What You Need to Know and Do for the 2010 Health Care Acts.
Basically you need to be covered by a qualified heath care plan or you may start paying a tax penalty begining in years after 2013.
The Patient Protection and Affordable Care Act (PPAC) and the Health Care and Education Reconciliation Act of 2010, also known as Obamacare or ACA, will require most taxpayers to have medical insurance by 2014. In an effort to achive Healthcare Insurance coverage for more people, the Acts have many carrot and stick provisions. You want to make the most of the carrots (incentives); and avoid the sticks(penalties).
Many of the benefits of the ACA have already come into place:
- Elimination of lifetime limits on coverage.
- Prohibition of rescissions of health insurance policies.
- Prohibition of pre-existing condition exclusions for children.
- Expansion of dependent coverage to age 26.
- Creation of a temporary reinsurance program for early retirees.
- Creation of a small business health insurance expenses tax credit.
- Creation of a temporary high risk pool for individuals who are uninsured because of pre-existing conditions.
Like millions of other Americans, you may have received a refund from your medical insurance company last year.
So far we’ve experienced the easier parts of the ACA. Now many of us will have to make some decissions about our own healthcare plans. Let’s look at the sticks; and then see what carrots can make them better.
The Stick that will grow: The Individual Mandate.
Individuals not eligible for Medicaid, Medicare, or other government sponsored coverage are required to maintain minimum essential coverage (bronze plan covering 60% of medical expenses)
Failure to maintain minimum essential coverage results in a penalty. The calculation uses the taxpayerís household income and a flat dollar amount. As a result, the penalty is the greater of:
- $95 or one percent of income in 2014,
- $325 or two percent of income in 2015, and
- $695 or 2.5 percent of income in 2016, up to a cap of the national average bronze plan premium.
Pay and play, or be taxed away! The fact that it was a tax became the strange way that the individual mandate survived the Supreme Court challege.
Exemptions to the individual responsibility requirement to maintain minimum essential coverage are made for:
- religious objectors,
- individuals not lawfully present in the U.S.,
- incarcerated individuals,
- those who cannot afford coverage,
- taxpayers with income less than 100 percent of the Federal Poverty Level (individual with income less than $14,404; family of four with income less than $29,3270)
- members of Indian tribes,
- those who have received a hardship waiver,
- individuals whose contribution toward employer-sponsored coverage or ìbronzeî level insurance exchange coverage would exceed 8% of household income, and
- those who were not covered for a period of less than three months during the year.
Grandfathered Plans Exception
Any individual or family who currently has coverage and would like to retain that coverage can do so. Coverage is deemed to meet the individual responsibility to have health coverage. Similarly, employers that currently offer coverage are permitted to continue offering such coverage under the ìgrandfatherî policy.
Employers with 50 or more employees could have a Penalty for Inadequate Coverage
Refundable Premium Assistance Tax Credit
An eligible individual enrolls in a plan offered through an exchange and reports his or her income to the exchange. Based on the information provided to the exchange, the individual receives a premium assistance credit based on income and the Treasury pays the premium assistance credit amount directly to the insurance plan in which the individual is enrolled. For employed individuals who purchase health insurance through an ex-change, the premium payments are made through payroll deductions.
Eligibility & Federal Poverty Level (FPL)
The premium assistance credit is available for individuals (single or joint filers) with household incomes between 100 and 400 percent of the Federal poverty level. Under current levels, the subsidy range would extend to an individual with income from $14,404 to $43,320 and to a family of four with income from $29,327 to $88,200.
Initial eligibility for the premium assistance credit is based on the individual’s income for the tax year ending two years prior to the enrollment period.
The Kaiser Family Foundation currently has an online Health Reform Subsidy Calculator located at: http://healthreform.kff.org/SubsidyCalculator.aspx
Small Business Health Insurance Expense Tax Credit
Provides a sliding scale tax credit of up to 50% of nonelective contributions the business makes on behalf of its employees for insurance premiums for small employers with fewer than 25 employees and average annual wages of less than $50,000.
The full credit is available to employers with 10 or fewer employees and average annual wages of less than $25,000 (indexed for inflation after 2013). The credit is reuced based on the number of employees over 10 and the excess of the employees average wages over $25,000. However, to be eligible for a tax credit, the employer must contribute at least 50 percent of the total premium cost or 50 percent of a benchmark premium. In 2010 through 2013, eligible employers can receive a small business tax credit for up to 35 percent of their contribution toward the employeeís health insurance premium. The IRS has a detailed ìfrequently asked questionsî website on the small business tax credit located at: