How Effective Will the Health Insurance Premium Tax Credit be at Providing Affordable Health Care?

The Affordable Care Act was enacted on March 23, 2010. The act states that starting in 2014, individuals and families can take a new Health Insurance Premium Tax Credit to help them afford health insurance coverage purchased through an Affordable Insurance Exchange. Exchanges are expected to operate in every state and the District of Columbia. The premium tax credit will be refundable so that taxpayers who have little or no income tax liability can still benefit. The credit also can be paid in advance to the taxpayer’s insurance company to help cover the cost of premiums. To be eligible for the premium tax credit, an individual must be an applicable tax payer, defined as: (1) a taxpayer or lawfully present alien with a household income between 100 percent and 400 percent of the federal poverty line for the taxpayer's family size, (2) who may not be claimed as a dependeant by another taxpayer, and (3) who files a joint return if married.

The Government believes that Exchanges will offer Americans competition and choice as insurance companies compete for business on a level playing field, which is expected to reduce costs. It is also believed that the exchanges will give small businesses the same purchasing power as big businesses. But will this actually be the result of this government initiative?

There are several reasons why government intervention to create a universal health care system may fail. First, we are already operating in an economy based on capitalism, so introducing socialistic measures my prove to be ineffective. Health insurance providers are already competing with each other in order to attract consumers. As a result, if we do not already have affordable health insurance, then by placing these companies in a bubble so that they can compete against each other, health insurance is not likely to somehow become more affordable. Second, it appears that the decision to enter into the exchange is going to be voluntary, and not mandated by law. As a result, the options of health insurance providers to choose from may also be very limited. Lastly, the government seek to exclude anyone who does not fall within the poverty levels established by the government, this would exclude most taxpayers in the middle and upper class. As a result, this plan would only work for low income individuals, and these are the individuals who are already receiving some form of governmental health insurance from welfare assistance.

On the other hand, this initiative may be successful if all businesses, both large and small, make the decision to switch to companies that are apart of the exchange because the health insurance providers would then have no choice but to either offer a better deal, or become a part of the exchange themselves. Then perhaps the middle class employees would stand a chance of benefiting from this initiative through the efforts of their employers as they bargain for the lowest rates. So while they may not be able to claim the premium tax credit, they may be able to receive affordable health insurance.

I would like to see the cost of health care be dramatically reduced in the United States. The overall health awareness and rating of the United States could imporove if more individuals were able to afford health insurance so that they may visit medical facilities on a regular basis, instead of on an as needed basis. I think that the premium tax credit is a good start in the right direction, but the government needs to stop assuming that it is the poor who do not have health care and realize that many middle class individuals also cannot afford health insurance. By choosing to base the premium tax credit on poverty lines, it makes it difficult for these individuals to obtain health care, and they would still have to rely on their employers to bargain for the lowest possible rates.

What do you think about the Health Insurance Premium Tax Credit? You have the right to be heard, and your suggestions are welcomed by the IRS. A public hearing is scheduled for November 17, 2011 at 10 a.m., in the auditorium of the Internal Revenue Building located at 1111 Constitution Avenue, NW., Washington DC. The government encourages comments and suggestions but me be submitted by October 31, 2011. Please visit http://www.irs.gov/newsroom/article/0,,id=220809,00.html for more information.