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News from EPI The tax implications of ACA: Health policy researchers call for public outreach on ACA subsidy

In a new article in the September issue of Health Affairs, the leading journal of health policy, a team of researchers recommend expanded educational efforts to ensure that consumers signing up for  health coverage through  the new Affordable Care Act (ACA) take maximum advantage of possible tax credits while avoiding repayments.

In “Large Repayments of Premium Subsidies May Be Owed to the IRS If Family Income Changes Are Not Promptly Reported,” researchers from the University of California and the Economic Policy Institute explain that subsidies for health insurance premiums to be offered under the ACA are classified as refundable tax credits and can be taken when taxes are filed or in advance, as reductions in monthly premiums. Recipients who take subsides in advance will receive tax refunds if their subsidies were too small, but will have to make repayments if their subsidies were too high.

The authors analyze how much individuals receiving subsidies for health insurance premiums would need to repay all or part of that subsidy to the Internal Revenue Service if they fail to report income changes during the year. To avoid this, the researchers recommend that the insurance exchanges educate consumers about how the subsidies work, the need to promptly report income changes, and provide tools and help determine how much advance subsidy enrollees should take.

“The subsidy was designed to ensure access to affordable health care,” said Ken Jacobs, lead author of the article and chair of the Center for Labor Research and Education (CLRE) at the University of California, Berkeley.  “Exchanges can take simple steps like educating consumers about how tax credits work, informing them about the importance of promptly reporting changes in income, family size or tax filing status, and through exploring additional methods of periodically reminding enrollees to report any changes that have occurred beyond what is already required under federal regulations.”

The article was co-authored by Economic Policy Institute Director of Health Policy Research Elise Gould; Dave Graham-Squire, a CLRE research associate; and Dylan Roby, a University of California, Los Angeles, assistant professor of health policy and management at the Fielding School of Public Health. Roby also directs the Health Economics and Evaluation Research Program at UCLA’s Center for Health Policy Research.

The researchers estimate that if no income changes are reported during the year, 38 percent of subsidy recipients would be in families owing repayments at the time they file taxes, with a median repayment of $857. If all changes are reported and subsidies are adjusted in a timely manner, the share of recipients owing repayments would fall to 23 percent with a median repayment of only $343. The greatest risk is for subsidy recipients in families whose incomes rise above 400 percent of the federal poverty level, who would be required to repay all of the subsidies received.  Timely reporting and subsidy adjustments would reduce the median repayment for this group from $1,650 to $332 per year.

“Timely reporting of income changes will make a significant difference in both the share of people who will owe repayments and the size of those repayments,” said Gould. “Consumer education is essential.”

Informing enrollees that timely and accurate income reporting is essential to the success of health reform, the authors note, advising that because of the risk of having to a repay a subsidy, some families may reject coverage through the exchange.

Yet the authors note that the process of signing up for a subsidy should not be a new concept to most taxpayers.

“Signing up for the subsidy is similar to deciding on your yearly tax withholdings,’ said Roby.  “With a little proactive planning by consumers and good information from exchanges, the number of consumers affected will be low.”

Contact information:

Ken Jacobs, (510) 643-2621 or

Elise Gould, (202) 775-8810 or

Dave Graham-Squire, (510) 643-5074 or

Dylan Roby, (323) 236-0336 or