Health Insurance Premium Credits Under H.R. 4872, the Reconciliation Bill

Chris L. Peterson
Specialist in Health Care Financing

Thomas Gabe
Specialist in Social Policy

On March 23, 2010, the President signed into law health reform legislation (H.R. 3590, the Patient Protection and Affordable Care Act, PPACA, P.L. 111-148) that will, among other things, provide "premium assistance credits" beginning in 2014 to help certain individuals pay for health insurance. 

On March 21, 2010, the House passed H.R. 4872, the Health Care and Education Reconciliation Act of 2010, hereafter referred to as the reconciliation bill. The reconciliation bill was written as making amendments to PPACA. 

This report describes the premium credits as reflected in the reconciliation bill (specifically, as amending PPACA). 

Under PPACA, state-established "American Health Benefit Exchanges" will have to be established in every state by January 1, 2014. Exchanges will not be insurers, but will provide qualified individuals and small businesses with access to insurers' qualified health plans in a comparable way. 

Only for purchase of coverage within an exchange, advanceable, refundable premium assistance credits will be available to limit the amount of money some individuals would pay for premiums. Under the reconciliation bill, for example, a family of three just above 133% of the federal poverty line (FPL)—that is, currently with annual income of $24,352—would be required to pay 3% of its income toward premiums ($824 annually, if the proposed premium subsidies were currently in effect). A family of three just under 400% FPL ($73,240), where the premium subsidies end, would be required to pay no more than 9.5% of its income in premiums ($6,958 annually, if the proposed premium subsidies were currently in effect). 

Although the premium credits will not be available until 2014 under PPACA, the illustrations provided in this report are based on current FPLs, to reflect how the premiums families would pay compare to their current income levels. 

Relative affordability of health insurance premiums individuals and families might face within health insurance exchanges would likely vary from exchange to exchange based on a host of factors, including enrollees' age, the health of the people actually enrolled in the plan, the varying prices paid by plans for medical goods and services, the breadth of the provider network, the provisions regarding how out-of-network care is paid for (or not), and the use of tools by the plan to reduce health care utilization (e.g., prior authorization for certain tests). Examples shown in this report depict a range by which premiums might reasonably be expected to vary based on enrollees' age, and variation in medical costs across geographic areas, for purposes of illustration only. Actual premiums would likely vary among health insurance exchanges based on a wide range of factors other than those depicted in this report.


Date of Report: March 24, 2010
Number of Pages: 27
Order Number: R41137
Price: $29.95

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