Beginning in 2014, the Patient Protection & Affordable Care Act (the health care legislation sometimes known as Obamacare) will impose the new requirement that U.S. persons, with certain exceptions, have minimal, essential health care insurance.
A minimum essential health care policy is one in which the insurer pays 60% of the average medical expenses incurred by an average person over the course of one year.
How this will affect your family will depend upon a number of issues:
Already Insured
If you will already be insured through an employer plan, Medicare, Medicaid, the Veterans Administration, or a private plan that provides minimal, essential care, then you will not be subject to any penalties under this new law.
Exempt from the Mandatory Insurance Requirement
The following individuals will be exempt from the insurance mandate and will not be subject to a penalty for being uninsured:
- Individuals who have a religious exemption;
- Those not lawfully present in the United States;
- Incarcerated individuals;
- Those who cannot afford coverage based on formulas contained in the law;
- Those who have income below the federal income tax filing threshold;
- Those who are members of American Indian tribes;
- Those who were uninsured for short coverage gaps of less than three months, and
- Those who have received a hardship waiver from the Secretary of Health and Human Services, who are residing outside of the United States, or who are bona fide residents of any possession of the United States.
Cannot Afford Coverage
Individuals and families whose household income is between 100% and 400% of the federal poverty level will qualify for a varying amount of subsidy to help pay for the insurance in the form of a Premium Assistance Credit. To qualify for that credit, the insurance must be acquired from an American Health Benefit Exchange operated by the individual or family’s state, or by the Federal Government. These exchanges are scheduled to be up and running as of October 1, 2013. The policies purchased through them will be effective as of January 1, 2014.
It is important to note that the subsidy is really just a tax credit based upon family income. It can be estimated in advance and used to reduce the monthly insurance premiums; it can be claimed as a refundable credit on the tax return for the year; or it can be some combination of both. However, it is based upon the current year’s income and must be reconciled on the tax return for the year. If too much was used as a premium subsidy, it must be repaid. If there is excess, it is refundable.
If household income is below 100% of the poverty level, the individual or family qualifies for Medicaid.
Penalty for Noncompliance
The penalty for noncompliance will be the greater of either a flat dollar amount or a percentage of income:
- For 2014, $95 per uninsured adult ($47.50 for a child) or 1% of household income over the income tax filing threshold;
- For 2015, $325 per uninsured adult ($162.50 for a child) or 2% of household income over the income tax filing threshold, and
- For 2016 and beyond, $695 per uninsured adult ($347.50 for a child) or 2.5% of household income over the income tax filing threshold.
Flat Dollar Amounts
The flat dollar amount for a family will be capped at 300% of the adult amount. For example, the maximum in 2016 for a family will be $2,085 (300% of $695). The child rate will apply to family members under the age of 18.
Overall Penalty Cap
The overall penalty will be capped at the national average premium for a minimal, essential coverage plan purchased through an exchange. This amount won’t be known until a later date.
If you have any questions as to how this new insurance requirement will affect you, contact the Experts at Henssler Financial: experts@henssler.com or 770-429-9166.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
