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Affordable Care Act Byron R. Sherman CPA, PC 01/31/2014 251-661-2121 What you need to know… History of the Act Exchanges, or marketplaces, expected to establish an are new organizations that Exchange, with the federal have been set up for buying government stepping in if a health insurance. They will state does not set one up. offer a choice of different health plans. Each state is Will I have to have health insurance? Most likely. Effective January 2014, the Affordable Care Act requires you to have “minimum essential” health The Affordable Care Act was passed almost three years ago with the goal of extending quality health insurance coverage to more Americans. The Act’s core requirements are that most Americans must have health insurance and that all but small employers must offer insurance to full-time employees. insurance if you are a U.S. citizen or legal resident. Your dependents must also be covered. What does the January 1, 2014 deadline mean to taxpayers? You are not required to buy insurance through the Exchange. If you prefer, you may purchase insurance through an insurance agent or broker. We have business contacts that would be glad to prepare a quote for you if needed for individual or group policies. I heard that some health plans are considered “grandfathered”, what does that mean? To encourage compliance for both individuals and employers, credits are offered for those who need financial help with buying insurance, and penalties are defined for those who do not get insurance. These requirements, credits and penalties become effective January 1, 2014 and January 1, 2015. Grandfathered plans are those that were in existence on March 23, 2010 when the Affordable Care Act was signed into law. Rules were issued effective July 12, 2010, regarding what changes can be made to plans and maintain grandfathered status. (See attached for more details) Courtesy www.drakesoftware.com – resources – affordable care act center 1 What happens if I don’t Starting in 2014, if you don’t have have health insurance? minimum essential coverage or an Helpful Links exemption, you will have to pay a penalty. IRS.gov What are the exemptions? 1. Financial Hardship – defined by the Secretary of Health and Human Services http://www.irs.gov/uac/AffordableCare-Act-Tax-Provisions 2. Religious objections – only certain faiths US Department of Labor: 3. Members of American Indian Tribes 4. Uninsured for less than three months http://www.dol.gov/ebsa/healthreform/ 5. Undocumented immigrants Medicaid.gov 6. Incarcerated individuals http://www.medicaid.gov/AffordableC 7. Those for whom the lowest cost plan option exceeds 8% of income areAct/Affordable-Care-Act.html WhiteHouse.gov 8. Incomes below the tax filing threshold http://www.whitehouse.gov/healthrefo How much is the The annual penalty will be a set amount per penalty? individual (including dependents) or a percentage rm The Exchange Site of your taxable income, whichever is greater. The annual penalty is capped at an amount roughly https://www.healthcare.gov/ equal to the national average premium for a qualified health plan. In other words, the penalty will be no more than it would have cost to buy insurance in the first place. It is charged for each month you (and your dependents) don’t have minimum essential coverage, and will be figured on your tax return. You can be uninsured for up to three months without penalty. What if I can’t afford health insurance? As listed above, exemptions are provided for those with low income. Also, being covered by Medicaid counts as being covered, and Medicaid will expand to cover those under age 65 who have an income of up to 138% of the federal poverty level. Also, people in their 20s may have the option to buy a lower-cost “catastrophic” health plan. Finally, if your income is less than 400% of the federal poverty level, a new Premium Tax Credit will be available to help you buy insurance. Courtesy www.drakesoftware.com – resources – affordable care act center 2 What is “minimum essential coverage”? What is a health insurance exchange? What’s the least amount of insurance I can buy? The Affordable Care Act requires health insurance plans to provide minimum services in 10 categories, called “essential health benefits.” While nearly everyone must obtain minimum essential coverage, each state can choose from a set of plans to serve as its benchmark plan. Whatever benefits that plan covers in the 10 categories will be deemed the essential benefits in that state. The 10 categories are: ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, including behavioral health treatment, prescription drugs, rehabilitative services and devices, laboratory services, preventive and wellness services and chronic disease management, and pediatric services, including oral and vision care. Exchanges, or marketplaces, are new organizations that will be set up for buying health insurance. They will offer a choice of different health plans. The lowest cost plan would be the Bronze plan offered by an Exchange. The Exchange will offer the following coverage levels: What is the Premium Tax Credit, and do I qualify? Bronze = covers 60% of covered healthcare expenses Silver = covers 70% Gold = covers 80% Platinum = covers 90% The purpose of the credit (also known as a subsidy) is to help individuals with moderate income buy health insurance through an Exchange. The credit is refundable, so it will increase your tax refund or help provide you one. If you don’t have the money needed to pay the full insurance premium upfront, you may qualify to get the credit in advance, without waiting for the refund on your tax return. Such an advance payment of the credit would not come to you, it would go directly to the insurance company. The received advance credit payments will be reconciled against your eligible credit amount when you file your tax return. You must be enrolled in a health insurance plan through an Exchange to be considered for the credit. The credit is effective January 2014. The credit is available only to those who buy insurance through an Exchange and meet certain requirements: 1. Your household income must be no more than 400% of the federal poverty level. 2. Your part of the insurance premium must be more than 9.5% of your household income, or the employer-offered insurance must not cover more than 60% of covered healthcare costs. Courtesy www.drakesoftware.com – resources – affordable care act center 3