansion,” said Doggett. “That’s why it’s so important that we find an alternative in the event that this Legislature concludes and no action has been taken on Medicaid expansion.”

Another form of help for families making less than 250 percent of the poverty level will be given by the federal government to help with out-of-pocket costs including co-pays and deductibles, said Anne Dunkelberg, associate director of the Center for Public Policy Priorities in Austin. Also, an insurance exchange for small business owners is in development under the healthcare law, she said.

“There will be lots of leveling out of prices in the small group market,” she said. “In 2014, no one can be turned down for insurance or be charged more because of pre-existing conditions.”

While no one yet knows what insurers will charge for premiums on the exchanges, USA Families provided two hypothetical examples to show how the premium tax rebate would work.

  • A single person making $23,000 a year could pick an insurance plan that would cost $5,000 a year in premiums. The out-of-pocket cost for the monthly premium would be about $1,450, or $121 a month and the rest would covered by a tax credit of $3,550.

  • A family of four has an annual income of $35,300. They pick a plan costing $12,500 in premiums a year and will pay about $1,410 for the plan, or $118 a month. The remainder of the premium would be covered by an $11,090 tax credit.

As part of a free service, tax prepare H&R Block is providing an assessment of how much a taxpayer could get in the form of the premium tax credit as well as how much they would have to pay in a fine if they did not purchase insurance next year. The credit will be based on 2012 tax figures, unless the customer reports a change in his or her income level at the time insurance is purchased.