As we enter into November of 2013 confusion about the Affordable Care Act prevails, but that’s not surprising, as there are a ton of new things to learn in order to understand how to make good decisions regarding health insurance coverage that’s right for you.

Public Law 111–148 The Patient Protection and Affordable Care Act passed into law on March 23, 2010 Since that date, there have been changes each year in health insurance, health care delivery and tax requirements. It is these three areas where most people have questions. Everyone is asking the right questions, though it’s not always easy to get answers. This article will explore some of those questions and provide practical answers.

What is the effect of the Affordable Care Act for me?

The basic tenant of the Affordable Care Act is this: Beginning January 1, 2014, individuals will be responsible for obtaining “minimum essential coverage” for themselves and their dependents, or pay a penalty. The “minimum essential coverage” requirement can be met any of the following ways:

  • Being eligible for coverage under Medicaid due to expansion of coverage to people with income up to 133% of the Federal Poverty Level. ($14,404 for Singles and $29,326 for a family of four). Michigan has voted to expand Medicaid in our state however, the current understanding is that it won’t be available until April of 2014.
  • Being enrolled in another government program such as Medicare, TRICARE, or Children’s Health Insurance Program (CHIP) or Michigan’s MiChild. People who are aged 65 and older DO NOT need to make changes in their health insurance due to the Affordable Care Act.
  • Being insured on your parent’s policy. On the majority of insurance plans, young people can remain on their parent’s policy until they are age 26. This is regardless of their work, school or tax dependence status. They may stay on the plan even if they are married, however their spouse can’t come on nor can babies born to the young person be covered.
  •  Being insured through your employer group at work. For many people who are insured through their work (or through their spouse’s work) this will be the best value
  • Purchasing insurance through the “Exchange” or “Marketplace”. If an individual is eligible for and wants the premium subsidies offered through the Affordable Care Act, they MUST APPLY for plans though Healthcare.gov.
  • Purchasing health insurance from the company and plan of your choice in the individual market or through a “Private Exchange.” People who do not qualify for subsidies will purchase coverage in much the same way as they do today, they WILL NOT APPLY for coverage through Healthcare.gov

How can I find out if I am likely to be eligible for tax credit subsidies and how do they work?

You can find subsidy calculators at many insurance company websites but generally I use the one from the Kaiser Family Foundation. You can find it by clicking here. Use your best estimate for your 2013 adjusted gross income or a projection for 2014 and be sure to choose the state that you live in. You will receive a report that tells you one of three determinations; you seem to be eligible for expanded Medicaid, or you are subsidy eligible (with an estimated annual subsidy amount), or your subsidy would be $0. This is ONLY an estimate and final determination of eligibility and subsidy amount can only be achieved by submitting a Healthcare.gov application.

There are two levels of subsidy. The first is a tax-credit that can be applied against your plan premium on a monthly basis or can be taken as a lump sum at the end of the year through your tax return. The second is a reduction in the “cost –sharing” in the actual health plan, meaning you may be eligible to have your deductibles, co-insurance and co-pays reduced costing you less out of pocket when you use the plan. Only people with incomes below 400% of the federal poverty level (FPL) can be eligible for tax-credits. People with incomes below 250% of the FPL may be eligible for both of the subsidy levels.

If you are eligible and offered coverage though work, even if you don’t take it, you ARE NOT eligible for subsidies through Healthcare.gov unless your share of the premium is more than 9.5% of your annual income (employee’s not household). 

What is my penalty if I don’t purchase coverage?

In 2014, the penalty for not having coverage is $95 or 1 % of the individual’s income, whichever is greater. By 2016, it increases to $695 or 2.5 % of income, whichever is greater. In 2017 and beyond, the penalty will increase each year with the cost of living adjustment (COLA). For families, the maximum penalty is three times the per-person flat-dollar penalty ($285 in 2014). The penalty for dependent children without coverage is half the cost of the individual flat-dollar penalty ($47.50 in 2014). Remember, people who pay the penalty (tax) still do not have insurance coverage and must pay all their medical bills as well as the penalty.