All About the Health Care Exchanges

Learning about the exchanges and how they will affect the individual and their family, the anticipated costs and deductibles has been the driving question around the Affordable Care Act.

Read the article below to get some of your questions answered.

The Basics of Health Care Exchanges

“As a part of the Affordable Care Act starting in 2014, All Americans must have a minimum amount of health insurance or be taxed by the government. The law also requires each state to have a health insurance exchange where people can buy health insurance coverage. People who don’t get health insurance at work, or can’t afford it, may be able to get it through an exchange. The exchanges do not replace buying health insurance privately. They are simply a new place to shop and buy.

health care exchanges
Three Exchange Model Options

On the exchanges, individuals and small businesses can buy qualified health plans (QHPs). Exchanges can be set up in one of the three ways. Each state determines how its exchange will be set up:

State-run Facilitator Model
– Any carrier meeting minimum federal and state requirements set for the health insurance exchanges can be in this exchange
-Carriers compete in an open market

State-run Active Purchaser Model
-State solicits bids from health insurance companies and determines which plans it will offer
-The state directly negotiates the price and benefits offered

Federally Run Model
-The US Department of Health and Human Services (HHS) runs the exchange in states that choose not to create one

Individuals-Three Options for Health Insurance in 2014

The law requires health insurance to be “guarante4ed issue”. That means a person (or family) can’t be denied coverage or charged more because of a health condition he or she already has, individuals not covered by a government health plan have three choices:

-Get coverage through their employer, if available
-Buy a plan through either individual market exchange, or the traditional market
-Go uninsured and pay a penalty, unless exempt

Subsidies and Credits for Individuals

Those who don’t have access to affordable, minimum essential health coverage can buy a health plan from the exchange and get a credit or subsidy if they meet income requirements. Credits and subsidies help with the cost of premiums and out-of-pocket health care expenses.

Income Requirements

  • 133% t0 400% of federal poverty level
  • for an individual that equals $15,282 to $45,960 per year in 2013
  • For a family of four that equals $31,322 to $94,200 per year in 2013

Those that meet the income level, can get a tax credit that may be applied to any level exchange plan (bronze, silver, gold or platinum)

The cost-sharing subsidy is available to those who earn up to 250% of federal poverty level and enroll in a silver exchange plan only.

An affordable health plan = individual’s share of premium is no more that 9.5% of income

Penalties for Individuals

in 2014, legal US citizens who do not have a minimum amount of health coverage will receive a penalty of $95 or 1% of their taxable income, whichever is greater

Penalty Timeline

Penalties will increase each year through 2015. In future years, the penalties will adjust annually.

  • 2014- Greater of $95 or 1% of taxable income
  • 2015- Greater of $325 or 2% of taxable income
  • 2016- Greater of $696 or 2.5% of taxable income
  • 2017 and beyond – Annual adjustments”

Article from: Catalog for Tax & Accounting Practitioners

We hope this article has been helpful in your planning of your family budget for the next year. We will keep you informed as we receive more information. To download the FLSA for employer and employee health care requirements and benefits, click here

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