Health Reform Tax Credits and Health Reform Rebates

Scales – Health vs Money

The main goal of the Affordable Care Act is to make medical coverage easier to obtain and inexpensive enough to afford. It's too early to know the exchange plan rates for 2014, but that information is anticipated no later than October 1, 2013 when quoting begins. In the meanwhile, it is helpful to be aware of some of the factors that will affect your cost for purchasing health insurance. This page will focus on the Health Reform tax credits and also on Health Reform rebates that will be available to qualified individuals, families, and small businesses.

If you are interested in getting coverage before the mandate is implemented, go to the right panel of this page, enter your zip code and click 'Go'. Enrollment will allow you to be in compliance before the new rule takes effect.

Health Reform Tax Credits on Health Insurance Exchange Plans

In 2014, people and small businesses who enroll for a health insurance exchange plan could qualify for Health Reform tax credits.

Individuals and families who enroll on an exchange plan could receive a Health Insurance Premium Tax Credit based on their income and family size. The income threshold is 133 percent to 400 percent of the federal poverty level. In 2012, that would translate to $14,856 to $44,680 for individuals and $30,656 to $92,200 for a family of four. If you qualify, the amount of the tax credit will vary depending on your salary, age, family size, and where you live. For a sample, click Individuals and Families Sample Tax Credit Calculator.

For groups, the Small Business Health Care Tax Credit is available to qualified companies with less than 25 employees and that pay at least 50 percent of the employees' premium. For tax years 2010 to 2013, the maximum credit is 35 percent of the company's contribution towards the employees' premium. In 2014, the tax credit goes up to 50 percent. The Health Reform tax credit is based on the average salary of their employees and the number of employees they have. Additionally, premiums over the amount of the tax credit can still be claimed as a business expense deduction. For details, click Small Business Health Care Tax Credit. Note that nonprofit organizations are also eligible for this credit. From 2010 through 2013, they can qualify for up to 25 percent; in 2014, the maximum tax credit is 35 percent. 

Businesses with 26 or more employees are not eligible for the Health Reform tax credit. Moreover, large companies with 50 or more employees are required to offer health benefits to eligible employees or pay a $2,000 penalty for each full-time employee in excess of 30 employees.

Health Reform Rebates

As part of the Health Care Reform law, insurance companies are required to spend at least 80 percent of premiums for individual-family and small group policies on the patient's direct medical care or on quality improvement of that care. If the carrier spends more than 20 percent of premiums on non-patient costs such as administration, overhead, and marketing costs, the carrier must send Health Reform rebates to the individual-family members or the small business owners.