Due to tax law changes, beginning Jan. 1, 2019, you'll no longer be required to have minimum essential coverage. Each January you'll still get an IRS Form 1095 from your pay center listing the coverage you had during the previous tax year.
There are four types of plans sold on the insurance exchange- bronze, silver, gold and platinum. Each plan offers a different level of health coverage available at different costs. The Second Lowest Cost Silver Plan, is the silver plan with the second lowest cost and available in the area in which the taxpayer lives. To find this while searching the exchange, sort the silver plans by price and find the one available to you (and your family) with the second lowest cost.
The Premium Tax Credit is based on the Second Lowest Cost Silver Plan (SLCSP) that is available in the area in which the individual taxpayer lives. You do not have to select the Second Lowest Cost Silver Plan to qualify for the credit.
The Premium Tax Credit is calculated as follows:
- Calculate the Household Income
- Calculate Household Income as percentage of Federal poverty line
- Calculate the applicable percentage
- Calculate the required contribution (household income X applicable percentage)
- Find the Second Lowest Cost Silver Plan (SLCSP) on the exchange
- Subtract the required contribution from the SLCSP
- Compare the difference to the premiums for the health plan actually enrolled in
- Lower amount is the amount of the tax credit for the year
Individuals may purchase a higher plan and pay the difference between the credit amount and the cost of the more expensive plan. Individuals may also purchase a cheaper plan but, if eligible for the tax credit, will not receive the credit.
For additional information regarding the SLCSP, please click here.