Or, is it an advance for those who qualify for the tax credit (based upon income), to help pay for the health insurance premiums, that might be offset by a tax credit the taxpayer might later receive the following year after the filing of tax returns?
In part 2 of the interview with Dr. Georges Benjamin (Executive Director of the American Public Health Association), Bayoubuzz publisher Stephen Sabludowsky asked about this program:
SABLUDOWSKY: Now in terms of the tax credits, if you're able to get on the Affordable Care Act in the marketplace and you get a tax credit, basically you have to pay the money back, so
DR BENJAMIN: The tax credit, is just like a credit, it's advanceable, it comes off your taxes and you don't have to pay that money back. Now, if your income goes up, and you’re not eligible for a component of that, than the IRS, just like any other credit the IRS adjusts it, but in most people's cases, they don't have to pay the money back.
SABLUDOWSKY: But, for example, like when you sign on, as I appreciate it, you estimate what your income is going to be, and if is more than that then you will have to pay the differential but this is more of shall I say a loan, by the government by the federal government am I correct?
DR BENJAMIN: It is not a loan
SABLUDOWSKY: in a sense I mean, let me just finished for a minute, for those people who were expecting say a tax refund, that tax refund could be diminished, because of the use of the tax credit assuming that they chose to use that tax credit to pay for the premium--is that correct
DR BENJAMIN:Well, think about what you do and you pay your taxes, right? You and I, we estimate how much were going to have to pay our taxes in the year and if we guess correctly, we don't have to pay anything back and the government is not owed anything and we don't get anything back but most of us either get something back or will have to pay something at the end of the year and tax credits operate pretty much the same way --we do a great guesstimate based upon some intelligent knowledge about what our income is going to be and the credit is to help you reduce what you would have paid for health insurance and if that is off then you might have to pay a little bit of that back . But that is expected not to be a big deal, once people are comfortable with the system, and we get better at it. And were going to get better at it over the years.
You know lots of people when they first get into the workplace and they first do their first assessment as to what the have to pay in taxes, a lot of people get year-end surprises as you may well know. I certainly did when I first went to workplace but I've been doing this for a long time and I'm much better at it in predicting my taxes and I suspect that as we get better at it as a system that this credit tax idea in terms of how much people might have to pay back will get better at it over time.
SABLUDOWSKY: I'm not criticizing system on this point at all, what I'm saying is that at least part of the refund that one would normally get--could, could have already paid for the premium for the insurance
DR BENJAMIN: it's not a loan, the government...
SABLUDOWSKY: No is not a loan at all but in a sense it's like prepaying, I'm not sure of the analogy but basically, correct me if I'm wrong, the government if you qualify, the government will pay the premium and at the end of the year the following year, the government will determine whether or not how much your income is and if you entitled to a tax refund , that tax refund might be reduced commensurate with the premium that has already been paid by the federal government.
DR BENJAMIN: Well the government is giving you a credit on some of your premium, in most cases they're reducing what you would have paid out-of-pocket so if your premium was 150 bucks with the tax credit, for example, your premium may only be 50 bucks, and the government is covering by giving you 100 bucks every month to pay the premium and at the end of the year if it turns out that there is a differential there and you would not eligible for that much premium assistance you may very well have to give that offset with taxes. But, they're working on that but remember you would have had to pay all of that out-of-pocket for health insurance.
SABLUDOWSKY: And that's assuming that you can get it. I think the overall point of trying to make is, it's not, well a lot of people were thinking well this is government money but it's really the individual people's insurance money in a great part because they would have received a lot of tax credit back or they would have received much of, or some, of the refund back that has been diminished, that's a point I'm trying to make, so let's move on to something that's probably a lot less complicated, at least for me,