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Affordable Care Act (Obamacare)

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Affordable Care Act (Obamacare)

Beginning with the 2014 Federal individual tax return, taxpayers will have to be reporting to the IRS data concerning their health insurance.  Everyone with the exception of those who meet one of the limited MUST have health insurance that meets the minimum essential coverage – or, they will pay a Shared Responsibility Payment (hereafter referred to as a “penalty”).

2015 Monthly Bronze Plan Premium:  The IRS released the 2015 monthly national average bronze level plan premiums that will be used in determining the shared responsibility penalty for individuals for the 2015 tax year. The individual shared responsibility payment for a tax year is the lesser of (1) the sum of the monthly penalty amounts, or (2) the sum of the monthly national average bronze plan premiums for the shared responsibility family. For 2015, the monthly national average bronze plan premium is $207 per individual, with a maximum of $1,035 for a shared responsibility family with five or more members. Rev. Proc. 2015-15, 2015-5 IRB .

Minimum Essential Coverage is the type of coverage you’ll need to avoid the fee for not having insurance under ObamaCare (the Affordable Care Act). In order to be in compliance with the law, you must maintain minimum essential coverage throughout the year or pay a fee for each month you go without it (although you are allowed up to three months in a row each year without coverage, due to a coverage gap exemption).

Minimum essential coverage is defined as follows:
  • Employer-sponsored coverage (including COBRA coverage and retiree coverage)
  • Coverage purchased in the Individual Market, including a qualified health plan offered by the Health Insurance Marketplace (also known as an Affordable Insurance Exchange)
  • Medicare Part A coverage and Medicare Advantage plans
  • Most Medicaid coverage
  • Children’s Health Insurance Program (CHIP) coverage
  • Certain types of veterans health coverage administered by the Veterans Administration
  • TRICARE
  • Coverage provided to Peace Corps volunteers
  • Coverage under the Non-appropriated Fund Health Benefit Program
  • Refugee Medical Assistance supported by the Administration for Children and Families
  • Self-funded health coverage offered to students by universities for plan or policy years that begin on or before Dec. 31, 2014 (for later plan or policy years, sponsors of these programs may apply to HHS to be recognized as minimum essential coverage)
  • State high risk pools for plan or policy years that begin on or before Dec. 31, 2014 (for later plan or policy years, sponsors of these program may apply to HHS to be recognized as minimum essential coverage)
The following types of health insurance are not minimum essential coverage:
  • Short Term Health Plans
  • Fixed Benefit Health Plans
  • Supplemental Medicare like Part D and Medigap
  • Some Medicaid covering only certain benefits
  • Vision only, Dental only, and limited benefit plans
  • Grandfathered Plans (You will avoid the fee, but won’t get the new rights and protections)

There are some new forms pursuant to the provisions of the Affordable Care Act (ACA) that will become familiar to most taxpayers beginning with 2014.  I have included a discussion about these new forms later in this webpage.

Exemption from the mandate to have health insurance

The easiest way to qualify for an exemption is to go to HealthCare.Gov and sign up for a marketplace account. When you sign up, you automatically find out if you qualify for some exemptions and might even find you qualify for lower costs on coverage. You can qualify to shop for a catastrophic plan with lower premiums if you obtain a Hardship Exemption.

If you plan on applying for an exemption, don’t leave it to the last minute. In most cases, you’ll have to fill out a form and wait for confirmation before you can report the exemption. In addition, many exemptions require certain documentation to verify you qualify. Obtaining that documentation also takes time. Waiting can mean a delay of your Federal Tax Refund.

Most exemptions will require documentation. If you cannot provide documentation, you may still qualify for certain exemptions, like for being homeless. That safest way to avoid the fee is to simply obtain health insurance. Some exemption will buy you more time to sign up and these tend to be the ones with more flexible requirements of proof.  Other exemptions simply allow you to not pay the tax and these will tend to require proof.

Unless you have an exemption certificate (assuming you do NOT have health insurance), you should expect to have to pay the penalty with your return. 

If any of the following circumstances apply to you, you may qualify for a “hardship” exemption from the penalty:
  1. You were homeless
  2. You were evicted in the past 6 months or were facing eviction or foreclosure
  3. You received a shut-off notice from a utility company
  4. You recently experienced domestic violence
  5. You recently experienced the death of a close family member
  6. You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property
  7. You filed for bankruptcy in the last 6 months
  8. You had medical expenses you couldn’t pay in the last 24 months that resulted in substantial debt
  9. You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member
  10. You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and CHIP, and another person is required by court order to give medical support to the child. In this case, you don’t have the pay the penalty for the child.
  11. As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace
  12. You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act
  13. Your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable
  14. You experienced another hardship in obtaining health insurance

Applying for a hardship exemption

To apply for a hardship exemption, use this exemption form: Individuals who experience hardships (PDF). See instructions to help you fill out an exemption application (PDF).

