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The Affordable Care Act or "ACA"
(which some call "Obamacare")

There is A LOT of information floating around about the Affordable Care Act (which I will shorten to "ACA" for the rest of this section). Without belaboring EVERY detail, I'll try to give you a useful overview.
I've broken down this section into two parts:
   • What Individuals Need to Know About The ACA
   • What Employers Need to Know About The ACA

What Do Individuals Need to Know About the ACA?

1. Medical expenses must exceed 10% of your Adjusted Gross Income in order to qualify for the itemized deduction medical write-off (the previous benchmark was 7.5% of Adjusted Gross Income).

There is a temporary extension of the 7.5% medical expense base for people who are aged 65 or older. This extension will last until December 31, 2016, at which time everyone will have to meet the 10% level.

An informative question/answer section can be found in this IRS link:
http://www.irs.gov/Individuals/Questions-and-Answers:-2013-Changes-to-the-Itemized-Deduction-for-Medical-Expenses .

2. Starting in January of 2014, individuals who are not covered by a health plan must find coverage, or face a penalty which will be included in their 2014 tax return.

Here is a chart of the penalty schedule now in place for uninsured, un-exempted individuals:

Penalty Schedule for Uninsured Individuals
Year Amount per Adult Amount per Child Not to Exceed
2014 $95.00 $47.50 $285.00 per family or 1% of household income
2015 $325.00 $162.50 $975.00 per family or 2% of household income
and later
$695.00 $347.50 $2085.00 per family or 2.5% of household income

Exemptions from the mandate can occur in these situations:

  • The required contribution to purchase insurance exceeds 8% of the household income (Number 6 later in this section addresses this);
  • There is a documented religious objection;
  • The taxpayer is an American Indian;
  • The taxpayer is incarcerated;
  • The taxpayer has income that is below the tax-filing threshold (under $10,300 for individuals; under $20,600 for married couples)
  • The taxpayer is uninsured for less than 3 months of the year.

3. There will be a Health Insurance Premium Tax Credit available to certain individuals to help pay for the cost of health insurance.

Basically, when you apply for your coverage through one of the online marketplaces, your situation will be assessed as to whether or not you will qualify for a credit. If you do, you can opt to have the credit paid in advance directly to your health provider, or you can pay the premium yourself and then be reimbursed by the credit at tax time.

If your premiums are paid in advance, you will receive Form 1095-A which you must include in the 2015 tax documentation you provide to our office. This form will be used to complete Form 8962 to see whether: you are due more of a credit; or you received too much of a credit and now must pay it back.

There are many mitigating details about this credit.

For a helpful question/answer section from the IRS, go to this link
http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-the-Premium-Tax-Credit .

4. Your health insurance coverage must meet the minimum standards as set forth by the ACA.

The exact words in the law are "Minimum Essential Coverage." You are considered to have minimum essential coverage if you have:

  • Any health insurance plan sold on the Health Insurance Marketplace;
  • Any individual insurance plan you already have (as long as it provides "Essential Health Benefits" as defined by the ACA...see statement #5 of this section);
  • Any employer plan (including COBRA);
  • Medicare;
  • Medicaid;
  • The Children's Health Insurance Program (CHIP);
  • TRICARE (applies to current service members and military retirees, their families and their survivors);
  • VA Health Care Program, VA Civilian Health and Medical Program (CHAMPVA) and Spina Bifida Health Care Benefits Program; or
  • Peace Corp volunteer plans.

5. Eligible insurances must provide "Essential Health Benefits" as defined by the ACA.

  • 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
  • Pediatric services, including oral and vision care

6. Did you forego getting health insurance because it was too expensive? You might qualify for the "Affordability Exemption." These are the steps you should follow to see if this is an exemption you can use.

First: Use the following chart to see if your household income falls within the 2015 Poverty Guidelines. Basically, household income includes the gross income of: the taxpayer, taxable social security must also be added into this household income figure.

Persons in Family/Household Household Income Poverty Guidelines
$11,770 to $47,080
$15,930 to $63,720
$20,090 to $80,360
$24,250 to $97,000
$28,410 to $113,640
$32,570 to $130,280
$36,730 to $146,920
$40,890 to $163,560

Does your household income fall within the chart? Continue to step two...

Second: Multiply your household income by 8.05%. That is your "Affordability Threshold."

Third: Find out how much the premium for the lowest cost "Bronze Plan" available to you was. Go to the following link to find this figure.

Fourth: Find out the cost for the second lowest cost "Silver Plan" that applies to you or your family. Go to the following link to find this figure.

Fifth: Fill out the "Marketplace Coverage Affordability Worksheet" found in the link below, page 11. If you don't understand the calculations, bring the amounts you discovered in the third and fourth step to your tax appointment, and we'll calculate the worksheet with our software. http://www.irs.gov/pub/irs-pdf/i8965.pdf