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Government prescribes tax credits for high health premiums

By Maryalene LaPonsie on September 6th, 2011

flying dollarsNew England residents pay the most per person for their health insurance coverage--and in some cases double the national average, according to an analysis by the Kaiser Family Foundation.

The findings are based on insurer filings to the National Association of Insurance Commissioners that compared medical insurance costs across states.

While monthly health insurance premiums average $215 per person nationwide, both Vermont and Massachusetts had average premiums exceeding $400 per person. Rhode Island, New York and New Jersey rounded out the top five in terms of cost with premiums in these states running from $344 to $364 per person per month.

Compared to its northern neighbors, Delaware was an anomaly with monthly health insurance premiums averaging $169 per person. Other states with low premium averages include the following: Alabama, $136; California, $157; Arkansas, $163; and Idaho, $167.

The foundation speculated that premiums may be higher in some states because of reforms that make it easier for those with pre-existing conditions to find health insurance coverage. Massachusetts, Vermont, New York and New Jersey have all enacted medical insurance reform legislation.

Tax credits for health insurance plans scheduled for 2014

Despite the findings, there may be some relief for New England residents currently stuck with steep premiums.

In 2014, the Affordable Care Act will require that all U.S. residents maintain health insurance coverage. In addition, health insurance plans will be made available through Health Insurance Exchanges managed by individual states and the federal government. Families searching for affordable health insurance may be eligible for tax credits to offset the cost of their plan premiums.

The Department of the Treasury recently released proposed rules governing the issuance of premium tax credits. Under the rules, families earning 100 to 400 percent of the federal poverty limit--$22,350 to $89,400 for a family of four in 2011--would be eligible for a tax credit for health insurance purchases made through a government exchange. The credit will be refundable which means that if it exceeds the amount of a family's federal tax liability, a check will be issued for the difference. In addition, for eligible families, the Department of the Treasury will advance the credit and send a payment directly to the health insurance company.

The actual amount of the credit will be tied to the plan premium as well as the family's income. Those earning 100 percent of the federal poverty limit will be expected to contribute 2 percent of their income toward their health insurance premiums. Families earning 400 percent of the poverty limit will be required to contribute 9.5 percent of their income.

 

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