How long a hardship exemption lasts

Hardship exemptions are usually provided for the month before the hardship, the months of the hardship, and the month after the hardship. However, the Marketplace may provide the exemption for additional months after the hardship, including up to a full calendar year.

  • For a hardship exemption based on affordability, the exemption will be granted for the remaining months in the coverage year.
  • For people ineligible for Medicaid only because a state hasn’t expanded Medicaid coverage, the hardship exemption will be granted for the whole calendar year.
  • For people eligible for Indian Health Services, the hardship exemption will be granted on a continuing basis. It may be kept for future years without having to submit another application. This is true as long as there are no changes to your membership in a tribe or eligibility for services from an Indian health care provider.
 

ObamaCare Hardship Categories and Documentation

You may qualify for a hardship exemption if you experienced one of the following:

Hardship numberCategorySubmit this documentation with your application
1.You were homeless.None
2.You were evicted in the past 6 months or were facing eviction or foreclosure.Copy of eviction or foreclosure notice
3.You received a shut-off notice from a utility company.Copy of shut-off notice from a utility company
4.You recently experienced domestic violence.None
5.You recently experienced the death of a close family member.Copy of death certificate, copy of death notice from newspaper, or copy of other official notice of death
6.You experienced a fire, flood, or other natural human-caused disaster that caused substantial damage to your property.Copy of police or fire report, insurance claim, or other document from government agency, private entity, or news source documenting event
7.You filed for bankruptcy in the last 6 monthsCopy of bankruptcy filing
8.You had medical expenses you couldn’t pay in the last 24 months.Copies of medical bills
9.You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member.Copies of receipts related to care
10.You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and the Children’s Health Insurance Program (CHIP), and another person is required by court order to give medical support to the child.Copy of medical support order AND copies of eligibility notices for Medicaid and CHIP showing that the child has been denied coverage
11.As a result of an eligibility appeals decision, you’re eligible either for:1) enrollment in a qualified health plan (QHP) through the Marketplace, 2) lower costs on your monthly premiums, or 3) cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace.Copy of notice of appeals decision
12.You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act.Copy of notice of denial of eligibility for Medicaid
113.You received a notice saying that your current health insurance plan is being cancelled, and you consider the other plans available unaffordable.Copy of notice of cancellation
14.You experienced another hardship in obtaining health insurance.Please submit documentation if possible
NEED HELP WITH YOUR APPLICATION? Visit HealthCare.gov or them at 1-800-318-2596. Para obtener una copia de este formulario en Español, llame 1-800-318-2596. If you need help in a language other than English, call 1-800-318-2596 and tell the customer service representative the language you need. We’ll get you help at no cost to you. TTY users should call 1-855-889-4325.
The amount of the penalty (fee) for not having health insurance and for not meeting one of the exemptions. The fee for not having health coverage is calculated one of 2 ways. If you or your dependents don’t have insurance that qualifies as minimum essential coverage you’ll pay either a percentage of your household income or a flat fee — whichever is higher.

The fee (penalty) in 2015

If you don’t have coverage in 2015, you’ll pay the higher of these two amounts:
  • 2% of your yearly household income. (Only the amount of income above the tax filing threshold, about $10,000 for an individual, is used to calculate the penalty.) The maximum penalty is the national average premium for a bronze plan.
  • $325 per person for the year ($162.50 per child under 18). The maximum penalty per family using this method is $975.

The fee for not having coverage in 2014

If you didn’t have coverage in 2014, you’ll pay the higher of these two amounts when you file your 2014 federal tax return:
  • 1% of your yearly household income. (Only the amount of income above the tax filing threshold, about $10,000 for an individual, is used to calculate the penalty.) The maximum penalty is the national average premium for a bronze plan.
  • $95 per person for the year ($47.50 per child under 18). The maximum penalty per family using this method is $285.

The fee after 2015

The penalty increases every year. In 2016 it’s 2.5% of income or $695 per person. After that it’s adjusted for inflation.

