Can provisions of the Affordable Care Act help you pay for health insurance coverage?
Yes! Starting January 1, 2014, you are generally required to have adequate health insurance or pay a penalty.
The good news is that if your income is within certain limits, you may qualify for an advanced premium tax credit to help pay for that coverage. This credit is paid directly to your insurance company as a subsidy.
How do I know if I qualify for a premium tax credit (subsidy)?
You may be able to get this tax credit if your employer doesn’t offer health insurance, or if they do, it covers less than 60% of covered benefits or the premiums would cost you more than 9.5% of your annual household income.
Your income must not be too low or too high. You cannot get the credit if you qualify for government programs like Medicare and Medicaid. You are only eligible for the credit if your household income is above between 100% and 400% of the federal poverty level.
How do I claim the credit?
You start by applying for insurance through your state’s health insurance marketplaces, also known as an exchange.
You must enroll before March 31, 2014, to receive health insurance through the exchange.
When you apply through an exchange, you’ll answer questions to determine whether you qualify for the credit.
What happens if my income is higher or lower than I expected?
Most of us can’t predict exactly how much we’ll make in a year. Make the best estimate you can, and when you file your income tax return, the amount is reconciled with the tax credit you should receive based on your actual income for the year.
If you incorrectly estimate your income, you may receive a bigger or smaller tax credit than you were entitled to. If you were entitled to a larger credit, you will get that money back. If you qualified for a smaller or no credit, you may have to pay back some or all of the credit.
If you don’t like the possibility of having to pay back the money at the end of the year, you can pay your entire premium yourself during the year.
That way, you would receive your entire credit as a refund when you file your income tax return, provided you were entitled to one.
Who doesn’t have to get health insurance or pay a penalty?
Not everyone has to buy insurance or pay a penalty. You won’t be penalized for not having insurance if your income is low enough that the lowest-cost plan would cost more than 8% of your 2014 income, or if you are not required to file a tax return based on your income level.
There are also exceptions for people whose religious beliefs prohibit medical treatment, members of a recognized health care sharing ministry, members of a federally recognized tribe, and people in other special situations.
How much penalty do I pay if I don’t get insurance?
The penalty for 2014, which will be paid on your tax return due April 2015, is 1% of your annual 2014 income or $95 per person, whichever is higher.
If you have children under age 18, the penalty is $47.50 per child – up to $285 total per family.
The penalty rises for 2015, and again for 2016. The maximum penalty per family in 2016 is $2,085.
Paying a penalty does not mean you are covered or entitled to any medical services.
Have you compared the insurance plans on the marketplace?