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Tax credits? Subsidies? Provider networks? What these Obamacare terms mean to you

Q: Will doctors and hospitals who accept health insurance from companies like Blue Shield accept insurance sold by the health insurance exchange? I’ve heard that Cedars-Sinai, for example, will not accept coverage from Covered California. 

A: You heard right, Lily.

Let’s say you currently buy health insurance on the open market. But you discover that you can get tax credits from the state’s new health insurance exchange, called Covered California. (For people whose incomes qualify, tax credits will lower the cost of premiums. To find out if that includes you, use Covered California’s rate calculator.)

And wouldn’t you know it, the same insurance company that covers you now also offers a plan on the exchange.

That means you’ll get to keep your doctor if you buy that Covered California plan. Right? RIGHT???

Not necessarily.

Many insurers are limiting the networks of doctors and hospitals that participate in their Covered California plans, meaning your doctor may not be included.

“You need to do your homework because the same doctor may or may not be there,” says Nicole Kasabian Evans of the California Association of Health Plans. “It depends by plan.”

The reason that your doctor may not participate in a plan offered by the same insurer is financial. Insurers limit networks to keep their costs – and premiums – down. Which is why Cedars-Sinai in Southern California, one of the most expensive hospitals in the nation, is not included as a provider in Covered California plans.  

Covered California says you can find out if your doctor or hospital participates by calling 800-300-1506 or visiting its website: CoveredCA.com. But, sorry to say, as of my deadline on Oct. 2, the search tool still wasn’t there.

Q: Everything I have read refers to tax credits. Can you explain? Will we take tax credits on our end-of-year income tax forms or get credit at the time of enrollment?

I’ve written endlessly about Obamacare’s complications. But it’s not just the law’s provisions I’m referring to. As Jayne from Bakersfield notes, it’s also the Byzantine language.

The Obamacare tax credits are sometimes called subsidies. The Internal Revenue Service uses the term “premium tax credits.” I’ve also heard them referred to as “advance premium assistance.” Huh?

Whatever you want to call them, these federally funded tax credits will be available to individuals and families who don’t have access to “affordable” health insurance from their employer (as defined in the law) or coverage from a government program such as Medi-Cal.

You will qualify if your income falls between 138 percent and 400 percent of the federal poverty level (FPL). This year, 400 percent equals $45,960 for an individual or $94,200 for a family of four. (Click here for FPL guidelines.)

But you don’t have to wait until tax time the following year to receive the credits. Tax credits can be applied in advance, immediately lowering your monthly premiums.

By the way, you can only receive tax credits by buying from Covered California. They won’t be offered for employer-sponsored insurance or open-market plans.

Q: Will my eligibility for tax credits in 2014 be based on my 2012 or 2013 income, or my estimated 2014 income? And when I do my 2014 taxes (in 2015), will there be an adjustment if my actual 2014 income is different than my estimated 2014 income?

A: Let’s start off with a straightforward answer and then ease into the pain: Your eligibility will depend on your 2014 income, says Anne Gonzales of Covered California, so make the best estimate you can.

Now for the pain: Yes, Ray from Richmond, if your actual income varies from your estimate, either you’ll owe, or be owed, money.

“If your income goes down, you’re entitled to more credit, so you’ll be entitled to a refund on your 2014 tax return,” says Garry Browning, a Certified Public Accountant in Modesto who trains other CPAs in Obamacare matters.

“But if your advance payments were more than you’re entitled to, you’re going to have to pay back the difference.”

Browning notes that there is a maximum you’d have to pay back, which varies with your income.

If, for instance, annual family income is under 200 percent of FPL, repayment is capped at $600 ($300 for individuals). The cap is $2,500 ($1,250 for individuals) if annual income is between 300 percent and 400 percent of FPL.

To avoid sticker shock, Gonzales suggests you contact Covered California right away if your income changes during the year.

“Otherwise, the adjustment will be made at tax time,” she says, “and that could be a surprise.”

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Emily Bazar

Senior writer Emily Bazar is based in our Sacramento office, where she covers stories about the federal health care overhaul, Medi-Cal budget cuts, children's dental care and variation in the use of medical treatments.  Prior to joining the Center for Health Reporting, Bazar was a national reporter for USA Today, where she covered immigration, the effects of the current economic recession and other topics. Her first journalism job was at The Sacramento Bee. Over nine years, her beats included transportation, higher education, California politics, the energy crisis and immigration. In 2003, she was one of two reporters who produced an award-winning special project, “Liberty in the Balance,” which explored civil liberties after Sept. 11, 2001. She appears regularly on KQED’s Forum,Capital Public Radio’s Insight and other radio shows to discuss health policy. Bazar graduated from Stanford University.

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