Quantifying Tax Credits for People Now Buying Insurance on Their Own

We estimated the availability and size of health insurance premium subsidies for people enrolled in non-group coverage using data from the 2008 Survey of Income and Program Participation (SIPP), Wave 6 (interview period April to July, 2010).

Individuals were grouped into families based on a series of decision rules designed to approximate what is referred to as “health insurance unit (HIU)” or “tax filing unit,” which is the basis for determining eligibility for premium tax credits under the ACA.

The analysis is based on the universe of people currently purchasing non-group insurance (also referred to as individual insurance) and anticipated to continue to do so. Based on ACA rules regarding eligibility for premium tax credits in health insurance marketplaces (also known as exchanges), certain groups of current non-group purchasers were assumed to obtain alternative coverage:

• All individuals belonging to a health insurance unit where any member received health insurance through work or an offer of employer-sponsored insurance.  All members of a family were assumed to have access to employer-sponsored insurance if one member of the family was offered coverage. People with access to affordable employer coverage are ineligible for exchange-based premium tax credits.
• Adults with incomes up to 138% of the poverty level and living in a state that has decided to expand Medicaid under the ACA (as of July 1, 2013). People eligible for Medicaid are ineligible for tax credits in exchanges. In states that choose not to expand, adults with incomes below 100% of the poverty level are included in the analysis but are ineligible for premium tax credits.
• Children (up to age 18 and full-time students up to age 20) with family income that would qualify them for Medicaid of the Child Health Insurance Program (CHIP) based on current eligibility levels.
• All individuals currently receiving Medicare or Medicaid as well as purchasing non-group coverage, who would be ineligible for premium tax credits and presumed not to purchase exchange-based coverage starting in 2014.

There are a small number of uninsured people (under 200,000 nationwide) living in families where another person is currently buying non-group coverage, and they are assumed to remain uninsured for the purposes of this analysis. If they purchased coverage, average tax credits would be higher than are reported here.

Health insurance units were assigned a premium based on age and family composition, assuming all current non-group purchasers (excluding those described above) continue to buy coverage. Premiums are based on our estimates for 2014 using the latest projection from the Congressional Budget Office (CBO) of the national average premium for the second-lowest-cost silver plan in 2016. Some states have begun to report approved premiums for 2014, and these early reports suggest CBO’s estimates are reliable.

Since tax credits are determined at the family level, all premium and subsidy figures are reported for adult purchasers based on the aggregate amounts for their entire health insurance units.