How you pay the fee

You’ll pay the fee on the federal income tax return you file for the year you don’t have coverage. Most people will file their 2014 returns in early 2015 and their 2015 returns in early 2016.
NEW FORMS
FORM 1095-A HEALTH INSURANCE MARKETPLACE STATEMENT This form will be issued because the taxpayer or a family member purchased health insurance through the Marketplace.   Anyone who purchased health insurance in the Marketplace has to account for the Premium Tax Credit (PTC) – a subsidy – that they either received at the time of insurance application or are entitled to at the time of return filing.  This form is necessary to determine the proper PTC. If the taxpayer received advance PTC payments that exceed the amount there are entitled to, then on the tax return, the excess PTC paid will be added as an additional tax (either reducing a refund, or increased the balance due).  This form is issued for each policy or plan that the taxpayer or family member enrolled in through that marketplace. FORM 1095-B  HEALTH COVERAGE This form will be issued by the provider of the health coverage to both the IRS and to the covered individual for policies that meet the “minimum essential coverage” as required under the ACA.  This form will be needed to determine whether the taxpayer may be subject to the penalty. FORM 1095-C EMPLOYER-PROVIDED HEALTH INSURANCE OFFER AND COVERAGE If you are employed and your employer offers you health insurance, the employer will prepare and submit this form ONLY to the employee.  It is NOT supplied to the IRS.  However, if the employee enrolled in the employer’s plan, the employer WILL submit to both the employee and the IRS the Form 1095-B providing details about the coverage provided.  Taxpayers who purchased insurance through the Marketplace (in lieu of signing up for the employer’s offered health care insurance) will need this form to determine if they may be eligible for any PTC. FORM 8962 PREMIUM TAX CREDIT For individuals who purchased insurance through the Marketplace, use of this form is MANDATORY to determine the amount, if any, PTC that is allowable.  Form 1095-A (discussed above) needs to be used in completing this form. If the covered individual received advance premium tax credits (APTC) that exceeded the amount that they were entitled to, this form will be used to calculate the excess credit paid that now must be repaid via the tax return.  If the individual was entitled to a credit that exceeds the APTC received (or if they received none during the year), then the credit will be entered on the tax return and treated similarly to income tax withholding – either increasing a refund or reducing a balance due. DISCLAIMER The above information is by no means intended to convey ALL of the nuances concerning the AFC and the insurance mandate.  It does, however, intended to provide basic information about the coverage requirements, the premium credit (subsidy) and the shared responsibility payment (penalty).  The website www.healthcare.gov is a great source for further information. ——————————————————————————————————————

IRS provides 2015 monthly bronze coverage premium for individual shared responsibility

Rev Proc 2015-15, 2015-5 IRB

The IRS has provided the 2015 monthly national average premium for qualified health plans that have a bronze level of coverage. This figure is used in determining the maximum individual shared responsibility payment. Beginning in 2014, if a taxpayer or an individual for whom the taxpayer is liable isn’t covered under minimum essential coverage for one or more months, then, unless an exemption applies, the taxpayer is liable for the individual shared responsibility payment on his return. Married individuals who file a joint return for a tax year are jointly liable. The amount of a taxpayer’s shared responsibility payment is based, in part, on the number of individuals a taxpayer is responsible for who do not have minimum essential coverage. For each tax year, the individual shared responsibility payment is the lesser of: (1) the sum of the monthly penalty amounts; or (2) the sum of the monthly national average bronze plan premiums for the “shared responsibility family.” Shared responsibility family means, for a month in a tax year, all nonexempt individuals for whom the taxpayer and the taxpayer’s spouse (if the taxpayer is married and files a joint return with the spouse) are liable for the shared responsibility payment under Code Sec. 5000A for that tax year. The monthly national average bronze plan premium means, for a month for which a shared responsibility payment is imposed, 1/12 of the annual national average premium for qualified health plans that (a) have a bronze level of coverage, (b) would provide coverage for the taxpayer’s shared responsibility family members, and (c) are offered through Exchanges for plan years beginning in a calendar year with or within which the tax year ends. Rev Proc 2014-46, 2014-33 IRB 367, Sec. 2, provides an explanation of the methodology used to determine the monthly national average premium amount. Monthly national average bronze plan premium for 2015. The monthly national average premium, for qualified health plans that have a bronze level of coverage and are offered through Exchanges in 2015, is $207 (up from $204 for 2014) per individual and $1,035 (up from $1,020 for 2014) for a shared responsibility family with five or more members.