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What the Affordable Care Act Means For Families

What the Affordable Care Act Means For Families - TaxACT

If you had access to health insurance for your family, regardless of where you worked or whether you were employed, would you and your spouse still be doing what you are doing now, and working where you are today?

For a number of families, the answer to this question is a resounding “no.”

Thanks to the Affordable Care Act and the rollout of the new health insurance exchanges, families, for the first time ever, have access to health insurance, regardless of their employment situation.

What factors affect Marketplace health plan premiums?

The key change is a provision of the Affordable Care Act that requires health insurance offered through exchanges (think: a website marketplace for comparing policies and buying health insurance) to be available to everyone, regardless of health conditions.

Applicants cannot be denied for health conditions, limited due to pre-existing conditions, or cancelled in the future due to a change in health.

Instead, everyone is required to have access to the same insurance policies – regardless of their actual health – and prices can be changed based only upon:

  • Age;
  • Family size (higher cost to cover more people);
  • Geographic region (prices are adjusted for cost-of-living and cost-of-care in the area); and/or
  • Tobacco use (smokers can be charged more, if the state chooses to allow it).

In addition, the price of coverage will vary depending on the category level and the depth of benefits it covers, ranging from “Bronze” plans (that cover an average of 60% of health care costs), to Silver plans (70% of costs), Gold plans (80% of costs), and Platinum plans (90% of costs).

For those under age 30, an additional “catastrophic” coverage type is available, with lower coverage levels but also lower premiums.

Now that families have easier access to insurance and more plan options, many are finding a newfound freedom in their employment decisions.

No longer is it necessary for one spouse to stay at a certain employer just to ensure access to health insurance. Instead, the family now has freedom to make job changes, have a parent stay home with children, or even start a new family business, safe in the knowledge they still have the opportunity to get health insurance regardless of health conditions, simply by signing up at Healthcare.gov during the annual open enrollment period.

ACA premium tax credit makes insurance more affordable

Of course, the caveat is that while access to health insurance is assured, the family must still be able to afford the coverage.

Here, too, the Affordable Care Act helps out, beginning in 2014, with the rollout of the Premium Tax Credit.

For instance, if your premium tax credit was $200/month ($2,400/year) and your insurance cost $300/month, you will simply pay the difference – $100/month – for your health insurance.

If it turns out you were credited too much or too little of the credit throughout the year, any over- or under-payments will be reconciled when you file your tax return at the end of the year.

The premium tax credit is calculated based on income, and is potentially available for individuals with Modified Adjusted Gross Income below $45,960, couples with income below $62,040, and a family of four with income below $94,200 (these thresholds are indexed annually for inflation and will be slightly higher in 2014).

To estimate the amount of premium tax credit you would be eligible for, you can check out the Subsidy Calculator estimation tool on HealthcareACT.com, or to get a more specific quote based on your exact income and circumstances, including the cost of health insurance in your state, complete the application at Healthcare.gov to see what your cost of health insurance would be.

But the bottom line is simply this…

Thanks to the Affordable Care Act, families will now have flexibility to make health insurance decisions based on their family needs and circumstances, without needing to worry about whether coverage will be available through an employer.

And for those who struggle with the cost of insurance, premium tax credits may provide substantial help to make that coverage more affordable as well.

Does the new guaranteed access to health insurance change any of your family planning around employment and health insurance?

Photo credit: adwriter via photopin cc

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About Michael Kitces

Michael Kitces is a Partner and the Director of Research for Pinnacle Advisory Group, and publisher of the financial planning industry blog Nerd’s Eye View. You can follow him on Twitter at @MichaelKitces, or connect with him on Google+.

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