IRS Releases Final Regulations on Health Insurance Premium Tax Credit for Coverage Purchased Through an Exchange

On May 18, 2012, the IRS issued final regulations under the PPACA on the federal premium tax credit that will be available to qualifying individuals who purchase health coverage through an American Health Benefit Exchange (“Exchange”), beginning in 2014. The premium tax credit will be available to directly reduce a qualifying individual’s premium for coverage purchased through an exchange. In order to be eligible for a tax credit towards the cost of coverage purchased through an Exchange, an individual’s household modified adjusted gross income must be between 100% and 400% of the federal poverty level (“FPL”). A qualifying individual must also not be eligible to enroll in “affordable” group health coverage that offers “minimum value.” For this purpose, coverage is deemed to be “affordable” if the employee’s required contribution for self-only coverage does not exceed 9.5% of his or her household income for the year. A plan provides “minimum value” if the plan’s share of the total allowed costs of benefits provided under the plan is at least 60%. The determination of “minimum value” will be addressed in future guidance. As noted earlier, an employee of an employer with 50 or more full-time employees receives a premium assistance tax credit, the employer may be subject to a financial penalty under the employer shared responsibility provisions of the PPACA.