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Health Premium Tax Credit Spending Rises Sharply: IRS

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The federal government paid about $38 billion in Affordable Care Act (ACA) premium tax credit subsidies for people with ACA public exchange coverage in 2019.

That’s up 40%, or about $14 billion, from the 2018 total, even though the number of people receiving ACA premium tax credit help fell 2%, to 4.8 million, according to a Treasury Inspector General for Tax Administration report based on Internal Revenue Service tax filing data.


The average amount of premiums per subsidy user increased 43%, to about $7,850, according to ThinkAdvisor calculations.

The drafters of the ACA created the public exchange system, or family of government-run, web-based health insurance supermarkets, to help people shop for health coverage on an apples-to-apples basis, and to distribute premium tax credit subsidies.

The subsidies help people with annual income from 100% to 400% of the federal poverty level pay for exchange plan coverage.

ACA drafters also created a cost-sharing reduction subsidy program. The cost-sharing reduction subsidy program helped exchange plan users with income under 250% of the federal poverty level handle deductibles, coinsurance amounts and co-payments.

Congress has decided against appropriating money to pay for the cost-sharing reduction program subsidies.

The Congressional Budget Office has estimated that the government spent about $7 billion on the cost-sharing reduction subsidies in 2017.

Partly because of the way the premium tax credit program is structured, the cost-sharing reduction subsidy cut ended up leading to a big increase in some exchange plan users’ total premium costs. For many exchange plan users who were eligible for ACA premium tax credit subsidies, the premium tax credit subsidies increased enough to offset the loss of the cost-sharing reduction subsidy.

— Read Taxpayer Reports of ACA Premium Tax Credit Subsidy Help Fall 9%, on ThinkAdvisor.

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