Affordable Care Act
AFFORDABLE CARE ACT
The health care law makes care accessible to everyone by:
- Generating the Health Insurance Marketplaces, through which individuals who do not have access to government-subsidized coverage or affordable employer-backed coverage can compare and buy plans (Some individuals may qualify for financial aid through the advance payments of the premium tax credit and/or cost-sharing reductions)
- Expanding Medicaid to cover people under the age of 65 whose household incomes are at or under 138% of the federal poverty level (FPL)
- Requiring individuals to maintain the minimum essential coverage, be eligible for an exemption from coverage, or to make a payment when filing federal income tax returns
The following types of health insurance coverage meet the individual responsibility requirement:
- Coverage procured in the individual market including the Federally-facilitated Marketplace
Government-funded coverage, such as Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and TRICARE (the Department of Defense health care program)
- Coverage under an employer-financed plan.
- Individuals who are ineligible for an exemption and do not have coverage (or the applicable taxpayers who claim such individuals as tax dependents) are required to make an individual shared responsibility payment.
The amount of the individual shared responsibility installment may increase between 2015 and 2016. It is vital that you share this policy and the increase in payment amounts to all clients.
- 2015: The annual individual shared responsibility payment is the greater of 2% of the taxpayer’s household income that is above the tax return filing threshold for the taxpayer’s filing status, or the taxpayer’s flat dollar amount, which is $325 per adult and $162.50 per child, limited to a family maximum of $975.
- 2016: The annual individual shared responsibility payment is the greater of 2.5% of the taxpayer’s household income that is above the tax return filing threshold for the taxpayer’s filing status, or the taxpayer’s flat dollar amount, which is $695 per adult and $347.50 per child, limited to a family maximum of $2,085.
The total payment amount is capped at the cost of the national average annual premium for a Bronze level health plan available through the Marketplace in 2015 and 2016.
The calculations above symbolize the amount of the installment for not having health insurance coverage for an entire year. Individuals (or the applicable taxpayers who claim such individuals as tax dependents) will owe 1/12th of the yearly payment for each month they (or their spouse or dependents) do not have coverage and are not excused. An individual is recognized as having coverage for any month in which he or she has coverage for at least 1 day of that month. People without coverage for less than three consecutive months during the year may be eligible for the short coverage gap exemption and will not have to make an installment for those said months. The short coverage gap exemption only applies to the first coverage gap during a year.
After 2016, the amount of the annual individual shared responsibility premium is modified for inflation.
For more information, please visit the Internal Revenue Service (IRS) website.
Under the Affordable Care Act, health plans that protect children as dependents must make dependent coverage available to children until age 26. These young adults have the option to join or remain on their parent’s plan even if they are:
- Married (coverage does not extend to married child’s spouse)
Not living with a parent
Not enrolled in school
Not financially dependent on a parent
Eligible to join their employer’s plan
The Affordable Care Act expects that non-grandfathered health plans offered in the individual and small group markets offer an all-inclusive package of benefits called essential health benefits (EHB). EHB include items and services within 10 benefit categories. The Affordable Care Act requires that EHB:
- Reflect a proper and suitable balance among the EHB categories
- Do not discriminate due to age, disability, or expected length of life
- Take into account the health care requirements of various segments of the population
Explicit health care benefits may vary from state to state. Even within the same state, it is possible that differences between health insurance plans will be applicable. When a consumer fills out an application and analogizes plans, he or she will see the specific health care benefits each individual plan offers
A grandfathered health plan is a group health policy that was fashioned, or an individual health insurance plan that was purchased:
- On or before March 23, 2010
- Unaltered in certain forms
- With the issuer communicating to enrollees that the plan is grandfathered.
Grandfathered plans are absolved of many alterations required under the Affordable Care Act. Plans or policies have a chance of losing their grandfathered status if they make certain noteworthy modifications that reduce benefits or increase costs to consumers
Individuals must preserve minimum essential coverage, qualify for an excuse from coverage, or make an individual shared responsibility payment when filing their federal income tax returns.
Health insurance issuers must:
- Offer all of their group and individual market policies to any eligible individual in the state (This reform is called “guaranteed issue”).
- Not restrict or eliminate coverage related to pre-existing health conditions, regardless of the age of the covered individual.
- Spend the required percentage of premium dollars on medical care or supply a rebate to the insured individuals/policyholders.
- Offer health insurance plans that protect benefits in a minimum of ten categories (called EHB).
There are four basic categories of coverage for health plans: Bronze, Silver, Gold, and Platinum. Each of these levels is based on an mean measure of plan generosity (AV). In addition to the level of coverage plans, issuers in the individual market can offer catastrophic plans to individuals under 30 years of age before the plan year begins and to those who have obtained a certification from the Marketplace that they are exempt from the individual responsibility requirement, either because they lack an affordable coverage option or because they meet the requirements for a hardship exemption.
All health plans must restrict cost sharing and out-of-pocket costs. Rates may vary by age, family structure, geographic area, and tobacco use.
2015 Federal Poverty Level Chart*
The Department of Health & Human Services (HHS) distributes poverty guidelines that are typically referred to as the “federal poverty level” (FPL). The Federally-facilitated Marketplace will utilize 2015 guidelines when making calculations for the insurance affordability programs under The Affordable Care Act beginning November 1, 2015.