SACRAMENTO, Calif. — Covered California Executive Director Peter V. Lee said Monday that approximately 800,000 California households received federal subsidies to make health care more affordable in 2014, with the estimated average amount received being more than $5,200 per household per year, or about $436 per month.
“The assistance provided through the Affordable Care Act helped bring health coverage within reach for more than a million people, and it changed lives across the state,” Lee said. “It’s important for uninsured Californians to know that many people like them received more than $5,200 last year to help them purchase health coverage, and that support is available to many others eligible to sign up before Feb. 15.”
The total amount of premium assistance — known as the federal Advanced Premium Tax Credit (APTC) — was $3.2 billion paid to health insurance companies on behalf of those who enrolled in private coverage through Covered California in 2014. The consumers themselves paid $1.1 billion toward those policies in 2014, meaning that for every dollar a subsidized consumer spent on premiums, the federal government paid another $3.
“This is an extraordinary time in our nation’s history,” Lee said. “The Affordable Care Act is making it possible for individuals to get the care they need by making coverage affordable.”
The data released Monday are reflected on new Health Insurance Marketplace Statements being mailed this week by Covered California. Known as Internal Revenue Service (IRS) Form 1095-A, the two-page statement (www.CoveredCA.com/news/pdfs/sample-1095-A.pdf) will show the amount of Advanced Premium Tax Credit each household received on a month-by-month basis in 2014. Similar to other tax documents, like a W-2 or 1099, the 1095-A will be used by consumers when they file their federal tax returns this year to ensure the subsidy they received is appropriate.
“Consumers need to use this information when they file their taxes for 2014,” Lee said. “For many consumers, their tax credit will need to be adjusted, because their income is different than what they estimated it would be for 2014. As a result, consumers will see their tax credit adjusted upward or downward in their tax return based on their actual income as reported to the IRS for 2014.”
Under the Affordable Care Act, the amount of tax credit reducing the consumer’s monthly health insurance premium payment is based on an estimate of their income made when they purchase their insurance. Consumers pay their share of the premium to the insurance company, and the federal government pays a portion on their behalf, based on their estimated income in the year ahead. The amount paid by the government is called the Advanced Premium Tax Credit, because it is paid in advance but reconciled as a tax credit at tax time based on the consumer’s official income as reported to the IRS. Consumers can elect to wait to receive the entire tax credit at the end of the year, but almost all consumers took their premium tax credit in advance.
“Our job this year is to introduce the 1095-A and make it as clear as we can,” Lee said. “In three or four years, we hope consumers will be as familiar with the form ‘1095-A’ as they are with 1040s and W-2s.”
Covered California held informational webinars this month to provide an overview of the 1095-A process with those who enrolled individuals in coverage, and the exchange has developed a fact sheet (www.CoveredCA.com/news/pdfs/1095-A-fact-sheet.pdf) to help enrollees understand the new form. Detailed questions and answers for consumers and tax preparers will be available on the Covered California website.
Many tax preparers and commercial tax software products are ready to accept information from Form 1095-A. Consumers may be able to get free software or in-person assistance filing their taxes and can learn more at www.irs.gov/freefile or www.irs.gov/VITA.
“We have been working with the IRS and the insurance plans for months to refine the process of issuing 1095-As,” Lee said. “Still, we know it won’t be perfect, and we will learn things in the first year and make improvements before we do it again for 2015.”
The period of time to sign up for coverage for 2015 continues for the next three weeks until Feb. 15.
“In addition to premium assistance, many consumers also benefited from cost-sharing reductions that lowered their out-of-pocket costs when they visited the doctor,” Lee said.
In 2014, more than 60 percent of consumers who received subsidized coverage through Covered California qualified for cost-sharing reductions, which reduced their out-of-pocket health care expenses. Lee said that in 2014, the value of the out-of-pocket discounts per household amounted to approximately $1,200 per year.
Estimated Annual APTC Received in 2014
About Covered California
Covered California is the state’s marketplace for the federal Patient Protection and Affordable Care Act. Covered California, in partnership with the California Department of Health Care Services, was charged with creating a new health insurance marketplace in which individuals and small businesses can get access to affordable health insurance plans. Covered California helps individuals determine whether they are eligible for premium assistance that is available on a sliding-scale basis to reduce insurance costs or whether they are eligible for low-cost or no-cost Medi-Cal. Consumers can then compare health insurance plans and choose the plan that works best for their health needs and budget. Small businesses can purchase competitively priced health insurance plans and offer their employees the ability to choose from an array of plans and may qualify for federal tax credits.
Covered California is an independent part of the state government whose job is to make the new market work for California’s consumers. It is overseen by a five-member board appointed by the governor and the Legislature. For more information about Covered California, please visit www.CoveredCA.com.