Individual Health Insurance

AS A RESULT OF HEALTH CARE REFORM, INDIVIDUALS ARE NOW REQUIRED TO PURCHASE HEALTH INSURANCE OR POTENTIALLY PAY A PENALTY AT THE END OF EACH YEAR.  WE CAN HELP YOUR EMPLOYEES UNDERSTAND THEIR HEALTH PLAN OPTIONS AND DETERMINE IF THEY QUALIFY FOR FEDERAL TAX CREDITS OR PREMIUM SUBSIDIES

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A key provision of the Affordable Care Act (ACA) is the individual mandate, which requires most individuals to purchase health insurance coverage or pay a penalty.

What is the individual mandate?

The ACA requires most individuals to obtain acceptable health insurance coverage for themselves and their family members or pay a penalty.

How much will the individual mandate penalty cost me?

The penalty for not obtaining acceptable health insurance coverage is being phased in over a three-year period. The amount of the penalty is the greater of two amounts—the “flat dollar amount” and “percentage of income amount.”

For 2014, the penalty is $95 per person or 1 percent of income. For 2015, the penalty is $325 per person or 2 percent of income. In 2016 and after, the penalty is $695 per person or 2.5 percent of income

“Income” for this purpose is your household income minus your exemption (or exemptions for a married couple) and standard deductions. Families will pay half the penalty amount for children.

The penalty is calculated on a monthly basis and will be assessed for each month in which you go without coverage. There is no penalty for a single lapse in coverage lasting less than three months in a year.

Who is exempt from the individual mandate?

You may be exempt from the individual mandate penalty if you:

  • Cannot afford coverage (that is, a required contribution for coverage would cost more than 8 percent of your household income)
  • Have income below the federal income tax filing threshold
  • Are not a citizen, national or lawfully present in the United States
  • Experience a gap in coverage for less than a continuous three-month period
  • Qualify as a religious conscientious objector
  • Are a member of a health care sharing ministry
  • Are a member of certain Indian tribes
  • Are given a hardship exemption by HHS
  • Are incarcerated

If you are eligible for an exemption for any day of a month, the Internal Revenue Service (IRS) has said you will be treated as exempt for the entire month.

Also, if you obtained health insurance coverage (either an Exchange plan or group or individual coverage outside of the Exchange) with an effective date on or before May 1, 2014, you will be exempt from the individual mandate penalty for months prior to the effective date of your coverage.

How do I qualify for a hardship exemption?

The hardship exemption is available through the Exchange if you face a hardship that prevents you from obtaining coverage. HHS has said that each of the following situations will always qualify as a hardship:

  • If you turn down coverage because the Exchange projects that it will be unaffordable (even if your actual income for the year turns out to be higher, so that you are not eligible for the affordability exemption)
  • If you are not required to file an income tax return but technically fall outside the exemption for those with household income below the filing threshold
  • If you would be eligible for Medicaid under the expansion but live in a state that does not expand Medicaid eligibility

If you face other unexpected personal or financial hardships, you may be eligible for a hardship exemption. This will be determined on a case-by-case basis.

How will the penalty be collected?

Starting in 2015, everyone who files a federal tax return for the previous year will be required to report the following:

  • Which members of your family (including yourself) are exempt from the individual mandate
  • Whether each person who is not exempt had insurance coverage for that year

You will owe a penalty for each non-exempt family member who doesn’t have coverage. If you and your spouse file a joint return, you are jointly liable for the penalties that apply to either or both of you.

If you are eligible to claim a dependent, you will be responsible for reporting and paying the penalty for that dependent.

Is there financial assistance available to help me purchase health insurance coverage?

Federal subsidies in the form of premium tax credits and cost-sharing reductions are available to low-income individuals who purchase health insurance through an Exchange. The Exchanges became operational Jan. 1, 2014.

