Advanced Premium Tax Credits (APTCs)

  1. How do the Advanced Premium Tax Credits work?
  2. What are Advanced Premium Tax Credits?
  3. Who administers the Advanced Premium Tax Credits?
  4. Who is eligible for the Advanced Premium Tax Credits?
  5. How is my income calculated for eligibility for the Advanced Premium Tax Credits?
  6. What are the Minimum Essential Coverage Standards?
  7. What are the Affordability Standards?
  8. How Do Minimum Essential Coverage and the Affordability Standards affect my eligibility for the Advanced Premium Tax Credits?
  9. What else do I need to understand about the affordability of my employer-sponsored insurance?
  10. How do I know what are the actuarial value of insurance plans?
  11. Does my advanced premium tax credit come to me each month?
  12. How do I pay my insurance premium?
  13. What is reconciliation?
  14. Do I have to take my tax credits in advance?
  15. Is there other federal assistance available for purchasing private insurance through MnSure?
  16. Do I need to report changes in my income and family size to keep my Advanced Premium Tax Cre
  17. When and how do I apply for Advanced Premium Tax Credits?
  18. Is the open enrollment period the only time I can use MnSure to apply for Advanced Premium Tax Credits?
  19. Do I have to provide proof of my income and family size?
  20. How often do I have to renew my coverage?
  21. Do I need to be a U.S. citizen to be eligible for Advanced Premium Tax Credits?
  22. Are there asset limits for Advanced Premium Tax Credits?
  23. Is applying for the Advanced Premium Tax Credits difficult?
  24. How can I get help applying for APTCs?
How do the Advanced Premium Tax Credits work?

The Advanced Premium Tax Credits help families and individuals that do not have employer-sponsored insurance and are ineligible for public programs (Medical Assistance, MinnesotaCare or Medicare) to purchase private insurance through MnSure that meets the coverage and affordability standards as explained above. As the name implies, APTCs are available to families in advance to help reduce their monthly premiums. 

APTCs are calculated based on the cost of the second lowest cost Silver plan available to you through MnSure minus your expected household contribution.  The expected household contribution is a percentage of your income (based on Modified Adjusted Gross Income (MAGI) and family size) that ranges from 6.3% to 9.5% of income.  The lower your income, the lower your expected household contribution will be and thus the higher your tax credit amount will be. 

For example, if the second lowest cost Silver Plan available to you in MnSure has a monthly premium of $300/month and your estimated household contribution is calculated to $120 a month, your tax credit will be $180/month. This means you have $180/month to go shopping with on MnSure.  You do not have to purchase a Silver plan.  You could pay less than the $180 if you choose to apply it to purchase a Bronze plan that will have the lowest monthly premiums.  However, Bronze plans will also require higher out-of-pocket costs when you need health care (in deductibles, co-pays and so on).  This might be an attractive option if you are a fairly healthy person who doesn’t require a lot of health care services each year.  You may also use your $180/month to apply to the premium payment to purchase a Silver, Gold or Bronze plan through MnSure which would have higher premium costs and may require you to pay more than $180/month in premiums but would require lower out-of-pocket costs when you need health care services.  A Gold or Platinum plan may be wise if you have a lot of health care costs.

What are Advanced Premium Tax Credits?

Advanced Premium Tax Credits (APTCs) are a part of the federally-enacted Affordable Care Act, which is effective January 2014. The APTCs provide financial assistance to those who are eligible to enable them to purchase insurance through the private non-group market.  It is one of the ways that the Affordable Care Act tries to make health insurance more affordable and accessible.  To learn more about the Affordable Care Act, click here.

Who administers the Advanced Premium Tax Credits?

Eligibility for the APTCs are determined by MnSure, Minnesota’s new online insurance exchange that was established by the Affordable Care Act.  MnSure is a private/public partnership that is governed by a board of directors that is appointed by the Governor of Minnesota.  For more information on MnSure, click here.

Who is eligible for the Advanced Premium Tax Credits?

Families and individuals in Minnesota, whose household income is between 200% and 400% of the Federal Poverty Guidelines (FPGs) may be eligible for the APTCs.  This means individuals earning up to $45,960 a year and a family of four earning up to $94,200 a year could be eligible. Other eligibility criteria include:

• Cannot be eligible for other insurance coverage providing it meets minimum essential coverage for affordability and covered services (see below).  Other minimum essential coverage includes (but is not limited to) insurance that is offered through an employer, Medical Assistance, MinnesotaCare, and Medicare);

• Must be a U.S. citizen or have acceptable immigration status;

• Must be under age 65;

• Must file federal income tax for the year of eligibility;

• Must purchase a private non-group policy through MnSure (Minnesota’s online insurance exchange).

