What Does it Mean for Me?

How the Affordable Care Act (ACA) affects you varies greatly depending on your age, who you may work for and many other factors. So what does it mean for you? Below is a list of how health care reform affects a number of common categories.

Everyone: Under the ACA, every adult must either have health insurance that meets minimum standards of coverage or pay a penalty when filing tax returns.

In 2016, the fee is 2.5 percent of income or $695 per person, whichever is greater, and $347.50 per child up to a $2,085 family maximum. Those who choose to pay the penalty and remain uninsured will still be responsible for 100 percent of the cost of their medical care. While the penalty applies to the vast majority of Americans, there are certain exemptions.

Uninsured people will not have to pay a penalty if they:

• Are uninsured for fewer than three months of the year
• Have very low income and coverage is considered unaffordable
• Are not required to file a tax return because their income is too low
• Would qualify under the new income limits for Medicaid, but their state has chosen not to expand Medicaid eligibility
• Are a member of a federally recognized Indian tribe
• Participate in a health care sharing ministry
• Are a member of a recognized religious sect with religious objections to health insurance

Elderly:

 The elderly now receive free preventive services under Medicare, annual wellness visits and personalized prevention plan services. Once those with Medicare prescription drug coverage enter the “donut hole” coverage gap, they will be eligible for drug discounts and subsidies, until the donut hole is completely closed in 2020. Medicare beneficiaries earning $85,000 or more will pay higher Part B premiums until 2019. High-income individuals will also pay higher premiums for Medicare prescription drug coverage. Those with Medicare Advantage plans may lose some benefits or experience an increase in copayments.

Unemployed and uninsured:

 Many individuals who are unemployed and uninsured likely qualify for Medicaid under the coverage expansion that began in 2010. The expansion of funding for community health centers, designed to offer free and reduced-cost care, will also provide relief. Certain uninsured individuals with pre-existing conditions can obtain coverage through the temporary high-risk pool as well.

Employees who do not have job-based health insurance, but earn too much income to qualify for Medicaid, can buy health insurance through the health insurance Marketplace.

There are many differences between Marketplaces, but they all share common traits. All will provide four tiers of coverage based on affordability that provide free preventive care and meet your household’s medical insurance needs, as well as exempt you from the fee.

Small-business owners:

 Organizations with 25 or fewer workers may be eligible for a tax credit to help provide coverage for employees. Employers with 50 to 99 employees must provide benefits or face a penalty beginning in 2016, and employers with 100 or more full-time employees must provide benefits or incur a penalty starting in 2015.

Young adults:

Children may stay on their parents’ policies until age 26. Those who buy coverage on their own or through the Exchanges can obtain cheaper catastrophic coverage. Individuals who obtain traditional benefits packages will pay less than those who are older than age 26. As part of the individual mandate, individuals age 26 or younger must obtain coverage unless qualified for an exemption.

Adults with a pre-existing condition:

 Adults with pre-existing conditions will be able to obtain individual coverage and pay the same rate as other participants in the same age group. Insurers cannot place annual or lifetime limits on coverage, nor can they deny coverage or charge higher premiums due to a pre-existing condition.

Children with a pre-existing condition:

 Group health plans and health insurance issuers may not impose exclusions on coverage for children with pre-existing conditions. This provision applies to all plans offered through the Marketplace.

Health Care Individual Mandate

The Affordable Care Act (ACA) requires most individuals to obtain acceptable health insurance coverage for themselves, and their family members, or pay a penalty. Because this provision has the effect of “requiring” individuals to have coverage, it is often referred to as the “individual mandate.” Individuals may be eligible for an exemption from the penalty in certain circumstances.

How much is the Penalty?

The penalty for not obtaining acceptable health insurance coverage is the greater of two amounts—the “flat dollar amount” and “percentage of income amount.”

Income for this purpose is the taxpayer’s household income minus the taxpayer’s exemption (or exemptions for a married couple) and standard deductions. In 2016 and thereafter, the penalty increases to $695 or up to 2.5 percent of income.

The penalty is capped at the national average of the annual bronze plan premium. Families will pay half the penalty amount for children, up to a family cap of three times the annual flat dollar amount per year.

 

Who is Liable for a Penalty?

The penalty will be assessed against an individual for any month during which he or she does not maintain “minimum essential coverage” (unless an exemption applies). The requirement to maintain minimum essential coverage applies to individuals of all ages, including children. The Treasury regulations provide that an individual is treated as having coverage for a month so long as he or she has coverage for any one day of that month.

Minimum essential coverage includes coverage under:

 

• A government-sponsored program, such as coverage under the Medicare or Medicaid programs, CHIP, TRICARE and certain types of Veterans health coverage;
• An eligible employer-sponsored plan (including COBRA and retiree coverage);
• A health plan purchased in the individual market; or
• A grandfathered health plan.

Minimum essential coverage does not include specialized coverage, such as coverage only for vision care or dental care, workers’ compensation, disability policies, or coverage only for a specific disease or condition. Under the ACA, minimum essential coverage also includes any additional types of coverage that are designated by HHS or when the sponsor of the coverage follows a process outlined in regulations to be recognized as minimum essential coverage.

 

Exceptions to the Individual Mandate

The ACA provides the following nine categories of individuals who are exempt from the penalty for not maintaining minimum essential coverage:

• Individuals who cannot afford coverage (those for whom a required contribution for coverage would cost more than 8 percent of their household income);
• Taxpayers with income below the filing threshold;
• Members of certain Indian tribes;
• Individuals who are given a hardship exemption by HHS;
• Individuals who experience a gap in coverage for less than a continuous three-month period (may only be used for one period without coverage per year);
• Religious conscience objectors;
• Members of a health care sharing ministry;
• Incarcerated individuals; and
• Individuals who are not citizens, nationals or lawfully present in the United States.

