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AFFORDABLE CARE ACT - Frequently Asked Questions

What is the Individual Health Insurance Mandate?


Starting on January 1, 2014 most Americans were required under the 2010 Health Care Bill to obtain "Minimum Essential Health Care Coverage" under Reg. 148500-12 and Implemented under Internal Revenue Code Section 5000A. "Minimum Essential Coverage" is not the same as "Essential Health Benefits". Essential Health Benefits are Components of health care plan and are subject to annual and lifetime dollar limits.

What is “Minimum Essential Coverage”?


It covers Employer sponsored coverage including Cobra coverage and retiree coverage. The employer plan needs to be affordable to the employee and provide minimum value.  A plan does fail minimum standards “if the plans share of total allowed costs of benefits provided under the plan is less than 60% of such costs.” (Bronze Plan).  The taxpayer has to use a minimum value calculator provided by the IRS and the Department of Human Resources to check it out.

Coverage purchased in the open market.

Medicare coverage (Including Medicare Advantage).

Medicaid coverage.

Children’s Health Insurance Program (CHIP) coverage.

Peace Corp Plan.

Tricare and Department of Defense Plans.

Self-funded student health insurance plans.

Foreign health coverage.

Refugee medical assistance.

AmeriCorp coverage.


Furthermore,  the “Minimum Essential Coverage” rule requires what’s called “Minimum Essential Benefits”.  In other words, you purchase your Health Insurance Plan Coverage and it must have the following 10 essential benefits to qualify:

1) Maternity care.

2) Hospitalization.

3) Rehabilitative & Habilitative services.

4) Laboratory services.

5) Prescription drugs.

6) Pediatric services.

7) Emergency services.

8) Mental & Behavioral health treatment.

9) Preventive and Wellness services.

10) Ambulatory Patient services.


What is “Minimum Essential Coverage”?

What if I didn’t have Health Insurance in 2014?  Do I have to pay a penalty?  Are there any exceptions?

What if I didn’t have Health Insurance in 2014?  Do I have to pay a penalty?  Are there any exceptions?


“Do any of the following apply?”

You are part of a religion opposed to acceptance of benefits from a health insurance policy.

You are an undocumented immigrant.

You are incarcerated.

You are a member of an Indian Tribe.

Your family income is below the threshold requiring you to file a tax return ($9,350 for an individual), ($18,700 for a family in 2010).

You have to pay more than 8% of your income for health insurance, after taking into account any employer contributions or tax credits.

If any of the above apply then there is no penalty for being without health insurance.


Were you insured for the whole year through a combination of any of the following sources?

Medicare.

Medicaid or the Children’s Health Insurance Program. (CHIP)

Tricare (for service members, retirees, and their families).

The veteran’s health program.

A plan offered by an employer.

Insurance bought on your own that is at least at the Bronze level.

A “grandfathered” health plan in existence before the health reform law was enacted.

If any of the above apply then the requirement to have health insurance is satisfied and no penalty is assessed.


How is the penalty calculated?

How is the penalty calculated?


Penalty is $95 per adult and $47.50 per child (up to $285 for a family) or 1.0% of family income, whichever is greater.


What if there was a gap in coverage?

What if there was a gap in coverage?


The penalty is pro-rated by the number of months without coverage, though there is no penalty for a single gap in coverage of less than 3 months in the year.

The penalty cannot be greater than the national average premium for a Bronze level coverage in an Exchange.


Who is required to have health insurance?

Who is required to have health insurance? (IRC Section 5000A)


The provision applies to individuals of all ages, including children.  The adult or married couple who claim a child or another individual as a dependent for federal income tax purposes is responsible for making the penalty payment if the dependent does not have coverage or an exemption.

Each child must have minimum essential coverage or qualify for an exemption for each month in the calendar year.  Otherwise, the adult or married couple who can claim the child as a dependent for federal income tax purposes will owe a penalty.

Senior citizens must have minimum essential coverage or qualify for an exemption for each month in the calendar year.  Senior citizens will have minimum essential coverage for each month they are enrolled in Medicare.

How is minimum essential coverage calculated?

How is minimum essential coverage calculated?


Individuals are treated as having minimum essential coverage for a month if they are covered for at least ONE day in the month.  Additionally, as long as the gap in coverage is less than 3 months, they may qualify for an exemption and not owe a penalty.


What is my conclusion?

Conclusion:


Their exists so much more to the Affordable Care Act conditions that it is next to impossible for me to include everything in this write up.  What I did accomplish was to lay the foundation of some of the basics, which will provide a heads up on some of the provisions within this new Federal mandate.

What sources were used for this FAQ?

Sources:


http://www.irs.gov/uac/Questions-and-Answers-on-the-Individual-Shared-Responsibility-Provision

Internal Revenue Code Section 5000A. (go to http://www.law.cornell.edu/uscode/text/26/5000A)

Seminar book purchased – “2014- 1040 Tax In Depth” by Jennings Advisory Group LLC.

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What is the Individual Health Insurance Mandate?