How is my income calculated for eligibility for the Advanced Premium Tax Credits?

There are three important things to understand about income calculation for the APTCs. 

First, income is calculated using Modified Adjusted Gross Income (MAGI).  MAGI is determined by taking gross income (W-2 reported wages and salaries plus taxable interest, pension, annuity or IRA distributions, Social Security benefits, business income, capital gains (or losses), unemployment compensation, ordinary dividends, alimony received, rental income, taxable refunds and other income) and subtracting certain deductions including self-employed expenses, student loan interest, tuition and fees, educator expenses, IRA deductions, moving expenses, penalties on early withdrawals, health savings deductions, alimony paid, and other similar deductions).  MAGI is found on Line 37 of IRS Form 1040.

Secondly, eligibility for APTCs is also based on family size – the larger the household, the higher your income can be.  Household size is based on how many dependents you claim when filing your income taxes.  Dependents can be your spouse, children (living with you or in another household), and other people whom you support as allowed under IRS tax codes.

Thirdly, because income and household size is based on your tax filing status, you must plan to file your taxes at the end of the year to be eligible for the APTCs.  If you are married, you must file jointly to be eligible.

What are the Minimum Essential Coverage Standards?

The Affordable Care Act requires insurance coverage to provide a basic set of covered services called the Essential Health Benefit Set.  This means all insurance (employer-sponsored, public programs and private insurance) should provide some level of coverage in 10 health areas:  ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and disease management, and pediatric services (including oral and vision care).  In addition, insurance plans must provide preventive care (yearly physicals and check-ups) at no cost to enrollees.  This means there are no co-pays for the office visit and that enrollees do not have to pay a percentage of the cost for these preventive services, nor do they have to meet their deductible to get preventive services.

What are the Affordability Standards?

The Affordable Care Act does require insurance to be affordable in a few ways.  First, all insurance, whether it be employer-sponsored or private, must meet a minimum 60/40 actuarial value. The simple definition of actuarial value is the proportion of medical expenses an insurance plan is expected to cover.  For example, an actuarial value of 100 means that a plan would pay all medical expenses.  A 60/40 actuarial value means the insurance plan would be expected to pay 60% of medical expenses and the enrollee would be expected to pay 40% of medical expenses.  The factors that affect actuarial value include the amount of deductibles, co-insurance, maximum out-of-pocket expenditures, and cost sharing for medical services.

Secondly, the Affordable Care Act looks at the affordability of the premium amounts an individual or family must pay.  The standard for employer-sponsored insurance is that the premium for employee coverage cannot be more than 9.5% of an employee’s W-2 reported income (see additional information on dependent coverage below).  The Advanced Premium Tax Credits are calculated to bring down the cost of private insurance purchased through MnSure to less than 9.5% of household income for those who qualify.

How Do Minimum Essential Coverage and the Affordability Standards affect my eligibility for the Advanced Premium Tax Credits?

If you have access to insurance that meets these standards, you cannot receive the APTCs.  Minimum Essential and Affordable Coverage includes (but is not limited to) most employer-sponsored insurance, Medical Assistance, MinnesotaCare, Medicare, and TriCare.

Having access means the insurance is available to you, not that you are currently enrolled in the coverage.  For public programs (Medical Assistance, MinnesotaCare and Medicare), having access means you are income eligible and qualify for this type of coverage.  For employer-sponsored insurance, having access means your employer offers insurance that meets the standards and you are eligible to participate.

If you have access to insurance as explained above, even if you elect not to accept it, you will not qualify for the APTCs.  This does not mean you cannot purchase health insurance through MnSure – just that you will not receive the financial assistance available through the APTCs. However, accessibility to employer-sponsored insurance does not affect your eligibility for the Medical Assistance program.  If you are income eligible, you can receive coverage under MA regardless of the offer of employer-sponsored coverage.

What else do I need to understand about the affordability of my employer-sponsored insurance?

The affordability standard for employer-sponsored insurance is based on the employee’s W-2 reported income NOT household income.  It is also based on the cost for employee ONLY coverage not on the cost of dependent coverage. Yet, dependents are disqualified from the APTCs based on this employee only affordability standard.

This means that if the employer offers the employee a coverage option with premiums that are less than 9.5% of the employee’s income and also offers dependent coverage, regardless of the cost, the employee and all dependents are ineligible for APTCs.

This does not mean that an employee’s dependent could not shop and purchase a plan through MnSure.  It means that financial assistance in the form of APTCs would not be available. The employee and dependents are still eligible to receive Medical Assistance as long as they meet the criteria.

How do I know what are the actuarial value of insurance plans?