The Treasury proposed regulations provide that an individual who is eligible for an exemption for any one day of a month is treated as exempt for the entire month.

The HHS proposed regulations enumerate several situations that will always be treated as constituting a hardship for purposes of the hardship exemption, including:

 

• Individuals who turn down coverage because the Exchange projects it will be unaffordable (even if his or her actual income for the year turns out to be higher so that they are not eligible for the affordability exemption);
• Certain individuals who are not required to file an income tax return but who technically fall outside the statutory exemption for those with household income below the filing threshold; and
• Individuals who would be eligible for Medicaid under the expansion, but live in a state that chooses not to expand Medicaid eligibility.

 

The HHS proposed regulations also provide that the hardship exemption will be available on a case-by-case basis for individuals who face other unexpected personal or financial circumstances that prevent them from obtaining coverage.

How is the Penalty Enforced?

Starting in 2015, individuals filing a tax return for the previous tax year will indicate which members of their family (including themselves) are exempt from the individual mandate. For family members who are not exempt, the taxpayer will indicate whether they had insurance coverage. For each non-exempt family member who doesn’t have coverage, the taxpayer will owe a payment. Spouses who file a joint return are jointly liable for the penalties that apply to either or both of them. Any individual who is eligible to claim a dependent will be responsible for reporting and paying the penalty applicable to that dependent.

The Internal Revenue Service (IRS) will generally assess and collect penalties in the same manner as taxes. However, the ACA imposes certain limitations on the IRS’ ability to collect the penalty. As a result, it is widely believed that any assessable penalty will be subtracted from the tax refund that the individual is owed, if any.

What is the individual shared responsibility provision?

Under the ACA, the federal government, state governments, insurers, employers and individuals are given shared responsibility to reform and improve the availability, quality and affordability of health insurance coverage in the United States. Starting in 2014, the individual shared responsibility provision calls for each individual to have minimum essential health coverage (known as minimum essential coverage) for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return.

Who is subject to the individual shared responsibility provision?

The provision applies to individuals of all ages, including children. The adult or married couple who can claim a child or another individual as a dependent for federal income tax purposes is responsible for making the payment if the dependent does not have coverage or an exemption.

When does the individual shared responsibility provision go into effect?

The provision goes into effect on January 1, 2014. It applies to each month in the calendar year. The amount of any payment owed takes into account the number of months in a given year an individual is without coverage or an exemption.

What are the statutory exemptions from the requirement to obtain minimum essential coverage?

• Religious conscience – You are a member of a religious sect that is recognized as conscientiously opposed to accepting any insurance benefits. The Social Security Administration administers the process for recognizing these sects according to the criteria in the law.
• Health care sharing ministry – You are a member of a recognized health care sharing ministry.
• Indian tribes – You are a member of a federally recognized Indian tribe.
• No filing requirement – Your household income is below the minimum threshold for filing a tax return. The requirement to file a federal tax return depends on your filing status, age, and types and amounts of income. To find out if you are required to file a federal tax return, use the IRS Interactive Tax Assistant (ITA).
• Short coverage gap – You went without coverage for less than three consecutive months during the year.
• Hardship – A Health Insurance Marketplace, also known as an Affordable Insurance Exchange, has certified that you have suffered a hardship that makes you unable to obtain coverage.
• Unaffordable coverage options – You can’t afford coverage because the minimum amount you must pay for the premiums is more than 8 percent of your household income.
• Incarceration – You are in a jail, prison or similar penal institution or correctional facility after the disposition of charges against you.
• Not lawfully present – You are neither a citizen, a national nor an alien lawfully present in the United States.

Coverage Availability

Overview

The Affordable Care Act (ACA) includes provisions that prohibit discrimination by health plans against people with pre-existing conditions and provide certain protections for consumers. Effective for plan years beginning on or after January 1, 2014, ACA extends guaranteed issue protections for individuals and employers, and prohibits the use of health and other factors to set premium rates.

Guaranteed Availability of Coverage

ACA requires health insurance issuers that offer coverage in a state’s individual or group market to accept every individual and employer in the state that applies for coverage, subject to certain exceptions. These exceptions allow issuers to limit enrollment:

 

• To certain open and special enrollment periods;
• To employers with eligible individuals who live, work or reside in the service area of a network plan; and
• In certain situations involving network capacity and financial capacity.

Guaranteed Renewability of Coverage

Individuals and employers have certain protections with respect to coverage renewal. For example, these protections will prohibit issuers from refusing to renew coverage because an individual or employee becomes sick or has a pre-existing condition. Specifically, health insurance issuers offering coverage in the individual or group market for non-grandfathered plans must renew or continue in force coverage at the option of the plan sponsor or individual, with certain exceptions.

These exceptions are:

 

• Nonpayment of premiums;
• Fraud or intentional misrepresentation of material fact under the terms of coverage;
• For group coverage, the plan sponsor’s failure to comply with employer contribution or group participation rules under state law;
• The issuer ceasing to offer coverage of this type (without regard to claims experience or health status-related factor);
• For network plans, there no longer being any enrollee who lives, resides or works in the service area of the issuer or where the issuer is authorized to do business (in the case of the small group market, the employer no longer having eligible individuals who live, work or reside in the service area for the network plan); and

 

Do I Qualify for a Subsidy?

 

You may be eligible for a government subsidy under the Patient Protection and Affordable Care Act.

The government contribution is an estimate based on the information you provide. If you have coverage through your job, you may not be eligible for this subsidy. Rules and prices may vary by state and by health care plan selected. 

Click Here to use our Subsidy Calculator to estimate if you qualify for a subsidy.