To be eligible for a premium tax credit, you:

  • Must generally have household income that is between 100 percent and 400 percent of the federal poverty line (FPL) for your family size
  • May not be claimed as a tax dependent of another taxpayer
  • Must file a joint return, if married
  • Must enroll in one or more qualified health plans through an Exchange
  • Cannot be eligible for minimum essential coverage (such as coverage under a government-sponsored program or an eligible employer-sponsored plan)

The amount of the premium tax credit varies based on your household income.

Some individuals who are enrolled in coverage through an Exchange may also be eligible for cost-sharing reductions to help them pay their medical expenses. Only those individuals with household incomes of up to 250 percent of the FPL are eligible.

There are several premium subsidy calculators available online that you can use to predict your health care costs, including this one.

For more information about individual insurance and health care reform, or for help getting started, contact Magellan today.

Under the Affordable Care Act (ACA), uninsured individuals are required to buy insurance or face a tax penalty.

When you use a health insurance Marketplace, you may be able to get lower costs on monthly premiums or out-of-pocket costs, or get free or low-cost coverage.

Subsidized coverage—or coverage that’s obtained through financial assistance from programs to help people with low and middle incomes—is available to individuals and families with household incomes up to 400 percent of the federal poverty level and who are not offered affordable coverage through their employers.

You can save money in the Marketplaces three ways. All of them depend on your income and family size.

  1. You may be able to lower costs on your monthly premiums through tax credits when you enroll in a private health insurance plan.
  2. You may qualify for lower out-of-pocket costs for copayments, coinsurance and deductibles.
  3. You or your child may get free or low-cost coverage through Medicaid or the Children’s Health Insurance Program (CHIP).

Tax Credits for Premiums

The most widely available subsidy is the Advance Premium Tax Credit, which helps cover the gap between the cost of their premium and what they can afford to pay.

The ACA requires households participating in the Marketplaces to put a certain percentage of their income toward the cost of health insurance. The exact percentage households need to pay is graduated up to 400 percent of the federal poverty level (FPL), with people at that percentage level required to pay the most and people at 100 percent of the federal poverty level required to pay the least. A rough guide to the graduated percentage is as follows:

Income Level Premium as a Percent of Income
Up to 133% FPL 2% of income
133-150% FPL 3-4% of income
150-200% FPL 4-6.3% of income
200-250% FPL 6.3-8.05% of income
250-300% FPL 8.05-9.5% of income
300-400% FPL 9.5% of income

Source: Kaiser Family Foundation

The percentage of income that households are required to pay, however, may not be enough to cover the cost of the insurance policy. The Advanced Premium Tax Credit steps covers the amount between what households are required to pay and the cost of the insurance policy.

Premium tax credits are both refundable and advanceable. A refundable tax credit is available to a person even if he or she has no tax liability. An advanceable tax credit allows a person to receive assistance at the time that he or she purchases insurance rather than paying his or her premium out of pocket and waiting to be reimbursed when filing an annual income tax return.

There are several online calculators available to help you estimate the size of your premium tax credit. In general, people at the following income levels will qualify to save in 2015.

  • $11,670-$46,680 for individuals
  • $15,730-$62,920 for a family of two
  • $19,790-$79,160 for a family of three
  • $23,850-$95,400 for a family of four
  • $27,910-$111,640 for a family of five
  • $31,970-$127,880 for a family of six
  • $36,030-$144,120 for a family of seven
  • $40,090-$160,360 for a family of eight

 

Reduced Out-of-pocket Costs

In addition to the Advance Premium Tax Credit, households that earn up to 250 percent of the federal poverty level may be eligible for cost-sharing subsidies. These subsidies are designed to help lower out-of-pocket costs.

Health insurance companies offering coverage through the Marketplace must lower the amount you pay out of pocket for essential health benefits if your household income is within the following amounts.

•      $11,670-$29,175 for individuals •      $27,910-$69,775 for a family of five
•      $15,730-$39,325 for a family of two •      $31,970-$79,925 for a family of six
•      $19,790-$49,475 for a family of three •      $36,030-$90,075 for a family of seven
•      $23,850-$59,625 for a family of four •      $40,090-$100,225 for a family of eight

Reduced cost-sharing is only applicable to silver plans. If you qualify for out-of-pocket savings, you must choose a silver plan to get the savings.

