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Premium Subsidies in the Context of Section 125 Plan Tax Savings and Employer Payroll Withholding

Premium Subsidies in the Context of Section 125 Plan Tax Savings and Employer Payroll Withholding. How Much Can This Save Individuals and States? Ed Neuschler, Institute for Health Policy Solutions SCI/NASHP/NGA Section 125 Plans Meeting July 18, 2008 Denver, CO.

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Premium Subsidies in the Context of Section 125 Plan Tax Savings and Employer Payroll Withholding

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  1. Premium Subsidies in the Context of Section 125 Plan Tax Savings and Employer Payroll Withholding How Much Can This Save Individuals and States? Ed Neuschler, Institute for Health Policy Solutions SCI/NASHP/NGA Section 125 Plans Meeting July 18, 2008 Denver, CO

  2. Illustration: Single Worker with No ChildrenEarning $20,800 Annually ($10.00 per hour) = 200% of Poverty Note: Red figures in italics = percent of income.

  3. Illustration: Single Worker with No ChildrenEarning $20,800 Annually ($10.00 per hour) = 200% of Poverty

  4. Illustration: Single Worker with No ChildrenEarning $28,080 Annually ($13.50 per hour) = 270% of Poverty

  5. Illustration: Single Worker with No ChildrenEarning $41,600 Annually ($20.00 per hour) = 400% of Poverty

  6. Illustration: Single Parent with Two ChildrenEarning $31,200 Annually ($15.00 per hour) = 177% of Poverty

  7. Illustration: Single Parent with Two ChildrenEarning $31,200 Annually ($15.00 per hour) = 177% of Poverty

  8. Illustration: Single Parent with Two ChildrenEarning $31,200 Annually ($15.00 per hour) = 177% of Poverty

  9. Illustration: Single Parent with Two ChildrenEarning $52,000 Annually ($25.00 per hour) = 295% of Poverty

  10. Illustration: Married Couple with Two ChildrenEarning $72,800 Annually ($35.00 per hour) = 343% of Poverty

  11. Single Worker with No Children:Contributions as a Percent of Family Income Before and After Tax Savings From Using a Section 125 Account to Pay Premiums(Illustration Using Oregon Tax Rates) 7.0% 6.0% 3.0% 4.9% 4.2% 2.2% 2.1% Combined effective marginal tax rate starts at 25.75%, reaches 30.3% at 170% FPL.

  12. Married Couple with 2 Children:Contributions as a Percent of Family Income Before and After Tax Savings From Using a Section 125 Account to Pay Premiums(Illustration Using Oregon Tax Rates) 7.0% 6.0% 3.0% 4.2% 4.9% 2.2% Combined effective marginal tax rate starts at 26.55%, exceeds 30% above 200% FPL. Does NOT include EITC effects.

  13. Distribution of Subsidy Costs for Low-Income Peoplein an Illustrative Subsidized Exchange,with and without Section 125 Tax-Sheltering

  14. Affordability Example 3:Single workers for “pay” employers at different ages, 500% FPL ($51,050) --Purchasing a $2500 deductible plan--

  15. Affordability Example 4:Married parent working at “pay” employer (with non-working spouse), 500% FPL ($103,250) --Purchasing a $2500 deductible plan--

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