Using Behavioral Economics to Understand Premium Tax Credit Reconciliation

  • Sarah Baggé


The Affordable Care Act provides advanced premium tax credits to millions of Americans to help with the cost of purchasing private health insurance on the new health insurance marketplaces. The amount of subsidy a family qualifies for is based on their projected income for the year ahead. However, since income is fairly unpredictable, some families end up qualifying for a larger tax credit when they do their taxes, while others end up with a smaller credit and must repay what they received throughout the year. In the first year of this reconciliation process, half of those who received advanced premium tax credits had to pay at least a part back. This outcome is consistent with recent literature in behavioral economics, which explores psychological, social, and cognitive influences on decision-making. This paper explores the reconciliation problem and possible approaches to reducing or eliminating it.

Author Biography

Sarah Baggé

SARAH BAGGÉ received her Master’s of Public Policy from George Washington University with a focus on social and health policy in December. Since 2013, she has implemented the Affordable Care Act in the District of Columbia as a part of the Health Benefit Exchange Authority (HBX), where she currently serves as Assistant Director of Marketplace Innovation, Policy, and Operations. Prior to joining HBX, Sarah was a health policy analyst at Families USA, a national healthcare advocacy organization. She has also worked to improve access to public benefits for low-income families as a fellow with the Congressional Hunger Center and as an AmeriCorps member. Sarah has a B.A. in International Relations from Wheaton College. She lives in
the District with her husband and an impressive collection of kitchen toys.