Navigating Premium Tax Credit Reconciliation: ADAP Policies & Best Practices. Xavior Robinson and Emily McCloskey, NASTAD August 19, 2015

Transcription

1 Navigating Premium Tax Credit Reconciliation: ADAP Policies & Best Practices Xavior Robinson and Emily McCloskey, NASTAD August 19, 2015

2 Participant Considerations Phone lines Lines will be muted until dedicated question time Please do not put your call on hold Verbal Questions Please wait until the Q & A section to ask questions on the phone Please identify yourself when asking a question or providing a comment Written Questions Participants have the ability to submit written questions during the webinar using the Chat function Webinar Hyperlinks Participants can access resources addressed in webinar using hyperlinks Webinar Presentation Slides Evaluation Following the webinar, participants will have the opportunity to complete a brief survey to provide feedback on the webinar

3 Webinar Overview 1) HRSA/HAB Policies on Tax Reconciliation 2) Review Premium Tax Credit Basics 3) Assessing Reconciliation Documents 4) Case Studies 5) Insight from ADAPs Colorado Iowa 6) Question and Comments

4 HRSA/HAB ACA Policies on Tax Reconciliation Ryan White program grantees and sub-grantees must vigorously pursue any excess premium tax credit a client receives from the Internal Revenue Service (IRS) upon submission of the client s tax return o Recovered excess premium tax credit refunds are not considered program income. Grantees must use recovered excess premium tax credits in the Health Insurance Premium and Cost-sharing Assistance service category in the grant year when the refund is received by the grantee or sub-grantee.

5 HRSA/HAB ACA Policies on Tax Reconciliation NEW PCN and Frequently Asked Questions: o HRSA will allow RWHAP grantees to cover client tax liabilities associated with an overpayment of the premium tax credit. o The payment to the IRS must be made from funds available in the year when the tax liability is due, even if the premiums that generated the tax liability were incurred in a previous funding year. o Programs are responsible for establishing and maintaining policies and procedures for coordinating payments to the IRS (direct payments to clients are prohibited). o Programs may only pay the amount directly attributed to the reconciliation of the premium tax credits; under no circumstances can Ryan White Program funds be used to pay the fee/penalty for a client s failure to enroll in minimum essential coverage.

6 Review of Premium Tax Credit Basics

7 Quick Review: Premium Tax Credit (PTC) Eligibility 1. To enroll in an Marketplace Qualified Health Plan you must be: Citizen or lawfully present Not incarcerated (except if pending disposition of charges) Resident of the service area of the Marketplace 2. Have income between 100 and 400 percent of the federal poverty line based on Modified Adjusted Gross Income (MAGI) 3. Be eligible to file taxes (or included as a dependent) 4. Be ineligible for other minimum essential coverage (MEC), which includes most public and employer-sponsored coverage Best Practice: Align ADAP enrollment/recertification with MAGI

8 Quick Review: Determining PTC Amount Click icons below for pertinent calculations Source: Center on Budget and Policy Priorities

9 Quick Review: PTC Advance vs. Lump Sum Advance: Premium Tax Credit paid directly to the Qualified Health Plan (QHP) issuer monthly. PTC is distributed evenly throughout the benefit year Individuals responsible for remaining monthly premium balance Lump Sum: Individuals responsible for paying QHP premiums monthly Individuals receive PTC as a lump sum upon filing federal taxes Best Practice: Require clients to accept the PTC as an advance

10 Quick Review: Life Cycle of Premium Tax Credits Best Practices: Encourage clients to file taxes Prioritize tax filing documents for ADAP enrollment and recertification

11 Quick Review: Lifecycle of Premium Tax Credits Client earns income Client files taxes and generates a MAGI for the 2012 tax year Best Practices: Encourage clients to report changes in income and life circumstances to the Marketplace Develop process to iteratively checkin with clients regarding changes in income or life circumstance Client receives PTC based on a projection of their income based on 2012 MAGI Client files taxes and reconciles projected MAGI with actual MAGI earned in 2014 Tip: Click here to view a list of documents that can be used as proof of income to the Marketplace (listed under Income)

12 Assessing Tax Reconciliation Documents

13 Three Key IRS Forms IRS Form Purpose Origin 1095-A Health Insurance Marketplace Statement 8962 Premium Tax Credit 1040 U.S. Individual Income Tax Return Statement of covered individuals and amount of monthly APTC sent to QHP(s) Reconciles projected APTC with actual PTC due to client Individual/family tax filing document Marketplace Generated Publically Available Publically Available Best Practice: Collect these forms from clients enrolled in Marketplace QHPs

14 IRS Form 1095-A Health Insurance Marketplace Statement Sent to anyone deemed eligible for the PTC Statement of covered individual(s) and amount if APTC sent to QHP(s) monthly Generated by the Marketplace

15 Best Practice: Confirm recipient identification information

16

17 IRS Form 8962 PTC Form Used to reconcile projected APTC with actual PTC owed to client Publically available

18 Lady Gaga Quick Tip: Boxes 1 through 5 determine the amount of premium tax credit a person was eligible for based on MAGI Quick Tip: Line 26 will tell you if the person will receive a refund from the IRS Quick Tip: Line 29 will tell you if the person owes an amount to the IRS

19 Lady Gaga Best Practice: For individual clients, use line 26 to vigorously pursue funds owed to ADAP Best Practice: Explore opportunities to assist clients with this liability listed in line 29

20 IRS Form 1040 U.S. Individual Income Tax Return Can be used to file individual or family taxes Publically available

21 Tip: Full-year coverage should be checked and Line 61 should be 0 for clients who were enrolled in an ADAP supported QHP for the ENTIRE tax year. Tip: RWHAP funds cannot be used to satisfy tax liabilities related to individual shared responsibility payment