Medicaid is the nation’s health insurance program for low-income individuals and families. To qualify for Medicaid, individuals must be low-income or must have incurred health expenses that have caused them to “spend down” their incomes to Medicaid eligibility levels.

Under the ACA, states have the option of expanding Medicaid to households making up to 138 percent of the poverty line. However, these are the minimum thresholds for Medicaid expansion. The rules for Medicaid eligibility are different for each state. States can choose to offer Medicaid to households with a higher income. Conversely, states can choose not to participate in the Medicaid expansion.

The Health Insurance Marketplace is a new online exchange for buying health insurance. The Marketplace offers a choice of different health plans, certifies plans that participate and provides information to help consumers understand their coverage options.

The Marketplace primarily serves individuals buying insurance on their own and small businesses with up to 100 employees.

Each state can establish its own Marketplace, which may be run by a government agency or a nonprofit organization. Alternatively, states can have the federal government set up their Marketplaces, or can work with the federal government on a partnership Marketplace.

States may create multiple Marketplaces, as long as only one serves each geographic area. States may also work together to form regional Marketplaces. The federal government will offer technical assistance to help states set up their Marketplaces.

Eligibility

The Marketplaces are intended to provide a new option for purchasing coverage for individuals and their families, many of whom may not have insurance or who currently purchase insurance in the individual market. This group will include, for example, pre-Medicare-eligible retirees, the self-employed, individuals whose employers do not provide insurance and those who cannot afford their employer’s insurance.

Individuals who have insurance through their employers (or who are eligible for insurance through their employers) may opt out of their employer plans during their renewal period and go to a Marketplace to purchase health insurance. However, if anyone is eligible for job-based health insurance but chooses to pursue individual coverage through the Marketplace, he or she will have the pay the totality of their health insurance premiums and will not be eligible for Marketplace subsides.

For an uninsured individual, the only requirements for obtaining insurance through a Marketplace are living in the service area of the Marketplace, being a lawful U.S. citizen or resident and not being currently incarcerated. Household income is not taken into account when determining whether an individual is eligible to purchase coverage through a Marketplace.

The Marketplace in Motion

The Marketplace is designed to help individuals find appropriate health insurance. The Marketplace is intended to offer “one-stop shopping” to find and compare private health insurance options.

In some ways, the Marketplace will be similar to travel websites that compare airfare and hotel prices. People using a Marketplace will be able to compare policies sold by different companies. But the Marketplace will be more complicated than simply comparing price quotes.

Available Plans

Plans offered through a Marketplace are known as qualified health plans, or QHPs. QHPs will have to offer a set of essential benefits. The details of these benefits will differ from state to state, but must include, at a minimum, doctor visits and outpatient services, hospitalization, emergency services, maternity and newborn care, pediatric services (including oral and vision), mental health and substance use disorder services, prescription drugs, lab services, preventive medicine and wellness services, and chronic disease management.

Individuals who sign up for insurance through a Marketplace may be eligible for federal subsidies (that is, tax credits or cost-sharing reductions) if their income falls within a certain range. However, regardless of whether an individual is eligible for the subsidies, he or she will still be eligible to purchase coverage through the Marketplace as long as the basic eligibility requirements are met.

The Marketplace will also direct people to Medicaid, the government health insurance program for the poor, if they’re eligible.

Purchasing insurance can be confusing, so information on the plan benefits will be standardized in an effort to make it easier to compare cost and quality. Plans will be divided into four different types, based on the level of benefits: bronze, silver, gold and platinum. There will also be a young adults’ plan. Rules on how much insurers can vary premiums based on age or geography are set by federal law, although states could adopt more restrictive rules.

The Marketplace is also required to operate toll-free hotlines to help consumers choose a plan, determine eligibility for federal subsidies or Medicaid, rate plans based on quality and price and conduct outreach and education.