Marketplace Insurance

Advanced Premium Tax Credits: BOGO Coupons of Health Insurance

I’ve found there are two types of people in this world: those who love to go grocery shopping and those who hate it. I find myself in the first category for two specific reasons. The first reason is that I like to know what I get to look forward to eating the following week. The second reason is that I love to find a good deal, which almost always revolves around the infamous Buy-One-Get-One-Free (BOGO) coupon.

Just yesterday, I was on the phone making a purchase and happened to check the coupon app on my phone just in time to get an additional 20 percent off. I felt like I’d just won tickets to the Superbowl I was so excited! The reality is that discounts simply make us happier and feel better about what we’re purchasing.


What if shopping for health insurance was as easy as going to the grocery store?

When I sat through my first several HR meetings regarding benefits, they might as well have been speaking in another language to me. Over time, I finally realized I needed to befriend someone who understood this stuff. One of my supervisors took the time to explain the cost savings differences between the copay plan and the HSA plan.

But that was it. I only had two choices, which, because of the cost, wasn’t really that much of a choice at all, to be honest. It certainly didn’t feel like a shopping experience. And, it certainly didn’t feel like there were any discounts or ways to find a great bargain, which is how I was used to shopping.


Where can I find coupons for health insurance?

What if I told you that not only can shopping for health insurance feel like an actual grocery store visit, but you can also find coupons to lower your costs? You’d probably think I was making a joke. You’d probably also think I was lying if I told you that around 70 percent of all Americans actually could get some sort of coupon for their health insurance. (Restrictions do apply, though, just like any good coupon, of course.)

The coupons I am talking about are called Advanced Premium Tax Credits. They are technically not a discount or coupon on the insurance product; they are an amount of tax credits that each family qualifies for. And the actual amount of that tax credit is determined by a pretty complex equation the government designed that includes zip code, county, how many people are in your household, if you smoke, and how much money does your household make. Everyone qualifies for something different, so the calculation is fairly complex. (It honestly takes the right software to know for sure.)

What makes these tax credits more like coupons though is that they are preemptive. They’re not like those tax credits you normally see at the end of the year. Advanced Premium Tax Credits happen in the background between the insurance carrier and the IRS.

Essentially, when you as a consumer go to purchase your insurance product, but it is a pretty low price, you have likely been given a certain amount of tax credits based on your personal household data, which lowers your personal cost each month.


How do Advanced Premium Tax Credits actually work?

Let’s consider an actual example here in Indiana: A family of five making $140,000 as a household would pay about $1,634 a month for a standard Bronze-level plan. In this case, this particular family is not eligible for any Advanced Premium Tax Credits.

If that same family makes $120,000, they now qualify for $699 worth of tax credits and their cost to purchase the same Bronze-level plan goes down to $935 monthly. (For the sake of the discussion, if that same family made $84,000, they would get an even better tax incentive called Cost Sharing Reductions). The reality is that there are better ways to buy health insurance. But most people either don’t know about or realize it’s too complicated to do on their own.

As a final disclaimer, the actual tax impact is verified during your tax return. If you have submitted all of the right information, you won’t have any problems. However, if you accidentally misrepresented your income, you may have to pay back some of the discounted cost because an incorrect equation was used to calculate your credits. This is why it is essential to work with a benefits coach or personal advisor when selecting your plan.


Your employer’s benefits are blocking your BOGO!

Remember that I mentioned only if you qualified for these health insurance “coupons” do you actually get to enjoy them? The most likely reason you can’t get these credits is because of how your employer is structuring your benefits. If they’re doing it the old-fashioned way, then they’re just doing your shopping for you and only giving you one or two group insurance options.

Rather than giving you money to shop for your own plan, your employer is choosing options that make sense for their family and/or the company’s budget. In doing so, they are not only making it so you can’t shop for yourself, but they are blocking your ability to get those Advanced Premium Tax Credits. Not only do you get less say in your plan, but your product is also going to end up costing more.

Now, it’s not necessarily your employer’s fault. This is the way most insurance has always been, so we can’t really blame them for maintaining the standard. But the reality is that it’s time to change the status quo! The change away from traditional group products into individual budgets and shopping has grown exponentially over the past 6 years. Maybe it’s time your team started thinking innovatively toward your approach to benefits?