22 The information a person includes on Form 8962 will be used to indicate whether that person is owed a refund or owes the IRS money because of an advance premium tax credit overpayment. Tip: The amount listed on Line 46 on IRS Form 1040 should be equal to Line 29 of IRS Form 8962 Tip: The amount listed on Line 69 on IRS Form 1040 should be equal to the amount listed on Line 26 of IRS Form 8962

23 Additional Tax Filing Information

24 Repayment Amounts Are Capped Based on Income Income Single filers All other filers < 200% FPL $300 $600 At least 200% FPL and < 300% PFL $750 $1,500 At least 300% FPL and < 400% FPL $1,250 $2, % FPL and greater N/A N/A Tip: Recent IRS guidance waives penalties for late payment and underpayment of owed taxes; the underlying tax liability due to advance premium tax credit overpayments owed to the IRS is not waived

25 How Much Will Repayments or Refunds Be? Estimated Average Amount of Repayment or Refund Annual 2013 income (% FPL) Average Repayment Average Refund 100% to < 200% FPL $667 $ % to < 300% FPL $886 $1, % to 400% FPL $1,380 $1,601 All ( % FPL) $794 $773 Source: Kaiser Family Foundation, Estimated Average Amount of Repayment or Refund among tax households owing repayment or receiving a refund

26 Case Studies

27 Change in Income

28 Taxpayer Murray

29 Murray When Murray applied for 2014 Marketplace coverage with advance premium tax credits (APTC) in October of 2013, his MAGI was $27,000 (235% FPL) o Murray gets $865 in APTC/annually BUT, Murray changed his job mid-way through the year and failed to report this to the Marketplace o When Murray files his taxes, his MAGI ends up being $11,000 (95% FPL) Note: Murray lives in a non-medicaid expansion state Special rule: because Murray was eligible for APTCs when he applied, he is actually owed a refund (he expected contribution is 2% of his annual income) o Murray is entitled to APTC of $2,724/annually Murray will get a refund from the IRS in the amount of $1,859

30 Determining Refund Amount

31 Determining Refund Amount IRS Form 8962 $1,859

32 Form 1040

33 Considerations for Families

34 Considerations for Families If a client is filing a joint tax return, but enrolled as an individual in a health plan o Each spouse will receive a Form 1095-A, which will delineate how the APTC was allocated across the plans

35 Considerations for Families After determining the refund or repayment amount for the family, you must calculate the client s refund or repayment APTC for Client: $ 700 APTC for Spouse: $1200 Total APTC: $1900 Client received 37% of APTC for the Family

36 Considerations for Families Total Refund: $2000 Client share of APTC: x 37% Client Share of refund: $736

37 Considerations for Non-filers

38 Considerations for Non-filers Clients who fail to file taxes risk the loss of their PTC in future benefit years ADAPs should not dis-enroll clients who received the APTC and fail to file taxes ADAPs can cease insurance and transfer clients to full-pay medication Best Practice: Encourage clients to file taxes The IRS has flexible and affordable repayment plans for those who owe tax liabilities The fear of filing taxes may be unfounded: many low-income people may be eligible for additional tax credits that could offset any perceived liabilities

39 ADAP Policies and Best Practices

40 ADAP Policies at Application To be eligible for premium assistance, ADAP/Ryan White insurance purchasing programs require clients to take the full amount of the premium tax credits Example: Virginia ADAP premium assistance eligibility policy

41 ADAP Policies During the Year ADAP/Ryan White insurance purchasing programs are covering clients remaining premium obligations left over after federal premium tax credit Programs are checking in with clients about importance of reporting changes to the Marketplace during the year (including at ADAP 6 month recertification) Income (monthly) Second Lowest Cost Silver Premium (monthly) Individual Minimum Contribution (monthly) Federal Premium Tax Credit (monthly) Mike (150% FPL) Mary (300% FPL) $1, $375 $57.45 $ $2, $375 $ $102.11

42 ADAP Policies at Tax Time? ADAPs are requiring clients who received advance premium tax credits to provide federal tax information to ADAP Line 46 on IRS Form 1040 indicates excess premium tax credits a person owes to the IRS Line 69 on IRS Form 1040 indicates net premium tax credit (i.e., amount owed to the taxpayer as refund)

43 Vigorously Pursuing Vigorously Pursuing Best Practices Implement client eligibility screening policy Document client contact Require attestation if client does not enroll in coverage Require client to accept full premium tax credit amount in advance and to acknowledge need to report changes in income to the Marketplace

44 Tax Filing Resources Tax prep resources for same-sex couples

45 Tax Filing Resources (ctd.) Tax prep resources for low-income individuals: o IRS Volunteer Income Tax Assistance (VITA) Program o Law school clinics

46 Insight from ADAPs

47 Adam Brisnehan Colorado 1) Vigorous Pursuit of Tax Refunds 2) Repayment Plans 3) Assisting Clients with Tax Liabilities

48 Holly Hanson Erica Carrick Iowa 1) Managing Changes in Client Income and Life Circumstance 2) Assisting Clients with Tax Liabilities

49 Questions?

50 Resources National Alliance of State & Territorial AIDS Directors (NASTAD), o Amy Killelea, akillelea@nastad.org o Xavior Robinson, xrobinson@nastad.org HIV Health Reform, HIV Medicine Association, HRSA/HAB ACA and Ryan White Resources, IRS The Health Insurance Premium Tax Credit for Tax Year 2014 What You Need to Know, Health Care Reform Resources o Center on Budget and Policy Priorities, Beyond the Basics, o State Refo(ru)m, o Kaiser Family Foundation, o Healthcare.gov,

51 THANK YOU!