Navigating Premium Tax Credit Reconciliation:

ADAP Policies &Best Practices

Xavior Robinson and Emily McCloskey, NASTAD

August 19, 2015

Participant ConsiderationsPhone 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

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

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.

HRSA/HAB ACA Policies on Tax Reconciliation

• NEW PCN 14-01 and Frequently Asked Questions:

oHRSA 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.

Review of Premium

Tax Credit Basics

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

Quick Review: Determining PTC Amount

Source: Center on Budget and Policy Priorities

Click icons below for pertinent calculations

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

Quick Review:PTC Advance vs. Lump Sum

Best Practice:Require clients to accept the PTC as an advance

Quick Review:Life Cycle of Premium Tax Credits

Best Practices:• Encourage clients to file taxes• Prioritize tax filing documents

for ADAP enrollment and recertification

Quick Review:Lifecycle of Premium Tax Credits

2012 2013 2014 2015

Client earns income

Client files taxes and generates a MAGI for the 2012 tax year

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

Best Practices:• Encourage clients to report changes

in income and life circumstances to the Marketplace

• Develop process to iteratively check-in with clients regarding changes in income or life circumstance

Tip:Click here to view a list of documents that can be used as proof of income to the Marketplace (listed under Income)

Assessing Tax

Reconciliation Documents

Three Key IRS Forms

IRS Form Purpose Origin

1095-A – Health Insurance MarketplaceStatement

Statement of coveredindividuals and amount of monthly APTC sent to QHP(s)

Marketplace Generated

8962 – Premium TaxCredit

Reconciles projectedAPTC with actual PTC due to client

Publically Available

1040 – U.S. Individual Income Tax Return

Individual/family taxfiling document

Publically Available

Best Practice:• Collect these forms from clients enrolled in Marketplace QHPs

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

Best Practice:Confirm recipient identification information

IRS Form 8962

• PTC Form

• Used to reconcile projected APTC with actual PTC owed to client

• Publically available

Quick Tip:Line 26 will tell you if the person will receive a refund from the IRS

Quick Tip:Boxes 1 through 5 determine the amount of premium tax credit a person was eligible for based on MAGI

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Quick Tip:Line 29 will tell you if the person owes an amount to the IRS

Best Practice:For individual clients, use line 26 to vigorously pursue funds owed to ADAP

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Best Practice:Explore opportunities to assist clients with this liability listed in line 29

IRS Form 1040

• U.S. Individual Income Tax Return

• Can be used to file individual or family taxes

• Publically available

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

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

Additional Tax Filing Information

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 $2,500

400% 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

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 $412

200% to < 300% FPL $886 $1,016

300% to 400% FPL $1,380 $1,601

All (100-400% FPL) $794 $773

Source: Kaiser Family Foundation, Estimated Average Amount of Repayment or Refund among tax households owing repayment or receiving a refund

Case Studies

Change in Income

Taxpayer Murray

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 Marketplaceo 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

Determining Refund Amount

Determining Refund Amount

$1,859

IRS Form 8962

Form 1040

Considerations for Families

Considerations for Families

• If a client is filing a joint tax return, but enrolled as an individual in a health plan

oEach spouse will receive a Form 1095-A, which will delineate how the APTC was allocated across the plans

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

Considerations for Families

Total Refund: $2000

Client share of APTC: x 37%

Client Share of refund: $736

Considerations for Non-filers

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

ADAP Policies and Best Practices

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

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 CostSilver Premium (monthly)

Individual MinimumContribution (monthly)

Federal Premium Tax Credit (monthly)

Mike(150% FPL)

$1,436.25 $375 $57.45 $317.55

Mary(300% FPL)

$2,872.50 $375 $272.89 $102.11

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)

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

Tax Filing Resources

• Tax prep resources for same-sex couples

Tax Filing Resources(ctd.)

• Tax prep resources for low-income individuals:oIRS Volunteer

Income Tax Assistance (VITA) Program

oLaw school clinics

Insight from ADAPs

Adam BrisnehanColorado

1) Vigorous Pursuit of Tax Refunds

2) Repayment Plans

3) Assisting Clients with Tax Liabilities

Holly HansonErica CarrickIowa

1) Managing Changes in Client Income and Life Circumstance

2) Assisting Clients with Tax Liabilities

Questions?

Resources

• National Alliance of State & Territorial AIDS Directors (NASTAD), www.NASTAD.org o Amy Killelea, akillelea@nastad.orgo Xavior Robinson, xrobinson@nastad.org

• HIV Health Reform, http://www.hivhealthreform.org/• HIV Medicine Association, www.hivma.org• HRSA/HAB ACA and Ryan White Resources,

http://hab.hrsa.gov/affordablecareact/• IRS The Health Insurance Premium Tax Credit for Tax Year

2014 – What You Need to Know, http://www.irs.gov/pub/irs-utl/15-Premium%20Tax%20Credit.pdf

• Health Care Reform Resources o Center on Budget and Policy Priorities, Beyond the Basics,

http://www.healthreformbeyondthebasics.orgo State Refo(ru)m, www.statereforum.orgo Kaiser Family Foundation, www.kff.orgo Healthcare.gov, www.healthcare.gov

THANK YOU!