By Marisa Kanof, Executive Editor, Brief Policy Perspectives
Sarah Baggé graduated from the Trachtenberg School of Public Policy and Public Administration at the George Washington University with a concentration in social and health policy in December of 2015. She currently works for the DC Health Benefit Exchange Authority (the Affordable Care Act (ACA) marketplace for the District of Columbia) where she leads the division concerned with individual and family healthcare coverage. On Tuesday February 9th, I sat down with Baggé to talk about her article that will be published in Volume 23 of Policy Perspectives.
Brief Policy Perspectives: What is your article about?
Sarah Baggé: Advanced Premium Tax Credit (APTC) reconciliation. The APTC is the main subsidy for the health insurance marketplaces. When you apply for health insurance on the exchanges you predict what your income will be for the year. Depending on what your income is, you’ll get a subsidy to help you pay for health insurance. If it turns out the subsidy was more then you needed, you have to pay back the difference on your taxes the next year. If your subsidy was not enough, you get money back. Data from 2014 shows that roughly half of all people who were eligible for the APTC had pay back money on their taxes, and that the average amount they had to pay back was $860.
The problem with this system is that it disproportionately affects people who don’t have stable incomes: people who work have temporary jobs, work part-time, or are self-employed. These populations are the least likely to be able to estimate their income, and are also most likely to qualify things for things like the Earned Income Tax Credit (EITC). These families count on money they get from the EITC and other refundable tax credits to be able to do things like make major repairs on their houses or cars, or put money away in savings. However the reconciliation process is threatening to dilute the impact of anti-poverty initiatives like the EITC.
My article discusses this problem, as well as ways to make the APTC work better. Some solutions that I talk about in the article include basing it on prior year income, or restructuring it so that reconciliation becomes less of a burden. One thing we’ve done with the DC exchange is setting a default of less than 100% of the subsidy. People who take that default and end up owing money after they reconcile, end up owing a much smaller amount.
BPP: How did you get interested in this topic?
SB: I’ve volunteered with the Volunteer Tax Assistance Program (VITA) for several years. Helping low-income people fill out their tax returns helped me realize what a potential problem this was.
BPP: What do you hope your readers take away from your article?
SB: I want people to understand how complicated the ACA and the tax system is. People like me – people who have salaries and stable jobs – set this system up, and it’s hard enough for someone like me to estimate my income for the year, let alone other people with much less stable work situations. Overall I would like people to transition away from a conversation about whether or not the ACA is good or bad, and instead look at it as something that is here to stay that we can improve upon.
BPP: Is there anyone in government, NGOs, think tanks, etc. that you hope your article lands in front of? If so, who and why?
SB: I’d love for people who work with other exchanges to read the article and experiment with some of the solutions I put forward. It’d be great if the exchanges could share best practices.
BPP: Where can readers go for more information about your topic?
SB: The Center for Budget Policy and Priorities has a good series called “Health Reform Beyond the Basics” that has a lot of great information. I also think people should go volunteer with VITA or become certified application counselors for the ACA. It’s really important to interface with the people who are affected by these policies.
You can read Baggé’s article “Using Behavioral Economics to Understand Premium Tax Credit Reconciliation” in Volume 23 of Policy Perspectives. The article appears online here.
**Disclaimer: The opinions expressed by the interviewee are her own and do not reflect the views, approval, or endorsement of the DC Health Benefit Exchange Authority.**