Changes to Obamacare in 2019 and the Effect on the Premium Tax Credit

The Affordable Care Act in 2019

Female doctor shaking the hand of a bedridden male patient
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The Affordable Care Act (ACA) has been the subject of congressional debate since President Barack Obama first signed it into law in March 2010, and a significant change came about in 2019 with regard to the associated tax penalty for not maintaining coverage. Subsidy eligibility remains the same, at least for the time being, but the individual mandate penalty is behind us.

Additionally, changes to previous rules now allow short-term plans to compete with ACA-approved coverage.

The Individual Mandate Penalty 

Taxpayers are still obligated to carry health insurance, either through their employers, through the ACA Exchange, or by independently selecting and paying for their own ACA-compliant plans. But they no longer have to pay a financial penalty if they don’t beginning in 2019, thanks to 2018’s Tax Cuts and Jobs Act (TCJA).

This change went into effect on Jan. 1, 2019, and it's bound to have some impact on the ACA, but definitive data won't be available until year's end.

At least a portion of taxpayers were expected to stop paying for insurance in 2019 because they were only doing so to avoid the tax penalty. Others might change over to the short-term limited duration health plans that can now expand to compete with ACA coverage.

Not only will the federal government lose those penalty dollars—about 4 million taxpayers were hit with the individual mandate penalty in 2016 alone—but ACA Exchange insurers made adjustments to compensate for the expected lost revenue.

Taxpayers still had to cough up the penalty when they filed their 2018 tax returns in 2019 because it was applicable in the 2018 tax year.

Non-Compliance Penalties at the State Level 

Some individuals will still have to pay penalties for not carrying insurance, at least at the state level. New Jersey, the District of Columbia, and Massachusetts impose penalties for not maintaining insurance.

Vermont intends to jump on the bandwagon in 2020 as the result of legislation passed in 2018. Lawmakers in Rhode Island voted to adopt a similar provision in July 2019, also effective Jan. 1, 2020.

The ACA Plans 

The ACA Exchange still offers plenty of plans to those who want to purchase them. Things remain largely unchanged in this respect in 2019.

There are still bronze, silver, gold, and platinum plans, and they’re still offered at varying cost and coverage levels. 

The second-lowest-cost silver plan remains the only one that provides adjusted premiums for low-income taxpayers. Bronze plans offer the least coverage, but they also provide more in the way of cost-sharing of deductibles and co-pays. Platinum plans offer the most comprehensive coverage. 

Premium Changes in 2019

Monthly premiums for the second lowest cost silver plan, considered the "benchmark" plan, are more or less holding steady in 2019, according to the Kaiser Family Foundation (KFF), although some states have experienced spikes while others have seen some decreases.

This occurred after a sharp hike in 2018, even as subsidized enrollees increased to 9.2 million from 8.7 million in 2018. But the number of unsubsidized enrollees correspondingly dropped.

It's been charged that some insurers inflated their premiums unnecessarily in 2018 in response to these legislative changes.

The KFF performed an analysis to determine how much average premiums would change before the premium tax credit is applied. Exchange premiums are largely based on income and location, and insurers pad these silver plan premiums to make up for losses experienced in other plans due to all this changing legislation.

The states where premiums are expected to increase most dramatically through the end of 2019 include:

  • North Dakota: 30%
  • Vermont: 23% 
  • District of Columbia: 21%
  • Delaware: 16%
  • New York: 15%
  • Colorado: 13%
  • Washington State: 12%
  • West Virginia: 11%
  • Hawaii: 10%

States where premiums are anticipated to decrease the most significantly by the end of 2019 include:

  • Pennsylvania: -27%
  • North Carolina: -20%
  • Arizona: -17%
  • Tennessee: -17%
  • New Hampshire: -15%
  • New Jersey: -15%
  • New Mexico: -15%
  • Connecticut: -12%

These changes are based on premium rates in these states’ most major cities.

The remaining 25 states not listed here are expected to experience increases or decreases of less than 10%. 

The Premium Tax Credit 

The premium tax credit remains the mechanism by which the ACA attempts to make health coverage affordable for low- and moderate-income Americans.

The credit is refundable, which means that it can be paid directly to taxpayers or the money can go to their insurers, thus reducing premiums in the upcoming year. Most Americans have historically elected to have their credits paid to their insurers. 

The amount of the credit depends on a taxpayer’s income, and it’s not available for those who qualify for Medicaid or the Children’s Health Insurance Program (CHIP), those who are eligible for Medicare Part A, or those who have employer-sponsored coverage available that’s considered to be affordable.

These terms all remain the same, but the income guidelines shift ever so slightly from year to year based on changes in the federal poverty level.

According to the Kaiser Family Foundation, the 400% level in 2019 means incomes of no higher than:

  • $48,560 for single taxpayers
  • $65,840 for a family of two
  • $83,120 for a family of three 
  • $100,400 for a family of four
  • $117,680 for a family of five
  • $134,960 for a family of six 
  • $134,960 plus $17,280 for each additional family member over six 

The credit is based on a version of your modified adjusted gross income (MAGI) that's specifically tweaked for purposes of the ACA. Your ACA MAGI must fall between 100% and 400% of the federal poverty level for eligibility, or 139% if you live in a state that expanded its Medicaid program subsequent to the passage of the ACA.

Depending on your ACA MAGI, you’re expected to financially contribute a portion of your premiums, and you’ll receive the subsidy tax credit to cover the balance. Individuals with ACA MAGIs of 300% to 400% of the federal poverty level are expected to contribute 9.86% of their premiums in 2019. Those earning 133% or less must contribute 2.08%. 

If it works out that you qualify for and receive too much of a subsidy credit—maybe you earned more than you anticipated—you must pay the overage back at tax time. The premium tax credit might be refundable, but you don’t necessarily get to keep that money.