The Affordable Care Act requires insurance carriers to rate the plans they offer into four categories: 

•Bronze plans have a 60/40 actuarial value, meaning the insurance plan pays 60 percent of the cost of covered services and the individual pays 40 percent (does not include premiums).  The monthly premium payment would be the lowest for Bronze plans. 

•Silver plans have a 70/30 actuarial value with the insurance carrier paying 70% of the costs of services and the individual would paying 30% of costs. 

•Gold plans have an 80/20 actuarial value.

•Platinum plans provide the most coverage of health care services with the plan paying 90% of costs and the individual paying just 10% of costs.  However, the higher the actuarial value the higher the monthly premium payment so Platinum plans would have the highest monthly premiums.

When you shop for plans on MnSure, they will be categorized by these “metal” levels so that you will know what kind of plan you are selecting and what kind of out-of-pocket costs you will be expected to pay.  For employer-sponsored insurance, the Affordable Care Act requires employers to inform their employees of the actuarial value or “metal” level of coverage offered and how much of the premium is covered by the employer. Medical Assistance and MinnesotaCare provide coverage at the Platinum level.

Does my advanced premium tax credit come to me each month?

No, your APTC will be sent directly to the insurance carrier for the plan you select from those offered on MnSure.  If you owe an additional amount to cover the premium payment, you will be responsible for submitting payment to the carrier.

How do I pay my insurance premium?

You can pay your portion of the insurance premium online at MnSure.  You can request that MnSure bill you for your portion of the premium or you can request that the insurance carrier bill you.  However, whichever option you choose, you must make certain your premium payment is received by the 15th of each month to ensure coverage is in effect for the following month.

What is reconciliation?

As explained above, your tax credit is calculated based on your income and family size as reported on your tax return.  When you apply for APTCs, your tax credit will be estimated based on your expected income for the year.  At the end of the year, your actual tax credit will be calculated based on your actual income.  If you received more or less in APTCs than your actual credit, you will need to reconcile.  If you received less in APTCs than you should have, you will receive an additional credit in the form of a tax refund.  If you received more than your actual credit, you will have to pay back the difference either by subtracting it from your tax return or by mailing a check for your tax liability.

Do I have to take my tax credits in advance?

No.  If you are determined to be eligible for the APTCs, you can elect to wait and get your tax credit at the end of the year when you file your taxes.  This will avoid any reconciliation but it means you will pay the full cost of your premium each month.  You can also elect to take a lower monthly tax credit amount than it appears you are eligible for in order to avoid any repayment at the end of the year.  Then you can get the difference in the amount you received and the actual amount you were due in the form of a tax refund.  Regardless of how you elect to receive your tax credit, you should be sure to report any changes in your household income or family size to MnSure as they occur.  See questions below.

Is there other federal assistance available for purchasing private insurance through MnSure?

In addition to the Advanced Premium Tax Credits, individuals and families that need to purchase private insurance are eligible for cost-sharing subsidies to reduce the out-of-pocket expenses that are required.  The cost-sharing subsidies can be used to make co-pays or reduce deductibles or help with other expenses.  Individuals and families who earn from 200% to 250% of the Federal Poverty Guidelines (FPGs) are eligible this type of assistance. You must be found eligible for APTCs to get this type of assistance.  In addition, you must select a Silver level plan (not Bronze or Gold or Platinum) to receive the cost-sharing subsidies.  Cost-sharing subsidies will also need to be reconciled at the end of the year.

Do I need to report changes in my income and family size to keep my Advanced Premium Tax Cre

Because the Advanced Premium Tax Credits are based on your estimated income and household size, it is important to report any changes that occur in your situation to MnSure within 10 days of the change to avoid repayments at the end of the year (see question on reconciliation) or to ensure you are taking full advantage of the financial assistance for which you are eligible.  The changes you should report include but are not limited to:

·       Income (changes to hours, wages, new income sources, etc)

·       New address

·       Household composition

·       Tax filing status

·       Additional access to payment of health care expenses by a third party, including Medicare, health insurance or other party

·       Disability status

When and how do I apply for Advanced Premium Tax Credits?

You must apply for APTCs by using MnSure and you must do it sometime during the open enrollment period.  For 2014, the open enrollment period is from October 1, 2013 to March 31, 2014.  For 2014, the open enrollment period will be from October 1 to December 31, 2014.

When you come to MnSure, you will be asked if you are looking to purchase insurance with or without financial assistance.  To be determined eligible for APTCs (or Medical Assistance and MinnesotaCare) you must select the “with financial assistance” option.  You will then be asked to create an account and enter income and household size information.  That information should be based on what you expect your income to be in the upcoming year and whom you plan to claim as tax dependents.  Having your tax returns with you from the previous year is helpful.

