By Graham McCaulley, Extension Associate, Personal Financial Planning, University of Missouri Extension
If you watch TV news programs, read newspapers/magazines, are on Facebook, or talk to friends and family that are even slightly into politics, then chances are you’ve been hearing about the Affordable Care Act. The Affordable Care Act (ACA, also referred to as Obamacare) is the most sweeping health-policy change since Medicare was established in 1965. Congress passed the law in 2010, and the Supreme Court declared it to be constitutional in 2012. The intense debate about the ACA has caused widespread confusion and speculation. However, the time for debate is over — the law is being implemented, and it’s important to make sure you have a basic understanding of how the law will affect you.
Speculation about how the ACA will affect you depends on what sources you get your information from. More conservative sources typically propose that the ACA will hurt the economy, workers, and will make health insurance cost more, while more progressive sources put forth that ACA will do the opposite by actually helping the economy, giving workers more options, and lowering the cost of health care/insurance in the long term. At this point no one knows for sure exactly how the effects of the ACA will play out, though, and it is not the aim of the Financial Tip of the Week to speculate. Instead, we aim to give just the facts.
So what’s my bottom-line?
If you’d like a quick, unbiased summary of the ACA, check out one of our earlier Financial Tips (https://ofsmizzou.org/the-affordable-care-act-in-plain-english/). Rather than cover every way the ACA may affect you (such as new consumer protections), in this tip we’ll just focus on the part of the ACA that applies to most everyone- the individual mandate. The individual mandate (also called the individual shared responsibility provision) calls for each individual to have minimum essential health insurance coverage, kind of like how most states require a minimum level of car insurance all drivers need to have. Starting in 2014, everyone must have minimum essential health insurance coverage for most of the year (i.e., don’t go more than three consecutive months without health insurance), qualify for an exemption, or make a shared responsibility payment when filing a federal income tax return.
Do I have to get new health insurance?
Generally speaking, if you have any of the following types of health insurance, you do not have to make a change to your health insurance as long as you are satisfied with this insurance. Other types not listed here, such as student insurance provided by a college or university, are also unlikely to change.
- Employer-sponsored insurance: Insurance your employer provides that either your employer pays for in full or, more than likely, that you and your employer share the cost of. This includes plans with or without “grandfathered” status and retiree plans.
- Private insurance (or direct-purchase insurance): Insurance that individuals purchase through an insurance broker or directly from an insurance company to insure themselves and/or their families. Often, people purchase private insurance when they do not have the option of employer-sponsored insurance and do not qualify for other types of federally-sponsored coverage (Medicare, Medicaid or military insurance).
- Medicare (Parts A, B, C or D): Individuals 65 or older qualify for Medicare (you also qualify if you receive social security disability income or supplemental security income.
- Medicaid, as long as you qualify
- Military health care insurance for military personnel and families (VA, TRICARE or CHAMPVA)
- Indian Health Service benefits
- COBRA: A type of health insurance plan for people between jobs who are experiencing a gap in coverage.
What if I don’t have health insurance coverage?
If you don’t have health insurance coverage you have three options:
1. Get insurance
Obtain insurance through one of the sources above, or purchase private insurance directly through the new Health Insurance Marketplace. The Marketplace is similar to a farmers market where individual farmers sell their produce to customers. Now replace the farmer with a private health insurance company and the produce with health insurance plans, and the whole market happens online. These are not government-funded or government-sponsored plans.
Each health insurance plan must contain a similar set of essential health benefits and follow the same rules. Consumers will be able to compare plans easily across insurance companies within the Marketplace, and you may be able to get assistance towards paying for your insurance and health insurance costs. Marketplaces in every state can be run by the state government or the federal government or through a partnership between them.
2. Pay the penalty
If you don’t have insurance in 2014 and don’t qualify for an exemption, then you will likely pay a penalty (also called a shared responsibility payment) when you file your income taxes in 2015. The graphic breaks down the penalty for next year and beyond.
3. Get an exemption
There are a number of exemptions from the mandate for individuals and families who:
- Cannot afford coverage:
- If the cost of the premium for the Bronze level of health insurance from the Health Insurance Marketplace is more than 8% of the individual or family’s modified adjusted gross income after tax credits have been applied.
- If your state chose not to expand its Medicaid program (see this link if you’re not sure http://kff.org/health-reform/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act/), and if your income falls below 100% of the federal poverty level, you will not receive a tax credit to help you purchase health insurance from the Health Insurance Marketplace, but you are also not subject to paying a penalty.
- Have income below the threshold for filing a tax return.
- Have a religious conscience objection (if you are members of, or subscribe to, religious groups that object to having insurance coverage on religious grounds).
- Are members of American Indian tribes.
- Are incarcerated for three or more months of the year.
- Are not lawfully living in the United States.
- Have a short coverage gap of less than three months: People who did not have health insurance for less than three months out of the year will be exempt from the penalty.
- Have a hardship exemption from HHS (the government): Granted if a person or family has experienced an unexpected natural or human-caused event that resulted in a significant unexpected increase in essential expenses (e.g., food, shelter, clothing) that prevented them from obtaining coverage. Hardship exemptions include homelessness, eviction, domestic violence, death of a close family member, bankruptcy, substantial recent medical debt, and disasters that substantially damaged the individual’s property.
Where can I get more information?
If you are interested in learning more about what type of health insurance plans may be available to you through your state’s Health Insurance Marketplace, or if you want to ask about an exemption from the individual mandate, a good place to start would be;
- Consumer call center open 24 hours a day:
800-318-2596 or 855-889-4325 using TTY/TDD
- Government healthcare website: https://healthcare.gov for English and https://cuidadodesalud.gov for Spanish
Kaiser Family Foundation. (2012). The requirement to buy coverage under the Affordable Care Act beginning in 2014. Retrieved October 20, 2013 from http://kaiserfamilyfoundation.files.wordpress.com/2013/04/requirement_flowchart_3.pdf.
U.S. Centers for Medicare and Medicaid Services. (2013, July 26). What if someone doesn’t have health coverage in 2014? Retrieved from https://www.healthcare.gov/what-if-someone-doesnt-have-health-coverage-in-2014/.
U.S. Internal Revenue Service. (2013, July 25). Affordable Care Act tax provisions. Retrieved from http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions.