Ask Emily

Tax credits? Subsidies? Provider networks? What these Obamacare terms mean to you

CHCF Center for Health ReportingOctober 4, 2013 

Another in a series of Q&A columns answering consumers’ questions about the Affordable Care Act.

Q: Will doctors and hospitals who accept health insurance from companies like Blue Shield accept insurance sold by the health insurance exchange? I’ve heard that Cedars-Sinai, for example, will not accept coverage from Covered California.

A: You heard right, Lily.

Let’s say you currently buy health insurance on the open market. But you discover that you can get tax credits from the state’s new health insurance exchange, called Covered California. (For people whose incomes qualify, tax credits will lower the cost of premiums. To find out if that includes you, use Covered California’s rate calculator at CoveredCA.com.)

And wouldn’t you know it, the same insurance company that covers you now also offers a plan on the exchange.

That means you’ll get to keep your doctor if you buy that Covered California plan. Right? RIGHT???

Not necessarily.

Many insurers are limiting the networks of doctors and hospitals that participate in their Covered California plans, meaning your doctor may not be included.

“You need to do your homework because the same doctor may or may not be there,” says Nicole Kasabian Evans of the California Association of Health Plans. “It depends by plan.”

The reason that your doctor may not participate in a plan offered by the same insurer is financial. Insurers limit networks to keep their costs — and premiums — down. Which is why Cedars-Sinai in Southern California, one of the most expensive hospitals in the nation, is not included as a provider in Covered California plans.

Covered California says you can find out if your doctor or hospital participates by calling 800-300-1506 or visiting CoveredCA.com. But, sorry to say, as of my deadline on Oct. 2, the search tool still wasn’t there.

Q: Everything I have read refers to tax credits. Can you explain? Will we take tax credits on our end-of-year income tax forms or get credit at the time of enrollment?

A: I’ve written endlessly about Obamacare’s complications. But it’s not just the law’s provisions I’m referring to. As Jayne from Bakersfield notes, it’s also the Byzantine language.

The Obamacare tax credits are sometimes called subsidies. The Internal Revenue Service uses the term “premium tax credits.” I’ve also heard them referred to as “advance premium assistance.” Huh?

Whatever you want to call them, these federally funded tax credits will be available to individuals and families who don’t have access to “affordable” health insurance from their employer (as defined in the law) or coverage from a government program such as Medi-Cal.

You will qualify if your income falls between 138 percent and 400 percent of the federal poverty level (FPL). This year, 400 percent equals $45,960 for an individual or $94,200 for a family of four.

But you don’t have to wait until tax time the following year to receive the credits. Tax credits can be applied in advance, immediately lowering your monthly premiums.

By the way, you can only receive tax credits by buying from Covered California. They won’t be offered for employer-sponsored insurance or open-market plans.

Q: Will my eligibility for tax credits in 2014 be based on my 2012 or 2013 income, or my estimated 2014 income? And when I do my 2014 taxes (in 2015), will there be an adjustment if my actual 2014 income is different than my estimated 2014 income?

A: Let’s start off with a straightforward answer and then ease into the pain: Your eligibility will depend on your 2014 income, says Anne Gonzales of Covered California, so make the best estimate you can.

Now for the pain: Yes, if your actual income varies from your estimate, either you’ll owe, or be owed, money.

“If your income goes down, you’re entitled to more credit, so you’ll be entitled to a refund on your 2014 tax return,” says Garry Browning, a certified public accountant in Modesto who trains other CPAs in Obamacare matters.

“But if your advance payments were more than you’re entitled to, you’re going to have to pay back the difference.”

Browning notes that there is a maximum you’d have to pay back, which varies with your income.

If, for instance, annual family income is under 200 percent of FPL, repayment is capped at $600 ($300 for individuals). The cap is $2,500 ($1,250 for individuals) if annual income is between 300 percent and 400 percent of FPL.

To avoid sticker shock, Gonzales suggests you contact Covered California right away if your income changes during the year.

“Otherwise, the adjustment will be made at tax time,” she says, “and that could be a surprise.”

Send your questions for Emily to AskEmily@usc.edu. The CHCF Center for Health Reporting partners with news organizations to cover California health policy. Located at the USC Annenberg School for Communication and Journalism, it is funded by the nonpartisan California HealthCare Foundation.

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