Is the open enrollment period the only time I can use MnSure to apply for Advanced Premium Tax Credits?

In most cases, yes, the open enrollment period will be the only time you can use MnSure to apply for APTCs and purchase insurance plans available through MnSure.  However, if you have a “qualifying” event occur during the year, you will be able to use MnSure to purchase a health plan and find out if you are eligible for APTCs.  Qualifying events include such things as changing or losing your job and access to employer-sponsored insurance, getting married, getting divorced, having a baby, etc.  You should report these changes to MnSure for further action.  You can use MnSure at anytime to see if you qualify for Medical Assistance or MinnesotaCare.

Do I have to provide proof of my income and family size?

The Affordable Care Act simplified the application process for federal financial assistance by requiring states to verify as much information as possible through electronic verification.  This means MnSure will verify your income and other personal information with other public information sources such as DEED, IRS, SSI, etc.  You will only be asked to supply proofs if your information cannot be verified or there is a significant discrepancy between what you report and the electronic sources.

How often do I have to renew my coverage?

The insurance plan you select to purchase using your Advanced Premium Tax Credits will likely remain in effect till the next open enrollment period through MnSure.  During the open enrollment period, you will update your application for financial assistance to find out what your tax credits will be for the upcoming year and you will have the opportunity to select a new coverage plan or remain with your current plan.  MnSure open enrollment periods will be from October 1 to December 31 of each year with coverage going into effect on January 1 of the following year (providing premium payments are made by December 15).  To purchase coverage in 2014, the open enrollment period is extended and will be from October 1, 2013 to March 31, 2014.

Do I need to be a U.S. citizen to be eligible for Advanced Premium Tax Credits?

No, but you do need an acceptable immigration status.  You will be asked to provide social security numbers or immigration document numbers for everyone for whom you are applying for assistance.

You do not need to provide social security numbers or immigration document numbers for those in the household who are not applying for coverage.

Are there asset limits for Advanced Premium Tax Credits?

The Affordable Care Act eliminated the need to report assets for any federal assistance for health care (including APTCs, MinnesotaCare and Medical Assistance).

Is applying for the Advanced Premium Tax Credits difficult?

There have been some problems reported with using MnSure.  However, technological improvements are being made to the site on an ongoing basis, which is helping with the user-friendliness and accuracy of the site.  Here are some tips you can follow to help make the process easier.

It has been reported that some browsers work better with MnSure than others.  Recommended browsers include Firefox 17-22 and 24, Google Chrome 30, Internet Explorer (IE) 9, and Safari 6.0.5 (for Apple computers).

When you come onto the MnSure site, you must first create an account if you want to apply for the APTCs or Medical Assistance and MinnesotaCare.  Setting up the account takes about 20 minutes.  It is recommended that you avoid using abbreviations when filling in your personal information (for example, for your address use Avenue or Street instead of Ave or St).

After creating your account, you will need to indicate if you are applying for “financial assistance with your health insurance.”  This is the option you want if you want to see if you are eligible for APTCs, MinnesotaCare or Medical Assistance.  The application process can take up to an hour.  Keep in mind that you must answer each question as it is asked.  You can’t skip ahead and come back to a question later.  If you don’t know the answer to a question, you will need to Save your application and come back to it (by logging in with your password) with the proper information. So, having the following information at hand may help:

·       Names, birth dates and social security numbers (or document numbers for immigrants) for everyone in the household

·       Accurate income information for all household members (you may want pay stubs and a copy of your previous year’s tax return available)

·       Information on any sources of unearned income (alimony received, child support, unemployment income, retirement benefits, etc)

·       Information on employer-sponsored insurance available to the family even if the family is not currently enrolled in that coverage (a form called Employer Coverage Tool is available that employers can complete with the requested information).

If you prefer or do not have access to a computer, you can elect to use a paper application to apply for health coverage with financial assistance. You can find that application here.

How can I get help applying for APTCs?

The Affordable Care Act requires states to provide help to individuals who are trying to determine their health insurance options. Assistance is available through navigators, in-person assisters and brokers. Navigators and in-person assisters can answer questions about any of the financial assistance programs (Medical Assistance, MinnesotaCare and Advanced Premium Tax Credits) and assist anyone who needs help with getting through the application process (MnSure or the paper application). Brokers can also assist and they can help you compare the health plan options that are available on MnSure. A statewide directory of navigators, in-person assisters and brokers can be found on the MnSure site under the Assisters tab. There is no charge to use a navigator, in-person assister or broker. If you use the Bridge to Benefits screening tool, the name and contact information for a navigator/in-person assister in your county will be provided if you select “One-on-one Assistance” as your “How to Apply” option.