The COVID-19 relief bill currently before Congress is set to increase the number of premium tax credits that people receive under the Obamacare exchanges.
The House Ways and Means Committee released the legislative proposals it will consider after part of the COVID-19 relief package. One such bill includes a provision that would lower the amount individuals and families are required to pay for insurance on the exchanges, thereby increasing the amount of the tax credits. It would last two years, from 2021-2022.
Consider a 50-year-old individual living in Los Angeles, California, earning $38,600 annually, or 300% of the federal poverty level. Currently, the second-lowest-cost silver plan on the exchange costs him $492 per month. Under current law, he must pay 9.83% of his income, about $314 per month, toward that premium. The difference, $178, is what he receives in a premium tax credit.
The COVID-19 relief bill drops the percentage of income he must pay to only 6%, about $193 per month. His premium tax credit would increase to $299 per month.
For those making 200% of the federal poverty level, the income requirement is dropped from 6.52% to 2%, and for those making 150%, it is reduced from 4.14% to 0%.
The bill also allows individuals and families earning 400% of the federal poverty line to qualify for premium tax credits. That is about $51,500 annually for an individual and $106,000 for a family of four. Currently, they are ineligible for premium tax credits, but if the bill passes, they will pay no more than 8.5% of their annual income toward health insurance on the exchanges. If that same 50-year-old from California earned 400% of the federal poverty level, he could be eligible for a tax credit of $127 per month.
