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COVID relief bill, IRS decision ease some pandemic-affected health care costs

Medical insurance word cloud graphic by Shawn Campbell via Flickr Creative Commons
Shawn Campbell via Flickr Creative Commons

Last year was difficult for lots of people. Millions lost their jobs due to coronavirus pandemic protocols. For many, that also meant losing their workplace provided healthcare coverage.

Finally, though, there is a bit of good news for folks in this situation.

The American Rescue Plan Act (ARPA), which was enacted in March, contains provisions to help individuals deal with COVID created health insurance issues.

Plus, the Internal Revenue Service recently announced that taxpayers who received more federal advance subsidy than needed to help buy health coverage through the Affordable Care Act (ACA) exchange don't have to pay back that extra amount.

Keeping your prior coverage: One option when you lose or leave a job is to continue your company's health coverage for a while. This is allowed under provisions in the federal Consolidated Omnibus Budget Reconciliation Act, or COBRA as its commonly called.

COBRA makes things easy on one hand. There's no searching for another policy. You're familiar with the coverage and process. Plus, you know your doctors accept it.

But COBRA medical insurance continuation is costly. When you're on the job, your employer picks up part of the coverage. With COBRA you generally have to pay the full premium on your own.

Covering COBRA costs: Thanks to the ARPA, COBRA is cheaper. Where the usual coverage continuation rule requires the former employees to pay as much as 102 percent of his/her workplace medical plan, this latest COVID relief bill calls for the federal government to pay the full COBRA premium from April 1 through Sept. 30 for qualifying individuals.

In addition to the six-month time frame during which Uncle Sam will pick up the policy premiums, there are a couple of other limits to the ARPA COBRA help.

If you get another job with employer-provided health insurance someplace else before Sept. 30, you lose eligibility for the no-cost coverage.

Also, while COBRA usually is available to workers who leave jobs for their own reasons, if you voluntarily left your job during the pandemic, you're not eligible for the COBRA help.

ACA assistance overpayment: Lots of folks, even before COVID-19 got out of control, relied on the marketplace — either the federal one at or one the many state marketplaces — to obtain medical insurance.

Cost of COVID_face mask_money

While the marketplace usually offers a variety of options, but even then — and especially if someone is facing pandemic created financial difficulties — finding an affordable policy can be a challenge. So ARPA lowered the cost in many cases for coverage purchased via a government exchange.

Premiums for these marketplace plans will cost no more than 8.5 percent of an individual's modified adjusted gross income. The change will be in effect through 2022.

Surplus subsidy relief: Another way marketplace health care plans are more affordable is through government provided subsidies. This financial assistance actually is a tax break, known as the Premium Tax Credit, or PTC.

You can claim the PTC at tax filing time or get it in advance. In most cases, purchasers of marketplace medical plans get the PTC in advance so they don't have to pay as much out of pocket for their coverage.

Sometimes, the advance PTC ends of being more than needed to cover the marketplace plan. Normally, the excess would have to be paid back when you file.

But as has been evident for more than a year, things are normal, with taxes or the rest of life. And the IRS has decided against this normal PTC payback requirements.

If your advance premium payments exceeded the amount of the actual premium credit you're entitled to for the 2020 tax year, you don't have to repay the extra.

And if you had filed and repaid the excess subsidy before the IRS' April 9 no-repayment announcement, no worries.

You don't have to file an amended return to get back the PTC overage. The IRS says it use the model created with automatic refunds for tax-exempt unemployment and will make automatic adjustments to affected PTC returns to reduce the repayment to zero and reimburse filers as needed.

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