With health care costs and insurance premiums rising across the country some farm families have been turning to the Affordable Care Act's Marketplace to find insurance coverage that is, well, affordable.

Others have found their adjusted gross income or AGI prices them out of a Marketplace policy, but that might not be the case in 2021, according to Kristine Tidgren, director of the Center for Agricultural Law & Taxation at Iowa State University.

“That’s because of a tax change in the American Rescue Plan that was passed and signed into law in March that could help a number of agricultural producers,” said Tidgren, one of the speakers at the Mid-South Agricultural and Environmental Law Conference. The conference was held online due to Covid-19 concerns again in 2021.

“This one is the premium tax credit for marketplace insurance coverage that's provided by the Affordable Care Act. Many times producers are self-employed, and they can’t afford to buy insurance on the individual market.”

As a result, some have turned to the Affordable Care Act Marketplace which can be less expensive if you have income below a certain level based upon how your income relates to the federal poverty limit.

“We're not going to get into too much detail on this except I want you to understand that, in the past, if you had income above 400% of the federal poverty limit, you were not entitled to any sort of benefit when it came to purchasing insurance on the ACA marketplace,” she said.

“So if you went out and purchased insurance on the marketplace, you would have to pay the full premium, which, in many cases, is very, very expensive.”

More benefits

The American Rescue Plan, which was intended to help the U.S. economy recover from the pandemic, said more people should be able to get the benefit of purchasing insurance on the ACA marketplace through the premium tax credit.

The new law says no one should have to pay more than 8.5% of their income as a premium for Marketplace insurance. If the cost of the insurance will be more than that amount, the purchaser can receive a premium tax credit.

“The way you typically receive this premium tax credit is you buy your insurance and tell the marketplace what your projected income is,” she said. “It calculates how much of a premium tax credit you're entitled to and gives you that premium tax credit in advance, which means it is paid directly to the insurance company.”

As an example, take a married couple, each of whom was 60 years old, from Tidgren’s home state of Iowa. (Each state has different rules, she noted.) They have modified adjusted gross income of $70,000 a year.

“As the facts stand, their income exceeds 400% of the federal poverty limit, so they’re not eligible for a premium tax credit under the prior law,” Tidgren noted. “If they wanted to purchase a plan on the marketplace, they would have had to pay $3,324 a month for insurance, which would be hard to do on an annual income of $70,000.

“If they seek to purchase insurance on the Marketplace now, the law says the most amount of premium they will have to pay is 8.5% of their modified adjusted gross income. So the most they would have to pay is $5,950 a year. They would technically be eligible for a $33,949 premium tax credit which they may receive in advance.”

There is an open enrollment period that ends Aug. 15 for Marketplace coverage for first-time purchasers. “Or, if they now can afford a better policy, they can change their coverage, as well.”

For more information on the tax changes in the American Rescue Plan, visit 3-Ag-Taxation-The-American-Families-Plan-and-Tax-Reform.pdf (netdna-ssl.com).