Recent news about changes to the Affordable Care Act’s rules and deadlines has caused some confusion about what’s required and what isn’t. For individuals not covered by employer insurance plans, though, the original requirements have not changed.
Although the employer mandate for providing health insurance coverage to workers has changed again, including a delay in the required implementation date, the rules for individuals remain in place. Unless you are already covered by an employer’s plan, Medicare or Medicaid, you’re required to obtain coverage on your own or pay a penalty. The plan is to have affordable options available through state operated exchanges. Some families with low to moderate incomes may be eligible for various subsidies.
The plans offered under the health care law are divided into four categories with metallic names: platinum, gold, silver and bronze. Premiums range from the highest, for a platinum plan, to the lowest, for bronze. With a platinum plan, out-of-pocket costs such as co-payments are lower. These costs are highest for the bronze plans.
Individuals can apply for subsidies in the form of tax credits and other reductions to offset the cost of insurance bought through an exchange. The tax credits are sent directly to the insurance companies. This reduces the effective premium, so individuals don’t have to pay up front. Credits are available to individuals and families with income between 100 percent and 400 percent of the federal poverty level. That means the upper threshold for health-insurance subsidies is a 2013 income of $45,960 for an individual and $94,200 for a family of four. However, if you are employed and your employer’s plan meets the law’s coverage standards, you won’t be eligible for subsidies even if your income falls below the threshold.
Beginning in 2014, failure to obtain some kind of approved coverage will subject individuals to a penalty. This is either 1 percent of your annual income or $95 per adult, whichever is higher. The penalty for uninsured children is $47.50 each, up to a maximum of $285 per family. The IRS has been assigned the responsibility of enforcing these penalties. The IRS can deduct penalties from any refunds to which taxpayers may be entitled.
As of March 12, 2014, Kathleen Sebelius, the (former) U.S. Secretary of Health and Human Services, announced that the March 31, 2014, deadline for individuals will not be extended.
My goal is to give my clients and the public useful information, explained in plain English, about their finances and taxes. If you have a question you’d like me to answer in a future article, please let me know.
Randy McIntyre is a Certified Public Accountant and a partner in McIntyre, Paradis, Wood & Company, CPAs. He has worked in public accounting since 1977, in Wilmington since 1992. His firm is built on a history of service, technical expertise, and innovative to provide the expertise of larger firms with a personal, one-on-one approach. To learn more about McIntyre, Paradis, Wood & Company, see www.mpwcpas.com. He can be reached at [email protected] or 910-793-1181.
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