Monday, November 11, 2013

Are you covered? Understanding the individual health insurance mandate.

As you may or may not be aware, all individuals are required by the new Affordable Care Act regulations to purchase a minimum standard of health insurance beginning Jan. 1, 2014. The state exchanges that offer various plans opened for enrollment on October 1st, 2013.  You can also keep any policy you have under your employer, or that you have already purchased for yourself or your family, as long as it meets the minimum essential coverage standards. However, there are exceptions to this requirement if you do not meet minimum income levels, or if the premiums you would have to pay are too expensive. So what does all this mean for you?

If your employer provides insurance coverage that meets the minimum requirements of the new “Obamacare” plan, you don’t have to do anything. Ditto if your current self-employed policy or individual or family coverage meets those requirements. However, if you do not have coverage through your employer or otherwise, or have been denied coverage in the past, then you need to make sure you are covered to avoid the steep penalties that take effect starting in 2014.

As I said above, there are some exceptions. If you are eligible for coverage from your employer, but your share of the premiums is more than 8% of your household’s AGI, the penalty doesn’t apply. Also, if you are not eligible for employer coverage but the cost of the bronze-level plan through an exchange, less any federal subsidies, exceeds 8% of your household’s AGI, the penalty is waived. Same for those whose income is below the filing threshold, those who are not covered for less than 3 months, and those who can show a hardship or religious reason for not having coverage.

The penalty for 2014 is the higher of $95 per adult ($47.50 per child), capped at $285 per family, or 1% of the excess of the taxpayer’s household AGI over the filing threshold ($10,000 for individuals, $20,000 for families in 2013). These taxes are reduced for any months the taxpayer had coverage, and cannot exceed the cost of a bronze-level exchange plan. The tax is paid annually on your Form 1040. This penalty increases to $325 or 2% of income in 2015, and $695 or 2.5% of income in 2016.

You may choose to purchase an insurance plan through a state exchange or directly from an insurance company. There are generally three levels of plans – bronze, silver, and gold – that provide different levels of coverage, and therefore have different premium costs. There are Federal subsidies available for taxpayers whose income is less than 400% of the poverty level (about $90,000 for a family of four). So you may qualify for some assistance to pay for insurance premiums. And you cannot be turned down due to a pre-existing condition.

Whatever your situation, make sure you have the minimum essential coverage in place for 2014, or be prepared to pay the penalty.

Melissa Gregg